Is a conservator or liquidating agent the state appoints over a failed savings and loan a state employee?

Texas AG Opinion JM-525: S&L Conservator as Employee

Plain-English summary

When a Texas savings and loan association was in trouble, the Savings and Loan Commissioner could step in and put someone in charge of it: a conservator to run and try to fix the association, a supervisor if the board consented to supervisory control, or a liquidating agent to wind it up if it could not be saved. The commissioner asked the Attorney General whether these appointees count as "employees" of the state under chapter 104 of the Civil Practice and Remedies Code, the statute under which the state indemnifies its own people (pays the damages, court costs, and attorney's fees adjudged against them) for conduct within the scope of their duties. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0525.pdf

The Attorney General said yes. Chapter 104 does not define "employee," so the AG used common usage and the way tort law separates an employee from an independent contractor. The deciding test in those cases is whether the person the work is done for has the right to control the details of the work. Article 852a gave the commissioner exactly that: conservators, supervisors, and liquidating agents all act under his supervision and direction, and the commissioner himself is an employee of the finance commission subject to its orders. Because the commissioner had the right to control the details of their work, the AG concluded these appointees are state employees for purposes of sections 104.001 and 104.008. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0525.pdf

The commissioner's real worry was that conservators and supervisors are paid out of the assets of the particular association they oversee, not out of state funds. The AG concluded that the source of payment does not decide the question. A person can be someone's employee even when a third party pays the wages, and the AG pointed to cases where caddies paid directly by golfers were still employees of the club, and where a shipowner paying workers who worked for another did not make them the shipowner's employees. The AG read the 1985 provisions that pay conservators and supervisors from association assets as exceptions to the older general rule that Savings and Loan Department staff are paid from department funds, so being paid from association assets did not keep them from being state employees. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0525.pdf

Currency note

This opinion was issued in 1986. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Article 852a and article 342-205 of the old Vernon's Texas Civil Statutes governing savings and loan associations have since been repealed or recodified (savings and loan regulation now sits in the Finance Code), and the savings-and-loan regulatory landscape changed substantially after the 1980s. The indemnity provisions of Civil Practice and Remedies Code chapter 104 remain but have been amended. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific statute mentioned here.

Common questions

Are state-appointed savings and loan conservators and liquidating agents state employees?

Yes, for indemnity purposes. The AG concluded that conservators, supervisors, and liquidating agents appointed under chapter 8 of article 852a are employees of the state for purposes of sections 104.001 and 104.008 of the Civil Practice and Remedies Code. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0525.pdf

What made them employees rather than independent contractors?

The right-to-control test. The AG explained that in tort cases the crucial test for employee status is whether the employer has the right to control the details of the work, and that the savings and loan commissioner has that right over conservators, supervisors, and liquidating agents, who all act under his supervision and direction. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0525.pdf

Does being paid out of the association's assets instead of state funds change the answer?

No. The AG concluded that the source of payment does not determine employee status, citing cases in which a person is an employee even though someone else pays the wages. The later statutes paying conservators and supervisors from association assets were read as exceptions to the general rule, not as removing them from state employment. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0525.pdf

What does it mean for the state that they are employees?

Under section 104.001, the state indemnifies an employee for actual damages, court costs, and attorney's fees adjudged against him for conduct described in the chapter, subject to the limits and exceptions in section 104.002 (for example, no coverage for willful or grossly negligent acts, or bad-faith deprivations of rights), and section 104.008 preserves any defense or immunity otherwise available. The AG's conclusion means these appointees fall within that indemnity framework. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0525.pdf

Background and statutory framework

Chapter 8 of the Savings and Loan Act (article 852a, V.T.C.S.) let the commissioner, on reasonable cause, place an association under a conservator (§ 8.05(a)(4)), whose powers and duties are set out in section 8.08 and who acts "on behalf of and under the supervision and direction of the commissioner." If a board consented to supervisory control, the commissioner could appoint a supervisor with a conservator's powers (§ 8.11); because the supervisor's powers are defined by reference to a conservator's, the AG read them as likewise subject to the commissioner's supervision. If the association could not be rehabilitated, the commissioner could appoint a liquidating agent (§ 8.09), who also exercises his powers under the commissioner's supervision (§ 8.09(c)).

Chapter 104 of the Civil Practice and Remedies Code makes the state liable to indemnify an employee, board member, or officer for damages, court costs, and attorney's fees adjudged against him for conduct described in section 104.002, which limits the liability to acts within the scope of office or employment and excludes willful, wrongful, or grossly negligent acts and bad-faith deprivations of rights. Section 104.008 preserves defenses, immunities, and jurisdictional bars. Because the chapter does not define "employee," the AG relied on context and common usage (Gov't Code § 311.011) and on the tort-law line between employees and independent contractors, where the right to control the details of the work is the crucial test (Newspapers, Inc. v. Love), and it is the right to control rather than its exercise that governs (Great Western Drilling Co. v. Simmons); the Tort Claims Act's own definition of "employee" likewise excludes an independent contractor (Civ. Prac. & Rem. Code § 101.001(1)).

On the payment question, the AG cited J. A. Robinson Sons, Inc. v. Wigart (a person can be an employee even though another pays his wages, in the "borrowed servant" context), Riverbend Country Club v. Patterson (caddies paid by players were still employees of the club), and Magnolia Petroleum Co. v. Francis (a shipowner paying workers who worked for another did not make them its employees). The AG treated the 1985 provisions paying conservators and supervisors from association assets as later, specific exceptions to the general compensation language of article 342-205(b), under the rules that a later statute and a special statute control (Stevens v. State; Cuellar v. State). The result: the commissioner's right to control the details of the work made conservators, supervisors, and liquidating agents state employees for purposes of sections 104.001 and 104.008.

Citations and references

The opinion cited the following authorities. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0525.pdf

Statutory provisions:

• V.T.C.S. art. 852a (Savings and Loan Act), §§ 8.05, 8.08, 8.09, 8.11
• V.T.C.S. art. 342-205(a), (b)
• Tex. Civ. Prac. & Rem. Code §§ 104.001, 104.002, 104.008, 101.001(1)
• Tex. Gov't Code § 311.011

Cases:

• Newspapers, Inc. v. Love, 380 S.W.2d 582 (Tex. 1964)
• Great Western Drilling Co. v. Simmons, 302 S.W.2d 400 (Tex. 1957)
• J. A. Robinson Sons, Inc. v. Wigart, 431 S.W.2d 327 (Tex. 1968)
• Riverbend Country Club v. Patterson, 399 S.W.2d 382 (Tex. Civ. App. - Eastland 1965, writ ref'd n.r.e.)
• Magnolia Petroleum Co. v. Francis, 169 S.W.2d 286 (Tex. Civ. App. - Beaumont 1943, writ ref'd)
• Stevens v. State, 159 S.W. 505 (Tex. Crim. App. 1913)
• Cuellar v. State, 521 S.W.2d 277 (Tex. Crim. App. 1975)

The opinion also cited Attorney General Opinions H-160 (1973) and H-94 (1973).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0525
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0525.pdf

Original opinion text

Best-effort transcription from a scanned PDF text layer. Minor OCR errors may remain; the linked PDF is authoritative.

The Attorney General of Texas

July 17, 1986

JIM MATTOX
Attorney General

Mr. L. L. Bowman, III
Commissioner
Texas Savings & Loan Department
2601 North Lamar, Suite 201
Austin, Texas 78705

Opinion No. JM-525

Re: Whether a person appointed as conservator, supervisor, or liquidating agent under article 852a, V.T.C.S., is a State employee for purposes of chapter 104 of the Civil Practices and Remedies Code

Dear Mr. Bowman:

You ask about the employment status of conservators, supervisors, and liquidating agents appointed by the Texas Savings and Loan Commissioner under sections 8.05, 8.08, 8.09, and 8.11 of article 852a, V.T.C.S. In particular you ask whether such persons are employees of the state for purposes of sections 104.001 and 104.008 of the Civil Practice and Remedies Code.

Chapter 8 of the Savings and Loan Act, article 852a, V.T.C.S., provides for the regulation of savings and loan associations by the Texas Savings and Loan Department and the Savings and Loan Commissioner. The commissioner has authority, under specified circumstances, to appoint conservators, supervisors, and liquidating agents to oversee the affairs of particular savings and loan associations.

If the savings and loan commissioner has reasonable cause to believe that there are grounds for intervention in the affairs of a savings and loan association, he may enter an order placing the affairs of that savings and loan association under the control of a conservator. V.T.C.S. art. 852a, § 8.05(a)(4). The powers and duties of a conservator are set out in section 8.08 of article 852a:

(c) The conservator and any deputy or assistant conservator appointed by the commissioner, on behalf of and under the supervision and direction of the commissioner, shall take charge of the books, records, property, assets, liabilities, and business of the association and shall conduct the business and affairs of the association. The conservator shall undertake the removal of the causes and conditions that necessitated the conservatorship. During the conservatorship, the conservator shall make such reports to the commissioner as the commissioner requires. The conservator shall take necessary measures to preserve, protect, and recover the assets or property of the association, including claims or causes of action belonging to or that may be asserted by the association. The conservator may deal with that property in the capacity of conservator and may file, prosecute, or defend against a suit by or against the association if the conservator considers this action necessary to protect the interested party or property affected by the suit.

. . . .

(e) The commissioner shall determine the cost incident to the conservatorship, and this cost shall be paid out of the assets of the association as the commissioner directs. (Emphasis added).

V.T.C.S. art. 852a, § 8.08(c), (e).

Also, the board of directors of a savings and loan association may voluntarily consent to being placed under supervisory control. V.T.C.S. art. 852a, § 8.11. In that case, the commissioner may appoint a supervisor who has the powers of a conservator under section 8.08. Because the legislature defined a supervisor's powers by reference to a conservator's powers, we think that the legislature intended a supervisor's powers, like a conservator's powers, to be subject to the supervision and direction of the commissioner. Also, section 8.11, like section 8.08, provides that the cost of supervisory control "shall be fixed by the commissioner and paid by the association." [1]

[1] Before August 26, 1985, the commissioner had no authority to appoint conservators or liquidating agents, but he did have authority, with the consent of the board of directors of the savings and loan association, to appoint a supervisory agent for a particular savings and loan association. Acts 1977, 65th Leg., ch. 239, at 642 (codified as article 852a, § 8.18; deleted by Acts 1985, 69th Leg., ch. 231, at 1929). A supervisory agent had essentially the same function as a supervisor has under the 1985 revision of chapter 8 of article 852a. The prior provision authorizing the appointment of supervisory agents explicitly made them subject to the instructions and supervision of the commissioner. Acts 1977, 65th Leg., ch. 289, at 644.

If the commissioner finds that a savings and loan association cannot be rehabilitated, he may issue an order of liquidation appointing a liquidating agent and dissolving the association. V.T.C.S. art. 852a, § 8.09(a). A liquidating agent, like a conservator or a supervisor, exercises his powers under the supervision of the commissioner. V.T.C.S. art. 852a, § 8.09(c). The statutes governing liquidating agents do not specify how the costs of liquidating agents are to be paid.

You ask whether conservators, supervisors, and liquidating agents are "employees" for purposes of sections 104.001 and 104.008 of the Civil Practice and Remedies Code. Section 104.001 provides:

In a cause of action based on conduct described in section 104.002, the state is liable for actual damages, court costs, and attorney's fees adjudged against:

(1) an employee, a member of the governing board, or any other officer of a state agency, institution, or department;

(2) a former employee, former member of the governing board, or any other former officer of a state agency, institution, or department who was an employee or officer when the act or omission on which the damages are based occurred;

(3) a physician licensed in this state who was performing services under a contract with the Disability Determination Division of the Texas Rehabilitation Commission or the Texas Department of Mental Health and Mental Retardation when the act or omission on which the damages are based occurred;

(4) a person serving on the governing board of a foundation, corporation, or association at the request and on behalf of The University of Texas System; or

(5) the estate of a person listed in this section. (Emphasis added).

Section 104.002 provides:

The state is liable under this chapter only if the damages are based on an act or omission by the person in the course and scope of the person's office, employment, or contractual performance for or service on behalf of the agency, institution, or department and if:

(1) the damages arise out of a cause of action for negligence, except a wilful or wrongful act or an act of gross negligence; or

(2) the damages arise out of a cause of action for deprivation of a right, privilege, or immunity secured by the constitution or laws of this state or the United States, except when the court in its judgment or the jury in its verdict finds that the person acted in bad faith. (Emphasis added).

Section 104.008 provides:

This chapter does not waive a defense, immunity, or jurisdictional bar available to the state or its officers, employees, or contractors. (Emphasis added).

The legislature did not define "employee" for purposes of section 104.002 or section 104.008 of the Civil Practice and Remedies Code. Therefore, in defining "employee" for purposes of those provisions we must rely on context and common usage. Government Code § 311.011.

Section 104.001 is an indemnity statute, and the consequence of determining that a person is an employee of the state is that the state becomes liable for damages based on certain conduct by the employee. See Civil Practice and Remedies Code § 104.002. Therefore, it is useful in determining the definition of "employee" for purposes of section 104.001 to look to definitions of "employee" in tort cases in which employer liability depends on the tortfeasor's being an employee rather than an independent contractor. See also Civil Practice and Remedies Code § 101.001(1) (definition of "employee" for purposes of Tort Claims Act excludes "independent contractor").

In such cases the crucial test in determining whether someone is an employee is whether the employer has the right to control the details of the work. Newspapers, Inc. v. Love, 380 S.W.2d 582, 591 (Tex. 1964). See also Attorney General Opinions H-160 (1973); H-94 (1973). Also, it is the right to control the details of the work rather than the exercise of that right that governs the issue of whether someone is an employee. Great Western Drilling Co. v. Simmons, 302 S.W.2d 400, 403 (Tex. 1957). As we pointed out above, the savings and loan commissioner, who is an employee of the finance commission, has the right to control the work of conservators, supervisors, and liquidating agents. V.T.C.S. art. 852a, §§ 8.08(c), 8.09(c), and 8.11; see also art. 342-205(a) (savings and loan commissioner is employee of finance commission and subject to its orders and directions). Therefore, we think that conservators, supervisors and liquidating agents are "employees" for purposes of section 104.001. Since section 104.008 uses the term "employees" in reference to the other provisions of chapter 104 of the Civil Practice and Remedies Code, it follows that conservators, supervisors, and liquidating agents are "employees" for purposes of section 104.008 as well.

You are apparently concerned about the employment status of conservators and supervisors because conservators and supervisors are paid out of the assets of a particular savings and loan association. (The statutes do not specify how liquidating agents are to be paid.) We do not think that the source of payment determines the question of whether conservators and supervisors are state employees. This office has noted before that, under some circumstances, "a person may bear the relationship of employee to another even though the other is not paying his salary or wages." Attorney General Opinion H-94 (1973), citing J. A. Robinson Sons, Inc. v. Wigart, 431 S.W.2d 327, 330 (Tex. 1968) (discussing matter of "borrowed servants"). In Riverbend Country Club v. Patterson, 399 S.W.2d 382, 384 (Tex. Civ. App. - Eastland 1965, writ ref'd n.r.e.), the court upheld a finding that caddies were employees of a golf club even though the caddies were paid directly by the players. In Magnolia Petroleum Co. v. Francis, 169 S.W.2d 286, 288 (Tex. Civ. App. - Beaumont 1943, writ ref'd), the court held that the fact that a shipowner paid employees during the time they worked for another did not establish that they were the shipowner's employees during that time. Likewise, in this case we do not think that the fact that conservators and supervisors are paid out of the assets of savings and loan associations precludes a finding that they are employees of the state.

We do note that article 342-205(b) contains the following language:

Each Deputy Savings and Loan Commissioner, the Savings and Loan Examiners, each Hearing Officer, and all other officers and employees of the Savings and Loan Department shall receive such compensation as is fixed by the Finance Commission which shall be paid from the funds of the Savings and Loan Department. (Emphasis added).

That language was added to article 342-205 by Acts 1973, 63rd Leg., ch. 25, § 1, at 37. The language in sections 8.08 and 8.11 that specifies that conservators and supervisors shall be paid out of the assets of a particular savings and loan association was added later. Acts 1985, 69th Leg., ch. 231, at 1929. Therefore, the later provisions that create employees who are not paid out of the funds of the Texas Savings and Loan Department should be read as exceptions to the general language of article 342-205. Stevens v. State, 159 S.W. 505, 506 (Tex. Crim. App. 1913) (where statutes conflict, later statute controls); Cuellar v. State, 521 S.W.2d 277, 279 (Tex. Crim. App. 1975) (special statute controls over general statute). Thus, article 342-205(b) does not preclude conservators and supervisors from being employees of the state for purposes of sections 104.001 and 104.008 of the Civil Practice and Remedies Code.

Because the savings and loan commissioner has the right to control the details of the work of conservators, supervisors, and liquidating agents, we conclude that they are employees of the state for purposes of sections 104.001 and 104.008 of the Civil Practice and Remedies Code.

SUMMARY

Conservators, supervisors, and liquidating agents appointed under chapter 8 of article 852a, V.T.C.S., are employees of the state for purposes of sections 104.001 and 104.008 of the Civil Practice and Remedies Code.

Very truly yours,

JIM MATTOX
Attorney General of Texas

JACK HIGHTOWER
First Assistant Attorney General

MARY KELLER
Executive Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Sarah Woelk
Assistant Attorney General