Washington State

Office of the Attorney General

Attorney General

Bob Ferguson

AGO 1954 No. 209 - Feb 16 1954
Attorney General Don Eastvold


State banks in the state of Washington may legally give security for deposits of the Washington State Fruit Commission.

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                                                               Februrary 16, 1954

Mr. D. C. Davis
Assistant Manager
Washington State Fruit Commission
11 South 7th Avenue
Yakima, Washington                                                                                               Cite as:  AGO 53-55 No. 209

Dear Sir:

            This is in response to your request for an opinion on the question of whether or not state banks in Washington may legally give security for deposits of the Washington State Fruit Commission.

            In our opinion, the answer to your question is "Yes."


            In an opinion written by this office dated August 21, 1934, addressed to Mr. A. T. Magnusson, receiver of the First National Bank of Elma, we advised that state banks in the State of Washington were authorized on June 25, 1930, for a long time prior thereto, and at all times subsequent thereto, to pledge collateral as security for the deposit of all types of public funds, particularly state funds.

            The authority for such pledges is found in RCW 30.04.140, a pertinent portion of which reads as follows:

             [[Orig. Op. Page 2]]

            "No bank or trust company shall pledge or hypothecate any of its securities or assets to any depositor, or creditor, except that it may qualify as depositary for United States deposits, postal savings funds or other public funds, or funds held in trust and deposited by any public officer by virtue of his office, or funds held by the United States or the State of Washington, or any officer thereof in trust, or for funds of corporations owned or controlled by the United States, and may give such security for such deposits as are required by law or by the officer making the same:  * * *."

            The question then resolves itself to whether or not these funds collected by the Washington State Fruit Commission constitute public funds within the meaning of RCW 30.04.140. The term "public funds" has been defined as money collected pursuant to law, which money is held for the public and is to be used for a public purpose.  (See opinion dated August 5, 1942, addressed to Honorable Ralph E. Tieje, President of Eastern Washington College of Education.)

            The Washington State Fruit Commission, as created by the legislature, is a public corporation.  Its funds are collected by means of an annual assessment levied upon all commercial soft tree fruits grown in this state.  (RCW 15.28.160).  The money collected is paid to the treasurer of the commission to be deposited in banks designated by the commission and disbursed on its order.  (RCW 15.28.190).  All monies collected from such levy are to be expended exclusively to effectuate the purposes and objects of the chapter, which are to promote the production, consumption and sale of soft tree fruits.

            Funds belonging to corporate agencies of the Federal Government are, for all practical purposes, government funds.  SeeInland Waterways Corp. v. Young, 309 U.S. 517, 84 L.Ed. 901, 60 S.Ct. 646.  We see no reason why this analysis should not apply to funds of corporate agencies of the state government.

            The only question that might arise from this analogy is whether the funds of the Washington State Fruit Commission are, in fact, expended for a public purpose, and of this there could be little doubt.  The legislature has the power to spend money in aid of the general welfare, and this power is broad as the power to levy taxes for such purposes.  Mills v. Stewart, 96 Mont. 429, 247 Pac. 332.

             [[Orig. Op. Page 3]]

            What constitutes a public purpose for which public funds may be expended is a legislative question.  People ex rel. McDavid v. Barrett, 370 Ill. 478, 19 N.E. (2d) 356.  When the legislature has designated a certain expenditure to be for a public purpose, its judgment will be respected by the courts unless such designation is palpably without reasonable foundation.  Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 81 L.Ed. 1245, 57 S.Ct. 868, 109 A.L.R. 1327.

71,S. ,S.           The legislature expressly declared the purpose of the Soft Tree Fruits Act to be the promotion of the welfare of the state.  See Preamble, chapter 73, Laws of 1947.  Where such attempts have been made to encourage, promote and aid agriculture, courts have generally agreed that the promotion of the agricultural industry can be considered a public purpose for which the taxing power may be exercised.  C. V. Floyd Fruit Co. v. Florida Citrus Commission, 175 So. 248, 112 A.L.R. 576.  We believe that the moneys collected pursuant to chapter 15.28 RCW can safely be considered "public funds" within the purview of RCW 30.04.140.

            It should be noted, finally, that RCW 30.04.140 permits banks to give "security for such deposits as are required by law or by the officer making the same."  Consequently, security could be given for this fund if it is required either by statute or by the officer making the deposit.  In our opinion, state banks may, under such circumstances, give security for deposits of the Washington State Fruit Commission.

Very truly yours,

Attorney General

Assistant Attorney General