Request By:
Mr. John L. Williams, Jr.
Commissioner
Department of Banking and Securities
Frankfort, Kentucky 40601
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
You request our opinion on the following question:
"Whether or not Property Valuation Administrators (PVA's), Commonwealth Attorneys, Assistant Commonwealth Attorneys, Circuit Clerks, Deputy Circuit Clerks, District Judges, Court Reporters, and members of their respective staffs are employees of the Commonwealth of Kentucky for purposes of membership in the Commonwealth Credit Union."
The Commonwealth Credit Union, Inc., was organized by and for state employees in 1951 pursuant to enabling legislation found in KRS Ch. 290. It is not a state agency since it neither receives nor expends state funds, and neither does it exercise any executive or administrative jurisdiction, powers, duties, rights or obligations of state government. The Commonwealth Credit Union is a private corporation that was organized and is being operated for the exclusive benefit of "state employees. "
From the corporate name and the fact that the corporation was organized by state employees, it is evident from the charter that the corporation was created for the exclusive benefit of state employees. See KRS 290.020 [articles of incorporation] . KRS 290.030 provides that bylaws must be filed with the original articles of incorporation. Subsection (3) of the latter statute provides that the bylaws must cover, inter alia, the matter of occupational eligibility for membership.
Article III of the bylaws, prior to the proposed amendment of that article, provides in effect that membership in the corporation is limited essentially to those who are "employees of the Commonwealth of Kentucky." Even the proposed Article III Bylaws Amendment of September 21, 1978, still speaks in terms of "employees of the Commonwealth." KRS 290.080(2)(c) stresses that membership in such corporations shall be limited to those persons which have a mutual affiliation by "identity of their employer." That subsection is the "mutual affiliation" requirement which applies to this credit union, since it was organized for "state employees. " At this point it is our opinion that the corporation has no authority, by way of amending bylaws, to narrow or restrict the membership to something other than "state employees" as defined by the courts in considering the ordinary use of language.
It is our opinion that there is no statutory definition of "state employee" , as such, applicable in this situation.
It is elementary that corporate bylaws are inherently "subject to the limitations that the bylaws must not contravene or be inconsistent with the charter of the corporation or its articles of incorporation . . ." 18 Am.Jur.2d, Corporations, § 162, p.p. 695-696. As we said above, the spirit and wording of the articles of incorporation spell out that the corporation is to exist only for the benefit of "state employees. " The only question is what is meant by "state employees" ? The relationship of a corporation and its shareholders is contractual and the articles and bylaws are part of the contract.
Toler v. Clark Rural Electric Cooperative Corp., Ky., 512 S.W.2d 25 (1974) 26. Thus the articles and bylaws should be construed as any other contract. Nontechnical words in a contract generally are to be understood in their ordinary and popular sense, unless the intent of the parties to use them otherwise is clearly shown from the context.
Bradford v. Billington, Ky., 299 S.W.2d 601 (1957) 604.
Here the bylaws cannot be changed to depart from the original articles of incorporation provision for "state employees" eligibility, the term "state employees" being dependent upon its ordinary and popular meaning and hinging around the statutory provision relating to "identity of their employer" [KRS 290.080(2)(c)].
The old Court of Appeals has already dealt with the question of whether a particular officer is a state employee or county employee where there is no applicable statutory definition of "state employee. " For purposes of social security the court held in
Shamburger v. Commonwealth, Ky., 240 S.W.2d 636 (1951) that the sheriff, circuit clerk and county clerk of Jefferson County were state employees, since they were paid by check of the state treasurer. The court wrote that the controlling point was the source of the compensation, i.e., who pays the salaries.
The principle in Shamburger, above, applies here. A "state employee" , for purposes of membership in this corporation, is merely one who receives pay from the state treasury. The following chart indicates the state treasury source of pay of the officers and employees in question:
PVA's - KRS 132.590 and 132.595Commonwealth's Attorneys and Assistants - KRS 15.755Circuit Clerks and deputies - KRS 30A.010, 30A.050, 64.055District Judges - Section 120, Ky. Const.Court Reporters - Section 120, Ky. Const., KRS 30A.310.
It is therefore our opinion that PVA's, commonwealth attorneys, 1 circuit clerks, deputy circuit clerks, district judges, court reporters, and members of their respective staffs are "state employees" for purposes of membership in the Commonwealth Credit Union, since they all are paid by checks drawn on the treasury of Kentucky.
The proposed amendment to Article III of the bylaws (membership) is illegal since it purports to narrow the term "state employees" , as aforementioned. As Commissioner you have ample reason to disapprove of such proposal. KRS 290.050.
Footnotes
Footnotes
1 And Assistant Commonwealth Attorneys