I._ .- . 

THE ATJTORNEY GPCNEPQAE 

OF TEXAS 

March 3, 1975 

Tbe Honorable Carlos F. Truan 

Chairman, Committee on Human 

Opinion No. H- 543 

Reaourcer 

House of Representatives 

P. 0. Box 2910 

Austin, Texas 78767 

Re: Constitutionality of certain 

portions of article 3183c, V. T. 

c. s. 

Dear Representative Truan: 

You have asked our opinion regarding the constitutionality of those 

provisions of article 3183c, V. T. C. S. which permit the superintendents 

of State institutions in the Texas Department of Mental Health and Mental 

Retardation to deposit the interest or increment accruing on the invested 

funds of inmates in a “benefit fund” from which the superintendent may 

expend the moneys for the education or entertainment of the inmates at 

the institution, ‘or for the actual expense of maintaining the fund at the 

institution. 

According to the Commissioner of the Department, inmates upon 

admission “are encouraged to relinquish excess funds and keep only small 

amounts in their possession for personal needs. ” Such funds, as well as 

any received after admission are, according to statute, deposited in the 

institution’s Trust Fund account and credited to the respective inmates. 

The interest earned on these invested funds is placsd in the institution’s 

Benefit Fund, and it is this accrued interest which is the subject of 

inquiry here. 

The statute specifies that moneys in the Benefit Fund should be 

utilized for the entertainment and education of the inmates of an institution. 

The Commissioner believes that “few of the patients and students have 

actual knowledge of the use to which interest earned on their funds is 

applied, ” and he states that the inmates in no way give their consent to 

the use of these funds. 

p. 2438 
. I . 

The Honorable Carlos F. Truan page 2 (H- 543) 

The Standard Operating Procedures Manual of the Department 

(March 1, 1972) requires that: 

. . . [e]ach expenditure must stand on its own as 

being of general benefit to the population of the 

institution. This does not mean or imply that 

every patient or resident must benefit from each 

expenditure from the Benefit Fund. The guiding 

principle in expenditures of these funds is that 

no partiality or preferential treatment is shown 

individuals or selected groups of residents or 

patients. Expenditures from Benefit Funds must 

be properly documented to show the exact purpose 

and, if practical, to show the names of the patients 

or residents benefiting from the expenditure. 

If an inmate’s relinquishment of his “excess funds” represents a 

valid contract, then the statutory effect of that agreement --the subsequent 

transfer of the accrued interest on those funds into the institution’s Benefit 

Fund-- must be deemed constitutional and valid, regardless of how the 

interest is ultimately expended. The constitutionality of article 3183~ 

thus dependes upon a factual determination of the validity of a particular 

inmate’s initial agreement to release his excess funds, and any funds 

received thereafter, into the institution’s Trust Fund account. 

There are three possible grounds on which an inmate might seek to 

avoid the contract whereby the consents to place his funds in the institution’s 

Trust Fund account: mental incapacity, undue influence, and mistake of 

law. 

It is a fundamental principle of contract law that each party to a 

contract must be legally competent and able to bind himself under an 

agreement. Phelps & Johnson v. Zuschlag, 34 Tex. 371 (1871). A person’s 

mere presence, however, in a mental mstitution is not determinative of 

the question of mental capacity to contract. Article 5547-8363 V. T. C. S., 

provides that: 

p. 2439 
. . . 

The Honorable Carlo8 F. Truan page 3 (H-543) 

The judicial determination that a person is mentally 

ill or the admission or commitment of a person to 

a mental hospital, without a finding that he is mentally 

incompetent, does not constitute a determination or 

adjudication of the mental competency of the person 

and does not abridge his rights as a citizen or affect 

his property rights or legal capacity. 

Likewise, mere mental weakness is not in itself sufficient to render a 

person incompetent for purposes of contract. Gray v. Allen, 243 S. W. 

684 (Tex. Civ. App. --San Antonio 1922, writ dism’d); Beville v. Jones, 

11 S. W. 1128 (Tex. Sup. 1889). Indeed, the law will presume that each 

party to a contract possesses sufficient mental capacity, and the burden 

of proof with respect to overcoming this presumption rests with the party 

who asserts the contrary. Swink v. City of Dallas, 36 S. W. 2d 222 (Tex. 

Comm. App. 1931). 

A person’s mental capacity to contract is dependent upon whether 

he knows and understands the nature and consequences of his act in 

negotiating the contract, and the resolution of this inquiry is a factual 

determination. Fox v. Lewis, 344 S. W. 2d 731 (Tex. Civ. App. --Austin 

1961, writ ref’d, n. r. e. ). The mental incapacity sufficient to void a 

contract must exist at the time the contract was entered. Cole v. Waite, 

242 S. W. 2d 936 (Tex. Civ. App. --Amarillo 1951)aff’d , 246 S. W. 2d 

849 (Tex. Sup. 1952). 

A second possible basis for avoiding the contract is the institution’s 

exercise of undue influence over the contracting inmate. Undue influence 

is separate and distinct from mental incapacity, and presupposes mental 

capacity to contract. Shelton v. Shelton, 281 S. W. 331 (Tex. Civ. App. 

--Austin 1926, no writ). The presence of undue influence may be demonstrated 

by the feeble-mindedness and susceptibility to influence of the party 

challenging the contract. McKay v. McKay, 189 S. W. 520 (Tex. Civ. App. 

--Amarillo 1916, writ ref’d). The combined elements of mental weakness, 

undue influence, and overreaching have been held sufficient to set aside 

a conveyance. Meyer v. Swift, 11 S. W. 378 (Tex. Sup. 1889). Furthermore, when one party to a contract stands in a fiduciary or confidential 

p. 2440 
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The Honorable Carlo8 F. Truan page 4 (H- 543) 

relationship to the other, the agreement will be carefully scrutinized 

by the courts, and the burden will be on the party in whan confidence 

has been reposed to show that the contract is just and reasonable, that it 

is supported by adequate consideration, and that it was freely entered into 

by the other party. Coon v. Ewing, 275 S. W. 481 (Tex. Civ. App. --Beaumont 1925,writ dism’d); Wells v. Houston, 57 S. W. 584 (Tex. Civ. App. 

1900,no writ). 

An inmate aggrieved by the operation of article 3183~ might also 

contend that, at the time he transferred his funds into the institution’s 

Trust Fund account, he was ignorant of the statute’s existence and effect. 

It is of course true that all persons of sould mind are presumed to know 

the law, Worthen v. Peoples Loan and Homestead Co., 150 S. W. 2d 830 

(Tex. Civ. App. --Galveston 1941,no writ), and that a mistake by a party 

to a contract as to its legal effect is generally no ground for equitable 

relief. Moore v. Studebaker Bros. Mfg. Co., 136 S. W. 570 (Tex. Civ. 

App. 1911, no writ); Kelley v. Ward, 58 S. W. 207 (Tex. Civ. App. 1903). 

aff’d , 60 S. W. 311 (Tex. Sup. 1901). 

But where the mistake was accompanied by circumstances tending 

to show misrepresentation, imposition, undue confidence, undue influence, 

mental incompetence, or surprise, relief has sometimes been granted. 

Means v. Limpia Royalties, 115 S. W. 2d 468 (Tex. Civ. App. --Ft. Worth 

1938, writ dism’d); Lange v. Bins, 281 S. W. 626 (Tex. Civ. App. --San 

Antonio 1926,no writ) ; Leslie v. City of Galveston, 226 S. W. 438 (Tex. Civ. 

APP. --Galveston 1920,no writ); Moreland v. Atchison, 19 Tex. 303 (1857). 

Especially in situations where the mistake is brought about by one possessed 

of superior knowledge, in whom trust has been reposed, a court of equity 

may intervene. Altgelt v. Gerbic, 149 S. W. 233 (Tex. Civ. App. --San 

Antonio 1912, writ ref’d). Other courts have granted equitable relief where 

one party takes advantage of the other’s ignorance of his legal position and 

rights. Commercial Bank & Trust Co. v. Buntain, 278 S. W. 503 (Tex. 

Civ. App. --Amarillo 1925, no writ); Ward v. Baker, 135 S. W. 620 (Tex. 

Civ. App. 1911, writ dism’d). 

An inmate’s relinquishment of his funds to the institution’s Trust 

Fund account, and the subsequent transfer of the accrued interest thereon 

p. 2441 
. . . 

The Honorable Carlo8 F. Truan Rage 5 (H-543) 

into the Benefit Fund, is thus a contract which is voidable on any of 

these three grounds, but it is not void as a matter of law. Gaston v. 

Copeland, 335 S. W. 2d 406 (Tex. Civ. App. --Amarillo 1960, writ 

ref’d. n. r. e.). Absent a particular inmate’s successful legal challenge, 

the contract must be deemed valid, and the relevant portions of the truet 

fund programwhich stand or fall in each particular cane upon the validity 

of the initial agreement, must be upheld as constitutional. 

SUMMARY 

Tmss provisions of article 3183c, V. T. C. S., which 

authorize the superintendent of a state institution in the 

Texas Department of Mental Health and Mental Retardation to “deposit any funds of inmates in his possession in 

any bank . . . [to] deposit the interest or increment 

accruing on such funds in a . . . ‘benefit fund, ’ of which 

he will be the trustee . . . [and to] expend the moneys in 

any such fund for the education or entertainment of the 

inmates of the institution, or for the actual expense of 

maintaining the fund at the institution!’ are constitutional 

on their face, but may be voidable by aparticular inmate’s 

showing that the initial relinquishment of his funds into 

the institution’s Trust Fund account was not a valid 

contract. 

Very truly yours, 

Attorney General of Texas 

, KENDALL, First Assistant 

C. ROBERT HEATH, Chairman 

Opinion Committee 

p. 2442