The Honorable John E. Fitzgibbon Opinion NO. D-916 County Attorney Webb County He: Whether a school P. 0. Box 577 district may contract with Laredo, Texas a company which employs a member of the school district's board of trustees.
Dear Mr. Fitzgibbon:
You have requested our opinion regarding whether a school district may contract with a'paper company which employs a member of the district's board of trustees. YOU state that the trustee works for the company in amanagerial capacity but owns no stock. He has entered into an agreement with hisemployer that hewill not receive any commission, bonus, or other remuneration based upon salesmade by the company to thedistrict, although he ispaid ayear-end bonus on thebasis of other company sales. You inquire as towhether, in such circumstances, the school district may contract with the paper company.
It iswell established that, even in the absence of a statute, the public policy of the state prohibits.transactions which involve a conflict of interest on thepart of public officials:If a public official directly or indirectly

has apecuniary interest in a contract, no matter how honest hemay be, and although hemay not be influenced by the interest, such a contract somade isviolative of the spirit and letter of our law, and is against public policy. Me ersv.Walker, 276 S.W. 305, 307 (Tex. Z!ihpT -- Eastland 1925, nowrit).

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See also City of Edinburq v. Ellis, 59 S.W.2d 99 (Tex. -- Comm'n App. 1933, holding approved). The principle ofMeyers has long been held applicable to themembers of a school district's board of trustees. Attorney General Opinions Nos. H-734 (19751,M-1236 (1972),WW-1362 (19621,O-2306 (1940),O-1589 (1939),O-876 (1939).
No Texas case or Attorney General Opinion has squarely determined, however, whether the principle applies to employees of a contractor, orwhether it is limited toofficers, directors, and substantial stockholders. InAttorney General Opinion o-2306, this office held that a school district trustee might receive compensation from a contractor for carpentry work performed by the contractor on a school district building, ifat the time the contract was let, there was no agreement stween the contractor and the trustee as to the employment inquestion. On the other hand, this office stated indicta inAttorney General Opinion M-1236 at 4, that "[wlhere thepecuniary interest of a public officer ina transaction is remote, as where . . .he isbut amere employee, rather than an officer or director . . .his interest is not one of such adegree thatwill render invalid the transaction inwhich his interest is involved." However, inEdward E. Gillen Co. 183N.W. 679, 68lm Kp. 1921), aRI sewerage commission was employed as the superintendent of a company which had contracted with the city. The Wisconsin Supreme Court held that, although the individual had no stock in the company andwas not one of its officers, he had such an interest in thebusiness andwelfare of his company aswould naturally tend to affect his judgment. If his company prospered, "his service and salary might be continued, and . . .hemight be promoted."
A California court has likewise held that a city councilman employed as a foreman of a company contracting with his citywas sufficiently interested in the contract to render itvoid, if his interest was such "aswould tend in any degree to influence him inmaking the contract . . .since upon the success of [the]business financially primarily depends the continued tenure of his position and the comoensation which he receives for oerformina the service required of him." Wheeler, Stockton Plumb& 6suppl; Co.v.

229 P. 1020, 1024 (Cal. Dist. Ct. App. 1924). Whenever the official's interest would "prevent him from exercising absolute loyalty and undivided allegiance to

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the the best interest" of contract isvoid. thegovernmental entity he serves, Miller ;,,;;ty ofeMar;negeb~2 ;,:T 519, 523 (Cal.Dist. Ct.App. co. & v. Moran, 293 P. 145, 146 (Cal.Gt.Ct. App.'1930). In PeoTe ex rel. me Pearsall v. Sperry, 145N.E. 344, 345-46 Sup.T9m the Supreme Court of Illinois, inholding that the employment of nine city council members by a company contracting with the city rendered the contract void, explained its rationale thus:

They would bemore than human if they could make the same fair and impartial contract with the contractor, as they could with another party with whom they had no relation byway of employment or otherwise.
~n~~~~o~~~~~~p~~~~~~~i~~~~~~.:~27:92d ;Byrne & Spee Csl Co. v. city of Louisville, 224 S.W. 883 CKy.Ct. App. 1920); contra, County ~l;ur:aofs~yl~:.C~~pnryl~i5~lty of Grafton, 86m24

. Itwould appear, then, that the trend andweight of legal authority would oblige our Texas courts tohold that a school district should not contract with a company which employs amember of the district's board of trustees in a managerial capacity, even though the trustee d~erivesno direct financial benefit from the contract. We do not address or question the language ofAttorney General Opinion M-1236 (1972),which dealt with stock ownership.
SUMMARY
A school district should not contract with a company which employs amember of the district's board of trustees in amanagerial capacity, even though the trustee derives no direct financial benefit from the contract. -Very truly yours,

eneral of Texas

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KENDALL, First Assistant

Opinion Committee jwb

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