OFFICE OF THE ATTORNEY GENERAL OF TEXAS
2. I AUSTI

GROVER SELLERS Yl ATTORNEY GNERAL

Honwable Weaver Ii. Baker. Cbaiman State Board of Control - Austin, Texas

Dear Sir: Opinlen Be. O-7005
Rer Authority of Beard

islature will have and Insurance Corpo
on the members of t and given careful st such surety bonds yeas haa been received ortlens of your letter:

agreed te execute the the State Board of

contract. ontract has been fully performed on

partles therete and beth parties to abide by the terms of the aaid**:Hon.,Weaver** H. Bsker, psge 

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## 23

,

Paragraphs tuo 8nd three of the aontraatyou have with Centrsrt

Surety 8nd InsurenaeCorporstlon8re quoted belovt

"The Party of the Second Part hereby aantrsats and agrees to execute the suretybonds on the member8 of t.he State Board of Control, the Searetary to the
**Stste** B0s.H of Cbntrol, 8nd the Superfntendents8nd Storekeeper-aoaountants of the vsrious ~eemosyn8ry Institutionsof,the State of Texas, under the supervision of the Boaed ,of Control, 8s required by statute

as 8nd vhen their present bonds axpire, or nev onea 8re requfred, fey 8 period of two ye8rs be-g Septehber

### 25, 1944. It is agreed and understood that should surety bonds be required8y lev of other employees of the State Board of Control or the various Eleemosynary inatitutZonsduring the time aoveredby this aontraat, the Party of the Second Part sgrees to execute them.. This is ln acaordanaewith the speaifiaations and bid proposal 8s submittedby the Pwty OS the Seoond, Part 8nd opened by the Party of the First Part on September 25, 1944, 8nd said speoifiaationa and bid proposal 8re hereby made 8 part of this contract for all purposes.

"In 8aaord8naevith the provisionsof the bid submittedby the **Party** of the Seaond Pert, the Party of the First PsFt hereby contractssnd 8gFeea to pay to the Party of the Ssaond Part Two ($2.00)Dollars per thous8ndper 8nnum for the Vsrious fidelitybonds to be executedby the Party of the Second Part. In

a aase the Legislature shouldprovide that premiumsmay **be** paid for two years In advance, the Party of the Seaond P8rt agrees that the **premium** sh8ll be Three and SevqntyXundredtha ($3.70)Dollars per thousand for m'two year peplod. The Party af the Second Part agreea to submit to the proper institution,or the Board of Control as the aase m8y be, 8 statement for the premium of each bond, executed In trlpllaate 8nd aaaomparnled **by** 8n affidavitas requiredby lav...?

It will be noted thst the effeativeperiod **of** the aontraat is from September 25, 1944, to September25, 1946. There sppears to be no question as to the vslldity of this aontraat 'atthe time itHon. Weaver Ii. Baker, page 4 

### 20

was signed September 

### 1944, The question, then, is, wh8t eifeat Senate Bill 233 has, 1-P any, upon the valldltp or legality of the aontraot.

It Is ow? opfnion thst the effeot of son8te Bill 233 is to make llleg$the exeautionof bonds thereunderat the rates therein stipulatedafter the effeativedate o? the nevly establishedrates by the Ismmsnae Board. After suah date, bonds may be made at the new rates for the reason hereinefterrtated.

The aonalualonia predicatedupon the rule **that** vhore a aontraat la exeautedwhlah la valid at the time of it8 exeaution but by reason of s8ubsoQuentah8nge in the law - whether **by statute**  or **valid 8dBbbItratlvo**  **Order8 making**  **the further**  subjeatmatter Of the aontraot illegal, It operates 8s a disahargo of the aontraat 60 weautc;d.

Corpus Jurls Seaundum,**Vol.** 17, p. 964, Sea. 467, dealerear

"Performenae of a aontraat a8nnot be aompolled vhere it vould involve **a** violation of law. Hence 8 aontraat is dlwah8rgo&vhero after it has been entered Into, the perfornmnaeis made unl8vful."

The text is supported**by** numerous a8868 Including Federal deal&ions and others from the highest oourta o” the States of Arlgensas,

Callfornl8,De18var0, ffeorgia, Illinois, Indiana M8ryland, Miselealppi,Aev limpshire,Hew York, Texas, West Virginia, 8nd WisaonsIn, In the pocket prt supplefaent, there BFQ Inaluded other a8888 from the State6 of PeIIASylV8d8, Rhode Island and Wyoming.

Bule VS. Porter, 22% 3. U. 999, the Texas aaae cited by the text quotes Ruling CSse Law aa followst

“One of the aondltlonsimplied In 8 aontraat is that the promiser shall not be aonrpelled to perform lfop~errmanae la rendered imgosslbleby an sat of

. The inferenae is that the perties did not aontomplatethat dmages should be peid for nonperformenae In the event that performanceYaa aubsequently ppohlbitedb law. The deaislonsof praatiacally

sll jurl.adla

eions me to the effect that where a contract,legal ln ita inception,becones,

A, HOPI.

Weaver H. Bsker, page 

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illegal by subsequentstatutoryenaotment,the aontrsot 1s wholly termlnsted8% soon 8% the statute takes effeat, even though the time speclfled for Its performancehes not yet fully expired, and no action aan be maintainedby either party for failure to peqform the obllgetlonsof the contract after the liiegailtyhas sttached."

In Lcui%vllleand ReehvilleRailroad Company vu). ROttiey, (n. 3. 

### )55MU. Ed. 297, It 1s said;

"This lmpossibllltyof enforcementexists vhether the agreement 1% illegai ln its lnoeptlon, **or** whether being oaild vhen made, the lllegallty has been **arested** by a subsequentstatute."

traats. The language~8s 8 quotationfrom Pommeroy on conThe 3hpreme Court further approvingPommeroy quoted
one of hi% supportingcritatione , Chief Justlae Lord Ellenborough, who a8idt "Thatno contr8ct can properlybe oarrled into effect which ~88 orlg!nailymade contrsry to the provisionsof law, or vhlah, being made conalstently vith the rules Qf law at the time, ha% become illegal ln virtue of some subsequentlaw, Bpe propositions which 8dmlt of no doubt." JustiaoHarlan then further quoted Judge Cooley upon the aonstltutlonal provisionprohibiting ieglslatlon lmpalring the oblfgstlonso? aontrsats,**as** follow%:

"But the aat to reguiste oommerae is 8 general iaw, and aontraotsare **8ivays** liable to **be** more or less affectedby general 18~9, even when ln no way referred to

. . . But this lnoldentai effect of the general lav is not understood to make It a 18~ impairingthe obligation of oontraots. It is 8 necessaryeffeot of 8ng oonslderableohange ln the publie iawa. If the Legislaturehad no **power** to alter It% police law% when the oontraatswould be effeatedthen the moat importantand valusblereformsmight be prealuded by the simple **devise** of enteringInto oontraots for the purpoee, Ho doctrine to that effeat would be even plausible,muoh leas sound and tenable."

In BrowntBr;sia;;; MerchsntsBank (H. Y.) 213 Rew York Supplement,146, 1 1

"Contraots

made with referenceto a subject within the restrictedpover OS 8 governmentoontalnHoni Weaver H. Baker, page 

### 6

the implied 

### OOndltlOA thata 

### ohangein 18v may be made end the obligationsof the parties varied
or 

### avoided. Flttsv. Andrevs, 192 App.‘Div.160, 182 R. Y. 9. 

### 464;Town of North Hempstead vs. **Publio** Serviq? Corp., 

### 231 n, Y. 44 450, 1 2 R. B, l&4* Legal Tender C88e6, 12 Wall, 

### 57, 551 J' ?

20 L,Rd. 

### 287). ‘The obligationof the law qwlifier, and In case of aonfliat,ovdrridos,the obligationof the oontraot.~ Postal. Tel. Cable Co. v. Assoalated Press, 228 R. Y, 370,- 375, 127 f. B. 256. ‘Contrsate must be undsrstood as made In referonae to the **poa** 8181s exerolso o? the rightful authorityof the government.~ 

### Louisville 6 R. R. Co, Y. Rottley, 219
**u. 3.**  

### 467, 482, 31 8. Ot, 265, 270, 55 L. Ed. 297, 

### 34 L. R. **A,** (R. 3.) 

### 671. The rights of the p8rties relitlve to the certificateto 8% signed,being subject to governmentrestrlation,aould not be removed from suah restrlationby 8 contraat aontrsry to the law. Rudson County Water Co. v. MaCarter, 

### 209 U. 3. 349, 357, 2% S.Ct. 529, 52 L. **Bd. 828,**  

### 14 Ann. Cas 

### 560~ People ox rel. City of Ecu York
v. Nixon, 229 8. Y. 

### 356, 359, 12% N. E. 245.When the new 18~ beceme operative,the partieswere relieved from performanoeIn that nuinner, for, vithout fsult on the psrt of either,both 

### were disabledfY?om performing.Adler v. tiles, 69 Miss. Rep. 601, 

### 126 N. Y, 9. 

### 13

54 ; 

### ." People v. dlobe Mutual Life Ins. Co, 91 R. Y. 

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This dealsionvaa 8ffirmed **by** the Court of Appeals, the highest jurlsdiationin Rev York. We have found no aase holding.%0 the aontrary. It is proper, **however,** under the, authorities,to sever the llleg8lportion of the contra& where the nature of the contractmakes such matter severable 8nd to i enforce the contra& aa to that portion r%m8iningilegal after such severance. t We understand the aorporation1% 8gre%881% to this

being done and is ullllng to write fidelitybonds under the, . . ____- ..----- -. se.-., r-- ,

contract for the remainder of lta term at the Board*8 prescribed rate8 (wry naturally since the rescrlbedmlnirmull rates are higher than the oontraotrate8 P edd we think it i.s within your authority to permit It to do so for the remainder of the lll;yz~ of your oontraot.