# The Attorney General of Texas

July 9, 1982 MARK WHITE Attorney General

Supreme Coun Building P.0. BOX 12546 Austin. TX. 713711-254~3 512,475.2501 Telex 9101874-1367 Telecopier 512!475-0266

1607 Main St., Suite 1400 Dallas. TX. 75201-4709 214,742.8944

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4309 N. Tenth. Suite B McAllen, TX. 78501-1695 5121682-4547

200 Main Plaza, Suite 400 San Antonio. TX. 78205.2797 512/225-4191

An Equal Opportunity/ Affirmative Action Employer Mr. CharlesD. Travis opinionNo.NW-493 ExecutiveDirector Texas Parks and Wildlife Department Re: Authority of Texas Parks 4200 Smith School Road and Wildlife Department to Austin, Texas 78744 reinvest trust funds

DearMr. Travis:

Your letter concerns the proper administration of certain funds containedwithin theVarner-HoggState Park Trust Fund administeredby the department as trustee for the benefit of the Varner-Hogg State Park in Brazoria County. This trustwas established in 1956by a deed which conveyed to the department certain real property and personalty in the form of stock. You inform us that a portion of the stock was in the Liggett Corporationand that that stockhas been cancelledas a result of a merger agreement, leaving the shareholdersonly the right to receive a cash conversion value. Since the conversion to cash would no longerbe income-producing,the departmentwishes to consider thepossibility of investingthe cash in some income-producingasset.

Your question in essence is twofold: (1) would such investment be consistentwith the trustdeed and (2)does the departmenthave the authority tomake such an investment?

The relevantportion of the subject trustdeed reads as follows:

And, for and in considerationof the agreements and conditions hereinafter set out, I, the said IIM HoggI have transferred, assigned and delivered, and by these presents do transfer, assign and deliver, unto the said State Parks Board of the State of Texas, stock certificates evidencing three hundred thirty (330) shares of Kennecott Copper Corporationconrmon stock, and one hundred (100) shares of Liggett & Myers Tobacco Company common stock, upon condition that all of the cash dividends from said stock shall be used only for the operation, maintenance .and improvement of,the premises hereinabove granted, and no other, and that the title to said stock shall vest and remain in said State Parks Board

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. Mr. CharlesD. Travis - Page 2 (Mw-493)

for so long a time as said premises shallbe used for State Parkpurposes,as hereinprovided.

TO HAVE ABD TO HOLD the above described premises and shares of stock, together with all and singular, the rights and appurtenancesthereto in anywise belonging unto the said State Parks Board of the State of Texas so long as said premises are continuously held and used by said Grantee, and its successors,as a State Park under the covenants,terms and provisionshereof, and no longer; and if the same be not used for said purposes, or at any time cease tobe used for such purposes, or at any time be used for any other purposes save and except those which are herein expressly described and mentioned, then and thereupon this conveyance and transfer shall be null and void and said premises and shares of stock, togetherwith any additional or substitute shares which may be hereafter acquired by way of merger, consolidation,stockdividends, split-ups, and/or spin-offs, by the issuing corporations or their successors, shall immediately thereafter revert to Grantor herein, her heirs or assigns, and it shall be lawful, without suit, but only upon the giving of reasonablenoticesto the State Perks Board of the State of Texas, or its successors, for Grantor herein, her heirs or assigns, to re-enter and repossess said premises and repossess said shares of stock,and thereafter peaceably to hold and enjoy said premises and shares of stock as if thesepresentshad not been made; and no act or omission on the part of Grantor,her heirs or assigns, save the failure to give such notice, shall be or constitutea waiver of the operationor enforcementof such condition; and upon such occurrence the State Parks Board of the State of Texas hereby expressly binds and obligates itself to re-transfer. re-assign, and deliver unto Grantor, her heirs or assigns, any and all certificatesevidencing said shares.

The cancellationof the Liggett stock and its conversion to cash clearlywas not one of the possibilities contemplatedby the grantor when the trust deed was executed and therefore we have no express instructions from the grantor as to how such a contingency should be handled. We are left with having to make a determination of whether
or not the investment of the cash conversionwould be contrary to the intentof the grantor. The grantor clearlyintended that the trustbe

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composed of income-producing assets, for that is what she in fact conveyed. Furthermore, the instrument is silent with regard to how the trustee should handle assets thatwere not income-producing. The grantor clearly intended to establisha trust that would be adequate to maintain the park grounds indefinitely. Given a choice between leaving a sum of cash in the fund which is not income-producing or converting cash into an income-producing asset, the latter choice appears tobe more consistentwith the intent of the grantor.

In answer toyour second question,we note initiallythat a state agency only has thosepowers which are expressly conferredupon it by law or necessarily implied therefrom. 2 Tex. Jur. III Administrative Law 511. The Parks and Wildlife Code itself does not grant to the department the general authority to invest monies under its control, but it does contain authority for the department to accept gifts for thebenefit of the state park system,Parks and Wildlife Code section 13.004,and thereforehas authority to act as trustee of those gifts. Attorney General Opinion WW-122 (1957). The situation we are presented with here is not one which involves money appropriated by the legislature or in any'way derived through taxation nor does it involve money under the department's general management and control. Rather, the departmentacts as a trusteeand as such accrues the same powers and responsibilitiesover the trust as any other trusteeunder the laws of the state of Texas.

There is an implied duty to invest non-income producing assets held in trust where there is a direction by the grantor to pay 'over the interest or income to a beneficiary,Moore v. Sanders, 106 S.W.2d 337, (Tex. Civ. App. - San Antonio 1937, no writ), and it is the trustee's duty to use reasonable diligence in so doing, McMullen v. Sims, 37 S.W.2d 141 (Tex. Comm'nApp. 1931, holding approved). While
no case in point can be found in Texas, it is a generally wellestablishedprincipalunder the common law that trusteeshave a duty, in the exercise of sound judgment and discretion, to convert unproductive property into an income-producing fund as soon as can reasonablybe done, Odgen v. Allen, 114N.E. 862 (1917). We find no hindrance to the application of theseprincipals to the situationyou havepresented.

We therefore conclude that (1) the Texas Parks and Wildlife Department has the authority under the law of trusts to invest funds of the trust, (2) the trust instrument contains no language which would limit that authorityand (3) such investmentmost fully complies with the intent of the grantor.

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. . . Mr. CharlesD. Travis - Page 4 (MN-495)

SUMMARY

The Texas Parks and WildlifeDepartmenthas the authorityas trusteeof theVarner-HoggState Park Trust Fund to invest its cash assets.

-MARK WHITE Attorney General of Texas

JOHNW. FAINTER,JR. FirstAssistantAttorney General

R1CHARD.E.GRAY III ExecutiveAssistantAttorney General
Preparedby Eva Loutsenhiser AssistantAttorney General

APPROVED: OPINIONCOMMITTEE

SusanL. Garrison,Chairman RickGilpin PatriciaHinojosa Eva Loutzenhiser JimMoellinger

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