THE ATTORNEY GESERAL 

OF TEXAS 

April 8, 1987 

Mr. Perry L. Adkisson 

Chancellor 

Texas A 6 M University System 

College Station, Texas 77843 

Opinion No. JM-671 

Re: Validity of a proposed contract between Texas A 6 M and a 

corporation which is a wholly 

owned subsidiary of a corporation owned in part by a member of 

the university's board of regents 

Dear Mr. Adkisson: 

You inquire about the legality of a proposed transaction between 

the Texas Agricultural Experiment Station (TARS) and an agribusiness 

corporation in which a regent of Texas A b I4 University is economically interested. 

The Texas Agricultural Experiment Station is an agency of the 

Texas A h M University System. Educ. Code 188.001(Z). It is under 

the supervision of the board of regents of the Texas A 6 M University 

System. Educ. Code $88.202. An Education Code provision specifically 

provides that the regents 

shall generate revenues through agreements establishing equitable interists, royalties, and 

patent rights relating to releases of agricultural 

research products by the Texas agricultural 

experiment station when economically feasible. 

Educ. Code 588.213. 

The transaction about which you inquire involves an agreement 

between TARS end Granada Development Corporation (GDC), the entity in 

which the regent has an ownership interest. The Board of Regents 

would have to approve any contract between the Agricultural Experimeut 

Station and GDC. See Educ. Code 0588.202. 88.203, 88.213. You 

describe the legal relationships between GDC. its parent corporation, 

of which the regent is one-half ovner. and other subsidiaries of that 

parent. We will summarize these complex corporate relationships to 

provide a factual setting for your conflict of interest question. 

The regent owns one-half the stock of Granada Corporation, which 

engages in agribusiness. Granada Development Corporation. a wholly 

owned subsidiary. of Granada Corporation. carries out research and 

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Mr. Perry L. Adkisson - Page 2 (JM-671) 

development projects for its own account and for the account of its 

clients. Among its clients are affiliates of GUC. Pou describe GUC's 

affiliates as "principally publicly owned limited partnerships for 

whom Granada Management Corporation serves as General Partner: owning 

uo more than a one percent interest." Granada Management is wholly 

owned by Granada Land & Cattle Company, which, in turn, is wholly 

owned by Granada Corporation. 

Thus, the university wishes to contract with GDC. a wholly owned 

subsidiary of Granada Corporation, in which a university regent owus 

half the stock. In addition. GUC does work for limited partnerships 

whose managing partner is wholly owned by another wholly owned subsidiary of Granada Corporation. You state that the limited 

partnerships cannot devote more than twenty percent of their capital 

to research and development, and it is presently anticipated that no 

more than fifteen percent of any partnership research and development 

activities would be carried ou pursuant to the proposed agreement 

with Texas A h M University. 

You state that the proposed agreement would take the form of a 

master agreement pursuant to which GDC's clients would totally fund 

specific research and development projects, to be identified in the 

future and to be carried on jointly by personnel of GUC and the 

Agricultural Experiment Station. The clients of GDC for whom specific 

projects were carried ou would receive a worldwide royalty-bearing 

exclusive license to market and sell the product of the research 

projects. The Texas Agricultural Experiment Station would receive 

royalties in amounts to be agreed upon between TAES and the partnership. Granada Management, as a one percent interest owner in the 

affiliate partnerships. would contribute a pro rata share of one 

percent of any cash contribution required and would be entitled to 

receive a pro rata one percent share of any research benefit. The 

regent who owns a half interest in Granada Corporation is connected to 

all parties to the contract - the Unfversity. GUC, and the affiliate 

clients of GDC. 

The Texas courts have established a strict rule prohibiting a 

public officer from having a personal financial interest in a contract 

entered into by the governmental body of which he is a member. The 

court in Meyers v. Walker, 276 S.W. 305 (Tex. Civ. App. - Eastland 

1925, uo writ) stated this rule as follows: 

If a public official directly or indirectly has a 

pecuniary interest in a contract, uo matter how 

honest he may be, and although he may not be 

influenced by the interest, such a contract so 

made is violative of the spirit and letter of our 

law. and is against public policy. 

Meyers v. Walker, 276 S.W. at 307. The rule aunounced in Meyers v. 

Walker has been relied upou in numerous cases co invalidate contracts 

p. 3073 
Mr. Perry L. Adkisson - Page 3 (JM-671) 

made by public officials who were pecuniarily interested therein. 

See, e.g., City of Edinburg v. Ellis. 59 S.W.2d 99 (Tex. Comm'n App. 

1933); Delta Electric Construction Co. v. City of San Antonio, 437 

S.W.2d 602 (Tex. Civ. App. - San Antonio 1969, writ ref'd n.r.e.); 

Bexar County v. Wentworth. 378 S.W.2d 126 (Tex. Civ. App. - San 

Antonio 1964, writ ref'd n.r.e.); Attorney General Opinion Nos. JM-171 

(1984) ; FW-179 (1980); E-1309 (1978); H-916 (1976); M-340 (1969); 

WW-1362 (1962); V-640 (1948); O-2929 (1942). The conflict of interest 

cannot be cured by the interested officer's recusing himself. Delta 

Electric Construction Co. v. City of San Antonio, 437 S.W.2d at 609. 

IU our opinion, the common law rule announced in Meyers v. Walker 

provides the answer to your question. Under the proposed contract, 

the affiliate clients of Granada Development Corporation will have a 

right to receive royalties on projects that may be developed from the 

research they fund. The legislature recognized the potential economic 

value of research conducted at TAPS when it enacted section 88.213 of 

the Education Code directing the regents to generate revenues "through 

agreements establishing equitable interests, royalties, and patent 

rights relating to releases of agricultural research products" by 

TAES . See also General Appropriations Acr. Acts 1985. 69th Leg., ch. 

980, art. V, 170. at budget 510 (protection of state's property rights 

in patentable product of research funded under Appropriations Act). 

The regent who owns half the stock in Granada Corporation has a 

pecuniary interest in Granada‘s subsidiaries and in their transactions. The economic well-being of Granada till be affected by the 

business activities of its subsidiaries, including work done under the 

proposed contract with Texas A h M University. Therefore, we believe 

the regent has a pecuniary interest in the contract between GDC and 

the university, arising out of his ownership interest in the subsidiary, even though GDC's clients, and not the subsidiary itself, 

will pay the costs and receive the benefit of projects undertaken by 

GDC and the university agricultural experiment station. The fact that 

GDC would uot receive any consideration from the university would not 

prevent the regent from having at least an indirect interest in that 

transaction. See generally Bexar County v. Wentworth, s. We 

believe the regent has a pecuniary interest through GDC's affiliate 

clients in the agreement with the uuiversity. 

Moreover, where the client for whom the Agricultural Experiment 

Station undertakes a project is an affiliate of GDC, the regent 

actually has a pecuniary interest in the transaction. Although you 

argue chat the regent's interest is "de minimis," the common law 

conflict of interest has been applied to small interests. See 

Attorney General Opinion H-624 (1975); see also Attorney Gene= 

Opinion J'M-424 (1986). 

The general partner of a limited partnership has, with certain 

exceptions, all the rights and powers of a partner in a partnership 

without limited partners. V.T.C.S. art. 6132a. 510(a). Thus, the 

p. 3074 
Mr. Perry L. Adkisson - Page 4 (JM-671) 

general partner is "an agent of the partnership for the purpose of 

its business." V.T.C.S. art. 6132b. §9(1). He may contract for 

the partnership. Boyd v. Leasing Associates, Inc., 516 S.W.2d 485. 

489 (Tex. Civ. App. - Houston [lst Dist.] 1974, writ ref'd n.r.e.1. 

The general partner of a limited partnership moreover stands in a 

fiduciary capacity to the limited partners. Crenshaw v. Swenson, 611 

S.W.2d 886. 890 (Tex. Civ. App. - Austin 1980. writ ref'd n.r.e.); 

Watson v. Limited Partners of WCXT, Led.. 570 S.W.2d 179. 182 (Tex. 

Civ. App. - Austin 1978. writ ref'd n.r.e.1. It is the general 

partner's duty to administer the partnership affairs solely for the 

benefit of the partnership. Creashaw v. Swenson, 611 S.W.Zd at 890. 

Granada Management Corporation is the general partner of Granada 

Development's affiliate client;. The individuals who own the parent 

corporation of Granada Management's parent may benefit economically 

from contracts which Granada Management Company may eater into on 

behalf of its clients. 

You argue that the enactment of article 6252-9b. V.T.C.S.. 

changed the common law rule of Meyers v. Walker and thus that doctrine 

does not govern this transaction. Section 6 of article 6252-9b. 

V.T.C.S., provides in part: 

(a) This section applies only to an elected or 

appointed officer who is a pember of a board or 

commission having policy direction over a state 

agency. excluding officers subject to impeachment 

under Article XIV, [sic] Section 2, of the Texas 

Constitution. If such an officer has a personal or 

private interest in any measure, proposal, or decision pending before the board or commission. he 

shall publicly disclose the fact to the board or 

commission in a meeting called and held in compliance with the Open Meetings Law (Article 

6252-17, Vernon's Texas Civil Statutes,) and shall 

not vote or otherwise participate in the decision. 

The disclosure shall be entered in the minutes of 

the meeting. 

(b) For the purposes of this section, the term 

'personal or private interest' has the same meaning 

as is given to it under Article III. Section 22. of 

the Texas Constitution, governing the conduct of 

members of the legislature. For the purposes of 

this section, a person does not have a 'personal or 

private interest' in any measure, proposal, or 

decision if he is engaged in a profession, trade, 

or occupation and his interest is the same as all 

others similarly engaged in the profession, trade, 

or occupation. 

p. 3075 
Mr. Perry L. Adkisson - Page 5 (JM-671) 

(c) A person who violates this section is 

subject to removal from office on the petition of 

the attorney general on his own initiative or on 

the relation of any other member of the board or 

commission or on the relation of any citizen. . . . 

You suggest that a state board may contract with a company in which a 

board member is interested as long as the interested person publicly 

discloses the fact and recuses himself. 

We have held that article 988b. V.T.C.S., a 1983 enactment pertaining to conflict of interest by local public officials, repealed 

the Meyers v. Walker doctrine at the local level. See Attorney 

General Opinion .R4-424 (1985). Article 988b. V.T.C.S.,provides in 

part: 

Sec. 3. (a) Except as provided by Section 5 of 

this Act, a local public official commits an 

offense if he knowingly: 

(1) participates in a vote or decision on a 

matter involving a business entite in which the 

local public official has a substantial interest if 

it is reasonably foreseeable that an action on the 

matter would confer an economic benefit to the 

business entity involved; 

. . . . 

Sec. 4. If a local public official or a person 

related to that official in the first or second 

degree by either affinity or consanguinity has a 

substantial interest in a business entity that 

would be peculiarly affected by any official action 

taken by the governing body. the local public 

official, before a vote or decision on the matter. 

shall file an affidavit stating the nature and 

extent of the interest and shall abstain from 

further participation in the matter. The affidavit 

must be filed with the official recordkeeper of the 

governmental entity. 

Sec. 5. (a) The governing 'body of a governmental entity may contract for the purchase of 

services or personal property with a business 

entity in which a member of the governing body has 

a substantial interest if the business entity is 

the only business entity that provides the needed 

service or product within the jurisdiction of the 

governmental entity and is the only business entity 

that bids on the contract. 

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Mr. Perry L. Adkisson - Page 6 (JM-671) 

. . . . 

Sec. 6. . . . The finding by a court of a 

violation under this article does not render an 

action of the governing body voidable unless the 

measure that ~was the subject of an action involving 

conflict of interest would not have passed the 

governing body without the vote of the person who 

violated this article. (Emphasis added). 

The language and legislative history of article 988b demonstrate that 

it applies to contract formation and that ic changes the common law 

rule invalidating a public contract in which even one member of the 

contracting governmental body has a private pecuniary interest. 

Section 6 of article 6252-9b, V.T.C.S.. prohibits voting or other 

participation in a decision by an officer who has 

a personal or private interest in any measure, 

proposal, or decision pending before the 

board. . . . 

V.T.C.S. art. 6252-9b. 06(a). Article 988b prohibits participation 

in a vote or decision on a matter involving a 

business entity in which the local public official 

has a substantial interest. . . . 

V.T.C.S. art. 988b. 53(a)(l). 

These two prohibitions are expressed in similar language. Article 

6252-9b does not, however. include any language indicating that 

section 6 was intended to apply to contracts , nor does its legislative 

history suggest an intent to modify the Meyers v. Walker rule. Article 

6252-9b was adopted in 1973 as Rouse Bill No. 1. Acts 1973, 63rd 

Leg., ch. 421. at 1086. It was described as "The Ethics Bill" and 

imulemented its ournoses throuuh financial disclosure bv state 

officers. Id.; "Background Repott on Local Officers' Conflict of 

Interest Problems" at 17 in Final Report of the Public Servant 

Standards of Conduct Advisory Committee, August 1983. Section 6 was 

added only when House Bill No. 1 was discussed by the conference 

committee. Texas Legislative Council. "Ethics and Financial 

Disclosure," at 31 in Selected Public Interest Legislation, May 1978. 

Some conferees expressed the opinion that the restriction on voting by 

members of the legislature in article III, section 22 of the Texas 

Constitution should also apply to members of boards and commissions. 

Id. Article III. 

follows: 

section 22 of the Texas Constitution provides as 

A member who has a personal or private interest 

in any measure or bill, proposed, or pending 

p. 3077 
n 

Mr. Perry L. Adkisson - Page 7 (JM-671) 

before the Legislature, shall disclose the fact to 

the House, of which he is a member, and shall not 

vote thereon. 

"It is an ancient rule that members of a lawmaking body shall not vote 

on matters in which they have a personal interest." Lute, Legislative 

Procedure, 366 (1922) (quoted in Texas Legislative Council, "Ethics 

and Financial Disclosure" at 32). 

Article 6252-9b, V.T.C.S.. was therefore modeled on a provision 

applicfble to legislators, who do not enter into contracts for the 

state. The state agencies whose offices are subject to section 6 

exercise regulatory and other executive functions. They may also 

enter into contracts necessary to carry out their executive responsibilities, but it is reasonable to conclude that section 6 pertains 

to the agencies' primary functions: rule making and the application 

of the statute and rules to individual cases. Section 6 does not 

prohibit an officer from participating in a measure, proposal or 

decision "if he is engaged in a profession, trade, or occupation and 

his interest is the same as all others similarly engaged in the 

profession, trade, or occupation." V.T.C.S. art. 6252-9b, 56(b). 

This proviso suggests that the legislature had regulatory actions in 

mind when it added section 6 to article 625%9b. Section 6 was 

moreover seen by the legislature as placing an additional restriction 

on state offices and.not as removing an existing restriction. 

When article 6252-9b, V.T.C.S.. became effective on January 1, 

1974, the following rule of statutory construction applied to all 

civil statutes: 

The rule of common law that statutes in derogation thereof shall be strictly construed shall 

have no application to the Revised Statutes; but 

the said statutes shall constitute the law of this 

State respecting the subjects to which they 

relate: and the provisions thereof shall be 

liberally construed with a view to effect their 

objects and to promote justice. 

Act of Feb. 21. 1879, 16th Leg. R.S.. adopting Tex. Civ. Stat., Final 

Title 53 (formerly codified as V.T.C.S. art. lO(8) repealed 1985). 

See Government Code 5312.006(b). 

m.C.S., is stated as follows: 

The object of article 6252-9b. 

1. Article III. section 18, of the Texas Constitution forbids a 

legislator from being interested in contracts with the state or a 

county authorized by any law during a term for which he was elected. 

p. 3078 
Mr. Perry L. Adkisson - Page 8 (m-671) 

It is the policy of the State of Texas that no 

state officer or state employee shall have any 

interest, financial or otherwise, direct or indirect, or engage in any business transaction or 

professional activity or incur any obligation of 

any nature which is in substantial conflict with 

the proper discharge of his duties in the public 

interest. To implement this policy and to 

strengthen the faith and confidence of the people 

of Texas in their state government, there are 

provided standards of conduct and disclosure 

requirements to be observed by persons owing a 

responsibility to the people of Texas and the 

government of the State of Texas in the performaace of their official duties. 

V.T.C.S. art. 6252-9b, Il. This objective would be poorly served by a 

construction of section 6 which weakens the common law conflict of 

interest rule applicable to state officers. 

Attorney General Opinions issued since article 6252-9b, V.T.C.S., 

became effective have applied the Mayars v. Walker rule to state 

agencies. See Attorney General Opinion Nos. MW-179 (1980); H-1309 

(1978). Section 6 of article 6252-9b. V.T.C.S., has been applied to 

an agency.in its capacity as a regulatory body. Ser Attorney General 

Opinion Nos. JM-126 (1984); E-1319 (1978). In our opinion, article 

6252-9b. V.T.C.S., did not modify the common law conflict of interest 

rule stated in Meyers v. Walker. 

Accordingly, the Board of Regents of A h H University may not 

approve a contract between the Texas Agricultural Experiment Station 

and a corporation ia which a regent of Texas A h H University has a 

financial Interest. Under the common law rule, the board is barred 

from approving the contract; racusal of the interested regent will not 

permit the board to approve it. See Delta Electric Construction Co. 

v. City of San Antonio, supra. Thepublic policy of the state strictly 

opposes such contracts even if all parties act in good faith and fully 

believe that the coatract will benefit the state. A prior opinion of 

this office determined that the board of regents of a state college 

could not contract with a bank of which a regear was an officer. The 

opinion made the following observation about the absolute nature of 

the public policy against conflict of interest in contract matters: 

It is not a question of whether or not the 

public interest will actually suffer in permitting 

the particular contract. but it is rather one of a 

sound policy as to official conduct where the law 

will not speculate upon the actualities following 

its violation. 

p. 3079 
Mr. Perry L. Adkisson - Page 9 (JM-671) 

Attorney General Opinion V-640 (1948) at 2. 

The Regents of A h M University may not approve the contract 

about which you inquire. 

SUMMARY 

The Texas Agricultural Experiment Station, an 

agency of the Texas A h M University System. may not 

contract with a private agricultural development 

corporation la which a regent of the university has 

a pecuniary interest. 

Attorney General of Texas 

JACX HIGHTOWER 

First Assistant Attorney General 

MARYXRLLRR 

Executive Assistant Attorney General 

JUDGE ZOLLIE STgARLRY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Susan L. Garrison 

Assistant Attorney General 

p. 3080