,

JIM MATTOX Attorney General 

# The Attorney General of Texas

August 14, 1986

Supreme Court Building P. 0. Box 12548 Austin, TX. 78711. 2548 512/475.2501 Telex 9101874.1367 Telecopier 51214750266 HonorableW. N. Kirby commissioner Texas EducationAgency 201 East 11th Street Austin, Texas 78701 OpinionNo: .JM-531

Re: Currentvalidity of a lease entered intoby a schooldistrict in 1950

714 Jackson, Suite 700 Dallas. TX. 752024508 21417428944

4824 Alberta Ave., Suite 1W El Paso, TX. 79905.2793 91515353484

SO6 Broadway, Suite 312 Lubbock, TX. 79401.3479 SW747-5238

4369 N. Tenth, Suite B McAllen, TX. 78501~1685 5121682.4547

200 Main Plaza, Suite 400 San Antonio, TX. 78205.2797 51212254191

An Equal Opportunity/ Affirmative Actlon Employer DearMr. Kirby:

You request advice on the validity of a lease agreement entered into in 1950 by the Board of Trustees of the Fredericksburg Independent School District [hereinafterthe "Board"]. The lease is between the Board and a lessee. It provides that the Board lease a designated tract of the school district's property for a monthly amount of $60.00 for 50 years in exchange for the lessee's agreement to expend at least !;30,000 on an officebuilding to be erected on the property. It is a:Lsorelevant to your inquiry that the lease agreement contained an unconditional right on the part of the lessee to assign the agreemer,t to a thirdparty.

In 1973, mom than 20 years later, the lessee assigned his interest in the lease agreement, with the Board's approval, to the president of the Board. That individual, the "assignee," remained a school trusteeunt:.lapproximately 8 months after the assignmentwhen he resigned.

You also inform us that at the time of the assignment in 1973, the Board was reiting office space in the building. The Board continued to rent space after the assignment from the assignee until the rentwas raiseil to an unaffordableamount. Moreover,you indicate that the school district, through the Board, in all likelihoodwill
never locatean iwtructional facilityon the property. The lease, 30 years from the date it was entered into, is hindering the school district from obta:.ning thebest and highestuse from itsproperty.

In that regarcl,

you have asked the followingquestions:

1. Whether the prior [Board]had the authority to lease the school property under such terms as are cont;Lined

in the lease?

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2. Whether the [Board] is estopped from attacking the lease in light of the fact that the districthas acceptedrentals for 35yearswithout attempting to set the lease aside?

3. Whether the assignmentof the lease in 1973 to a then-current member of the [Board] affects **the** validity of **the** lease?

4. Whether the school district has any right to the rentals rweived by the lessee and assignee if the lease is ii fact illegal?

These questions you htve presented contain issues of fact which must be decided before a complete resolution of the problem may be addressed. This office dc#esnot resolve factual questions in the opinion process. See. e.g.,, Attorney General Opinion JM-486 (1986); JM-394 (1985). However, be will address those matters regarding strictly legal issues in order to provide some guidance in this matter.

It is well settled law in this state that the board of trustees of an indeuendent school district has exclusive power to manage and control school property. :Irusteesof Independent- School District of ? Cleburne v. Johnson County"i)emocratic Executive Committee, 52 S.W.Zd 71, 72 (Tex. 1932); see ali& Attorney General Opinion M-1047 (1972). The Board's discretion is limited to the extent that it will not use this power to impinge upon the district's governmentalpurpose, that is, operatinga public school. River Road NeighborhoodAssociationv. South Texas Sport, No. 04-ll4-00206-CV(Tex.App. - San Antonio 1986, rehearing granted) (not :!et reported); Royse Independent School District v. Reinhardt, 159 S.W. 1010 (Tex. Civ. App. - Dallas 1913, writ ref'd); Attorney General Opinion M-1047 (1972). This reasoning is consistentwith the rule that the governmentalpowers or functions of a government or governmental agency can never be abdicated or bargained away. See Clear Lake City Water Authority v. Clear Lake --- Utilities District, 549 S.b'.Zd385 (Tex. 1977); see also Banker v. Jefferson County Water Control and Improvement District, 277 S.W.Zd 130. 134 (Tex.Civ. App. - Ezaumont 1955,writ ref'd n.r.e.).

The question of whether a particular action of a school board impingesupon the district's governmentalpurpose, that is, operating
a public school, is essentially a question of fact. See River Road Neighborhood Association v. South Texas Sports, No. 04-84-00206-CV (Tex. App. - San Antonio71986,no writ) (not yet reported); Royse Independent School Distric,:v. Reinhardt, 159 S.W. 1010 (Tex. Civ. APP. - Dallas 1913,writ repd).

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It is argued by the present Board that the lease is presently impinging upon the Board's authority to perform its governmental function because the Board is unable to take substantial steps to increase the revenue being generated from the property. We have not found any authority supporting the proposition that a governmental body is entitled to renege on a valid contract simply because it is financially advisable to d',so. Cf. City of Big Spring v. Board of Control, 404 S.W.Zd 810 (Tex. 1966). As indicated above, these factual questionsarebeyond the scope of this office'sauthority.

The Board also cites SouthTexas Sports,m, in supportof its .positionthat the 50-year%ase agreement shouldbe declared invalid. In that case a schoolboard entered into a le'ase agreementwhich had a potential maximum duratior.of 50 years. The lease was between a professional football club and a school district for certainproperty owned by the school distr1c.tconsisting of an athletic stadium. The stadium had been primarily used as a place for athletic contests involving schools of the d:Lstrict.The football club, lessee, leased the stadium to play its hone games. Id. The Court of Civil Appeals held that the lease was invalidbecauzit effectively destroyed the power of the district to manage and control the school property for schoolpurposes.
The court declared the lease involved in South Texas Sports invalid because the record revealed that although the lease provided that the club may use the stadium except when the school district needed the facility, scheduling conflicts were in fact resolved in favor of the lessee. The schooldistrict'suse of the facilitywas at the discretion of the lessee. Unlike the facts presented to us, the record supplied to the court was sufficient to determinewhether the 50-year lease impinged upon the school district's governmental function. Moreover, the cc,urt did not conclude thatbecause the lease agreement would bind the school district for a period of 50 years it
was void as contrary to public policy.

In response to your third question, it seems clear that the 1973 assignment to the then-currentmember of the Board did not affect the validity of the lease. T!laassignment merely created a contractual relationship between the :Boardand its president. It was this contractual relationshipw~:LchIs void and is against public policy. Accordingly, the relation:rhipbetween the original lessee and the Boardwas unaffectedby the: assignment.

The lease agreement g;ivethe lessee the "unconditional"right to assignhis interest in the l.ease.Therefore, theBoard's approvalwas not necessary to complete the transactionbetween the lessee and the then-currentmember of thr,Board. The assignment was made prior to the enactment of article 9313b of V.T.C.S. Therefore, the validity of the assignment turns on whether it falls within the common law

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prohibition which bars sct.001districts from contracting with any entity in which a trustee has a pecuniary interest, no matter how small. SeeMeyers v. Walke,;:, 276 S.W. 305 (Tex.Civ. App. - Eastland 1925, nowrit); City of EdJ.r,burg v. Ellis, 59 S.W.Zd 99 (Tex. Comm'n APP. 1933);Delta ElectricI:onstructionCo. v. City of San Antonio, 437 S.W.2d 602 (Tex.Civ.Al,p.- SanAntonio 1969,writ ref'd n.r.e.); Attorney General Opinions JM-424 (1986); JM-379 (1985). Such a contract is "violative of the spirit and letter of our law, and is against policy." See Meyers v. Walker, supra, at 307. Contracts in violation of theMeyers v. Urrlker doctrineare void. Id. -- Although the assignmentbetween the lessee and the assignee did not involve a direct contract.with the Board, the contractual arrangementfalls squarelyl&thin theMeyers prohib.ition.An assignee stands in the sameposition as his assignor. SeeHouchinsv. Scheltz, 590 S.W.Zd 745 (Tex.Civ. Ap:?.- Houston [14th-St.1 1979,no writ). The Board uresidentwas entitled to receive rent which is a oecuniarv benefit. see generallyDeli:a Electric ConstructionCo. v. Ci;y of Sa; Antonio, 437 S.W.Zd 602 (Te::,Civ.App. - SanAntonio 1969.writ ref'd n.r.e.). Therefore the ass:Lenment between the lessee and the assignee
was illegalandvoid and had no affect on thevalidity of the original lease.

You also ask whether ,theresignation of the Board president, eight months after the 197: assignment,had the effect of curing the void transaction. The MEfers v. Walker court also stands for the proposition that an ultra v.Lresand void contract with governmental entity is not subject to ra,?ification.SeeMeyers v. Walker, 276 S.W. 306, at 307. Therefore, the subsequentresignation could not cure the illegal orvoid contract. Finally, questions two (2) and four (4) are so intertwinedwith issues of fact that we cannot provide definitive answers. These questions involve equitable considerationswhich requfre thebalancing of factual and legal prine:iplesbeyond the scope of this office's authority.

SUMMARY

A board of trustees of an independent school district has the authority to lease school property so long as 1:helease does not impinge upon the board's authority to perform its essential function; i.e., to operate public schools. The question of whether the 50-year lease agreement, which is hindez,ing Fredericksburg Independent School District from obtaining a higher rental value for its prop=rty. impinges upon its essential governmental function and is a question

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of fact. The sin3:Le fact that the lease is for a period of 50 year; is not necessarily contrary to public policy.
Although the 1373 assignmentbetween the Board president and the Lesseedid not involve a direct contractual rela,::ionship with the Board, the effects of the armignment created a relationship which resulted in a pecuniarybenefit to the Board president, and therefore, was void as against public policy. The questionofwhether a party to
a contractmay benefit from the equitabledoctrine of estoppel invo:.vesa determination of factual issues.

JIM MATTOX Attorney General of Texas

JACKRIGHTOWER FirstAssistantAttorneyGeneral

MARY KELLER ExecutiveAssistantAttorne:r General

RICK GILPIN Chairman,Opinion Committee
Preparedby Tony Guillory AssistantAttorney General

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