OFFICE OF THE ATTORNEY GENER.~I.

. STATE OF TEXAS

JOHN CORNYN

November 26,2002

The Honorable Russell W. Malm Midland County Attorney 200 West Wall Street, Suite 104 Midland, Texas 79701 Opinion No. JC-0582

Re: Whether a lease agreement between Midland County and a museum violates limitations on the use of public funds in article III, section 52 and restrictions on public debt in article XI, section 7 of the Texas Constitution, and related questions (RQ-0543-JC)

Dear Mr. Malm:

You ask a number of questions about the validity of a lease agreement between Midland County (the “County”) and the Museum ofthe Southwest (the “Museum”).’ We conclude that the County had the authority to acquire property for the purposes of operating a museum and was authorized to enter into the lease agreement with the Museum under chapter 319 of the Local Government Code and its statutory predecessor, former article 2372d ofthe Revised Civil Statutes. The commissioners court that entered into the lease agreement could have reasonably determined that the County’s and Museum’s respective obligations under the lease agreement comported with article III, section 52 ofthe Texas Constitution, which prohibits the expenditure ofpublic funds for private purposes. On the other hand, the lease agreement violates the restrictions on public debt in article XI, section 7 of the Texas Constitution to the extent the agreement obligates the County to pay for the Museum’s utilities and other expenses and to insure and maintain the building and grounds over amulti-year period without giving the County the right to terminate atthe end ofeach year or to elect on ayearly basis whether or not to appropriate funds to satisfy its obligations under the lease. Because the terms of the lease agreement that obligate the County to pay for the Museum’s utilities and other expenses and to insure and maintain the building and grounds are severable from the agreement’s other terms, however, the remainder of the lease agreement is not void.

‘See Letter from Honorable Russell W. Mahn, Midland County Attorney, to Honorable John Cornyn, Texas Attorney General (May 7, 2002) (on file with Opinion Committee) [hereinafter Request Letter]; Museum of the Southwest, The Juliette and Fred Turner, Jr. Memorial Gallery information page (attachment to Request Letter) [hereinafter Turner Gallery]; Amended and Restated Lease Agreement (May 8, 1989) (attachment to Request Letter) [hereinafter Amended and Restated Lease Agreement]; Warranty Deed (July 10, 1968) (attachment to Request Letter) [hereinafter Warranty Deed dated July 10, 19681; Warranty Deed (July 9, 1968) (attachment to Request Letter) [hereinafter Warranty Deed dated July 9, 19681.The Honorable Russell W. Malm - Page 2 (JC-0582)

You inform us that in 1968 Midland County “accepted adeed ofreal estate from the Museum

. . . for the sole purpose of leasing the property back to the Museum for the operation of an art museum.” Request Letter, supru note 1,at 1. The property consisted of the former Turner estate, which included the Turner mansion and grounds.2 The original lease was for aperiod often years. See Request Letter, supra note 1,at 1. In 1978 the County and the Museum executed arenewal of the lease agreement for aten-year term. See id. at 2. In 1985 the parties again renewed the lease agreement and provided that the lease would run until 1988 and, if the Museum completed an addition before adate certain in 1987, the lease would extend for fifty years from 1968. See id. In 1989 the parties executed anAmended and Restated Lease Agreement, which provided that the lease would be for aterm of fifty years commencing on September 1,1968. See id. Except where noted otherwise, this opinion will refer tothe 1989 lease agreement, which isthe lease agreement currently in effect.

The lease agreement obligates the County to insure the buildings and structures located on the premises; tomaintain the exterior structural condition ofthe buildings, including the foundations, walls, roofs, and doors; and to maintain “the grounds and landscaping at the leased premises in accordance with the standards and dignity befitting a museum and local ordinances as they may apply.” Amended and Restated Lease Agreement, supra note l,TT 3,5. The County is also required to bear the cost of utilities (except telephone) and to service and maintain the heating, air conditioning, and plumbing systems. See id. 16. You state that in fiscal year 2000 the County paid approximately $64,000 to meet its obligations under the lease. See Request Letter, supra note 1, at2. The lease agreement does not require the Museum to make lease payments other than an initial $1.OOpayment, but it does require the Museum to operate the leased premises as a museum, to maintain the interior of the buildings, and to pay for the cost oftelephone services. See Amended and Restated Lease Agreement, supra note 1,TiT[ 1,4.

We understand that the Museum is aprivate, non-profit corporation governed by aboard of trustees. In addition to leasing and managing the property atissue, the Museum has constructed a. planetarium on adjacent land owned by the City ofMidland and a children’s museum on adjacent land owned by the Museum. See Museum Brief, supra note 2, at 3. The principal building on the property atissue, the Juliette and Fred Turner Jr.Memorial Gallery, contains permanent exhibits of American art,with an emphasis onthe Southwest, aswell astemporary exhibits. See Turner Gallery, supra note 1.

You ask a number of questions about the lease agreement’s validity under the Texas Constitution, such as whether the lease agreement is consistent with article III, section 52, which limits the expenditure of public funds, and article XI, section 7, which limits a county’s authority to incur debt. Given counties’ limited jurisdiction, however, we need not reach these constitutional issues ifthe County lacked an affirmative grant ofexpress orimplied authority to enter into the lease agreement. See Tex. Att’y Gen. Op. Nos. JC-0439 (2001) at2(“A county commissioners court may

2SeeBrief, Museum ofthe Southwest, from Leonard B. Smith, Attorney atLaw, to Susan Denmon Gusky, Chair, Opinion Committee, Office of the Attorney General (July 3, 2002) (on file with Opinion Committee) [hereinafter Museum BriefJ.The Honorable Russell W. Malm - Page 3 (JC-0582)

exercise only those powers that the state constitution and statutes confer upon it, either explicitly or implicitly.“); JC-0171 (2000) at 1(“It is well settled that the authority of the commissioners court to contract [o]n behalf of the county is limited to that conferred either expressly or by necessary implication by the constitution and laws of this state.“). Therefore, before addressing your constitutional questions, we address your questions regarding the County’s statutory authority to enter into the lease agreement.

You ask whether a county “has legal authority to acquire property for the purposes of operating an artmuseum orcontracting with aprivate organization to do so.” Request Letter, supra note 1, at 5. We conclude that a county has the legal authority to do so. A county is generally authorized by section 270.00 1ofthe Local Government Code to acquire real property by deed. See TEX.LOC.GOV’TCODE ANN.9270.001 (Vernon 1999) (“A deed, grant, orconveyance that ismade, is acknowledged orproven, and isrecorded as other deeds of conveyance to acounty, to the courts
or commissioners of acounty, or to another person for the use and benefit of acounty vests in the county the right, title, interest, and estate that the grantor had in the property at the time the instrument was executed and that the grantor intended to convey.“); TEX.REV.CIV.STAT.ANN.art. 1576 (Vernon 1962 & Supp. 2002) (statutory predecessor to Local Government Code section 270.001) (repealed). As discussed further below, a county is specifically authorized to acquire property for museum purposes by chapter 319ofthe Local Government Code. Chapter 319 of the Local Government Code authorizes a commissioners court to establish and maintain a museum. Section 319.001 authorizes the commissioners court of a county to “provide for annual exhibits ofhorticultural, agricultural, livestock, mineral, and other products that
are ofinterest to the community.” TEX.Lot. GOV’TCODE ANN. 6319.001 (Vernon 1999); see also TEX.GOV’TCODEANN. $3 1473.021-.024 (Vernon 2000) (county authority topurchase orconstruct building to be used for coliseum, auditorium, or annual exhibit of livestock or agricultural, horticultural, or mineral products of the county; to issue bonds to finance such purchase or construction; and to impose atax to pay the bonds). Pursuant to section 319.002, “[t]o aid in the exhibition of products listed in Section 319.001,” a commissioners court “may establish and maintain a museum, building, or other improvement in the county or at any other location in the United States atwhich afair or exposition isbeing held.” TEX.Lot. GOV’TCODE ANN. 6319.002 (Vernon 1999) (emphasis added).
Opinions of this office addressing sections 319.001 and 319.002’s statutory predecessor construed the grant of authority in what is now section 319.002 broadly to permit a county to establish and maintain a museum separate and apart from “annual exhibits of horticultural, agricultural, livestock, mineral, and other products” now provided for in section 319.001. Id 0319.00 1;see, e.g., Tex. Att’y Gen. Op. Nos. M-l 113 (1972) at2(concluding that former article 2372d authorized county topayportionof salary ofmanager ofapioneer museum); WW-371(1958) at 3 (concluding that authority in former article 2372d to provide exhibits “is then broadened to include the additional powers pertaining to museums”); see also Tex. Att’y Gen. Op. No. C-656 (1966) at 2 (concluding that a “museum” is “a repository or collection of natural, scientific, or literary curiosities or objects ofinterest, orofworks ofart”). The language of sections 319.001 and 319.002 derives from former article 2372d of the Revised Civil Statutes, which was repealed andThe Honorable Russell W. Malm - Page 4 (JC-0582)

codified in chapter 319 in 1987. See Act ofMay 1, 1987,7Oth Leg., R.S., ch. 149, 59 1(adopting Local Government Code), 49 (repealing former article 2372d), 1987 Tex. Gen. Laws 707,707,1306.

This broad construction of the former law dates from 1958, see Tex. Att’y Gen. Op. No. WW-371 (1958) at 3, and there is no indication that the legislature sought to modify it in adopting the recodification ofarticle 2372d in the Local Government Code. Former article 2372d authorized counties to “provide for annual exhibits of horticultural and agricultural products, livestock and mineral products, and such other products as are ofinterest tothe community.” Act ofNov. 9,1934, 43d Leg., 4th C.S., ch. 20, 5 1, 1934 Tex. Gen. Laws 52, 52; Act of Oct. 27, 1936,44th Leg., 3d C.S., ch. 507, 8 1, 1936 Tex. Gen. Laws 2103, 2103. It also provided that “[i]n connection therewith, such counties may also establish and maintain museums.” Act ofNov. 9,1934,§ 1,1934 Tex. Gen. Laws at 52. Although we believe that this language could have been construed more narrowly to limit counties to establishing museums only in connection with “annual exhibits of horticultural and agricultural products, livestock and mineral products, and such other products,” the broader reading of the statute was supported by former article 2372d-3, which authorized a
. commissioners court topermit the use ofarticle 2372d improvements “for anyuseful public purpose which, in the opinion ofthe Court, will be ofbenefit tothe county and its citizens.” Act ofMar. 29, 1951,52d Leg., R.S., ch. 49,§ 2,195 1Tex. Gen. Laws 78,78. Likewise, section 319.004 authorizes
acommissioners court to permit the use of abuilding or improvement “for any public purpose the court determines to be of benefit to the county and its residents.” TEX.Lot. GOV’T CODEANN. 8 319.004(d) (Vemon 1999 & Supp. 2002). Accordingly, we adhere to the longstanding interpretation.
Chapter 319also authorizes acommissioners court tolease museum buildings and to contract for their management. Section 319.004 authorizes a commissioners court to “contract for the complete management of, and for the conducting, maintenance, use, and operation of, buildings, improvements, and exhibits authorized bythis chapter.” Id. 0319.004(a). The commissioners court “may lease the buildings, improvements, or exhibits,” id. 0319.004(b), and “may permit the use of
abuilding, improvement, or exhibit for any public purpose the court determines to be ofbenefit to the county and its residents,” id. $3 19.004(d). A contract or lease made under this section must be evidenced by an order of the commissioners court and entered in the minutes of the court. See id. 8 319.004(c).

The lease agreement expressly provides that the leased premises shall be used for the purposes of maintaining apublic museum
. . .in accordance with the provisions

ofArticles 2372d and 2372d-3, Vernon’s Annotated Civil Statutes (or any successor provision orprovisions thereto), for the display ofthe products there specified and for such other displays, exhibits and endeavors as are of educational, cultural or intellectual interest to the citizens of Midland County, Texas.The Honorable Russell W. Malm - Page 5 (JC-0582)

Amended and Restated Lease Agreement, supra note 1,71. The original lease agreement contained
asimilar term. See Lease Agreement 11 (Sept. 5, 1968) (attachment to Request Letter, supra note 1). Although the 1989 lease agreement, like the original 1968 lease agreement, refers to articles 2372d and 2372d-3, those provisions were repealed and codified in chapter 319 of the Local Government Code in 1987. Chapter 319 authorized the County to enter into the 1989 lease agreement. We assume that the lease agreement was evidenced by an order of the commissioners court and entered in the minutes of the court as required by section 319.004(c) of the Local Government Code.

With regard to the commissioners court’s statutory authority to enter into the lease agreement, you also ask whether the lease would “be void orvoidable ifitwas entered into without complying with the requirements of Chapter 263 ofthe Local Government Code.” Request Letter, supra note 1,at6. Chapter 263 provides competitive procedures that acounty generally must follow to sell or lease county property. See, e.g., TEX.LOC.GOV’TCODE ANN. $§ 263.001 (Vernon 1999) (sale or lease ofcounty real property by public auction); 263.007 (Vernon 1999 & Supp. 2002) (sale
or lease of county real property through sealed-bid or sealed-proposal procedure). This office has concluded, however, that the requirements of chapter 263 do not apply to a contract entered into under section 319.004 of the Local Government Code. See Tex. Att’y Gen. LO-98-057, at 2-3 (“[Wlhen another statute authorizes the county to lease a specific kind of real property, the provisions ofchapter 263 do not apply.

...The county isnot required to competitively bid acontract entered into pursuant to section 319.004.“). Accordingly, alease entered into under section 319.004 of the Local Government Code (or its predecessor) is not void or voidable if it was entered into without complying with chapter 263.

Given our conclusion that chapter 319 authorized the County to acquire the property for
museum purposes and to enter into the lease agreement, we do not address your question about the County’s authority under chapter 331of the Local Government Code or your question about the effect ofthe 1968 conveyance ofthe property to the County ifthe County did not have authority to acquire the property. See Request Letter, supra note 1,at4. We instead turn to your questions about the constitutional limitations on county authority.

You askwhether County expenditures formuseum maintenance and other museum expenses pursuant to the lease agreement violate article III, section 52. See Request Letter, supra note 1, at4. You are also concerned that the lease agreement may violate this provision because the lease agreement does not require the Museum to make lease payments to the County beyond the initial payment of $1.OO. See id. We conclude that the commissioners court that entered into the lease agreement could have reasonably determined that the County and Museum’s respective obligations under the lease agreement comported with article III, section 52.

With respect to the County’s payments under the lease agreement, article III, section 52bars
atransfer ofcounty funds to aprivate entity unless the transfer serves apublic purpose ofthe county and the transfer is subject to adequate controls, contractual or otherwise, to ensure that the public purpose is accomplished. See Tex. Att’y Gen. Op. No. JC-0439 (2001) at 1. Article III, section 52 of the Constitution precludes the use of public funds for private purposes by counties, cities, andThe Honorable Russell W. Malm - Page 6 (JC-0582)

other political subdivisions. See TEX.CONST. art. III, 852 (“[T]he Legislature shall have no power to authorize any county, city, town or other political corporation or subdivision ofthe State to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever, ortobecome astockholder in such corporation, association orcompany.“). Article III, section 51contains asimilar provision applicable tothe legislature. See id. 851. Article III, section 52 precludes counties from making unconditional gifts or donations to private entities-expenditures which, by definition, lack sufficient controls to ensure that an authorized public purpose is achieved. See, e.g., Kordus v. City ofGarland, 561 S.W.2d 260,261 &n. 1(Tex. Civ. App.-Tyler 1978, writ ref dn.r.e.) (holding that taxpayer had standing to bring action against city to enjoin it from making donations to private corporation in violation of article III, section 52) (citing Tex. Att’y Gen. Op. No. H-397 (1974)); Tex. Att’y Gen. Op. No. JC-0113 (1999) at 2-3 (citing authority). In making an expenditure ofcounty funds that benefits aprivate person or entity, however, acommissioners court will avoid violating article III, section 52ifit (i)determines in good faith that the expenditure serves a public purpose and (ii) places sufficient controls on the transaction, contractual or otherwise, to ensure that the public purpose is carried out. See, e.g., Tex. Att’y Gen. Op. Nos. JC-0439 (2001) at 1,JC-0113 (1999) at 2, DM-256 (1993) at 2-3.

In 1989 when the County entered into the Amended and Restated Lease Agreement, aprior opinion ofthis office supported acommissioners court’s determination that expending county funds to benefit amuseum would serve apublic purpose. See Tex. Att’y Gen. Op. No. MW-423 (1982) at 2 (concluding that Texas Historical Commission museum grants served a public purpose for purposes of article III, sections 51 and 52because support ofmuseums helps to educate the public about such subjects ashistory, economics, anthropology, and the fine arts). Furthermore, although the lease agreement between the County and the Museum could have given the County greater control over the Museum’s performance of its contractual obligations, the lease agreement does require the Museum to operate the County’s property as amuseum. The lease agreement would appear toplace sufficient controls onthe transaction toensure that the public purpose-the operation ofamuseum-is carried out. See Tex. Atty. Gen. Op. JC-0439 (2001) at2(“Acontract that imposes
on the nonprofit organization an obligation to perform a function that benefits the public may provide adequate control.“) (citing Key v. Comm ‘rs Ct. ofMarion County, 727 S.W.2d 667, 669 (Tex. App.-Texarkana 1987, no writ) (per curiam)).

You also assert that alease ofpublic property “for rental or lease payments at less than fair market value

. . .would amount to [a]

. . .gift or grant ofpublic money” in violation of article III, section 52. Request Letter, supra note 1,at4. Although courts and this office have concluded that the lease of public property to a private entity does not violate article III, section 52 where the transaction serves apublic purpose and where an adequate rental is paid, see Dodson v.Marshall, 118 S.W.2d 621,624 (Tex. Civ. App.-Waco 1938, writ dism’d); Tex. Atty. Gen. Op. Nos. JC-0179 (2002) at4, H-445 (1974) at4, H- 109 (1973) at 5, article III, section 52 does not necessarily require
acounty to lease property for fair market value ifthe lease serves apublic purpose. See Tex. Att’y Gen. Op. No. JM-1156 (1990) at 3 (article III, section 51does not prohibit state from leasing space for child care facilities atarate lower than fairmarket value iflease serves apublic purpose). Again, chapter 263 of the Local Government Code, which generally requires a county to lease property pursuant to competitive procedures, does not apply here.The Honorable Russell W. Malm - Page 7 (JC-0582)

Whether the consideration apublic entity receives for use of its property is “adequate” is a determination for the entity’s governmental body to make inthe first instance and is adetermination to which a court will defer. In City ofFort Worth v. Groves, for example, the court expressly deferred tothe commissioners court’s factual determination that leasing the county convention center to the City of Fort Worth under the statutory predecessor to section 319.004 of the Local Government Code for $1.OO per year and the city’s agreement to operate and maintain the convention center for the benefit of the public provided adequate consideration. See City ofFort Worth v. Groves, 746 S.W.2d 907,916-17 (Tex. App.-Forth Worth 1988, no writ); see also id. at 916 (“In the absence of a showing of fraud or bad faith, it is not for the courts to declare a document conforming to the language of a lease having terms reasonable to alease, to be something else.“). Here, while the Museum does not pay the County monetary consideration touse the leased property, the Museum does operate the County’s property as amuseum and pay for the upkeep ofthe interior of the buildings. The commissioners court that entered into the 1989 lease agreement could have reasonably determined that the lease agreement required the Museum to provide adequate consideration for use ofthe County’s property. See id. at 916. Finally, we address whether the lease agreement creates acounty debt in violation of article XI, section 7ofthe Texas Constitution. Under article XI, section 7, acounty may not incur debt for any purpose “in any manner” unless the county simultaneously creates the debt and provides for levying and collecting “a sufficient tax to pay the interest thereon-and provide at least two per cent

. . . as a sinking fund.” TEX. CONST.art. XI, 8 7. Article XI, section 5 contains a similar limitation that applies only to cities. See id. art. XI, 8 5 (prohibiting municipality from creating “debt”). For purposes of these constitutional provisions, “debt” is “any pecuniary obligation imposed by contract, except such aswill, atthe date ofthe contract, within the lawful and reasonable contemplation of the parties, be satisfied out of current revenues for the year, or out of some fund then within the imrnediate control ofthe city [orcounty].” City ofBonham v.S.W.Sanitation, Inc., 871 S.W.2d 765,768 (Tex. App.-Texarkana 1994, writ denied). A contract that runs for more than
ayear but that gives the city or county aright to terminate itatthe end of each year is acommitment of current revenues only and is not adebt. See id.

We conclude that the lease agreement violates article XI, section 7to the extent it obligates the County to pay for the Museum’s utilities and other expenses and to insure and maintain the buildings and grounds over amulti-year period. The commissioners court that entered into the lease agreement could not have contemplated that the County could satisfy its unspecified, multi-year obligation out of county revenues on hand in 1989. We gather that the County did not provide for levying and collecting taxes topay the interest and to create asinking fund.3 Furthermore, the lease

‘Article XI, section 7imposes conditions on the creation ofdebt; itdoes not authorize creation ofdebt. See Tex. Att’y Gen. Op. Nos. JC-0139 (1999) at 2; DM-467 (1998) at 7n. 18 (“Article XI, section 7 [of the Texas Constitution] limits the authority of a county to incur debt; it does not affirmatively authorize counties to levy taxes for any purpose.

... Therefore, before providing for alevy and sinking fund in order to comply with article XI, section 7, acounty should first verify that it is authorized to levy the tax.“) (citing A4itcheZZCounty v. City Nat7 Bank, 43 S.W. 880, 883 (Tex. 1898) (Texas Constitution article XI, section 7 “contains no grant of authority to levy atax”)). It does not appear that
a county would be authorized to levy a tax to support its obligations under a lease entered into pursuant to chapter 319 (continued...)The Honorable Russell W. Malm - Page 8 (JC-0582)

agreement does not give the county aright to terminate atthe end of each year orto elect on ayearly basis whether or not to appropriate funds to satisfy its obligations under the lease.

The Museum asserts that the County’s obligations under the lease do not create adebt within the meaning of article XI, section 7 because the County owns the premises and is obligated to operate and maintain itsproperty separate and apart from the lease agreement and because the lease agreement does not provide for fixed orregular payments. We disagree.
First, the Museum asserts that the County’s obligation tomaintain the Museum buildings and grounds and topay for itsutilities and property insurance isno different than the County’s obligation to maintain and provide utilities for other county-owned facilities such asthe county courthouse or the county libraiy4 The crucial difference, however, is that the County has not contractually obligated itself to another entity to maintain those county buildings ortoprovide utilities orproperty insurance for them. The lease agreement transforms the County’s general discretionary duty to maintain its property as it sees fit into a “pecuniary obligation imposed by contract.” City of Bonham, 871 S.W.2d at 768. In addition, acontract need not provide for fixed orregular payments in order to create debt forpurposes ofarticle XI, section 7. See, e.g., Brown v.Jefferson County, 406 S.W.2d 185,188 (Tex. 1966) (“an indemnity agreement is a ‘debt’ within the constitutional sense, and.

. . , as a corollary thereto, provision must be made for the payment of any interest that may accrue thereon and for the retirement ofthe obligation”); Tex. Atty. Gen. Op. No. DM-467 (1998) at5(“acounty’s agreement to indemnify athird party fordamages arising from acts ofthe third party creates adebt within the meaning ofarticle XI, section 7”). Indeed, both acourt and this office have specifically concluded that a contract that obligates a city or county to expend unfixed sums to maintain property or operate facilities creates debt in the constitutional sense. See, e.g., City of Wichita Falls v.Kemp Pub. Library Bd. ofTrs., 593 S.W.2d 834,837 (Tex. Civ. App.-Forth Worth 1980, writ ref d n.r.e.) (obligation that city undertook to run library when it accepted the building from aprivate party created adebt within the meaning of article XI, section 5); Tex. Att’y Gen. Op. No. WW-1049 (196 1) at 2-3 (county agreement with the United States Soil Conservation Service and asoil conservation district tobudget annually sufficient funds to maintain flood control projects would create a debt within the meaning of article XI, section 7).

In support of its position that these lease terms do not violate article XI, section 7, the Museum also contends that the County is obligated to maintain the Turner mansion and grounds by the warranty deed pursuant to which the Museum conveyed the premises to the County in 1968. In

3(...continued) of the Local Government Code. See TEX.Lot. GOV’TCODE ANN.8 319.005 (Vernon 1999 & Supp. 2002) (use of net
revenue from use of building or improvement authorized by chapter 319); TEX.GOV’TCODE ANN. $0 1473.02 l-.024 (Vernon 2000) (county authority topurchase or construct building tobe used for coliseum, auditorium, or annual exhibit of livestock or agricultural, horticultural, or mineral products ofthe county; to issue bonds to finance such purchase or construction; and to impose a tax to pay the bonds).

4SeeSupplemental Brief, Museum ofthe Southwest, from Leonard B. Smith, Attorney atLaw, to Susan Denmon Gusky, Chair, Opinion Committee, Office of the Attorney General (Nov. 4,2002) (on file with Opinion Committee) [hereinafter Museum Supplemental BriefJ.The Honorable Russell W. Malm - Page 9 (JC-0582)

July 1968, the co-executors ofthe estates ofFred and Juliette Turner conveyed the Turner mansion and grounds to the Museum, which agreed “to maintain and care for said premises consistent with their present dignity and appearance, normal wear and tear excepted.” Warranty Deed dated July 9, 1968, supra note 1, at 2. The next day, the Museum conveyed the Turner mansion and grounds to the County, “subject to all the terms, provisions, covenants and conditions set forth” in the first warranty deed. Warranty Deed dated July 10,1968, supra note 1,at 1. We have not been asked by the County to address the constitutionality ofthe warranty deed. We do note, however, that the duty to maintain the premises under the warranty deed is much more limited than the obligations the County has undertaken under the lease. Thus, assuming that the County did agree pursuant to the warranty deed “to maintain and care for said premises consistent with their present dignity and appearance, normal wear and tear excepted” and that that agreement is constitutional, the terms of the warranty deed would not support the more expansive obligations the County has undertaken under the lease. Furthermore, the case cited by the Museum, Harris County v.Jones, 219 S.W.2d 737 (Tex. Civ. App.-Galveston 1949, writ ref d n.r.e.), upheld a county’s agreement in a deed conveying 100 acres to the county to reconvey 10 acres to the grantors at a certain price, and concluded that such a reconveyance was not subject to a statute requiring counties to sell real property at public auction. That case does not address the interplay of a county’s agreement in a deed to maintain property and article XI, section 7. Although we conclude that the terms ofthe lease agreement that obligate the County to pay for maintenance ofbuildings and grounds and other museum expenses over afifty-year term violate article XI, section 7and are not enforceable, this does not necessarily mean that the remainder ofthe lease agreement is without effect. As a general rule, where part of the consideration for an agreement is illegal, the entire agreement is void if the contract is entire and indivisible. See Montgomery v. Browder, 930 S.W.2d 772, 778 (Tex. App.-Amarillo 1996, writ denied). The doctrine of severability is an exception that applies in circumstances in which the original consideration for the contract is legal, but incidental promises within the contract are found to be illegal. See id. In such a case, the court may sever the invalid provision and uphold the valid portion, provided the invalid provision does not constitute the main or essential purpose of the agreement. See Williams v. Williams, 569 S.W.2d 867, 871 (Tex. 1978); Rogers v. Wolfson, 763 S.W.2d 922,925 (Tex. App.-Dallas 1989, writ denied). We have found no authority suggesting that the doctrine of severability may not be applied when a contract term is invalid under article XI, section 7. A 1982 opinion of this office applies the doctrine to a contract term creating a debt in violation ofarticle III, section 49, which prohibits the state from creating adebt. See Tex. Att’y Gen. Op. No. MW-475 (1982) at4(“an invalid indemnity clause in anotherwise enforceable contract will not ordinarily invalidate the remainder of the contract”) (citing Williams v. Williams, 569 S.W.2d 867 (Tex. 1978)).

We believe that the unconstitutional terms are severable from the lease agreement and that the remainder ofthe lease agreement is effective. Here, the essential consideration orpurpose ofthe lease agreement is the County’s agreement to lease the Turner estate to the Museum to use it as a museum and the Museum’s agreement to operate the estate forthat purpose. As we have concluded, the County’s agreement to lease itsproperty tothe Museum forthis purpose islegal. See discussion, supra pp. 3-5. In our view, the County’s agreement to pay certain limited expenses associated withThe Honorable Russell W. Malm - Page 10 (JC-0582)

the Museum ismerely apromise incidental tothe lease agreement’s essential purpose. Furthermore, the lease agreement expressly provides that “[i]f any clause or provision hereof is invalid, unenforceable or illegal under present or future laws effective during the life of this lease, it is the intention of the parties that the remainder of this agreement shall not be affected thereby but shall continue in full force.” Amended and Restated Lease Agreement, supra note 1,7 16.

The Museum has submitted asupplemental brief that takes the view that the essential feature ofthe lease agreement isthe Museum’s promise to manage, conduct, and maintain apublic museum and that the County’s financial obligations are merely incidental to the lease agreement. See Museum Supplemental Brief, supra note 4, at 2. On the other hand, the County asserts in its supplemental brief that “the financial provisions are a large part of the consideration provided by Midland County. They are directly tied to the remainder ofthe consideration supplied by Midland County, which is allowing the Museum touse the building. The two provisions are inseparable. The financial provisions are not incidental promises, but a material part of the lease? We find the County’s position unpersuasive. Under the lease agreement, the Museum has received from the County the right to use the Turner estate for only $1, with no annual lease payments, for fifty years. The County’s financial obligations under the lease are minimal when compared to this primary consideration provided by the County.

For these reasons, we conclude that the lease terms that obligate the County to pay for the Museum’s utilities and other expenses and to insure and maintain the buildings and grounds are severable from the lease agreement’s other terms and that the lease agreement is not void. The Museum is still entitled to lease the Turner estate and to operate it as amuseum. This office is not
a court, however. We cannot definitively resolve the legal relationship between the parties if the County continues to insist that the unconstitutional terms ofthe lease agreement are not severable
or if the parties are otherwise unwilling to accept our legal analysis.

‘Supplemental Brief, Midland County, from Honorable Russell W. Malm, Midland County Attorney, to Susan Denmon Gusky, Chair, Opinion Committee, Office of the Attorney General (Nov. 4, 2002) (on file with Opinion Committee).The Honorable Russell W. Malm - Page 11 (JC-0582)



### SUMMARY

Midland County had statutory authority to acquire property for the purposes of operating a museum and was authorized to enter into alease agreement with the Museum ofthe Southwest. The commissioners court that entered into the lease agreement could have reasonably determined that the County and Museum’s respective obligations under the lease agreement comported with article III, section 52 ofthe Texas Constitution. To the extent terms ofthe lease agreement obligate the County to pay for the Museum’s utilities and other expenses and to insure and maintain the building and grounds
over a multi-year period and do not give the County a right to terminate atthe end of each year orto elect on ayearly basis whether
or not to appropriate funds to satisfy its obligations under the lease, those terms violate the restrictions on public debt in article XI, section 7 of the Texas Constitution. Because those terms are severable from the lease agreement’s other terms, however, the remainder ofthe agreement is not void. The Museum is still entitled to lease the Turner estate and to operate the estate as amuseum.

Attorney General of Texas

HOWARD G. BALDWIN, JR. First Assistant Attorney General

NANCY FULLER Deputy Attorney General -General Counsel

SUSAN DENMON GUSKY Chair, Opinion Committee
Mary R. Crouter Assistant Attorney General, Opinion Committee