Court Opinion

ID: 4134043
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:45:17.503073+00
Date Added: 2024-06-11T14:26:49.569410
License: Public Domain

Honorable Robert 8. Calve&    Opinion No. n-625
Comptroller of Public Account6
Capitol Station               Re: Legality of issuing
Austin, Texas                     warrant to a me&er of
                                  the Legislature or to a
                                  firm, partnership or corp-
                                  oration in which he ia
                                  interested, for good8 or
                                  8ervfces luppliedtoa
                                  &ate agency.

Dear Mr. Calvertr

     Your rccemt letter inquire6 concerning the legality of
payment of expenses incurred in the operation of a state
agency and advised UCIthat such expense8 are provided for by
pro-existing law and that appropriationhas been made for said
expenses.

     Your specific inquiries are:

          "(1) Can I legally imue my warrant to a
     member of the Legislature of this State in payment
     of business service8 performad by or supplies or
     materials sold by maid member of a State Agency,
     when the warrant is to ba charged to moneys appro-
     priated by the Legislature during the term for
     which said member wao elected to the Legislature?

          "(2) Can I legally issue my warrant to pay
     an account neceagary for the .operation of a State
     Agency to a firm, partnership or corporationof
     which the member of the Legislature is a member of
     or owns an interest in aaid firm, partnership, or

                           -2989-
Bon. Robert       S.   Calvert, page 2 (M-625)

      corporation,when said warrant is to be chal-ged
      to moneys appropriatedby the Legislature during
      the term for which said mexber was elected to
      the Legislature?"

     In view of authorities cited herein,*we must reply in the
negative to your first question.

       The last clause of Article III, Section 18, Constitution
of   Texas, as amsnded IVovember5, 1968, reads as follows:
           *....nor shall any member of the Legislature
      be interested,either directly or indirectly, in
      any contract with the Statu, or any county thereof,
      authorized by any law passed during the term for
      which he was elected.*

     You have not cited the session law under which the relevant
appropriationswere made, but even a Qeneral AppropriationsAct
falls within the purview of the phrase, #any law passad during
the term for which he was elected.*  Article VIII, Section 6,
Constitution of Texas, and Attorney General Opinions O-1519
(1939) and O-6592 (1945).

      IIIwd     v. FreestQgL 57 S.W. 338, (Tex.Civ.App.  1900,
no writ), the Court considered a printing contract cwering
the publication of a delinquent tax list, and awarded by the
County to a msmber of the Legislature. The law providing for
publication of such list had been passed during one term served
by the membar and reenacted with say change in the rate allowed
for publication during the term of the mmber that included t:?e
date onwhich the contractvmsmada.

     6ven thoughthe contract stated that the county was not
obligated to mahe any payment from its am funda, and Lillard
*is to look to the delinguent tax payers for his costs, when
paid....," the court held the contract invalid, stating:

             ....We think it apparent that the intention
              l

       of the above clause of the constitution (Wticle 3,
       Section 18) was to absolutely prohibit any person

                                  -2990-
Ron. Robert S. Calvert, page 3 (M-c25)

    frcm entering into a contract with the state or
    county authorized by a statute passed by a legis-
    lature of which such person was a member. Such
    being the case, the intention should be given
    effect.  Cooley, Const. Law, p. 69; Story, Const.
    g 413: Rawle, Const. ch. l., p. 31; Potter's Dwar.
    St. p. 659." (parenthesismaterial supplied.)

     Conference Opinion of the Attorney General's Department,
No. 2411, January 30, 1922, held,

         *A person who was a member of the Legislature
    at the time of the enactment of what is known as
    the State Highway CcnmaissionLaw could not lawfully
    make a contract with a county for road construction
    work involving funds awarded to such county by the
    State Highway Commission."

    Attorney General Opinion No. O-1519, supra, held:

          "It is our opinion that it would be viola-
    tive of Section 18 of Article 3 of the Consti.=
    tution of Terse for a msmber of the Legislature
    to sell livestock or any other commodity to the
    Texas Prison System through the Board of Control
    or to any other State Department when the author-
    ity for the purchase is conferred and the money
    to pay for livestock or other conunodityis appro-
    priated under the General Departmental Appropria-
    tion Bill passed during the term for which said
    member of the Legislature was elected."

          Attorney General Opinion No. O-6582, aupra, held a
contract between the State of Texas and a member of the Legis-
lature, or a corporation in which a member is a stockholder,
for the publishing of pr~oposedconstitutionalamendments
adopted during the member’s term, was prohibited by Article III,
Section 18, Constitution of Texas. In that opinion, it was
assumed that the Legislature at the same term appropriated

                          -2991-
Ron. Robert 8. Calvert, page 4 (M-625)

money for the publication,but in our opinion the contract
would bs invalid absent such appropriation if the resolution
authorized such publication.
                                        .
     Your second inguiry involves the application of Article 221,
Section 18 to the situation where a member of the Legislature
owns an interest in a firm, partnership, or corporation.

     Article III, Section 18 proscribes an interest, either
l
pLect or w;           in the prohibited contracts. It is our
opinion, therefore, that this provision of the Constitution
prohibits a contract with any firs or partnershipwhere a
msmber of the Legislature is a member of the firm or partner-
ship and under circumstanceswhich would forbid the contract
with the Legislative membsr individually. 43. Am. Jur. 105,
Public Officers, Sees. 296 and 297; m                    's-
trict, 252 Rich. 629, 233 N.W. 439, 440 (1930), reasoning that
membership in a partnership is a disgualifying interest and
clearly an *individual interest." *A partnership is nothing
tie than the individualswho have associated themselves to-
gether in the conduct of a business.* Burke Machinerv Co. v%
$Nnen&g~& 138 Cr. 314, 6 P.2d 886, 888 (1932).

     Your second inguiry also raises the question of the appli-
cability of Article III, Section 19, Constitution of Texas, as
amended Nwember 5, 1968 to the situation where a member of
the Legislature is a stockholder in a corporation. No single,
all inclusive rule can be laid dwn to govern situations of
this kind. Bach ease presented must be decided on the basis
of the facts of that particular case.

     The general rule would prohibit a corporation in which a
Legislator is a stockholder from contractingwith'the state
or a county. 43 American Jurisprudencs 107, Public Officers,
Section 300 - Interest in Contracting Corporation - states as
followsr

          'The general rule is to the effect that the
     interest of a public officer as a stockholder in

                          -2992-
Hon. Robert S. Calbert, page 5 (M-625)

       a corporation entering into a contracturalre-
       lation with the public is a prohibited interest
       in the transactionwithin the meaning of statu-
       tory provisions in substance prohibiting a public
       officer from being interested directly or in-
       directly in any contract with the public, and of
       the ccmmon-law principle against such interest,
       based upon public policy, of which such statutory
       provisions are the concrete expression. A stronger
       case of interest exists where public officers are
       not only stockholdersbut also officers of corpo-
       rations with which the public has attempted to enter
       into a contract. The interest of the parties in
       such cases is clearly within the meaning of pro-
       visions prohibiting public officers from being
       interested directly or indirectly in contracts
       with the public."

     In our opinion. hwever,  it is necessary in each case pre-
sented to examine a number of relevant factors in order to de-
termine whether the Legislator actually owns an interest of the
kind within the prohibition of the Constitution. It is essential
to determine whether the Legislator is an officer or director of
the corporation,whether he is influential in the management of
the corporation through any other circumstance,whether he owns
in his own name or beneficially a substantial interest in a
closely held corporation.or whether his interest is in fact a
minor interest in a corporationwith many shares widely dis-
tributed so that.his ownership entitles him to no substantial
share in the management or earnings of the corporation.

     A valid analogy may be appl,iedto the corporate situat.ions
arising under the last provision of Article III, Section 16
and cases arising under the provision of Article 5, Section 11,
Constitution of Texas, wnich provides that “NO Judge .sballsit
in any case wherein he,may bs interested...."

       In this connection see Hubbard v. H~milt.on.~~-n-ty,,
                                                          113 Tex.
547,   261 S.W. 990 (1924). for the holding that "The elementary

                            -2993-
Hon.   Robert 8. Calvert, page 6(X-625)

rule is that the interest sufficient to disqualify a judge from
sitting in a case 'must be a direct, real, and certain interest
in the subject matter of the litigation,.notmerely indirect
or incidental, or remote or contingent or possible,'~ citing
authorities. (Emphasis supplied.)

       In the same opinion, at page 992, appears the language:

            -Again the rule is elementary that an interest
       which a judge has in collponwith many others in a
       public matter is not sufficient to disgualify him.”

     See also frnr )W~dv v. Citv of gniversitv Park, 278 S.W.Zd
9l.2(Tex.Civ.App.1955, error ref. n.r.8.) the following language:

            "Accordingly,to be disqualified for interest,
       the judge must, by the judgment in the case, gain
       or lose something, the value of which mgv be s 1
       pated. 25 T.J., p. 269. Morewu,     the liability-
       of pecuniary gain or relief to the judge must occur
       upon the event of the suit, ggt result remotely,
       in the future from the general operation of the
       law upon the status fired by the decision," citing
       authorities. (6mphasis supplied.)

     See 63 C.J.S. 558, Municipal Corporations, Section 991 -
What Constitutes gInteresta in Contract - under subhead 'Modi-
fication or abrogation of rule. for the follwingc

            "In other jurisdictionsthere is a further
       modification of the rule as to the amount of
       interest which it is necessary to shw, the
       modified rule being that it must be lug8 enough
       to give rise to a real conflict of interest.*

          In our opinion, then, the facts of a particular case
wherein a Legislator is a stockholder in a corporation doing
business with the state could clearly bring then case as a matter
of law-within the prohibition of Article III, Section 18, or

                           -2994-
Hon. Robert S. Calvert, page 7(M-625)

the facts might well shw that the Legislator's interest is so
remote that there is no real conflict of interest and remove
the case from the prohibition. In each case all the relevant
facts will have to bs fully developed before the proper de-
terminationmay bs made.

     To construe the Constitutionalprovision so strictly that
it would apply where a Legislator owned an insubstantialin-
terest in a large corporationwith many shares widely distrib-
uted, and where he had no control or meaningful influence in
the management of the corporation,would probably bring into
guestion many state and county contracts entered into in good
faith with suppliers of goods and services essential to the
operation of the state and county gwernmsnts.

     Attorney General Opinion No. O-6502, supra, is modified
to the extent of any conflict with this opinion.

                        SUMMARY

         The Comptroller may not lawfully issue his
    warrant. in payment of goods or services furnished
    to a state agency, to a member of the Legislature
    or to a firm or partner8hi.pof which a member of
    the Legislature is a member, when the warrant is
    to be charged to funds appropriated by the Legis-
    latute during the term for which said member was
    elected to office.

         No single rule will serve to hold that when
    a member of the Legislature awns stock in a corpo-
    ration that corporation is or is not.precluded fran
    contracting with the state or a county under the
    provisions of Article III, Section 18, Constitution
    of Texas.  Each case must be determined strictly on
    the basis of a full developnent of those relevant
    facts discussed in this opinion, as well as any
    additional relevant facts.

                           -2995-
                                                               .
                                                                   ,

mm.   Robert   8. Calvert, p8go 8 (M-625)

           Attorney   @sawal     Opinion lo. 04582 (1945) is
      modified to the   extent    oi sdy cosdlict with this
      opinion.                                 .

                                 -2996-