Untitled Texas Attorney General Opinion ( 1976 )

The Honorable John E. Fitzgibbon Opinion NO. D-916
County Attorney
Webb County He: Whether a school
P. 0. Box 577 district may contract with
Laredo, Texas a company which employs a
member of the school
district's board of
trustees.
Dear Mr. Fitzgibbon:
You have requested our opinion regarding whether a
school district may contract with a'paper company which
employs a member of the district's board of trustees. YOU
state that the trustee works for the company in a managerial
capacity but owns no stock. He has entered into an agreement
with his employer that he will not receive any commission,
bonus, or other remuneration based upon sales made by the
company to the district, although he is paid a year-end
bonus on the basis of other company sales. You inquire as
to whether, in such circumstances, the school district may
contract with the paper company.
It is well established that, even in the absence of a
statute, the public policy of the state prohibits.transactions
which involve a conflict of interest on the part of public
officials:
If a public official directly or indirectly
has a pecuniary interest in a contract, no
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. Me ers v. Walker,
276 S.W. 305, 307 (Tex. Z!ihpT -- Eastland
1925, no writ).
P- 3840
The Honorable John E. Fitsgibbon - page 2 (H-916)
See also City of Edinburq v. Ellis, 59 S.W.2d 99 (Tex.
--
Comm'n App. 1933, holding approved). The principle of Meyers
has long been held applicable to the members of a school
district's board of trustees. Attorney General Opinions
Nos. H-734 (19751, M-1236 (1972), WW-1362 (19621, O-2306
(1940), O-1589 (1939), O-876 (1939).
No Texas case or Attorney General Opinion has squarely
determined, however, whether the principle applies to employees
of a contractor, or whether it is limited to officers, directors,
and substantial stockholders. In Attorney General Opinion
o-2306, this office held that a school district trustee might
receive compensation from a contractor for carpentry work
performed by the contractor on a school district building,
if at the time the contract was let, there was no agreement
stween the contractor and the trustee as to the employment
in question. On the other hand, this office stated in dicta
in Attorney General Opinion M-1236 at 4, that "[wlhere the pecuniary
interest of a public officer in a transaction is remote, as
where . . . he is but a mere employee, rather than an
officer or director . . . his interest is not one of such
a degree that will render invalid the transaction in which
his interest is involved."
However, in Edward E. Gillen Co.
183 N.W. 679, 68lm Kp. 1921), a RI
sewerage commission was employed as the superintendent of
a company which had contracted with the city. The
Wisconsin Supreme Court held that, although the individual
had no stock in the company and was not one of its officers,
he had such an interest in the business and welfare of his
company as would naturally tend to affect his judgment. If
his company prospered, "his service and salary might be
continued, and . . . he might be promoted."
A California court has likewise held that a city council-
man employed as a foreman of a company contracting with his
city was sufficiently interested in the contract to render
it void, if his interest was such "as would tend in any
degree to influence him in making the contract . . . since
upon the success of [the] business financially primarily
depends the continued tenure of his position and the
comoensation which he receives for oerformina the service
required of him." Stockton Plumb& 6 suppl; Co. v.
Wheeler, 229 P. 1020, 1024 (Cal. Dist. Ct. App. 1924).
Whenever the official's interest would "prevent him from
exercising absolute loyalty and undivided allegiance to
p. 3841
The Honorable John E. Fitzgibbon - page 3 (H-916)
the best interest" of the governmental entity he serves,
the contract is void. Miller ;,,;;ty ofeMar;negeb~2 ;,:T
519, 523 (Cal. Dist. Ct. App.
& co. v. Moran, 293 P. 145, 146 (Cal. Gt.Ct. App.'1930).
In PeoTe ex rel. Pearsall v. Sperry, 145 N.E. 344, 345-46
me Sup.T9m the Supreme Court of Illinois, in holding
that the employment of nine city council members by a
company contracting with the city rendered the contract
void, explained its rationale thus:
They would be more than human if they
could make the same fair and impartial
contract with the contractor, as they
could with another party with whom they had
no relation by way of employment or other-
wise.
~n~~~~o~~~~~~p~~~~~~~i~~~~~~.:~27:92d
; Byrne & Spee Csl Co. v. city of
Louisville, 224 S.W. 883 CKy. Ct. App. 1920); contra, County
~l;ur:aofs~yl~:.C~~pnryl~i5~lty of Grafton, 86 m24
.
It would appear, then, that the trend and weight of legal
authority would oblige our Texas courts to hold that a
school district should not contract with a company which
employs a member of the district's board of trustees in a
managerial capacity, even though the trustee d~erives no
direct financial benefit from the contract. We do not
address or question the language of Attorney General Opinion
M-1236 (1972), which dealt with stock ownership.
SUMMARY
A school district should not contract with
a company which employs a member of the
district's board of trustees in a managerial
capacity, even though the trustee derives
no direct financial benefit from the contract.
-Very truly yours,
eneral of Texas
P* 3842
The Honorable John E. Fitzgibbon - page 4 (H-916)
KENDALL, First Assistant
Opinion Committee
jwb
p. 3843