Case Information
*1 July 26, 1948
Mr. Joe Skiles, Business Manager
North Texas State Teachers College
Denton, Texas
Opinion No. v-640 Re: The legality of selecting a bank as trustee for bondholders of a college revenue bond issue when an officer of the bank is also a member of the college’s board of resents.
Dear Sir:
Two letters, one from you and one from Mr. William L. Kerr, President of the Board of Regents, Texas, both request an State Teachers Colleges of upon the abmove subject opinion of this Department ^ . a copy 0s tne proposea matter. We have before us contract evidencing an agreement by and between the Board of Regents of the State Teachers Colleges of Texas for and on behalf of the North Texas State Teachers College at Denton and Dallas National Bank, Dallas, Texas. The instrument evidences a contract which, in legal effect, makes the bank an agent or trustee for the benefit of bondholders of certain revenue bond issue and likewise for the benefit of the Board in divers respects, wherein the Board agrees to make and maintain certain deposits with the bank and agrees to pay for the bank’s services a stipulated monthly sum. The integrity and hon- esty of the regent-officer is questioned by no one. You are interested solely in the legal principle in- valved.
This brief general statement of the nature of the contract is sufficient for the purposes of our opinion.
It is contrary to the public policy of the State for public officers or boards of the State to This is make contracts of the type above mentioned. so because such public officers and boards owe to the *2 (v-640) or. Joe Skiles - Page 2
State their unbiased official discretion in the matter of making contracts with others, and especially free from personal interest adverse to the State. The con- tract of the Board of Regents, of which Mr. Thomas is a member, with the bank, of which Mr. Thomas is Vice- President, Is in violation of the public policy above (Corn. App.) 59 S.W. mentioned. City of Edinburg v. Ellis (2d) 99. It is not a question of whether qr 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. Many years ago the Supreme Court reversed the judgment of a district judge in a case where he was distantly related to one of the parties, and sent the cause back for another trial, saying, in its judgment of reversal, that in truth the judge below had decided the case properly.
A contract between the Board of Regents of the State Teachers Colleges with a National bank whereby the bank is to act as agent and trustee for certain bond proceeds and the Board pays to the bank certain monthly pay- ments and keeps and maintains certain deposits, is contrary to public policy and should not be made.
Yours very truly, ATTORNEY GENERAL OF TEXAS Assistant OS :wb APPROVED :