The Honorable Joe Max Shelton       Opinion No. H-887
Grayson County Attorney
Third Floor, Courthouse             Re: Expenditure of muni-
Sherman, Texas 75090                cipal funds for expenses
                                    of defending suits brought
                                    against mayor, city police-
                                    man, and members of the
                                    city council.

Dear Mr. Shelton:

     You have requested our opinion regarding the circum-
stances under which a Texas general law city may expend
funds for the defense of elected city officials and employees
who have been sued in their official and individual capacities.
Specifically, you present two fact situations arising from
recent litigation involving officials of the City of Pottsboro.
Fact situation number one arises from a suit by residents of
an area recently annexed by the City of Pottsboro.  You state
that several residents of the annexed area filed suit in
federal court against the mayor and members of the city
council, individually and in their official capacity, seeking
injunctive and declaratory relief as well as monetary damages.
The Pottsboro city attorney, who is paid on an hourly basis,
successfully defended the mayor and city council members before
both the United States District Court and the Court of Appeals
for the Fifth Circuit. Fact situation number two arises from
a suit filed in federal court by a Pottsboro businessman
against a Pottsboro police officer and three members of the
city council, alleging deprivation of constitutionally
protected rights and related tort claims. The defendants in
fact situation number two have retained a private attorney
who was employed pursuant to a resolution of the city council.




                          P. 3734
The Honorable Joe Max Shelton - page 2   (H-987)



     We have addressed the question of when a governmental
entity may expend funds to provide legal representation for
its officers on several recent occasions. Attorney General
Letter Advisory NO. 24 (1973) considered the constitutionality
of a bill then pending before the Legislature authorizing
district and county attorneys to represent county officials
and employees in suits involving any act of the official or
employee while in the performance of public duties. The bill
further authorized county commissioners to employ and pay
private counsel when necessary or proper to provide legal
counsel for county officials. We concluded that the bill under
consideration was constitutional so long as its operation was
limited "to those circumstances where the interests of the
county . . . are at stake, and where there is a good faith
showing that the individual sued was acting within the scope
of his authority in the performance of public duties." Id.
at 3-4. The bill was subsequently enacted, and is now article
332c, V.T.C.S.

     In Attorney General Opinion H-70 (19731, we considered
whether a school district might purchase liability insurance
to protect its trustees from the costs of defending litigation
brought against them individually for acts or omissions
committed in the good faith discharge of their official duties.
We concluded that:

          Where a Texas governing body believes in
          good faith that the public interest is at
          stake, even though an officer is sued
          individually, it is permissible for the
          body to employ attorneys to defend the
          action . . . . The propriety of such a
          step is not made dependent upon the outcome
          of the litigation, but upon the bona fides
          of the governing body's motive. -Id. at 5.

     More recently, in Attorney General Opinion H-544 (19751,
we considered whether a county might authorize the expenditure
of funds to provide legal representation for a district judge
who was sued in an effort to enjoin his proceeding with a
court of inquiry. We observed:




                           P- 3735
The Honorable Joe Max Shelton - page 3   (H-887)



            Among the expenses which the county may
         authorize or ratify are the costs of hiring
         an attorney. The authority of a county
         commissioners court to employ counsel to
         represent county interests in suits, even
         when nominally against individuals, has been
         recognized. . . . . [Citations omitted]. These
         cases are in accord with the general rule in
         the United States that a public body, acting
         in good faith, may indemnify public officials
         for legal expenses incurred in suits brought
         against them for acts committed in discharge
         of their duties. Annot., 130 A.L.R. 736 (1941).

            Conversely, in any case where the public
         official acted outside of or beyond the scope
         of his legal powers, a public body has no
         authority to pay such legal expenses. Attorney
         General Letter Advisory No. 24 (1973).

      We believe the analyses of questions you present with
regard to officers and employees of a general law city to be
essentially identical to those applied to county officials
in Letter Advisory No. 24, to school trustees in Attorney
General Opinion H-70, and to a district judge in Attorney
General Opinion H-544. When the city council believes in good
faith that the city's interests are at stake, even though an
officer or employee is sued individually, the city may employ
an attorney to defend the action. The authority of the city
council to employ attorneys is limited, however, to those
situations in which legitimate interests of the city -- not
merely the personal interests of city officers or employees
-- require assertion or defense. Attorneys clearly may not
be compensated from public funds when city officials have only
a "direct personal interest" in the use of city funds for their
own defense. City of--- Del Rio v. Lowe, 111 S.W.Zd 1208, 1219
 (Tex. Civ. App. -- San Antonio-'r9m    rev'd 122 S.W.Zd 191
                    See
 (Tex. sup. 1938). --    also State v. Averill, 110 S.W.2d 1173
 (Tex. Civ. App. -- San  Antonio 1937  writ ref'd).




                        p. 3736
The Honorable Joe Max Shelton - page 4   m-887)



     The expenditure of funds in defense of a suit in which
city interests are at stake, even though the city may not be
named as a party to the suit, is a "municipal function.“
City of Corsicana v.
                  -- Babb, 290 S.W. 736, 737 (Tex. Comm'n App.
1927, jdgmt adopted). Such expenditures "do not constitute
a gratuity, but constitute a public expenditure of the
municipality for which city funds may be used . . . ." Id.
A city is under no duty or obligation to indemnify its omcials
and employees against legal expenses, "but, if it do employ
the attornev. the municioalitv becomes leaallv bound to nav
his compensation." ---
                     Id. 'see also Attorney-General Opinion -
H-544 (1975).

     The authority of the city council to appropriate funds
for the legal defense of council members and other city officials,
when the public interest so requires, has been upheld notwith-
standing the statutory prohibition of article 988, V.T.C.S.,
upon any direct or indirect interest in any city contract
by any council member or other city officer. Cit of Corsicana
v. Babb, supra; Chandler 5 Saenz, 315 S.W.2d -T-
--                                            87 Tex. Civ.
APP. -- San Antonio 1958, writ ref'd n.r.e.).  See also
                                               --
Chrestman v. Tompkins, 5 S.W.2d 257 (Tex. Civ. App. -- Dallas
1929, writ?ef'd).
     It is, therefore, our opinion that the governing body of
a Texas general law city may lawfully authorize the expenditure
of public funds for the defense of elected city officials and
employees who have been sued in their official and individual
capacities if the suit involves an action of the official or
employee within the scope of his authority in the performance
of public duties, and if the governing body believes in good
faith that the public interest is at stake. Public funds may
not be expended if the litigation involves only the personal
interests of city officials or employees in which the city
has no interest or may have an adverse interest. In situations
where the use of public funds may be justified, the municipality
is under no obligation to provide legal representation for its
officials and employees, but is merely authorized to do so in
the discretion of its governing body.

     This office cannot resolve the fact situations you present
since we are unable to resolve questions of fact in the opinion
process. Your resolution of them must be made in accordance
with the legal guidelines set out in this opinion.


                          P- 3737
The Honorable Joe Max Shelton - page 5     m-887)




                       SUMMARY

            The governing body of a Texas general law
            city may lawfully authorize the expenditure
            of public funds for the defense of elected
            city officials and city employees who have
            been sued in their official and individual
            capacities if the suit involves an action
            of the official or employee within the scope
            of his authority in the performance of public
            duties, and if the governing body of the city
            believes in good faith that the public interest
            is at stake.

                                 Very truly yours,




                                 Attorney General of Texas

APPROVED:                 'J



&h
DAVID M. YinJDALL, First Assistant




C. ROBERT HEATH, Chairman
Opinion Committee

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