                                  The Attorney        General of Texas
                                                    h-e   a, 1984
JIM MATTOX
Attorney General



Supreme Court Building          Honorable Bob Bullock                Opinion No. .JM-162
P. 0. Box 12549                 Comptroller of Public Accounts
Austin, TX. 78711. 2548
51214752501
                                P. 0. Box 13528                      I&: Application of article III,
Telex 9101874-1367              Austin, Texas   78774                secti0n   ia    of   the    Texas
Telecopier  512/475-0266                                             Constitution prohibiting legisla-
                                                                     tors from contracting with the
                                                                     state
714 Jackson, Suite 700
Dallas, TX. 75202.4506
2141742.8944                    Dear Mr. Bullock:

                                             1. A contract between the state and a
4824 Alberta Ave.. Suite 160              corporation owned and operated by a member of the
El Paso, TX. 799052793
915/5x3-3494
                                          legislature is illegal, void, and unenforceable if
                                          the person was a member of the legislature when
                                          general legislation authorizing the transaction,
  ~1 Texas, Suite 700                     or   an  appropriation act     authorizing funds
Houston, TX. 77002.3111                   therefor, was enacted.
713/223-5886

                                             2. Your office is not authorized to approve
808 Broadway, Suite 312                   vouchers or issue payments to the corporation for
Lubbock. TX. 79401.3479                   supplies or goods delivered to state agencies but
SW747.5239                                not paid for.

4309 N. Tenth. Suite B                       3. Your office cannot properly issue payment
McAllen. TX. 78501-1885                   for supplies or other goods that have not been
512,882.4547                              shipped by    the corporation and, therefore,
                                          delivery should not be accepted.
200 Main Plaza, Suite 400
San Antonio,   TX. 78205.2797               4. Agencies with outstanding balances "owing"
51212254191                              to the corporation are not required to return the
                                         merchandise received, but should do so if it can
                                         be done without cost to the state. They should
An Equal Opportunity/
Affirmative Action Employer
                                         cancel all pending orders.

                                     The foregoing statements answer specific questions you have posed
                                concerning transactions by state agencies with a corporation owned,
                                controlled, and operated by a legislator who first took office in
                                January 1981.   In June, 1982, the State Purchasing and General
                                Services Commission executed a twelve months supply contract with the
                                firm pursuant to the State Purchasing and General Services Act,
                                article 601b, V.T.C.S. The aforesaid statute was first enacted in




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                                                                         --.


Honorable Bob Bullock - Page 2 (~~-162)




1979, but it was amended in 1981. You advise that more than 90 state
agencies have done business with this company, using general operating
funds appropriated by      the 1981    legislature in    the general
appropriations act.

     Article III, section 18 of the Texas Constitution provides in
pertinent part:

          No Senator or Representative shall, during the
          term for which he was elected, be eligible to (1)
          any civil office of profit under this State which
          shall have been created, or the emoluments of
          which may have been increased. during such
          term. . .-. nor     shall   any  member
                                             .      of   the
          Legislature be interested, either directly or
          indirectly, in any contract with the State, or any
          county thereof, authorized by any law passed
          during the term for which he was elected.
          (Emphasis added.)

     The Sixty-seventh Legislature of which the affected legislator
was a member amended sections 3.08(a) and 3.28 of article 6.01b,
V.T.C.S., the State Purchasing and General Services Act, Acts 1981,
67th Leg., ch. 546 at 2265. Both sections affect contracts with the
corporation. As amended, section 3.08 regulates the amount of
supplies, materials and equipment that may be purchased by state
agencies directly, and section 3.28, as amended, makes corporations
eligible for a "Texas bidders" preference previously unavailable to
them. See Attorney General Opinion MW-332 (1981). Ownership and
control of a corporation gives a legislator an interest in its
contracts within the meaning of article III, section lg. -See Attorney
General Opinion M-625 (1970).

     In Lillard v. Freestone County, 57 S.W. 338 (Tex. Civ. App. 1900,
no writ), the court considered the refusal of a county to pay a former
legislator on a contract for his services. The person had been a
member of the Twenty-fourth and Twenty-fifth Legislatures. The law
pursuant to which the contract was executed was first passed in the
Twenty-fourth Legislature and amended in the Twenty-fifth. The court
said:

         We think it apparent that the intention of
         [article III, section 181 of the constitution was
         to absolutely prohibit any person from entering
         into a contract with the state or county
         authorized by a statute passed by a legislature of
         which such person was a member. . . . The law was
         amended and w-enacted as a whole by the 25th
         legislature.    The   fees  for   publishing   the




                                 p. 713
Honorable Bob Bullock - Page 3   (JM-162)




         delinquent tax list were changed. It may be the
         change was slight, but, whether a change was made
         at all in this respect, we think the entire law,
         having been w-enacted as a whole, was 'passed'
         within the meaning of article 3, section 18, of
         the constitution. . . .

Id. at 338, 340.

     The 1981 amendments did not formally re-enact all of article
601b, V.T.C.S., but it was noted in American Surety Company of New
York v. Axtell Company, 36 S.W.2d 715, 719 (Tex. 1931), that an
amended act is ordinarily to be construed as if the original act had
been repealed, and a new and independent act in the amended form had
been adopted in its stead. We think the Lillard rule is applicable
here, especially since the specific provisions enacted in 1981 during
the legislator's term directly affect the opportunity of his company
to contract with state agencies.

     In addition, the funds provided agencies to effect their
contemplated transactions with the corporation were authorized by the
general appropriations act enacted in 1981 during the legislator's
term. Over a sixty year period, five different attorneys general of
the state have considered whether an appropriations act, as well as
general legislation, will operate as "authorizing" legislation within
the prohibition of article III, section 18 of the Texas Constitution.
Every one of them have reached the same conclusion: it will. See the
opinions of Attorneys General John Hill, Attorney General Opinion
H-696 (1975); Crawford Martin, Attorney General Opinion M-625 (1970);
Grover Sellers, Attorney General Opinion O-6582 (1943); Gerald Mann,
Attorney General Opinion O-1519 (1939); W.A. Keeling, Conference
Opinion No. 2411, January 30, 1922.

     We agree. A constitutional provision designed to guard against
favoritism, corruption and extravagance in state government should not
be given a narrow construction unless the intent of the framers to do
so is clear, particularly where it has received a broad construction
for many years. Director of the Department of Agriculture v. Printing
Industries Association of Texas, 600 S.W.2d 264, 270 (Tex. 1980). In
our opinion, the contract executed in June 1982 was prohibited by
article III, section ia       of the Texas Constitution and is
unenforceable.

     The effect of a constitutionally prohibited contract between a
state agency and a contractor was laid out thirty years ago in the
case of State v. Steck, 236 S.W.2d 866, 869 (Tex. Civ. App. - Austin
1951, writ ref'd). There, a corporation had in good faith supplied
the state with tax stamps pursuant to a contract that had not been
approved by the governor, secretary of state, and comptroller as




                                 p. 714
Honorable Bob Bullock - Page 4   (JM-162)




article XVI, section 21 of the Texas Constitution required. By
different deliveries, the company provided the state 63,OOO.OOO stamps
that were delivered but not paid for.

     The court declared the contract unenforceable. Inasmuch as all
parties were required to take notice of statutory and constitutional
provisions pertinent to the making of contracts with the state, and
since the contract was voluntarily entered into, the state was held
not liable for any of the stamps delivered and used. See State v.
Ragland Clinic Hospital, 159 S.W.2d 105, 107 (Tex. 1942); 14 Tex. Jur.
3d, Contracts §173 at 282. -Cf. Attorney General Opinion MW-475
(1982).

     The company in State v. Steck, 236 S.W.2d 866 (Tex. Civ. App. -
Austin 1951, writ ref'd), asserted that it was entitled, at least, to
recover the reasonable value of its property under a cmmmn law right.
The court disagreed. Common law, in order to support a recovery, it
said, "must not be inconsistent with the Constitution and laws of the
State." -Id. at 869.

     In our opinion, officers of the state may not expend public funds
in payment of the supplies or materials delivered to and used by state
agencies pursuant to the contract, but supplies or materials that have
not yet been used may be returned to the corporation, if done at no
cost to the state.

                             SUMMARY

             Article   III,  section   ia   of  the   Texas
          Constitution prohibits a contract between the
          state and companies owned, controlled, and
          operated by a member of the legislature if the
          contract was authorized by a general statute or
          appropriations act passed during the legislator's
          term of office. The state is not liable for
          supplies or materials furnished it pursuant to
          such a contract.




                                          JIM     MATTOX
                                          Attorney General of Texas

TOM GREEN
First Assistant Attorney General




                                 p. 715
Honorable Bob Bullock - Page 5   (JM-162)




DAVID R. RICHARDS
Executive Assistant Attorney General

Prepared by Bruce Youngblood
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Rick Gilpin, Acting Chairman
David Brooks
Jim Moellinger
Bruce Youngblood




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