Hon. J. W. Edgar          Opinion No. V-1566
Commissioner of Education   "
Texas Education Agency    Re: Authority of the Board of
Austin, Texas                 School Trustees of Karnack
                              Independent School Dis-
                              trict to pay current funds
                              to the Federal government
                              to reimburse lunch program
                              money fraudulently obtained
                              by a former superintendent
                              of the district some four
Dear Dr. Edgar:               or five years ago.
          Your request for an opinion of this office
relates to a factual situation wherein a former super-
intendent of the Karnack Independent School District,
now deceased, allegedly submitted false claims to the
federal government asking to be reimbursed for an
amount of money in excess of that due for serving school
lunches. It is also alleged that the superintendent
forged the school board's endorsement on several of the
school lunch program checks, and a substantial amount
of this money was traced to his personal account, The
school district never realized any benefit from such
monies illegally diverted, and the school district has
never ratified in any manner the actions of the school
superintendent. The federal government has made demand
upon the Karnack Independent School District for $l,l32.-
56.
         The questions presented for determination are:
         "1. Under the facts submitted, IS the
    Rarnack Independent School District liable
    to the Government for payment of school
    lunch program money paid four to five years
    ago on misrepresentations and falsifica-
    tions of its agent, who diverted the money
    fraudulently to his own use? Or stated
    another way: Is the school district liable
    to the Government for embezzlement and mis-
    appropriation of funds obtained from the
    Government by its agent, superintendent of
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                                                                . .




Hon. J. W. Edgar,page 2 (V-1566):


                        I,   .      ~,.   ..   ..~


                               ,I,
     the.-distrdct>:~based'on
                            false claims of'&
     superintendent of:which the,'~bbard,had
                                           no
     kaowledge?:.' ',!
                    _ ~;Tr     ::.~~ ~,

          "2. If the answer to the above ques-
     tion is in the affirmative, may the school
     district pay the claim from current or
     futuresrevenues of the distriat, such claims
     admittedly being based on fraudulent acts
     committed four to five years ago?
          13. If it is your opinion that such
     claims may be paid from school district
     funds, what school funds, assuming avail-
     ablerunds exist, may be used for that
     purpose?"
          The act setting up the National Hot Lunch Pro-
gram (42 U.S.C.A. Sets. 1751-1760)  declares it to be
the policy of Congress, as a measure of national security
to safeguard the health and well-being of the nation's
children ,and to encourage the domestic consumption of
nutritious agricultural commodities and other foods, by
assisting the states in providing an adequate supply of
food and other facilities for the establishment and
maintenance of nonprofit school lunch programs. "An
examination of the Federal statute creating the lunch
program shows that Federal agencies are charged with the
duty of keeping the funds devoted to the hot lunch pro-
gram under surveillance and their misappropriation ~
beyond question would constitute a Federal offense.s'
Hunt v. Allen, 53 S.E.2d 509 (W.Va. Sup. 1948).
          An examination of the factual situation pre-
sented reveals that the money in question was obtained
through-the fraudulent practices of the former superin-
tendent, whereby claims were presented to the federal
government in excess of the amount actually used in the
hot lunch program, and no benefits either directly or
indirectly were received by the Karnack Independent
School District. This being true, the question is im-
mediately presented as to whether the claim of the
federal government is one sounding in tort or one based
solely upon contract. Clearly, if the action is one
sounding in tort there is no liability on the part of
the school district, whereas liability might be
established if this be a claim upon a contract. School
       .



,.-.       Hon. J. W. Edgar, page 3 (V-1566)


           districts are public corporations and governmental
           agencies exercising a governmental function.
           v. Whitney Independent School District, 205
           7Tex.Civ.App. 1947). It performs no proprietary
           functions which are separate and independent of its
           governmental powers and a school district has no liability
           for actions sounding in tort arising out of the performance
           of governmental functions. ,Braun v. Trustees of Victoria
           Independent School District, 144 S 0W *2d 947 (Tex.Civ.
           APP. 1938 error ref.) and authorities cited thereini
           Att'y Gent Op. O-443 (1939).
                     In 1 C.J.S. 1098, Actions, Sec. 44, it is said:
                    "The distinction between an action in
               contract and one in tort is not one merely
               of form but is rather one of substance, the
               r,emedyin tort being broader than that in
               contract. As indicated by the'definitions
               previously given in B 1, actions in contract
               and in tort are to be distinguished in that
               an action in contract is for the br,eachof
               a duty arising out of a contract either ex-
               press or implied, while an action in tort
               is for a breach of duty imposed by law,
               which arises from an obligation created by
               a relation, ordinarily unconnected with a
               contract, but may arise either independently
               of any contract or by virtue of certain con-
               tract relations. In the latter, if the
               cause of action as stated arises from a
               ,breach of promise it is ex contractu, but if
               it arises from a breach of a duty growing
               out of the contract it is in form ex delict0
               even though it incidentally involves a
               breach of contract.
                     "While the general distinction between
                actions in contract and in tort is clearly
                defined and well understood, it is often
                difficult to determine whether a particular
                action is one or the other, particularly
                under the code system of pleading, and where
                under the circumstances of the particular
                case either form of action might be maintained.
                A treatment of the distinction between actions
                in contract and in tort assumes a twofold
                aspect, involving on the one hand a considera-
                tion of the essential nature of the cause of
                                                             .



Hon. J. W. Edgar, page 4 (v-1566)


     action, as for the purpose of determining
     which is the proper or only available form,
     of remedy, and whether an action which is
     clearly in the one form or the other can be
     maintained; and on the other hand, particu-
     larly where either form of action might be
     maintained, a consideration of the question
     as tomwhich form plaintiff has in fact
     res~ortedto. In some cases both features
     of this question are involved, and they are
     so.closely related that they may pro erly
     be, and are, considered together in 18 45 -
     51 .",
           It would appear beyond doubt, from your factual
recitation, that the acts of the former superintendent
 of the Earnack Independent School District were outside
the scope of his authority. It is well settled law that
a governmental agency in the performance of a g,overn-
mental function can be bound only by such acts of its
agent as arpeauthorized b law or by contract. State
v. Perlstein, 79 S.W.2d 1t3 (Tex.Civ.App.~1934, error
Da             Eat. Guard Armory Board v. McGraw, 132
Tex. 613-TCTS W 2d 627 (1939) Charles Scribner's Sons
v. Marrs, 114 $e;. 11, 262 S.W: 722 ( 24) j Fort Worth
C$vary Club v. Sheppard, 125 Tex. 33;: 83 S.W.2d 660
       . In Campbell Building Company v. State Road
Commission,~ P.2d 837, 864, 866 (Utah Sup. 1937) the
court stated:
          "We think that the engineer had no
     authority to waive on behalf of the state
     the requirements in the written contract.
     He undoubtedly had no authority to enter
     into a new or different contract, and.it
     would follow that he had no authoritv to
     waive the provisions in this one. The
                                         " con-
     tract specified what his duties and powers
     were and this was well known to the con-
     tractor. It is generally:,~heldthat an
     architect or engineer in charge of con-
     struction work ioes not have authority to
     waive a provision requiring written extra
     work orders. . . The state cannot be held
     for the acts of its engineer beyond the
     powers conferred by law or the written con-
     tract. . . .
Hon. J. W. Edgar, page 5 (V-1566)


          "The state cannot be held for any such
     actions by its employees, even if true, for
     the reason that it can be held only on the
     contract and for the acts of its a ents and
     officials pursuant toXi?contract -%?ici3
     for any unauthorized or malicious conduct
     which may have resulted in damage;" (Under-
     scoring ours.)
          In Clodselter v. State, 86 N.C. 54 (1882)   the
court stated:
           "That the doctrine of respondeat
     superior, applicable to the relation of
     principal and agent created between other
     persons, does not prevail against the
     sovereign in the necessary employment of
     public agents, is too well settled upon
     authority and practice to admit of con-
     troversy.
          "No government has ever held itself
     liable to individuals for the malfeasance.
     lathes, or unauthorized exercise of power*
     by its officers and agents." (Underscoring
     ours
        .)
          It is therefore our opinion that the Karnack
Independent School District would not be liable for the
unlawful acts of its former superintendent, and the
claim of the federal government is seemingly based
upon an action in tort for which there is no liability
on the part of the Karnack Independent School District.
          Moreover, the money obtained by the former
superintendent under our factual situation was never
placed in the depository of the school diStriCt.  Since
the school board never ratified his unauthorized acts
and the district never received any benefit from them,
there would be no liability for repayment attaching to
the district on the ground of estoppel or other similar
ground. In First National Bank of Athens v. Murchison
Independent School District, 114 S.W.2d 382 (Tex.Civ.
App. 1938), the court said:
                                                           . .._




Hon. J. W. Edgar, page 6 (V-1566)


          "Plaintiff's cause of action under its
     pleading was upon the three instruments
     executed to the said payee bank, 'in part
     payment of the purchase price of school
     furniture~and equipment.' The great weight
     of the testimony established that the de-
     fendant district did not purchase theLschoo1
     equipment above recited, with proceeds of
     funds advanced by the Murchison bank, hence
     a failure of proof resulted under plaintiff's
     allegations of liability. Applying the -..;
     strict rule governing such contracts of pub-
     lic corporations, we conclude that the war-
     rants sued upon by plaintiff, under this
     record, were unauthorized and created no
     obligation against the defendant district.
     37 Tex.Jur., Schools, i% 75-loo..,Nor were
     there, for the particular years, over and
     above the amounts necessary to conduct the
     school, any available funds out of which
     these debts could be paid. Collie~rv.
     Peacock, 93 Tex. 255, 54 S.W, 1025; Warren
     v. San er Independent School District, 116
     Tex.'l83, 288 S.W. 159; Harllngen Tndepend-
     ent School Dtitrlct v. C. H. Page & Bro.,
     Tex. Corn.App.,48'S.W. 2d 983; Templeman
     Common School District v. Boyd B. Head Co.,
     Waco Court of Civ. Appeals, 101 S.W.2d
     352.  The defense of estoppel does not ac-
     crue to the plaintiff bank, no school
     furniture and equipment having been received
     by the district, though the warrants and
     board resolution stated otherwise. city
     of Dublin v. H. B. Thornton & Co., Eastland
     Court of Civil Appeals, writ refused, 60
     S.W.2d 302, and many cases there reviewed."
          In answer to your first question submitted,
it is our opinion that no liability attaches to the
Karnack Independent School District under the facts by
reason of the fraudulent practices<df'b former,.superfn-
tendent. It therefore becomes unnecessary to answer
your other questions.
Hon. J. W. Edgar, page 7 (v-1566)


                       SUMMARY
          The Karnack Independent School Dis-
     trict Is not Uable to the Federal Govern-
     ment for the repayment of money paid in the
     administration of the school lunch program
     upon the misrepresentations and fraudulent
     practices of a former superintendent who
     converted the money to his own use.
                                    Yours very truly,
APPROVED:                             PRICE DANIEL
                                    Attorney General
J. C. Davis, Jr.
County Affairs Division
Mary K. Wall
ReviewlrigAssistant                   Burnell Waldrep
                                        Assistant
Charles D. Mathews
First Assistant
BW:am
