Honorable E. R. Gregg
Chairman, Board of Managers
Texas State Railroad
Rusk, Texas
Dear Mr. Gregg: , Opinion No. O-5728
Re: Whether or not the Board of
Managers of the Texas State Rail-
road has the authority to enter into
a contract with a private auditor
for an audit of accounts between
Texas State Railroad and the New
Orleans Railroad.
You make the following request for an opinion, to-wit:
“The Board of Managers of the Texas State Railroad, of
which body I am chairman, recently caused an audit to be made
through the office of the State Auditor. This audit was not corn-
plete and was not made by parties familiar with the auditing of
railroad matters. Since receiving this audit and going over it
carefully and after having conferred with men whom we consider
capable of making an audit of the matters between the Texas
State Railroad and the New Orleans Railroad, we are convinced
that a comp@te audit should be made. It is our opinion that we
can make a contract with such a party, or parties, which will not
involve the State in so far as expense is concerned; in other words,
we can make this,contract on a contingent basis, the auditor re-
ceiving his remuneration out of the amount, if any, recovered from
the T & N 0 Railroad.
“I will appreciate it very much if you will let me have the
opinion of your office as to whether or not the Board of Managers
of the Texas State Railroad is authorized, under the Act creating
it, to make a contract as stated above.“’
-- .
Honorable E. R. Gregg, Page 2 O-5728
The Board of Managers for the Texas State Railroad was created
by Senate Bill No. 267, Chapter 26, General Laws, 37th Legislature, Regu-
lar Session. This Act was amended by the passage of Senate Bill No. 14,
Chapter 4, at the Second Called Session of the same Legislature. The orig-
inal Act has been further amended by the passage of Senate Bill No. 69,
Chapter 3, at the Regular Session of the 38th Legislature (1923).
The powers of the Board, as the same have been amended, are,
insofar as pertinent, as follows:
“SEC. 2. Immediately after the taking effect of this Act it
shall be the duty of the Board of Prison Commissioners of the
State of Texas, upon demand of the Board of Managers of the
Texas State Railroad, to deliver the possession of said railroad,
together with all equipment, supplies, chases, books, records
and documents of every character, and all property of whatever
kind belonging to the said Railroad, to the Board of Managers,
created by this Act.
“SEC. 3. The Board of Managers is hereby authorized,
upon approval of the Governor of the State of Texas, and given
full authority to sell or lease said railroad for the highest amount
and upon the best terms obtainable, to any person, firm, or corpora-
tion, and in the event said Railroad is sold to execute and deliver to
the purchaser thereof a deed to the right of way and to all other
lands owned by the State of Texas and used in connection with said
railroad and to do any and all things, necessary to convey the title
of said railroad right of way, rolling stock, and all other property
and chases of whatever kind belonging to said railroad to the pur-
chaser, and in the event the Board of Managers shall lease said
railroad, it shall have the authority to execute such a lease agree-
ment as it may deem to the best interest and welfare of the State
of Texas, subject, however, to the approval of the Governor of the
State of Texas; provided that in the event of the sale of said railroad
the proceeds thereof shall be first applied to the payment of the bonds
and accrued interest thereon, owned by the Public School Fund of the
State of Texas and against said railroad. Any balance shall be paid
into the Treasury of the State.
“SEC. 4. If the Board of Managers cannot sell said railroad
or lease the same to an advantage, then it is hereby authorized to
continue to operate the same upon the most economical bases poss-
ible, and until such time as the Board may be able to find a satisfac-
tory purchaser for said railroad or lease the same to an advantage,
Honorable E. R. Gregg, Page 3 O-5728
and for the purpose of rehabilitating said railroad and putting the
same in shape so that traffic may move over the same in safety,
there is hereby appropriated out of any funds in the State Treas-
ury not otherwise appropriated, the sum of Twenty-five Thousand
($25,000.00) Dollars to be used in the payment for repairs and oper-
ation from the date of the taking effect of this Act, which with the op-
erating revenue derived from the railroad, to be paid by warrants
drawn upon the State Treasury, by the Comptroller upon order of
the Board of Managers. And said Board of Managers shall have at
their disposal for the purpose of improving and repairing said
Texas Railroad, fifty (50) able-bodied convicts to be furnished by
the Prison Commission of Texas, and to be used at any time during
the first year of said management of said Texas Railroad by the
Board of Managers, created by this Bill. The Board of Managers
are hereby directed to make report of their action in the premises
to the next Called Session of the Thirty-seventh (37th) Legislature.
“SEC. 5. Such Board of Managers shall make reports to the
Comptroller of all receipts, expenditures and disbursements, which
reports shall be prepared not later than the tenth (10th) day of each
month and shall cover the operations of said railroad for the preced-
ing calendar month. They shall be accompanied by a remittance to
the Comptroller of all monies so received by such Board of Managers
in the course of its operations during such month.
“SEC. 6. All disbursements and payments of every nature what-
soever, including interline balances shall be paid by warrant of the
Comptroller upon the Treasury drawn by him upon due order of the
Board of Managers. Interline balances shall be carried by the Comp-
troller as a separate trust fund for the benefit of connecting lines en-
titled to revenue funds collected by said railroad.
“SEC. 7. All current funds received by the Board of Managers
or any station agent of such railroad shall be forthwith transmitted
to such State Bank as may be designated by the Board of Managers as
a depository of such funds. Remittance of such funds to the Comptrol-
ler shall be made by the check of the Chairman of the Board of Managers
upon such bank.
“SEC. 8. Such Board of Managers shall make full report of any
sale or lease of such railroad to the Governor. In case of the opera-
tion of such railroad by such Board, full reports of all expenses, dis-
bursements and income shall be made by it to the Governor, on the
Honorable E. R. Gregg, Page 4 O-5728
first days of July and January of each year. In case of the lease of
such railroad the rentals shall be collected and audited by the Board,
and a full report thereof likewise made to the Governor semi-annual-
ly.
“The Governor shall submit all such reports to the Legislature
at each Session next succeeding the receipts thereof by him.”
“Section 3a. In addition to the powers otherwise vested in said
Board of Managers with respect to the Texas State Railroad, said
Board of Managers is hereby authorized and empowered to make and
enter into any other contract or contracts, agreement or agreements
with respect to said railroad, or any property, right, franchise, privi-
lege, or other matter or thing belonging thereto or constituting any
part thereof, and not inconsistent with law, whether of sale, option of
sale, trackage agreement, or of any other nature or character whatso-
ever, as in the judgment of the Board of Managers will be to the best
interest of said railroad, ,the people and interests to be served thereby,
and the State.
“Section 7a. Any money accruing or arising on account of said
railroad shall be applied in the discharge or payment of such indebted-
ness, claims or demands as may have accrued or arisen on account of
said Texas State Railroad since March 12, 1921, and as may be author-
ized by law to be paid therefrom, including personal expenses actually
and necessarily incurred by any member of the Board of Managers in
the discharge of his duties as such, such clerical or other help or em-
ployment as in the judgment of the Board of Managers it may be neces-
sary to incur in properly handling, caring for, managing and otherwise
transacting any duty or business arising on account of or by reason of
s&d Texas State Railroad, as well as any other cost or expense properly
and necessarily incurred by said Board of Managers with respect to the
duties enjoined upon it by law concerning said railroad; and should there
at any time be on hand a sum of money which in the judgment of the Board
of Managers is in excess of the amount necessary to meet such disburse-
ments, payment or expenditures with respect to said railroad as are au-
thorized by law, said Board of Managers is authorized to apply such ex-
cess to the payment of matured interest coupons representing the inter-
est due on the bonds of said railroad that are owned by the public free
school fund of this State, and after discharging such interest as may from
time to time be due on said bonds, any amount of such excess thereafter
remaining on hand may be applied to the payment of said bonds as they
have or may mature, such payments to be made by warrants drawn by
the Coroptroller upon order of the board.af,managers.”
Honorable E. R. Gregg, Page 5 O-5728
No State officer, board or representative of the State whatsoever, has
any authority as a mere incident to his position to make contracts on behalf
of the State, or to convey away State property. Such power must be conferred
by statute, either expressly or by necessary implication, and implications with
respect to such powers are not favored.
We find nothing in the statutes creating or regulating the Board of Texas
State Railroa’d conferring upon the Board power to do what you suggest -- that
is, to enter &to a contract with an auditor upon a contingent-fee basis, payable
out of any sum recovered by the State through such audit. Such recovery would
necessarily be public funds -- the property of the State -- and such contract
would be void.
Furthermore, we have been unable to find where the Legislature has
made any character of appropriation in favor of the Board for the last several
bienniums without which your Board would have no authority to incur a State
liability in any event, but we do not put our decision upon that ground, since
the ground first stated is sufficient, and is a specific answer to your inquiry.
You are therefore respectfully advised that the contract of employment
mentioned by you may not be entered into by your Board.
Very truly yours
ATTORNEYGENERALOFTEXAS
Ocie Sp;er
Assistant
ROVED DEC 9 1943
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FIRST ASSISTANT
ATTORNEY GENERAL
APPROVED
Opinion
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Chairman
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