OFFICE OF THE AlTORNEY GENERAL OF TEXAS
AUSTIN
iionorabls George E. Sheppard
Coznptroller of Public Aooounts
Austin, Texas
Dear Sir:
warrant in
eratlon to the
ter of Hovembsr
on Is avail-
ler’s Depart-
issus warrant
y of the knerioan National Bank
Senate Bill 179, Chapter 440, Aots
s, reads as follower
Honorable Gee. H. Sheppard, page 2
*TO pay the American Eatlonal Eank,
of Austin, Texas, to rel!nburse sold bank
for money ndvnnoed for the oonstruotlon
of the Auditorlun Building at Iqricultural
and Meohanloal Collage, aaid building hsv&ng
been aut.horlzed by tha Aoto of the Thirty-
fourth Lo&lslature, First Called Session,
1915, page 104, and said sum bei% the un-
expended balance of said appropriation----$8,861.62*
Seotion 5 of said’ Xot provides in part a8 fol-
lows :
“It is spsolfically provided herein that
before any claim shall be raid frcm funds
hereby appnpriated the aam shall have the
approval of the Stats Co.nptroller, the State
Auditor and Bfflclenop Zxpert, and the At-
torney General. ‘It la further provided that
any claim, involving the refund of Gofranohlae
tax shall also carry the aF;roval of the
Secretary of State in addition tom the other
offio lals herein rimed.. *
The State Coqtroller has never approved the
pspnant of this claim. No warrant thersfore has ever
been issued. The preceding administration of the At-
torney Genaral~s office first wrote an opinion, In
August, 1937, holdiw the appropriation to ‘pay the
claim of the h.BriCaA NstioAal EaAk to be UACOAStitU-
tional, the effect of such opinion ncoassarlly being
to deny the existence of ConstitUtiO3al authority fn
the Attorney General, tha Comptroller, and the State
A~uditor and Pffiolenoy Expert to approve the payment there-
A ytnr later by conference opinion No. 3022, dated
$ust .22, 1938, iddressed to the Honorable Tom C. KIna:,
State Auditor, the preceding admln:strntlon of the At-
torney CanereVa offioe held the appropriation to be
constitutional., aAd overruled the preceding opinion
rendered by ~the a dzinlstration, the effeot of this opinion
being only to hold that the Constitution of the State Of
Texas would not prevent the, a.pproval of the clakn. This
opinion of the’Attorney’Genera1, however, did not approve
-he payment of the claim expresnly.
Honorab16 Gee. H. Sheppard, page 3
The State Auditor and Dfficlenoy Sxpart refused
to approve th6 oleim, end CA Dov%mb%r 8, 1938, the her-
fcan D3tional Bank, as relator, filed Its petition for
m3Adomus fn the 98th Dlstrlct Cxrt of Travis County,
agr_inst Tom C. King, State Auditor and Efficiency Expert,
only, aasking to have the cnurt compel Ton C. King, State
Auditor and Efficiency vdpert, to approve the clnim of the
Xm.%rican National Ba;lk. On Deosmbnbar19, 1938, the case
1~3s heard and the court ordored mandamus to issue against
Tom C. icing, State l*udltor and '2fticiancy ExpGrt, cozipelllng
him to approve the payment'of such olaim of ths American
National Bank. Onthe so.718 day the Attorney General, rep-
resenttip, tha Stste Auditor, filed with the clerk of the
cc,urt notlae of appaal and request for findings of fact and
c0nc1uaions of law. On February 16, 1939, transcript and
stata-tint of facts vrere filed vrlth the Austin Court of
Civil Xppeals. On June 20, 1939, appell%e, the rh5riCaA
X'ntioA31 Eank, fired it3 zzotlon to dismiss the appeal on
the 8rouAda "th3t A0 AOtiCa Of app%al iA Op%A OOUl% was
6ver given. n The Court of Civil Appeals dismissed the appaal
OA July 12, 1939, for r6aBoAs stated in app%~le%*s SotioA,
snd motion of appellant for rehszring was ~subs%qu6Atly dis-
aisaed. ft arpaars, therefore,~ that the.judgmeAt of the
District Court granting mandamus to oompel the Stat6 :.udi-
tor to approve the claim of the Aasrioan Xatlonal Bank has
beooae.final.
The question to be determined, therefore, is the
effect of this final jadgment upon the Attorney. GeAeral,
th% State Comptroller, and the State of~Teras. IA other
t:ords, is the jus'gmment of ths Dlstrlot Court of Travis
County, rendered in the suit agaiast To?n C. King, State
Audltor, detarxining the question of the COnStitutiOAality
of-the claim of the Amerlcan.Natlonal Bank, res adjudicata
Or such&sue as'against the State of Texas, the Attorney
General, and the State COmptrOll%r.
This question, wa are oonvInoed# must be
answered in the negative.
nThe key which unlocks the State Treasury is an
set of the L6glslatura'dlr%ot~Ag the thing to bs done
which is denandad." Treasurer yw, Vygall, 46 Tar. at
pnee 465. That tvhich the Stat6 has set up as a condition
pr%c%deAt +.o th% payment of a olaim.aeaiAst it may not be
iicnorable Geo. B. Sheppard, pa~,e 4
abrogated by the subotltutlon of a new and dlfrerent
ooxultlon precedant.
Hepa the Leglsla+re has seen rlt to provide
that the clain of the i%nerioan National Bank nay not br
paid until three separate and dlstinot officers at the
State eovarment shall hnvs approved it. The approval
or one or these orrlcers Is not *the key Xhlch unlocka
the State Treasury.* The jud@ent of t,F,e cburt ag:~.lnst
Ton C. Xl% la not binding on the Comptroller or the
Attorney General, upon the fuod.acisntal principle of law
that a judgmnt la not binding upon one who la notaa
prty ta the ?rooaedlng. Texas Juris~rutiecce, Vol.
26, pares 241-242. The jucig:aezt is sot blcdl3g, upon
tile State, because the Stste has not OonsentsS that it
shall be represented in the mtter of approvlna this
claim by To% C. Elng alone, but has stipulated that
the spproval thereof shall be by the three G.ffiCial8
maad, to-nit, the State Aud.&tor, the Attorney General,
*rid t;?e Cozptroller.~ The duty of approving or dls-
approvlllp; such claim Pested upon all three offioara,
rat upon on0 0r the& Gz16re psrforsanco of a duty is
sought to be coapelled by cL9ndem8, all persons charged
?'lth the psrforzmnce Or that duty mat be 33a8 parties.
Gaal v. Townsend, 77 Tel. 464, 14 S. W. 365.
All parties charged with the Uutg of a?prov-
iw or disapproving the claim of the American National
Sank F;ere not made parties to the suit in the Dlstriot
Court or Travis County, but only Toa C. Elng, State
Auditor, was a party to such suit, and judgment therein
MS rendered odly against hlzz. It is therefore apparent
that the ju@mnt of the court rendered In that Oase
1s not detar~inntlvs 0r.the issues involved as against,
the State Co%ptrollar, the'irttcrney General, or the
State or Texas,
.Havlng determined that the judgnent rendered
by the District Court of Travis County is not binding
upon the State of Texas, or the Comptroller or the At-
torney General, we pass to the question of whether your
depnrtzent ia legally authorized to issue a warrant in
psyaent of this claim. This question lnvolves daters-
lning Prhether the Comptroller and the Attorney General
nay oonstltutlonallp approve the payment of this olaln,
Honorable Geo. H. Sheppard, page 5
The racts under which the alleged olala of
t:ie Amrican National Bank arose are these:
Chapter 32, Aots Gf the First Called Baasion
of the 34th Lsglalaturs of Texas:, In 1915, appropriated,
for ths wrIncsl biennium baglnn!.ng Septsmber 1, 1915, J
and enElng August 31, 1917,” $lC~O,OOO.CO**or so mob
thersGf as my ba nsoeasary” for the construction of
an auditorium at A. & ?*l. Collsg0 (page 1Of.). Cn Z~ovesbsr
29, 1916,. ths Board of Dirsotorr: of A. k V. College enter-
;d into 6 contract with Ledbettor .? Creethouse of Austin,
Texas, for the srsction of such auditorium at a CGntraCt
price or $91.138.38. On April it,1917, the tinltea States
dsolnred war on Gemany. In the spring or 1918, Ledbetter
E; Cresthouse Cefaultecl In the pc~rfomance of their contract,
and the sureties on their. bond --‘&used to proceed vlth the
construction or the building, c~.alalng that the war had so
Inoraassd costs 0: labor and xa’;erlals as to make it iul-
possible to csnpl%ts the contract for oonstruction or ths
building at the contract price, withaut Suffering a 106.0,
and thet this fact relieved the!.1 fro2 perromance. T&ire-
arter, several embers or the Board or hirectors or A. &
X. Colle.ne and a repreoentotlve of the Govsrnor of Texas
?rsvailed upon Major LlttlaTleld, President Gf the A%r-
Ican Xstlonal Sank, to advmce nufflcisnt moneys to enable
Ledbatter & G.resthouse to ccxpljte the building without
suffering a loss, rspresentlng 20 Xajor utthfi0ia t%t
there wes an unexpsnded balance of the $lOO,COO.CO agpropria-
tion nhlch they could not .sxpend vlthout sonsent of the
Legislature, but that they zould reco.mend. that the
Legislature ralinburse the bank .Por the nonsy advanced. Such
nonap was advanced by the bank in the sm of approxtiataly
PZ3,OOOiCO. by nhich the buildf:lg vma CO.?l?lSted by
Lsdbsttar & Greathouse In accordance with the plans end
specIfIcatIona axbodied In the original contract.
The lnabllltg of ths LsgIslaturs, under restraint
or the oonet.ltutIon,~ to appropriate anything In payment of
this account over and above $8,d61.62, Is conceded; but It
la COntsndSd t%at at the time this agrsexient was hnd with
?%jor Littlefield, there was an unexbendsd balance in the
SlO0,OC.O.GO opproprlat Ion of $8,861.82, and that, by VatI-
ricetIonW by the Legislature of the. agreemnt cads with
Xajor Littletleld, wlthla the .ltxIta of the E!SOMt pr~e-
sorlbsd by ths Wprs-srietlng law?, to-wit. ths 1913 “o-
Honorable Gao. H. Sheppard. paxa 6
proprlatlon, tha payment or the clalm to thk extent 0r
$8.861.62 escapes the oondematlon or the constitution,
By the 45th kelslature, thera.wae appropriated
this aurn of $8,861.62, payment of vhioh was authorfzed to
be made only upon the oondition hereinabove noted.
It will be obaervad that Article VIII; Section
6, or our constitution limits n$propristions to tcms not
exceeding two ywrs. It will li!iewlse be observad thet
the $100,000.00 appropriation was zeda available for ex-
penditure for the fiscal biennium "endjx Aquust 31,
1917." The LeGislatura did not 'Pest the Board of kecents
with a continuing authoritp~to contract for ex;endltura of
the ~lGO,OOO.CO, but only alth authority to contract with
reference thereto duriq the period for which the approprla.
tlon was ziade. Ooncading ror the purpoees or this opinion,
t!b?t on Aufqlst 31, 1917 , $C,861.62 or the origl.nal ammo-
prlatloti rmained unancmbered, neverthaless, by vi&a of
the provisions of the constitution end of the appropriation
hill Itself, the unoblfGated 0," unetmunberad portion or the
~100,C00.00 appropriation lapsed, and the authority to con-
tract with rafe/enoa to It cululnatad on Septe?zber 1, 1917.
nt the tim the contract or ny;reemnt with rei”erence to
such unexpended balance was had, tho unexpended portion
cf the appropriation was no lor,ger availabla,:'ond 'the euth-
o,-ltp to contract with referenca to It had expired. It is
clear, tkerefare, that the aRroement upon which the claim
for $E,861.62 we8 founded was not authorized to he .znds
upon an appropriation in axlstence at the.tFae of the incur-
ring or the slain; that the authority or the orricers in-
volvsd to bind the state.by contracts for the construction
of the auditorium had expired with the appropriation which
had oonrerred At. It ie appamnt, therefore, thet tha
qreexent was an attoxpt on the part of suoh otfiaiala
to create a debt against the State, without authority
conferred by pm-existing law.
AS a nattsr or faot, ht thctime this agreamnl
v.3~ aads, there was In existence and In full force end ar-
.feot e law passed ~by the Le&slaturs, to-wit, Seuata'Blll
XO. 29, enaoted by the First Called Session or the 33rd
Legisletare; approved Aup,uat 19, 1913, tha provla1ouaot
which nerr as.rollowsr
Honorable Geo. H. Sheppard, page 7
55eotlon 1. Th?t it shall hereafter
be unlawful for any regent, or ragonto,
alrector or directors, officer or orfleers,
member or members, or any educational or
eleemospnery Institution oi the state or
Texas, to contract or pro-A@6 for ths srec-
Mon. or repair of any building, or other
1:qprovoment or the purchese' or equipment
or supplies of any kind whetsoever ror amp
such icstltutlo~, not authorizad by specirlio
lcglalatlvo enactment, or by nrittsn dlraa-
tlon of the Governor .of this State, aotlng
under and consistent with the authority ot
existing laws, or to contract or cicate any
indebtednose or doflclenog- In the name or.
or againet the Stote, not s~eclflcnlly
authorlzod by legislative onact&ent. . . .
Yhsctlon 2. That any end all oontrs.ats,
debta or derlolencias creatsd contrary to
the provlslons or this Act ,shall be wholly
and totallyvoid and shall not bo onforoeable
against the State."
Section 3 or said Act provided ti:et for a vlola-
tion or ita provisions tha orfander should be: removed
from orrfce, andshould, .ln _addition,
__ be- punished by
lziprlsomant in tho aounty jail for not loss than 10
days nor more than six months.
Section L9, Artlch ISI, of the cocstitution
,“rovldos that “no debts sh:all’bd created by or on behalr
oi the State; except to supply-assual doficienaios of
rsvenuo, repel Invasion, suppress insurrection, datead
the Steta ~ln time ot war, or pay existing debts; . . .
. . .”
Artiale III, Seotion 14, of the constitution
provides that “The Loglelature . . . shall not grant
extra coqmnsation to eny . . lpublic contractors,
after . . . contrsat entered Into, ror th6 ~arformanco
or the saao; nor grant ;. by egprcIrlation or, otherwise,
any amount .of’ money ;~.. . to arq’ individual, on a
claim, real or pretsndod, when the aaae shall not $8~6
been provided far by pro-6xist+tg law; . . . .*
.~Tho validity and appllcabillty of the proposl-
tion stated below with rotoroncr to the aroatlon and
Zonorablr Geo. ‘H. Sheppard, pagr 8
attaroptad payment of this claim ore 4vids~t.s
.l. Creation of debt.
(a) Tha Leglslaturs nay not create or author-
Ixe the craatlon of a debt against the State, szcspt for
purposes which do not include the situation befor us.
(b) The agreesent with the American National
Bank was an uEauthorlzed atteIipt to create a debt or
llablllty aSainbt th4 State, am3 was void iron its in-
caption both by virtus oi the constitutional provlslm
am? bp virtue of the exprees provlalons of the statutce
above quoted.
(0) Ratification nay not create a liobllit7
against the Stato In the taoe of a oonstItutlons1 provision
denying the llablllty and prohIbitInS the Lecialatara r;roa
racognlxing such claI.ze.
2. Extra comanaation to public contractor.
(a)
~The Legislature is without pov4r to allow
extra cc.?l-,ensatlon
to a pub110 contraotor for ooapleting
the ;?erfornanos of a contraot entored Into bstveen the
contractor and the State.
(b) Vhat the Legislature is without power to do
direct17 my not be aocompllahetl by indirection.
The purpose and etrect OS the agreenant seas be-
tw6en the state officers and the Amrican National Bank
were the allov~4’;ence of additional oospensatlon to ,Ledbettsr
et Greathousa to induce thezu to cofnp14ta a Contrect already
entered Into and partly perroraed, according to Its terms
and SpecificatlonS.
3. fa.mrmant of claim not authorized by pre-
6XiStillP. law.
(a) Tha constitution denlas th4 existenc4 of
porter in the Leeislaturo to pay “by appropriation .or
othervise* al “real or pretended” o1aI.m: “not . . .
provIOed for by ~pre-exfstin& law. n
.(b) The Leglslatur4 aay not pa7 a claim unless
there erlst4d at th4 tin4 the taots upon which the claim
.
Honorable Geo. 8. Sheppard, pa,:6 9
15 roundod occurred a law reco,~nliinp that such facts
Impose a valid and subsisting obllpatlon upon the State.
(c) All persons CoalInS tilth pub110 officers
are charged with ti&lad$:e of the llnltntlons upon their
suthority, and clalas arIsInS upon contracts or agresxenta
ylhlch public OfrICers lnck authority to mske iaposa no
ohlI,yetIon upon the State whIoh may be recognized and
paid by the Leglalaturo.
(d) The.cla13 of the Amrlcan National Bank
la founded upon, a contract or ograeaent md4 by public
cfflcers without authority, thotc belrq, no law ves~lng
such officers v:Ith authority to borrow Toney In behalf
of the state, and their authority to contrsct vi th rof-
e-ence to the ~100,000.00 sparo;>rIation havim expired
at the t&m of the agreemnt w:‘.th the AnerIcan ?r’atIonal
Bank, and the str?tutes in eriscence at that time having
speciffcally denied such autho-nlty and provided that
such contract should be utterly void and uneforoeable
against the State.
The .foregoInq proRosltIons are axply eupported
by tba Iollowing oases:
Stste v. bllson, 71 Ter. 291, 9 S. W. 155
CorsIoana Cotton Xl110 v. Sheppard, 71 S.
7;‘;‘
(2d)
. 247
hosti:: Batlonai Bank v. Sheppard, 71 S.
P./2d) 2L2
Zt. ~Corth Cavalry Club v. Sheppard, 83
5. Vi. (2d) 660
State v. Ferlsteln. 79 S. W. (26) ll.3
-XIchols v. State, 32‘5. V?, 452 - .-
State v. Ealdeaan, 153 S. S. 1020
Conference Opinion bl C. Ip. Taylor,
approved by C. ?d. Cureton, Attorney
General, CpInIon Rook 52, paEe 20
Boo4 v, United Stotea, 218 U. S. 320,
54 L. Ed. 1q55
I Gordon v. State, 233 N. T. 1, 134 H. 6.
698. 21 A. L. A. 562
?Aulz&~.~ &tual~~ens?It Life 1~s. Co.
(Cola. ) 33 L. R. A. 827
Ths following language quoted iron portIona of
tho opInIon In the case of Gordon v. State, cited su;?ra,
Is particularly applicable to the fact8 of thlo case:
Eonorable Geo. EL Sheppard, pa.xa 10
“The contract of Nov3nber 10, 1915,
‘betweao claimant and the %ate, ban executed
after clalsant, In co2petitlon rlth othar
contractors, had subsittai a proposal for
a psrforaanoe of the acirk therein spcoiriad
to be perfomad ana the 19bor and mtarlal
necessary to complete the same. Cla imnt
88s a oontractor, end raxiliar with the
nature of the work to be grforxed, the cost
of labor end matarials nacesanry to ccaplate
the specified work, end tie. tine viithln u:hich
the sme 00uia be completed. Enga~ea in a
hszordous business, claimmt was chargaabla
with kr-,owladga of the la&31 obW”:tion Fn-
posed upon a psrty to a csntraot to perform
his covansnts, and llsbilltg to respond in
daaoges In the event of nmpcrforaance, and
that a like obliqtion rest&id upon the state.
Ye may also attribute to claimant, as a busi-
ness nan and oontmotor, knovrladge of the
increasing abnormal cant? itlons existing at
tine time of the execution of the oontroct.
The powers of Europe had for some Use prior
to Novazabbor 10, 1915, baea and were than en-
gxgad in war. Some five aonths previously
t!:a qyressor bed ruthlessly caused the
death of American citizens and helpless
ohilfiran upon the high sea, and the fact
was apparent that the United States oould
cot, in the interest of humanity md as a
massure of sali-protection, 10% delay
p?rtJoipatlon in the Ilar in ala of the forces
opposad to the aglrressor. A oontinuanca of
the r;ar, and partioulnrly the entry of this
country into the conflict, would neoasoarllp
result Ln scarcity of labor, incraased cost
of the sane, snd Increased cost or mtarisl,
with continued business depression. Confrongad
Rith thct condition and outlook, claixsnt pro-
posed to undertake the mrk under the contract.
To say that he did not appreciate the risk, .and
that his proposal to perform the work was
not made in oonts.mplatlon of the abnormal
conditions then’ extant end dan&er of on in-
oraasa of the came, vould be a serious ra-
flectlon upon his sagaoitp as a business
man. Tie unit prices to be paid by the
state for labor and material ware tlxed by
olaimant in his propoeal. As a contractor
.
Honorable Gao. H. Sheppard, pace 11
he was aware of the prevafling cost of labor
ana ssterisls, and ms quUflad to antlolpate
tha conditions likaly to nrim during the tam
of tha contract. At lesst, he undertook and
was ~1111~’ to Co so, and to &ve a bond to
secure perf-ormnca on his port. Baving entered
into the contract, olaisont becasa legally
and equitcblg bound to discharge the obllqatlon
ossu~~ad bg htim, however onerous the burden.
Zorat v. L. Vcgalstein & Co. 188 App. Mr.
605, 611, 177 N. Y. Supp. 102; Colubus
R. Fo:::er ?: Light Co. v. Columbus, 249 U.
7. 399, 63 L. Ea. 669, 6 A. L. x. 1618,
P. U. R. 19193, 239, 39 Sup. Ct. Rep. 349.
lallura or refuse1 on the Part of the olalm-
snt to 2arforn the co&tract muld vast fin
tile stste a cause of action for dmages
against hln, and to such actlo.? a defense
that by raeson of wr conclitlons the cost
of 1abor”and rJatarials had increased, rendar-
lng the controot a loss to hia, would be
unavailia’.
n. . . . . . .Fqulty and justice do not
require the state tc rehburs6 a contrsotor
for the increased expense incurred by h.i?x
in the parformino~ of a contract dn’a in no
aaaaura to the act of th6 ststa. The c lalaant
esswed the risk Incident to the pcrfor.smncs
of his contract. Esa the cost of labor and
.nltarials decreased rethar than Increased,
the state; under the oontraot, I7oula still be
obll~sted. to pay the unit prices it covannnted
to PsY, and equity and jur,tlca would turn a
deaf ear to a suggestion by the state that
the expense to claimant hfid bean naterially
reduced, his anticipated Profits thereby
lcrgely lnoreas6b, and therefore a aoral
obliEation axisted upon his port to reduce
the cost to tho state:
“The state did not undertska to indsanify
alslmnt against loss upon his aontraot. On
the contrary,: It raquLrad him to p,ivea band for
a strict oozapllsnoa on his part with the tarme
Honorable Cso. ii. Sheppard, 3er.s 12
of the snme. “er conditions and the increased
cost of labor &I msterials or soarclty of
labor Rare not praclpltstad by the state or
due to any act upon its part. So far aa
the record diecloses, the state rerfoned
every obllCatlon rast:ng upon it undar the
contrsot. Tie contmct bc;tvaen the cleFnant
and L?e state VW purely s buslnoss tronsac-
tlon skin to contracts between indlvl@uals.
Undoubtcdlp claimant .antlaipsted a yrctit
would raxlt from his conlxact. If dissp-
qointad and a loss rssultod, ha assumed ths
risk of such losa and to b,t..:r the sarra. A
contribution to hi-, and okar contrrctors
similarly situvtad by the taxpayers of the
state unaar the State of 1919, or In what-
ever form fraxad, would operate aa a dispan-
sat&On of charity.
1)
. . l .
The. oo.mmlssion c:auhlbited.n
For the reasons stste,l, we are constrained to
hold that the Comptroller ar.d tie Attorney General are
without constitutional authcritj to approve the Pnynsnt
of t:.is claim and that, your depurttent is not leeally
.?uthorizea, und6r the constitution, to issue a warrant
In payzent thereof.~ Confereuce opinion Xo. 3022, written
by the preceding admlnistrstion of the kttornay General’s
Capsrtaent of the State of Texas, addressed to the Honorable
Tom c. King, Stat6 Auaitor,, .+us.:in, Texas, unaer ante of
August 22, 1938, and found in Me reports and opinion8 of
the httornay General of Texas for the years 1936-1938,
inclusive, on page 171, Is hereby .expressly overruled.
Since the appropriation providing for tha payment
or this claim is condenned by the constitution, and thers-
iOr6 void, it follor?s that no’ a;:propriatlon is available
for the payment of th6 Clab Of th6 AnariCan National Bank,
for;clesrly, an’appropriation Ls not ~to be considered aa
availabl6 in law unless that eD~n?oprietion Is validly =d6.