Can a Texas county official do business with the county they serve if they follow the conflict-of-interest disclosure rules?

Texas AG Opinion JM-1090: Can a County Official Contract With Their Own County?

Plain-English summary

The Duval County Attorney presented a practical problem. The county judge was a licensed pharmacist who owned the only drug store in the City of Freer; the next nearest pharmacies were 25 and 27 miles away. Before he took office, indigent residents used vouchers approved by the county welfare department to buy medicine from his store, and he then submitted those vouchers to the county for payment. The question was whether he could keep doing that now that he was county judge, given the laws that bar county officials from having a financial interest in county contracts and claims.

Two provisions were in tension. Section 81.002 of the Local Government Code requires the county judge and commissioners, before taking office, to swear they will not be interested, directly or indirectly, in a contract with or a claim against the county, with narrow exceptions, one of which is "a contract or claim expressly authorized by law." That language descends from old article 2340 of the civil statutes, which had folded in the strict common-law rule voiding any contract in which a member of the governing body had an interest. But chapter 171 of the Local Government Code, adopted later, took a different approach to the same problem. Instead of voiding interested transactions outright, chapter 171 requires a local official with a substantial interest in a business entity to file an affidavit disclosing the interest and to recuse himself from the vote, and makes a knowing violation a Class A misdemeanor. A transaction handled under chapter 171 is not automatically void; it is void only if it would not have passed without the interested official's vote.

The Attorney General read the two statutes together, as statutes on the same subject should be. The commissioners court is the governing body of a county, so its members are "local public officials" under chapter 171. Chapter 171 therefore authorizes the commissioners court to enter a contract or approve a claim in which the county judge has a pecuniary interest, provided the chapter's disclosure and recusal requirements are met. And because chapter 171 authorizes it, the transaction becomes "a contract or claim expressly authorized by law," which fits the exception to section 81.002. So the county judge could continue providing medicines to indigents for county reimbursement if chapter 171 was followed. The opinion also cleared away a distraction: the county attorney had pointed to section 171.005 (which allowed contracting with a sole-source interested business under certain conditions), but that provision had been repealed in 1989 and could be disregarded. Finally, the opinion limited an earlier opinion, JM-855, to its facts, so its broader statements about section 81.002 and chapter 171 would not be read to forbid interested county contracts generally.

Currency note

This opinion was issued in 1989. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Chapter 171 of the Local Government Code has been amended repeatedly since 1989, including changes to its dollar thresholds, its definition of a substantial interest, and its disclosure procedures, and section 81.002 has been amended as well. The section numbers used here (for example, section 171.008 renumbered as 171.006) reflect the 1989 codification. Anyone facing a present-day conflict-of-interest question for a county official should work from the current text of chapter 171 and section 81.002 and current case law rather than the 1989 provisions described here.

Who this opinion affected (as of 1989)

County judges and commissioners: The opinion meant that an official's financial interest in a county contract or claim was not an automatic bar. If chapter 171's disclosure and recusal steps were followed, the commissioners court could still act on the transaction, and the official's section 81.002 oath was not violated.

Small and rural counties: In places where a public official might be the only local provider of a needed good or service (as with the sole pharmacy in Freer), the opinion offered a lawful path for the county to keep buying from that provider rather than losing access to it.

Indigent residents relying on county assistance: The practical effect was that indigent residents in Duval County could keep filling prescriptions locally with county reimbursement, so long as the commissioners court used the chapter 171 procedures.

Common questions

Can a Texas county official ever contract with their own county?
Under this opinion, yes, if chapter 171 of the Local Government Code applies and its disclosure and recusal requirements are met. That makes the transaction "expressly authorized by law," which satisfies the exception in the section 81.002 conflict-of-interest oath.

What does chapter 171 require of an interested official?
It requires the official with a substantial interest to disclose that interest and to recuse himself from participating in the decision. A knowing failure to comply is a Class A misdemeanor.

Does an interested official's involvement void the whole action?
Not automatically under chapter 171. The action is voidable only if it would not have been approved without the vote of the official who violated the chapter.

What happens to transactions chapter 171 does not cover?
They remain subject to section 81.002. If a transaction is not authorized by chapter 171 (or by section 271.902), the flat conflict-of-interest prohibition still applies.

Background and statutory framework

The request came from the Duval County Attorney about the county judge, a licensed pharmacist who owned the only drug store in Freer. Before he took office, indigent persons used county-approved vouchers to buy medicine there, which he submitted to the county for payment. See Local Gov't Code § 115.021 (commissioners court shall audit and settle all accounts against the county and direct their payment).

Section 81.002(a) requires the county judge or a commissioner, before undertaking the duties of office, to take the official oath and swear in writing that he will not be interested, directly or indirectly, in a contract with or claim against the county except (1) a contract or claim expressly authorized by law, or (2) a warrant issued to him as a fee of office. That language was added by a 1981 amendment to article 2340, V.T.C.S., recodified as section 81.002. Acts 1981, 67th Leg., ch. 527, § 3, at 2230. Before the 1981 amendment, article 2340 and its predecessors incorporated the strict common-law policy prohibiting contracts between a governmental body and a private entity in which a member of the body was interested. See, e.g., Bexar County v. Wentworth, 378 S.W.2d 126 (Tex. Civ. App. - San Antonio 1964, writ ref'd n.r.e.) (invalidating a contract entered in violation of article 2340); see also Knippa v. Stewart Iron Works, 66 S.W. 322 (Tex. Civ. App. 1902, no writ) (commissioner may not enforce an assignment of a contractor's claim against the county). The 1981 enactment that added the exception also adopted article 988a, V.T.C.S., now section 271.902, allowing a county to purchase from a cooperative association even though members of its governing body belong to it. Acts 1981, 67th Leg., ch. 527, § 1, at 2229; see Attorney General Opinion H-624 (1975). The exception was stated in expansive terms and was not limited to cooperative transactions. See Bill Analysis, H.B. 450, 67th Leg. (1981).

In 1983 the legislature adopted article 988b, V.T.C.S., now chapter 171 of the Local Government Code, establishing financial disclosure and recusal requirements for a local public officer who has a substantial interest in a business entity that will receive an economic benefit from official action. Local Gov't Code §§ 171.003, 171.004; Acts 1983, 68th Leg., ch. 640, at 4079. A knowing failure to comply is a Class A misdemeanor. Local Gov't Code § 171.003. A violation does not make the governing body's action voidable unless it would not have been approved without the vote of the violating official. Local Gov't Code § 171.008 (renumbered as section 171.006 by Acts 1989, 71st Leg., ch. 1, § 40, at 46). This modifies the strict common-law rule, which would have invalidated the action even if the interested official had not participated. See Local Gov't Code § 171.007; see also Attorney General Opinion JM-424 (1986). Chapter 171 defines "local public official" to include a member of the governing body or another officer of a county or other local governmental entity who exercises more than advisory responsibilities. Local Gov't Code § 171.001(1).

The commissioners court is the governing body of a county. Tex. Const. art. V, § 18. Its members are local public officials within chapter 171. The opinion concluded that chapter 171 authorizes the commissioners court to enter a contract or approve a claim in which the county judge or a commissioner has a pecuniary interest, as long as it complies with chapter 171. Such a contract or claim is "a contract or claim expressly authorized by law" within the exception to section 81.002. That construction follows the rule that statutes in pari materia should be construed together, giving effect to both. See, e.g., Duval Corp. v. Sadler, 407 S.W.2d 493 (Tex. 1966); Conley v. Daughters of the Republic, 156 S.W. 197 (Tex. 1913); Allen v. Texas Dep't of Public Safety, 411 S.W.2d 644 (Tex. Civ. App. - Texarkana 1966, no writ). A transaction the commissioners court enters in compliance with chapter 171 is not invalid under section 81.002 even though the county judge has an economic interest in it. Transactions not authorized by chapter 171 or section 271.902 are still subject to section 81.002. See Attorney General Opinions JM-1006 (1989); JM-927 (1988); Letter Opinion 88-127 (1988); see also Letter Opinion 88-40 (1988).

The opinion also addressed an earlier statement. Attorney General Opinion JM-855 (1988) had said chapter 171 did not expressly authorize a county commissioner to contract with the county, in a case barring a commissioner from leasing county space for a private business; but the facts there indicated chapter 171 would not have applied to the lease in any event. The opinion limited JM-855's statements about the relationship of section 81.002 and chapter 171 to the fact situation that opinion addressed, so they would not be applied to county contracts generally.

Finally, the county attorney had suggested that section 171.005 (allowing a governing body to contract for services or personal property with a business in which a member has a substantial interest if that business is the only one providing the needed service or product within the jurisdiction and bids on the contract) barred the transaction. But section 171.005 had been repealed in 1989. In codifying the Local Government Code in 1987, the legislature recodified section 5(a) of article 988b as section 171.005, but the same legislature also amended article 988b to repeal that language and replace it with a different provision. Acts 1987, 70th Leg., ch. 362, § 5. Under the Code Construction Act, the repeal of a statute by a code does not affect an amendment of the statute by the same legislature that enacted the code; the amendment is preserved and given effect. Gov't Code § 311.031(c). Accordingly, the provision set out as section 171.005 had been repealed and could be disregarded. The county judge could provide medicines to indigent persons for county reimbursement in accordance with chapter 171 as amended.

Citations

Statutory and constitutional authorities:

• Local Gov't Code § 115.021 (commissioners court audits and settles accounts against the county)
• Local Gov't Code § 81.002 (conflict-of-interest oath of county judge and commissioners)
• Local Gov't Code § 271.902 (purchases from a cooperative association; formerly V.T.C.S. art. 988a)
• Local Gov't Code §§ 171.003, 171.004 (disclosure and recusal for substantial interest); § 171.008 (voidability; renumbered 171.006); § 171.007 (effect on common-law rule); § 171.001(1) (definition of local public official); § 171.005 (repealed 1989)
• Texas Constitution art. V, § 18 (commissioners court)
• V.T.C.S. art. 2340 (predecessor conflict statute, repealed 1987); art. 988a; art. 988b (predecessor of chapter 171)
• Gov't Code § 311.031(c) (Code Construction Act; repeal by a code does not undo a same-session amendment)
• H.B. 450, 67th Leg. (1981); House Bill 1976, 71st Legislature (amending section 81.002)

Cases:

• Bexar County v. Wentworth, 378 S.W.2d 126 (Tex. Civ. App. - San Antonio 1964, writ ref'd n.r.e.) (contract void under article 2340)
• Knippa v. Stewart Iron Works, 66 S.W. 322 (Tex. Civ. App. 1902, no writ) (commissioner may not enforce assignment of a contractor's claim against the county)
• Duval Corp. v. Sadler, 407 S.W.2d 493 (Tex. 1966) (in pari materia construction)
• Conley v. Daughters of the Republic, 156 S.W. 197 (Tex. 1913) (harmonizing statutes on the same subject)
• Allen v. Texas Dep't of Public Safety, 411 S.W.2d 644 (Tex. Civ. App. - Texarkana 1966, no writ)

Attorney General materials referenced:

• Referenced: H-624 (1975); JM-424 (1986); JM-1006 (1989); JM-927 (1988); JM-855 (1988, limited to its facts); Letter Opinion 88-127 (1988); Letter Opinion 88-40 (1988)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1090
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1989/jm1090.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative. (The scan's first line mis-renders the opinion number as "JR-1090"; the running headers correctly show "JM-1090." One garbled case name, "Kninna v. Stewart Iron Works," was confirmed by citation lookup to be "Knippa v. Stewart Iron Works" and corrected.)

August 28, 1989

Honorable Abelardo Garza
Duval County Attorney
P. O. Drawer M
San Diego, Texas 78384

Opinion No. JM-1090

Re: Authority of a county judge to sell prescription drugs to indigents for reimbursement by the county (RQ-1696)

Dear Mr. Garza:

You state that the county judge of Duval County is a licensed pharmacist who owns the only drug store in the City of Freer in Duval County. Aside from this pharmacy, the nearest pharmacies in the county are 25 and 27 miles from Freer. Before the county judge assumed office, indigent persons used vouchers approved by the county welfare department to buy medicines from his drug store, and he submitted them to the county for payment. See Local Gov't Code § 115.021 (commissioners court shall audit and settle all accounts against the county and direct their payment). You ask whether the pharmacist may continue to provide medicines to indigent persons for reimbursement by the county now that he is county judge.

Section 81.002 of the Local Government Code provides in part:

(a) Before undertaking the duties of the county judge or a county commissioner, a person must take the official oath and swear in writing that the person will not be interested, directly or indirectly, in a contract with or claim against the county except:

(1) a contract or claim expressly authorized by law; or

(2) a warrant issued to the judge or commissioner as a fee of office. (Emphasis added.)

Local Gov't Code § 81.002. The underlined language in the above provision was added by a 1981 amendment to article 2340, V.T.C.S., now recodified as section 81.002 of the Local Government Code. Acts 1981, 67th Leg., ch. 527, § 3, at 2230 (amending V.T.C.S. art. 2340 (1925) (repealed 1987)).

Prior to the 1981 amendment, article 2340, V.T.C.S., and its predecessors incorporated the strict common law policy which prohibits contracts between a governmental body and a private entity in which a member of that body is interested. See, e.g., Bexar County v. Wentworth, 378 S.W.2d 126 (Tex. Civ. App. - San Antonio 1964, writ ref'd n.r.e.) (invalidating contract entered into in violation of article 2340, V.T.C.S.); see also Knippa v. Stewart Iron Works, 66 S.W. 322 (Tex. Civ. App. 1902, no writ) (commissioner may not enforce an assignment of a contractor's claim against the county). The 1981 enactment which added the underlined exception to article 2340 also adopted article 988a, V.T.C.S. This provision, now codified as section 271.902 of the Local Government Code, authorizes a county to make purchases from a cooperative association even though one or more members of its governing body belong to it and might indirectly benefit from the purchase through increased dividends. Acts 1981, 67th Leg., ch. 527, § 1, at 2229; see Attorney General Opinion H-624 (1975) (article 2340, V.T.C.S., barred county from contracting with a cooperative in which a commissioner had a small interest). The exception added to article 2340 ensured that counties would get the benefit of the legislative change in the common law. See Bill Analysis, H.B. 450, 67th Leg. (1981). The exception was, however, stated in expansive terms and was not limited to a county's transactions with a cooperative.

In 1983 the legislature adopted article 988b, V.T.C.S., now codified as chapter 171 of the Local Government Code, establishing financial disclosure and recusal requirements for a local public officer who has a substantial interest in a business entity that will receive an economic benefit from an official action by the governmental body on which the officer serves. Local Gov't Code §§ 171.003, 171.004. See Acts 1983, 68th Leg., ch. 640, at 4079. An official who knowingly fails to comply with these requirements commits an offense punishable as a Class A misdemeanor. Local Gov't Code § 171.003. A violation of chapter 171 does not make the action of the governing body voidable unless it would not have been approved without the vote of the person who violated the chapter. Local Gov't Code § 171.008 (renumbered as section 171.006 by Acts 1989, 71st Leg., ch. 1, § 40, at 46).

This enactment thus modifies the strict common-law rule which would have invalidated those governmental actions even if the interested official had not participated. See Local Gov't Code § 171.007 (as amended, Acts 1989, 71st Leg., chapter 1, at 47, incorporating into chapter 171 an amendment to art. 988b, V.T.C.S., adopted by Acts 1987, 70th Leg., ch. 362); see also Attorney General Opinion JM-424 (1986). Instead, it permits the transaction but forbids the interested official from participating in it, enforcing these requirements by subjecting him to criminal liability for violations.

Chapter 171 defines "local public official" as follows:

a member of the governing body or another officer, whether elected, appointed, paid, or unpaid, of any district (including a school district), county, municipality, precinct . . . or other local governmental entity who exercises responsibilities beyond those that are advisory in nature. (Emphasis added.)

Local Gov't Code § 171.001(1).

The commissioners court is the governing body of a county. See Tex. Const. art. V, § 18. Members of the commissioners court are local public officials within chapter 171 and are subject to its provisions and procedures for transactions in which a member of the court has a substantial interest. In our opinion, chapter 171 authorizes the commissioners court to enter into a contract or approve a claim in which the county judge or a commissioner has a pecuniary interest, as long as it complies with the requirements of this legislation. The claim or contract which arises under authority of chapter 171 is "a contract or claim expressly authorized by law" within the exception to section 81.002 of the Local Government Code.

This construction of the two provisions is supported by the rule that statutes in pari materia should be construed together, giving effect to both, if possible. See, e.g., Duval Corp. v. Sadler, 407 S.W.2d 493 (Tex. 1966); Conley v. Daughters of the Republic, 156 S.W. 197 (Tex. 1913); Allen v. Texas Dep't of Public Safety, 411 S.W.2d 644 (Tex. Civ. App. - Texarkana 1966, no writ). Both section 81.002 and chapter 171 of the Local Government Code deal with conflicts between a county commissioner's private economic interest and his official duty to participate in decisions on the expenditure of county funds or the use of other county resources. As statutes on the same subject, they are to be construed together and any apparent inconsistencies are to be harmonized. See, e.g., Conley v. Daughters of the Republic, supra. Accordingly, a transaction that the commissioners court enters into in compliance with chapter 171 of the Local Government Code will not be invalid under section 81.002 even though the county judge has an economic interest in it. Transactions not authorized by chapter 171 or section 271.902 are still subject to section 81.002.1 See Attorney General Opinions JM-1006 (1989); JM-927 (1988); Letter Opinion 88-127 (1988); see also Letter Opinion 88-40 (1988) (reserving question on whether chapter 171 applied to transaction).

Attorney General Opinion JM-855 (1988) stated that chapter 171 did not expressly authorize a county commissioner to contract with the county. This opinion determined that section 81.002 barred a county commissioner from leasing space from the county to operate a private business. The facts presented in Attorney General Opinion JM-855 indicated that chapter 171 would not apply to the lease transaction in any case. Thus, chapter 171 did not except that proposed transaction from section 81.002. The statements made by Attorney General Opinion JM-855 about the relationship of section 81.002 and chapter 171 of the Local Government Code should be limited to the fact situation addressed by that opinion and not applied to county contracts generally.

You suggest that section 171.005 of the Local Government Code prohibits the county judge from providing prescription medicines to indigent persons and seeking reimbursement from the county. This provision states as follows:

The governing body of a governmental entity may contract for the purchase of services or personal property with a business entity in which a member of the governing body has a substantial interest if the business entity is the only business entity that

(1) provides the needed service or product within the jurisdiction of the governmental entity; and

(2) bids on the contract.

Local Gov't Code § 171.005 (repealed 1989). We need not consider whether the quoted provision would prohibit your transaction, because it was repealed in 1989.

In adopting the Local Government Code in 1987, the legislature recodified and repealed article 988b, V.T.C.S. Acts 1987, 70th Leg., ch. 149, §§ 1, 49(1). Section 5(a) of article 988b, V.T.C.S., was recodified as section 171.005 of the Local Government Code. The same legislature adopted an amendment to article 988b repealing the language quoted as section 171.005 and replacing it with an entirely different provision. Acts 1987, 70th Leg., ch. 362, § 5. In these circumstances, we apply the following rule from the Code Construction Act:

The repeal of a statute by a code does not affect an amendment . . . of the statute by the same legislature that enacted the code. The amendment . . . is preserved and given effect as part of the code provision that revised the statute so amended . . . .

Gov't Code § 311.031(c). Accordingly, the provision set out as section 171.005 of the Local Government Code has been repealed and may be disregarded. The 71st Legislature has adopted a bill which incorporates into chapter 171 of the Local Government Code the amendments to article 988b, V.T.C.S., adopted by the 70th Legislature. Acts 1989, 71st Leg., ch. 1, § 40, at 45 (effective August 29, 1989). The language quoted above as section 171.005 does not appear in section 171.005 as adopted by the new bill or in any other provision of chapter 171 included therein. The county judge may provide medicines to indigent persons for reimbursement by the county in accordance with the provisions of chapter 171 of the Local Government Code as amended.

1. House Bill 1976 of the 71st Legislature amends section 81.002 of the Local Government Code to allow members of the commissioners court to serve as officers of certain other entities, subject to the provisions of chapter 171. This bill becomes effective on August 28, 1989. Acts 1989, 71st Leg., ch. 475, § 1, at 1647.

SUMMARY

Chapter 171 of the Local Government Code applies to transactions between a county and the county judge or another member of the commissioners court. Transactions that are not subject to chapter 171 are still subject to section 81.002 of the Local Government Code.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Susan L. Garrison
Assistant Attorney General