Untitled Texas Attorney General Opinion ( 2000 )

June 28.2000
Ms. Kathryn A. Yeager Opinion No. JC-0240
Chair, Board of Regents
Midwestern State University Re: Whether donated endowment and
3410 Tat? Boulevard scholarship funds may be transferred from the
Wichita Falls, Texas 76308-2099 control of a university to that of its private
foundation (RQ-0178-JC)
Dear Ms. Yeager:
You have asked this office whether and how certain funds donated to Midwestern State
University (the “University”) for the purposes of faculty endowment and scholarships may be
transferred from the control ofthe University to that of a private foundation which, as we understand
it, exists to benefit the University. As you explain it, “The proposed shift of funds would be made
with the agreed provision that there would be no difference in purpose with regard to the use of the
funds.” Letter from Louis J. Rodriguez, President, Midwestern State University, to Honorable John
Comyn, Attorney General of Texas (Jan. 28,200O) (on file with Opinion Committee) (hereinafter
“Request Letter”).
We note at the outset that our response will ofnecessity be general in nature, relying on your
representations concerning matters of fact with regard to these donations. We do not decide matters
of fact in the opinion process. See Tex. Att’y Gen. Op. Nos. JC-0020 (1999) at 2, M-187 (1968) at
3,0-29 ll(l940) at 2. Accordingly, to the extent that an understanding ofthese particular gifts, their
status, and the donor’s intent with regard to them would require fact-based inquiry, we can give
advice only concerning the legal issues, taking the facts as you give them to us.
As you explain it, certain funds were given to Midwestern State University, apparently for
the purposes of faculty endowment and student scholarships, with the “expressed. . preference that
the funds be managed by Midwestern State University, rather than its foundation.” Request Letter,
supra, at 1. Because you and the donor appear to believe that the Public Funds Investment Act
restricts certain investments of these funds, but see Tex. Att’y Gen. Op. No. DM-489 (1998)
(defining “public funds” subject to act), the donor “has now expressed a changed preference that the
funds be managed by the University foundation, rather than the University.” Request Letter, supra,
at 1. You do not suggest that the gift of these funds was a revocable trust, and for the sake of the
analysis we will presume that such is not the case.
Ms. Kathryn A. Yeager - Page 2 (JC-0240)
You ask us first to consider the possible applicability of two recent opinions of this
office, Attorney General Opinions JC-0138 (1999) and JC-0146 (1999). Attorney General Opinion
JC-0138 concerned whether a public junior college could transfer funds donated by a private donor
to a nonprofit foundation “created exclusively for charitable and educational purposes in providing
support for the specific College seeking to transfer the funds.” Tex. Att’y Gen. Op. No. JC-0138
(1999) at 1. Attorney General Opinion JC-0146, on the other hand, concerned whether a state
university could transfer legislatively appropriated funds to a private, out-of-state endowment. We
agree that the factual situation your letter describes, one in which you seek to transfer funds granted
to Midwestern State by a private donor for restricted purposes from the control of the university’s
regents to those of the foundation allied with the university, is essentially the same as, and is
therefore governed by Attorney General Opinion JC-0138.
You next ask, if “the funds described in this request are not general funds but funds
impressed with a charitable trust. whether the transfer could be done by written agreement, or if
the judicial proceedings suggested by JC-0138 must be followed.” Request Letter, supva, at 1.
As we understand your description of the funds in question, they were given for restricted
purposes and are not general funds of the university. In Attorney General Opinion JC-0138, we
explained that “Restricted funds such as these are impressed with a charitable trust; the college’s
legal title to them is subject to an inalienable beneficial interest.” Tex. Att’y Gen. Op. No. JC-0138
(1999) at 3.
Generally, the method by which such a trust may be modified is that set forth in section
112.054 of the Property Code, pursuant to which a court of competent jurisdiction must be shown
that “because of circumstances not known to or anticipated by the settlor, compliance with the terms
of the trust would defeat or substantially impair the accomplishment of the purposes of the trust.”
TEX.PROP.CODEANN.$ 112,054(a)(2) (V emon 1995). The remedy sought would be analogous to
that described in Attorney General Opinion JC-0138. That is, the regents of Midwestern State
University, who pursuant to section 103.08 of the Education Code are to administer such funds as
these, would petition the court to substitute for them “the trustees of a nonprofit corporation created
to provide support to the college in question . . .” Tex Att’y Gen. Op. No. JC-0138 (1999) at 4.
Because this office represents the public interest in charitable trusts, “the attorney general is a proper
party and may intervene in a proceeding” such as this. TEX.PROP.CODEANN. $123.002 (Vernon
1995). Notice of such a proceeding is to be given this offtce “by sending to the attorney general, by
registered or certified mail, a certified copy of the petition or other instrument initiating the party’s
involvement in the proceeding.” Id. $ 123.003(a) (Vernon Supp. 2000).
Ms. Kathryn A. Yeager - Page 3 (JC-0240)
SUMMARY
A gift of timds to a state university for a restricted purpose is
impressed with a charitable trust. In order to modify such a trust, the
university’s regents must petition a court of competent jurisdiction
for such a modification. The Office of the Attorney General, which
represents the public interest in charitable trusts, is a proper party to
such a proceeding, and should be given notice in the manner
prescribed by section 123.003(a) of the Property Code.
Yo s ve truly,
4Jvi-T
JOI\IN CORNYN
Attorney General of Texas
ANDY TAYLOR
First Assistant Attorney General
CLARK KENT ERVIN
Deputy Attorney General - General Counsel
ELIZABETH ROBINSON
Chair, Opinion Committee
James E. Tourtelott
Assistant Attorney General - Opinion Committee