Gulf Regional Educ. Television Affiliates v. University of Houston

• Decision Date: 21 January 1988
• Docket Number: No. B14-86-875-CV,B14-86-875-CV
• Citation: 746 S.W.2d 803
• Parties: 45 Ed. Law Rep. 1296 GULF REGIONAL EDUCATION TELEVISION AFFILIATES, Appellant, v. UNIVERSITY OF HOUSTON and Florence M. Monroe, Appellees. (14th Dist.)
• Court: Texas Court of Appeals

Page 803

746 S.W.2d 803

45 Ed. Law Rep. 1296

GULF REGIONAL EDUCATION TELEVISION AFFILIATES, Appellant, v. UNIVERSITY OF HOUSTON and Florence M. Monroe, Appellees.

No. B14-86-875-CV.

Court of Appeals of Texas,

Houston (14th Dist.).

Jan. 21, 1988.

Rehearing Denied March 17, 1988.

Jay S. Siskind, Houston, for appellant.

Kevin Thomas O'Hanlon, Austin, Susan L. Wheeler, Houston, for appellees.

Before PAUL PRESSLER, MURPHY and ELLIS, JJ.

OPINION

ELLIS, Justice.

Gulf Regional Education Television Affiliates (GRETA) and its director Katherine L. Buck sued the University of Houston (the University) and Florence M. Monroe, seeking damages for conversion of property and for interference with business activities and contractual relationships with third parties. On a Rule 12 Motion to Compel Attorney to Show Authority, the trial court ordered the suit dismissed without prejudice and filed findings of fact and conclusions of law. Ms. Buck's claim for wrongful termination was severed, and GRETA appealed, challenging both the trial court's conclusions of law and the use of Rule 12 to dismiss GRETA's claims. We affirm the order of the trial court.

The parties disagree as to GRETA's inception. GRETA maintains that it is an unincorporated association of Gulf Coast area independent school districts and parochial schools that was established in the 1960's to produce and broadcast instructional television programming to its members. While GRETA purchased broadcast time from KUHT, the public television station owned and operated by the University, GRETA claims it was not obligated to broadcast solely on KUHT. In its brief, GRETA states that it had a constitution and that its business was conducted by a board of directors in accordance with by-laws.

The association derived its income from its member school districts through local taxes and state funds (and private sources in the case of its member parochial schools). The board of directors, which consisted of fourteen representatives elected by the membership, set policy and ran the association, entering into contracts and purchasing facilities and equipment. The University, as fiscal agent, actually issued the checks and also provided security, utilities and accounting.

The University states a slightly different set of facts. It asserts that in the 1960's it formulated a proposal, in conjunction with several Houston area school districts, to make educational programs available to area students through broadcasts on KUHT. To implement the proposal, the University established GRETA as an auxiliary enterprise of the University and hired a director to coordinate the purchase of air time from KUHT. The member school districts elected representatives to a board of directors, whose function was to advise KUHT of the members' wishes regarding programming. The University collected money on a per student basis from the members through GRETA, and the funds were deposited by the GRETA director in a University account from which the KUHT bill was paid.

In 1985, University auditors discovered that, at the direction of the GRETA board, GRETA director Katherine Buck had for several years been depositing the GRETA funds in an account at MBank Pasadena rather than in University accounts. The governing board of each state institution of higher education is directed to designate special depository banks to hold certain receipts of the institution, including those derived from auxiliary enterprises, separate and apart from funds that are deposited in the state treasury. Tex.Educ.Code Ann. § 51.008(a), (b) (Vernon 1987 & Supp.1988). The University Board of Regents had not so designated MBank Pasadena. Upon this discovery, Florence Monroe, Associate Vice President for Public Service and Telecommunications, dismissed Ms. Buck as director. The University then discontinued GRETA as an auxiliary enterprise and assumed sole responsibility for educational programming at KUHT. The locks on the GRETA facility were changed, equipment seized and employees released.

The president of the GRETA board then contacted several board members by telephone and received authorization to hire an attorney to file a lawsuit against the University and Ms. Monroe. As defendants, the University and Ms. Monroe moved to compel plaintiff's attorney to show his authority to maintain suit on behalf of GRETA. They argued that GRETA is an auxiliary enterprise of the University, that the University is an arm of the State of Texas, and that only the Attorney General of Texas is authorized to bring suit on behalf of an arm of the state. At a hearing on the motion, defendants also questioned whether a quorum of the GRETA board had authorized the suit and whether GRETA is a public body subject to the Open Meetings Act.

The relevant findings of fact and conclusions of law are set forth as follows:

FINDINGS OF FACT

3. GRETA is an auxiliary enterprise of the University of Houston.

6. GRETA has a Board of Directors elected from among the membership.

7. Since June 24, 1985, the GRETA Board has not met in a publicly called open meeting convened under the provisions of Art. 6252-17 V. A.T.S.

8. This suit was filed on February 20, 1986, by Mr. Jay S. Siskind, Attorney at Law on behalf of GRETA.

9. Authorization to bring this suit was made by Mr. Carl (sic) Thomas, Chairman of the GRETA Board, after informal telephone consultation with five GRETA Board members.

10. Six Board members do not constitute a quorum of the GRETA Board. This suit has not been authorized by a quorum of the GRETA Board at an open meeting.

11. Neither The Board of Regents nor the administration of the University of Houston System have authorized the filing of this suit.

12. The Office of the Attorney General of Texas did not authorize the filing of this suit.

CONCLUSIONS OF LAW

1. Gulf Region (sic) Education Television Affiliates (hereinafter GRETA) is an auxiliary enterprise of the University of Houston and subject to governance by the Board of Regents of the University of Houston.

2. A suit brought by or on behalf of an auxiliary enterprise of the University

of Houston must be authorized by the Board of Regents of the University of Houston.

3. The GRETA Board is a public body within the meaning of the Texas Open Meetings Act. (V.A.T.S. Art. 6252-17).

4. No public body may take an official action unless it is taken at a public meeting.

5. Since the purported authorization to bring this suit was not taken at a public meeting it was void.

6. Plaintiff GRETA and attorney Jay Siskind were not authorized to file or maintain this suit against the University of Houston.

In its first of seven points of error, GRETA argues that the trial court erred in dismissing the suit because GRETA was an unincorporated association with authority to sue or be sued in its own behalf and was therefore authorized through its attorney of choice to file and maintain this suit. In point of error two, GRETA asserts that the court erred in concluding that GRETA was subject to governance by the University Board of Regents because it was an unincorporated association governed by its own board of directors. GRETA's third point of error is that because of its unincorporated association status, the trial court erred in concluding that GRETA and its attorney were not authorized to bring this suit and that a suit brought by GRETA must be authorized by the University.

Given the wording of the points of error, GRETA apparently does not challenge the trial court's findings of fact but rather challenges the conclusions of law. Thus, it is our duty to review the correctness of the legal conclusions drawn from the facts actually found. Harry Hines Medical Center, Ltd. v. Wilson, 656 S.W.2d 598, 603 (Tex.App.--Dallas 1983, no writ).

The principal issue is the nature of GRETA or, rather, that of an auxiliary enterprise. All parties agree that GRETA is an auxiliary enterprise of the University. However, they disagree as to the resulting relationship between the two entities--specifically, whether GRETA is actually a part of the University subject to the latter's control. The University defines an auxiliary enterprise as a self-supporting component such as KUHT, the athletic department, the housing and food service programs and the bookstore. GRETA, on the other hand, likens its status to that of an unincorporated association.

Auxiliary enterprises are nowhere defined in the statutes or case law. Our information thus comes from the record, primarily through the testimony of Scott Chafin, University Counsel, and a letter written in 1972 to a GRETA board president by a University vice president. Chafin testified that at the University and at two other state universities at which he was employed, the term auxiliary enterprise has meaning insofar as budgeting and financial records are concerned. State universities derive their funds from a variety of sources (state appropriations, tuition and fees, contracts and grants, gifts and endowments). However, there are certain university operations that are self-supporting and are prohibited by law from being funded through those sources. It is these operations that traditionally have been called auxiliary enterprises.

The University apparently does not have to have direct control over an operation to consider it an auxiliary enterprise. For example, the housing operation is supported by dormitory rentals and is run by the University. The food operation, however, is run by an outside contractor with the University maintaining very close control over it. Both operations are considered auxiliary enterprises. Also, it is not uncommon for an auxiliary enterprise to have a board of trustees, a board of directors or an advisory board. When asked how University control manifests itself over an auxiliary enterprise such as GRETA, Chafin responded that the enterprise is managed by University employees who report through a particular chain of command. ...