Untitled Texas Attorney General Opinion ( 2000 )

OPFKE OF THE ATTORNEY GENEMI STATE OF TEXAS
JOHN CORNYN
August 16,200O
Mr. Terry W. Langford Opinion No. JC-0268
Eaatland County Auditor
100 W. Main, Room 205 Re: Whether Ranger Hospital District is
Eastland, Texas 76448 authorized to donate tobacco settlement funds to
the City of Ranger for the purchase of an
ambulance without the City assuming any District
liabilities, and related questions (RQ-0190-JC)
Dear Mr. Langford:
You ask whether the Ranger Hospital District (the “District”), in the context of its
dissolution, is authorized to donate the District’s tobacco settlement funds to the City ofRanger (the
“City”) for the purchase of an ambulance without the City assuming any District liabilities. You
additionally ask whether an election is required to approve the dissolution of the District, or whether
it may be dissolved by aresolution of the District’s board of directors. We conclude that the District
is not authorized, in the context of its dissolution, to transfer the District funds to the City ofRanger
for the purchase of an ambulance without the City of Ranger’s assumption of the District’s
remaining debts and obligations. We additionally conclude that an election is required to approve
dissolution of the District.
A hospital district’s powers are limited by the authorizing constitutional provision, its
enabling act, and provisions ofthe Health and Safety Code applicable to hospital districts generally.
See Tex. Att’y Gen. Op. No. JC-0220 (2000) at 2. As a special district, the District may exercise
only those powers that are expressly delegated to it by the legislature, or which exist by clear and
unquestioned implication. See Tri-City Fresh Water Supply Disf. No. 2 Y. Mann, 142 S.W.2d 945,
946 (Tex. 1940); Jackson County Hosp. Dist. v. Jackson County Citizensfor ContinuedHosp. Care,
669 S.W.2d 147, 154 (Tex. App.-Corpus Christi 1984, no writ).
The District was created pursuant to article IX, section 9 of the Texas Constitution and
special enabling legislation. See Act ofApr. 23, 1969,61st Leg., R.S., ch. 93, 1969 Tex. Gen. Laws
238, amended by Act of May 3, 1999, 76th Leg., R.S., ch. 114, 5 1, 1999 Tex. Gen. Laws 549
(“Enabling Act”); see also TEX. CONST. art. IX, 5 9 (legislature may create hospital district by
general or special law). Article IX, section 9 provides in part:
Mr. Terry W. Langford - Page 2 (X-0268)
The Legislature may also provide for the dissolution of hospital districts
provided that a process is afforded by statute for:
( 1) determining the desire ofu majori&of the qualified voiers
within the district to dissolve it;
(2) disposing of or transferring the assets, if any, of the
district; and
(3) satisfying the debts and bond obligations, if any, of the
district, in such manner as to protect the interests of the citizens
within the district, . and provided that no election to dissolve shall
be held more often than once each year. In such connection, the
statute shall provide against disposal or transfer of the assets of the
district except for due compensation unless such assets are
transferred fo another governmental agency, such as a county,
embracing such district and using such transferred assets in such a
way as to benefit citizens formerly within the district.
TEX. CONST. art. IX, 5 9 (emphasis added). Under this provision, the legislature may provide for
dissolution of a hospital district only if it provides for a “process” to determine the will of the
majority of the hospital district’s voters, and means of disposing of a hospital district’s assets and
satisfying its debt.
Section 21A of the District’s Enabling Act, enacted in 1999, provides that:
(a) The district may be dissolved as provided by this section.
(b) The board of directors may order an election on the question of
dissolving the district and disposing of the district’s assets and
obligations. The board of directors shall order an election if the board
of directors receives a petition requesting an election that is signed by
a number of residents of the district equal to at least 15 percent of the
registered voters in the district.
(c) The election shall be held not later than the 60th day after the
date on which the election is ordered. Section 41.001(a), Election
Code, does not apply to an election ordered under this section.
(d) The ballot for the election shall be printed to permit voting for
or against the proposition: “The dissolution of the Ranger Hospital
District of Eastland County, Texas.” The election shall be held in
accordance with the applicable provisions of the Election Code.
Mr. Terry W. Langford - Page 3 (JC-0268)
(e) If a majority of the votes in the election favor dissolution, the
board of directors shall find that the district is dissolved. If a majority
of the votes in the election do not favor dissolution, the board of
directors shall continue to administer the district and another election
on the question of dissolution may not be held before the first
anniversary of the most recent election to dissolve the district.
(f) If a majority of the votes in the election favor dissolution, the
board of directors shall transfer the land, buildings, and other
assets that belong to the district to Eastland County or another
governmental entity in the district or shall administer the assets,
and debts in accordance with Section 21B of this Act. If the district
transfers. other assets to Eastland County or another governmental
entity, the county or entity assumes all debts and obligations of the
district at the time of the transfer and the district is dissolved.
Act of May 3, 1999, 76th Leg., R.S., ch. 114, 5 1, sec. 2lA, 1999 Tex. Gen. Laws 549.
You explain that the Ranger Hospital District “is in the process ofbeing dissolved” and ask
about “matters ofconcem that [it has] incompleting the dissolution.“Request Letter at 1.I In 1989,
the District filed for relief under chapter 9 of the Bankruptcy Code, and its plan of reorganization
was confirmed and approved by the bankruptcy court in 1990. See Ranger Brief at 1? In 1992, the
bankruptcy court entered a Final Decree and closed the bankruptcy proceedings. See id. at 2.
Pursuant to the reorganization plan and orders of the bankruptcy court, the District sold its principal
asset, the District hospital building, paid its creditors, and has no further liabilities. See id. at 1-2.
Subsequently, the District received its portion of the tobacco settlement monies in the amount of
$58,000. See id. at 2. Neither the settlement agreement pursuant to which the state received the
tobacco monies nor the Texas Department of Health, which manages and distributes these funds,
restricts the purposes for which these funds may be spent by the District. See id. at 2-3.’
With this background, we begin our analysis with your second question: “If notice is given
on the agenda of a regular meeting, an item of discussion is the dissolution of the hospital district,
‘Letter from Mr. Terry W. Langford, Eastland County Auditor, to Office of the Attorney General, Opinion
Committee (Feb. l&2000) (on file with Opinion Committee).
‘Letter brief from Mr. Wayne S. Weaver, Attorney at Law, on behalf of Ranger Hospital Dishict, to Elizabeth
Robinson, Chair, Opinion Committee (Mar. 31, 2000) (on tile with Opinion Committee).
‘See also Ranger Brief, pt. 10 (Letter from Linda S. Wiegman, Supervising Attorney, Offke of General
Counsel, Texas Department of Health, to Lester 0. Berg, Berg and Jones (Feb. 17,1999)); seegenerally Distribution
of Tobacco Settlement Proceeds to Local Political Subdivisions, Frequently Asked Questions (updated May 30,
2000)Qttp:llwww.tdh.state.tx.us/dpa/tobacco.h~>.
Mr. Terry W. Langford - Page 4 (JC-0268)
and if the Board resolves to dissolve the hospital district at that meeting, must an election be held
to approve the dissolution of the hospital district?’ Request Letter at 2.
We conclude that an election is required to approve dissolution ofthe District. In accordance
with article IX, section 9’s direction to provide a “process” to determine the will of the majority of
hospital district’s voters, section 21A of the Enabling Act requires an election to be held to
determine whether the District may be dissolved. See Act ofMay 3, 1999,76th Leg., R.S., ch. 114,
4 1, sec. 2 1A, 1999 Tex. Gen. Laws 549. The board of directors may order the election on its own
motion, but it must order the election if petitioned by fifteen percent or more of the District’s
registered voters, See id. sec. 21A(b); ``~&OHOUSECOMM.ONCO~NTYAFFAIRS,BILLANALYSIS,
Tex. H.B. 1889, 76th Leg., R.S. (1999) (“[aluthorizes [Ranger Hospital District] board ofdirectors
to order an election on the question of dissolving the district and disposing ofthe district’s assets
and obligations. Requires the board to order an election if the board receives a petition .“).
Regardless of whether the dissolution proceedings are initiated by the District’s board of directors
or the District’s voters, the District cannot be dissolved unless a majority of the District’s voters
approve the dissolution at an election. See Act of May 3, 1999, 76th Leg., R.S., ch. 114, $ 1, sec.
21A(f), 1999 Tex. Gen. Laws 549.
The statute is not permissive. The District contends that an election is permitted, but not
required, to dissolve the District relying on the section 21A(b) language that “[t]he board ofdirectors
may order an election on the question of dissolving the district _” Id. at sec. 21A(b) (emphasis
added); see also Ranger Brief at 5-6. We disagree. While the term “may” is generally considered
permissive, see Womack Y. Berry, 291 S.W.2d 677, 683 (Tex. 1956) (use of permissive “may”
imports exercise of discretion in matter), we construe the language of subsection 21A(b) to be
permissive only to the extent that the board of directors has the discretionary authority to determine
whether the District should be dissolved (unless petitioned by the requisite percentage of the
District’s voters). Once the board determines to dissolve the District, it must order an election on
the dissolution question. This construction is, first, consistent with the language of the statute read
as a whole. See Sayre V. Mullins, 681 S.W.2d 25, 27 (Tex. 1984) (in determining meaning of
statutory language, statute to be read as a whole giving consideration to entire act). Section 21A
specifically and in detail provides for an election; no other procedure for dissolving the district is
referenced or mentioned. Moreover, dissolution is expressly conditioned on approval ofthe voters:
“If a majority of the votes in the election favor dissolution, the board of directors shall find that the
district is dissolved. If a majority of the votes in the election do not favor dissolution, the board of
directors shall continue to administer the district .” Second, and more important, such
construction is consistent with article IX, section 9’s directive that an enabling statute provide a
“process” to determine the will of the majority of a hospital district’s voters regarding dissolution.
See TEX. CONST. art. IX, 5 9; McKinney v. Blankenship, 282 S.W.2d 691,697 (Tex. 1955) (statute
will be construed, ifreasonably possible, to render it constitutional). We presume that the legislature
is familiar with the constitutional provision and intended compliance with it. See Wentworth v.
Meyer, 837 S.W.2d 148, 154-55 (Tex. App.-San Antonio 1992, orig. proceeding), overruled on
other grounds, 839 S.W.2d 766 (Tex. 1992); see also Acker v. Texas Water Comm ‘n, 790 S.W.2d
299,301 (Tex. 1990) (“A statute is presumed to have been enacted by the legislature with complete
Mr. Terry W. Langford - Page 5 (X-0268)
knowledge of the existing law and with reference to it.“). The District’s view that an election to
approve dissolution of the District is permitted but not required is contrary to article IX, section 9
of the constitution and the statute as a whole.
Nor do we believe that the District has been legally dissolved by virtue of the bankruptcy
proceedings under federal law, thus preempting state law requirement for an election. The District
asserts that: “Since the Bankruptcy Court approved the plan (without objections by any potential
party in interest) the Supremacy of Federal Law prevails and the Ranger Hospital District became
dissolved as a matter of fact and law. In other words, the chapter 9[] plan approved by itself
dissolved the Hospital District with subsequent activities merely wrapping up the business.” Ranger
Brief at 4. We have found no authority for the proposition that a confirmed plan of reorganization
under chapter 9 of the Bankruptcy Code, as a matter of law, dissolves the debtor; and the District
does not direct us to any such authority. See, e.g.. In re Addison Community Hosp. Auth. 175 B.R.
646, 648 (Bat&r. E.D. Mich. 1994) (“Chapter 9 of the Bankruptcy Code was drafted solely for
municipalities. The provision allows debt adjustment which fosters the continuance of
municipalities rather than their dissolution.“). The only authority the District cites to support its
assertion, Woodruff v. Bryant, 558 S.W.2d 535 (Tex. Civ. App.-Corpus Christi 1977, writ refd,
n.r.e.), is inapposite. Woodruff deals with the right of a partner to dissolve a partnership under the
Uniform Partnership Act. See id. Additionally, we note that neither the District’s confirmed plan
oforganization or orders ofthe bankruptcy court provided to us purport to dissolve the District. See
Ranger Brief, pts. 1, 3, 5,6.4
You also ask: “May the Hospital District donate the funds it received from the tobacco
settlement to the City of Ranger (a government entity) with the stipulation that these funds be
applied to the purchase of an ambulance for the City without the City assuming any liabilities?’
Request Letter at 1. Because you tell us that the District is in the process of being dissolved and
because you express a concern that section 2 1A(f) ofthe District’s Enabling Act requires a transferee
pf the District’s assets in dissolution to assume any remaining liability of the District, see id., we
understand you to ask about the transfer of the funds only in the context of dissolution and address
your question accordingly. We conclude that the Enabling Act does not authorize the District to
transfer its assets in dissolution, such as the funds in question, without assumption by the transferee
of the District’s remaining debts and obligations.
Subsection (t) of section 21A of the Enabling Act requires the transferee of District assets
in dissolution to assume any remaining debts and obligations of the District by providing that “[i]f
the district transfers the land, . . and other assets to Eastland County or another governmental entity,
the county or entity assumes all debts and obligations of the district at the time of the transfer and
‘(In the United States Bankruptcy Court for the Northern District of Texas, Abilene Division: In Re: Ranger
Hosp. Dist.d/b/a RangerHosp., CaseNo. 189-10173-9, Debtor-in-Possession’s First AmendedPlan ofReorganization
(May 22, 1990); Order Confirming First Amended Plan of Reorganization (July 30, 1990); Agreed Order Authorizing
Execution of Contract of Lease and Purchase of Real Estate (June 21, 1991); Final Decree in Chapter 9 Case (Aug. 2 I,
1992)) (all documents on file with Opinion Committee).
Mr. Terry W. Langford - Page 6 (X-0268)
the district is dissolved.” Act of May 3, 1999, 76th Leg., R.S., ch. 114, 6 1, sec. 21A(f), 1999 Tex.
Gen. Laws 549. The debt and obligation assumption requirement is the statutory consideration for
the transfer of the assets intended to comply with article IX, section 9’s directive that a dissolution
statute “shall provide against disposal or transfer of assets of the [hospital] district except for due
compensation ,” TEX. CONST. art. IX, 5 9 (emphasis added); see also id. art. III, 9 52 (prohibiting
grants ofpublic money to “corporations”); Wentworth, 837 S.W.2d at 154-55 (presume legislature
is familiar with state constitution and intended compliance with it). The transfer of assets in
dissolution without assumption of the District’s debts and obligations would violate section 21A(f)
of the Enabling Act.
The District, relying on article IX, section 9, appears to believe that it may transfer the funds
to the City, another governmental entity, without also transferring liabilities because the City will
use the funds in a manner that benefits residents formerly in the District. While article IX, section
9 allows the legislature to authorize a dissolving district to transfer to “another governmental agency,
such as a county, embracing such district and using such transferred assets in such a way to benefit
citizens formerly within the district,” this provision is not self-executing. See Tex. Att’y Gen. Op.
No. JM-859 (1988) at 5 (“Article IX, section 9, of the Texas Constitution. confers authority, l&
on the governing bodies of hospital districts, but rather on the legislature.“). The legislature did not
include such authorization in the District’s Enabling Act. Furthermore, article IX, section 9 does not
require that the Enabling Act contain such authorization. See Tex. Att’y Gen. LO-93-049, at 6
(because hospital district’s Enabling Act makes no provision for distribution of hospital district
assets to another governmental entity, hospital district cannot distribute its funds to governmental
agency); id. at 4 n.3 (article IX, section 9 does not require that enabling act contain such provision).
Because article IX, section 9 does not grant authority directly to a hospital district, but, rather,
authorizes the legislature to do so, the District may not without additional legislative authority
transfer its assets in reliance on this constitutional ground.
Mr. Terry W. Langford - Page 7 (X-0268)
SUMMARY
The Ranger Hospital District in the context of dissolution is
not authorized to transfer its tobacco settlement funds to the City of
Ranger for the purchase of an ambulance without the City assuming
any remaining debts and obligations of the District. An election is
required to approve dissolution of the District.
Attorney General of Texas
ANDY TAYLOR
First Assistant Attorney General
CLARK KENT ERVIN
Deputy Attorney General - General Counsel
SUSAN D. GUSKY
Chair, Opinion Committee
Sheela Rai
Assistant Attorney General - Opinion Committee