Untitled Texas Attorney General Opinion ( 1952 )

December 19, 1952'
Hon. A. K. Stewart Ctpi+on No..V-1556
County Attorney
Montgomery County Re: Validity of a construction
Conroe, Texas contract let by the Commls-
sloners' Court In an amount
in excess of the unobligated
balance In the permanent
lmprovement.,fund~pluf~the
amount of a bond issue voted
for this .constructlonpro-
Dear Sir: ject.
Your request reads a8 follows:
'On October 13, 1952, the Commlsslon-
era' Cotit of 74ontgomeryCounty, Texas,
entered into a construction contract for
an addition td.the county hospltal,ln the
amount of $581,491.00. eon this date the
county had.on hand Unencumbered funds
avalla@le In the amount of $570,820.65.
However, based on experience for many pre-
vious years, the Cbmml~slonersl Court
reasonably anticipated that it would col-
lect $10,670.35 ln delinquent taxes and
other.unencumbred and unappropriated
revenuea, exclusive of the 1952 tax levy.
"Questloti,:
Ii the contract valid?"
you are more specifically concerned with whether
the contract constitutes a debt in violation of Section
7 of Article XI of the Constitution of Texas since all
statutory provieions concerning the awarding of the con-
tract and the expenditure of money have been complied
with.
In answering your question we shall assume that
the anticipated delinquent tax collections and other un-
encumbered and unappropriated revenues~referred to In
your request Include only revenue8 which are properly
payable to the county's Permanent Improvement Fund.
Hon. A. K. Stewart, page 2 (V-1556)
Article KI, Section 7 of the Constitution of
Texas provides In part:
"But no debt for any purpose shall
ever be Incurred in any manner by any city
or county unless~provlslon Is made, at the
time of creating the same, for levying and
collecting a sufficient tax to pay the
Interest thereon and provide .at least two
per cent (29) as a sinkingfund; and the
condemnatlon~of the right of way for the
erection of such works shall be fully pro-
vided for."
The term "debt" as used in the above quoted
constitutional provlslon:has been uniformly held by the
courts of this State to mean "any pecuniary obligation
Imposed by contract, ,exceptsuch as were, at the date of
the contraot, within the lawful and reasonable contem-
plation of the parties, to-be satisfied o,utof the cur-
rent revenues forthe. year; or out of some fund then
within the immediate control of the corporation."
Tex. 420, 151 S.W. 523,'m). y,
An excellent discussion of Section 7 of Article
XI IS found in MoNeill v.~City of Waco, ,89 Tex. 83, 33
s.W. 322 (1895),:wherein the 'SupremeCourt atated:
'Since the inhibition against the
'creation' or 'incurring' of a 'debt,'
without the fprovlslon,' la universal, it
is of vital imnortance'to determine the
meaning of the w&d 'debt' as used In the
constltutlon: The word has no fixed, legal
algnlflcatlon, as has the word 'contract,'
but Is used in different statutes and con-
stltutlons in senses varying fr.oma very
restricted to a very general one. Its
meaning, therefore;ln any particular stat-
ute or constitution, Is to be determined by
construction, and decisions upon one stat-,
ute or ~constltutlon often tend to~confuse
rather than ald~In ascertaining its slgnlfi-
cation in another relating to,an entirely
Hon. A. K. Stewart, page 3 (V-1556) ``'.
different subject., These constlt,utlonal
provlslons were~lntended as.restraints upon
the power of municipal corp&atlona,to'conr
tract that class of pcicunlary~Llabllltles
not to be satisfied out of the current
revenues or other funds within their control
lawfully applicable thereto, and which would
therefore, titthe date of the contract, be
an unprovided-for llablllty, and properly
included within the general meaning of the
word 'debt.' They have no application, how-
ever, to that class of pecuniary obligations
In good faith Intended to be, and lawfully,
payable out of either the current revenues
for the year of the contract or any other
fund within the Immediate control of the
corporation. Such obligations being pro-
vided for at the time of their creation, so
that in the.due course of the transactions
they.are to be satisfied by the provisions
made, it would be an m-easonable construc-
tion of the ctinstltutionto:hold them debts,
within Its meaiiing,,soas to require the
levy of a wholly unnecessary tax upon the
citizen. Thu``,'awarrant drawn against the
current revenues of the year for one of the
ordinary expenses~of the ~corporatlon for such
year, when all .the claims for ordinary .ex-
penses foti~thatyear do not exceed such rev-
enues, or a contract entered Into for the
making of any public improvement authorized
by law, e:g. the building of a courthouse or
jail, and obligating the corporation to pay
therefor, there being funds within its lm-
mediate control lawfully applicable thereto
sufficient; and in good faith contemplated
by the contracting parties to be used in pay-
ment thereof when due, are not debts, within
the meaning of such constitutional provl-
slons requiring the making of provision for
the Interest and sinking fund. The payment
of such claims being lawfully provided for,
In such way-that their satisfaction In the
due course of business is reasonably certain,
they are, In legal contemplation, so far
satisfied as to be considered as not contem-
plated by the constitutional provisions,
though It may result, from some cause not
. , .
2
Hon. A. K. Stewart, page 4 (V-1556)
provided against by the law, such as failure
to collect the taxes, robbery, embezzlement,
or wrongful diversion of the funds, that
they are not'pald from the contemplated
sources.*
Under the facts presented, the obllgatdon
created by the contzact 1s to be satisfied out of the
reasonably anticipated ourrent revenues available for
the year 1952 and no art of the 1952 tax levy (available
for 3953 expendituresP Is to be used to satisfy the
obligation. It Is therefore our opinion that the con-
tract does not create a debt In violation of Section 7
of Article XI of the Constitution of Texas.
S.l.mMARY
An obligation created by a contract
to be satisfied out of r,easonablyanticipated
dtireiitrevenue& does not constitute a debt
-the meanlng of Section 7 of Article
of Texas. Stevenson
XI of the C6ns~tltiatlon
Yours very truly,
APPROVED: PRICE DANIEL
Attorney Qeneral
J. C. Davis. Jr.
County Affairs Division
Mary K. wall BY
Reviewing Asaiatnat Bruce Allen
Assistant
Charles D. Mathews
First Assistant
BA:am