Untitled Texas Attorney General Opinion

TREA-``ORNEY GENERAL
OFTEXAS
HonorableGeo. H. Sheppard
Comptrollerof Public Accounts
Austin, Texas
Dear Mr. Sheppard:
OpinionNumber O-3441
Be: Authorityof State Board of
Education,the holder of the
originalbonds, to a preferential
right to contractfor acquiring
refundingbonds isszd in lieu
thereof.
We are in receiptof your letterof April 19, requestingour opinion
on the followingquestion:
"IS the State Board of Education,the holder of the original
bonds for the benefit of the PermanentSchoolFund, entitled
to a preferenceright to contractfor acquiring refunding
bonds issued in lieu thereof?"
The facts underlyingthis questionare, that the State Board of Education
exerciseditsoption to purchasebonds originallyissuedby a road district
of a county. The bonds providedthat the issuemay be redeemedat any
time by givingten (10) days' notice,and the issuingdistricthas
declaedto redeem all of the originalbonds purchasedby the State
PermanentSchoolFund, and to issue in lieu thereof~ refundingbonds- The
State Board of Educationnotifiedthe issuingdistrictthat the Permanent
School Fund would purchasethe refundingbonds when the same were issued
and pay the price offeredthereforby the beat bona fide bidder. The
issuingdistrictelected to sell the refundingbonds to a purchaser
other than the PermanentSchool Fund, the holder of the originalbonds.
In our opinion,preciselythis same questionwas ra,isedin the case of
DallasCounty v- Lockhart,96 S. W. (2d) 60. The SupremeCourt replied
as followsin answer to such question:
"The option grantedby Article 2673, as amended,to the Slate
Board of Educationto purchasecountyand municipalbonds
must be held to be limited-
--- to --
the purchase
-- of .,..,?
-_ ori&nal
bonds.
.-v* RefundxgTonds are not issued to be sold on"iT;e'
market as originalbonds. They cannotbe issued until the
HonorableGeo. H. Sheppard,Page #2 O-3441
Originalbonds are called,andwhen iseuedare not the
propertyof the county or municipalityissuingthem,
but immediatelyupon their issuancethey become the
propertyof the party having the right theretoby previous
agreement. To give that articlea constructionthat would
make it applicableto refundingbonds would be to give to
the Board of Educationthe power to preventthe making of
any contractlookingto the refundingof bonded indebtedness
even when the originalbonds are in the hands of a private
investor. Such a constructioncannotbe adopted."
The SupremeCourt in the Dallas County v. Lockhartcase, supra,
expresslystated it was not calledupon to determinewhether the holders
of originalbonds are entitledto a preferenceright to contractfor
refundingbon& issued in lieu thereof,but as stated in the above quoted
portionof the Court'sopinion,the refundingbonds cannotbe issueduntil
the originalsare cancelled,and when issuedthey become the propertyof
the party having the right theretoby previousagreement.
There is nothingto preventthe presentholder of the bonds calledout
of the PermanentSchoolFund from retainingthem as evidenceof an
obligationagainstthe issuingdistrictand therebydefeatany
preferenceright the State PermanentSchool Fund could have to refunding
bonds that may have been issued in lieu thereof. Therefore,it would
become a matter of contractbetween the issuingdistrictand the owner
of the-bondsas to the terms upon which same would be paid. Such as
agreementobviouslycould be made without the necessityof issuingnew
evidencesof such agreed obligations.
We think the languageof the Court above quoted sufficientlyin point to
deny to the Board of Educationthe power to exercisea preferenceright
to contractfor acquiringrefundingbonds issuedin lieu of originalbonds
redeemedfrom the State PermanentSchoolFund pursuantto a legal call
by the issuingdistrict.
Having answeredthis questionin the negative,we deem it unnecessaryto
reply to the second questioncontainedin your letter of April lgO
Trustingthat this satisfactorily
answersyour inquiry,we area
Very truly yours
ATTORNEY GENERALOFTEXAS
APPBOVEDAPB. 29, 1941
s/ GlennB. Lewis S/ ClsrenceE. Crowe
ACTING ATTORNEiX GSNERhL
OF TEXAS
APPBOVEDOPINIONCOMMITTEE BY
BY B. W. B. CEUUBMAN ClarenceE. Crowe
CEC-s-ldw Assistant