TREA-~~ORNEY GENERAL
OFTEXAS

Honorable

Geo. H. Sheppard Comptroller

of PublicAccounts Austin, Texas
Dear Mr. Sheppard: Opinion Number O-3441 Be: Authority

of State Board of Education,

the holder of the original

bonds, to a preferential right to contractfor acquiring refunding

bonds isszd in lieu thereof.
We are in receiptof your letterof April 19, requesting our opinion on the following

question:
"IS the State Board of Education, the holder of the original bonds for the benefitof the Permanent SchoolFund, entitled to a preference

right to contract

for acquiring refunding bonds issued in lieu thereof?" The facts underlying this question

are, that the State Board of Education exercisedits

option to purchase

bonds originally

issued by a road district of a county. The bonds provided that the issuemay be redeemed at any time by givingten (10) days'notice,and the issuing district

has declaedto redeem all of the original bonds purchased

by the State Permanent

SchoolFund, and to issue in lieu thereof~ refunding

bonds- The State Board of Education notifiedthe issuing district

that the Permanent School Fund would purchase the refunding

bonds when the samewere issued and pay the price offeredtherefor by the beat bona fide bidder. The 

### issuing

districtelected

to sell the refunding bonds to a purchaser other than the Permanent School Fund, the holder of the original bonds.
In our opinion,

precisely

this same question

was ra,ised

in the case of DallasCounty v- Lockhart, 

### 96 S. W. (2d) 60. The Supreme Court replied as followsin answer to such question: "The option granted by Article 2673, as amended, to the Slate Board of Education to purchasecountyand municipal bonds must be held to be limited to the purchase

of ori&nal --- - -- -- -_ .,..,? bonds.RefundxgTonds are not issuedto be sold on"iT;e' .-v* market as original

bonds. They cannot be issueduntil theHonorable Geo. H. Sheppard,

Page #2 

### O-3441

Original

bonds are called,

andwhen iseuedare not the property

of the county or municipality issuing

them, but immediately

upon their issuance they become the property

of the party having the right thereto by previous agreement. To give that articlea construction that would make it applicable to refunding

bondswould be to give to the Board of Education the power to preventthe making of any contractlookingto the refunding of bonded indebtedness even when the original bonds are in the hands of a private investor. Such a construction cannot be adopted." The SupremeCourt in the Dallas Countyv. Lockhart case, supra, expressly

stated it was not calledupon to determine whether the holders of original

bonds are entitled to a preference

right to contract

for refunding

bon& issued in lieu thereof, but as stated in the above quoted portionof the Court'sopinion, the refunding

bonds cannot

be issued

until the originals

are cancelled,

and when issuedthey become the property of the partyhaving the right thereto by previous

agreement. There is nothingto preventthe present holder of the bonds calledout of the Permanent

SchoolFund from retaining them as evidence

of an obligation

againstthe issuing district

and thereby

defeatany preference

right the State Permanent School Fund couldhave to refunding bonds that may have been issued in lieu thereof. Therefore, it would become a matter of contract between the issuing district

and the owner of the-bonds

as to the terms upon which same would be paid. Such as agreement

obviously

could be made without the necessity of issuing

new evidences

of such agreed obligations.
We think the language of the Court above quoted sufficiently in point to deny to the Board of Education the power to exercise a preference

right to contract

for acquiring

refunding

bonds issued in lieu of original bonds redeemedfrom the State Permanent SchoolFund pursuant to a legal call by the issuing

district. Having answeredthis questionin the negative, we deem it unnecessary to reply to the second question contained

in your letter of April lgO Trustingthat this satisfactorily answers

your inquiry,

we area Very truly yours

APPBOVED

APB. 29, 1941 s/ GlennB. Lewis ACTINGATTORNEiX GSNERhL 

### OF TEXAS ATTORNEY GENERALOFTEXAS S/ Clsrence

E. Crowe

APPBOVED

OPINIONCOMMITTEE BY BY B. W. B. CEUUBMAN Clarence E. Crowe CEC-s-ldw Assistant