r - 

THE.ATTOFWEY GENERAL 

OF-TEXAS 

Gerald C. Mann AUSTIN~I.'~'EZAR 

Hon. 0. E. Gerron Opinion NO. o-2231 

County Attorney Re: The authority 

Ector County school district to 

- - 

of an independent 

borrow money for the 

_- ~~ Odessa, Texas erection of a football stadium beyond 

the current available funds of the disDear Sirr trict. 

Your request for opinion of April 15, 1940, has been 

received and carefully considered by this department. We quote 

from your letter of request as follows: 

"1 wish an opinion as to the legality of the following 

loan made by theFirst National Bank, Odessa, Texas, to the 

Ector County Independent School District for the expansion 

of their football stadium and field: 

"STATEMENT OF FACTS 

"A warrant signed by the president and secretary of the 

Board of Trustees of the Ector County Independent School 

District and countersigned by the Superintendent of the 

school to the amount of eighteen thousand dollars ($18,000) 

made payable to the First National Bank of Odessa and secured by current taxes to the amount of two hundred and 

sixty four thousand dollars($264,000) delinquent taxes to 

the amount of twelve thousand dollars ($12,000) and one 

half of the net gate receipts of all the ball games played 

by the Odessa High School football team during the duration 

of the loan. The agreement between the bank officials and 

the school officials was as follows: 

'It That the First National Bank would make the loan 

of eighteen thousand dollars ($18,000) in the above mentioned warrant and that although the loan was secured by 

current and delinquent taxes, the bank was to permit the 

loan to be repaid out of net gate receipts, the amount 

yearly to vary according to gate receipts for the duration 

of the loan not to exceed three years. The entire loan, 

principal and interest was made for the school fiscal year 

beginning September 1, 1939 to August 31, 1940, at which 

time two thousand dollars ($200.00) of the principal will 

have been paid and interest in full will have been paid. 

On September 1, 1940, a new warrant will be issued to the 

First National Bank of Odessa by the Ector County Independent School District securing the principal of sixteen 
. 

Hon. 0. E. Gerron, page 2 (O-2231) 

thousand dollars ($16,000) with current taxes for the year 

1940-41, delinquent taxes and one ~half of the net gate receipts of that year and so’on until said loan is paid, princi~pal and interest in full. The bank is permitting the 

school district to pay the loan from gate receipts although 

it is secured by their school taxes. However, the Board 

of Trustees has agreed to pay the loan from taxes should 

the gate receipts fail. 

193YJ" 

The loan was made September 9, 

Article 2827, Vernon’s Annotated Texas Civil Statutes, 

- -- reads in part as hollows: 

“The public free school funds shall not be expended 

except for the following purposes: 

11 0 * * 0 

“Local school funds from district taxes, tuition fees 

of pupils not entitled to free tuition and other local 

sources may be used for the purpose enumerated for State 

and county funds and for purchasing appliances and supplies, 

for the payment of insurance premiums, janitors and other 

employees, for buying school sites, buying, building and repairing and renting school houses, and for other purposes 

necessary in the conduct of the public schools to be determined by the Board of Trustees, 0 . . ..I* 

Article 2749, Vernon’s Annotated Texas Civil Statutes, 

contains the following language. 

II 

. . ..provided. that the trustees, in making contracts 

with teachers, shall not create a deficiency debt against 

the district *I1 

The Supreme Court of Texas in the case of Collier vs. 

Peacock, 54 SW 1O279 held that a Board of Trustees is not authorized to execute a teacher’s contract which would cause a deficiency debt against the school fund of a district for any particular year. The same doctrine has been extended and applied not 

only to teachers’ contracts but to other obligations, such as 

the purchase of supplies, equipment, and permanent improvements 

to the school property. 

In the case of Templeman Common School District V. R.C. 

Head Company, 101 SW 2d 352, two warrants were issued in payment 

for septic toilets, said warrants being dated February 22, 1933, 

due February 22, 1934, and ~April 1, 1934. These were renewal 

warrants and there was no showing that the district had any 

available funds on hand for the year for which the purchase was 
Hon. 0. E. Gerron, page 3 (O-2231) 

made. The court in holding that recovery could not be had & 

said warrants stated: 

‘%lhile the loan refused in said statute (2749) refers 

specifically to a deficiency created in the employment of 

teachers, it has been held that it applies with equal force 

to debts incurred in the purchase of equipment. In this 

connection, the Court of Civil Appeals in Stevenson vs. 

Union Feeding Company, 62 SW 128, 129, in referring to the 

holding of the Supreme Court in the case of Collier vs. 

Peacock, supra, said: 

“‘It is held that a warrant for teacher’s salary in excess of the sum apportioned to the district for the year 

‘can not be made a charge upon the funds of a subsequent 

year. gPticle 3959 (now Article 2749) was construed as a 

limitation upon the powers of the trustee to contract any 

debt which would cause a deficiency in the school fund of 

the district. While the article applies alone to contracts 

for teachers salaries, we think the construction based upon 

it by the Supreme Court applies with equal force to the 

articles controlling the purchase of school furniture.‘” 

This same doctrine has been applied to independent 

school districts. Trustees of Crosby Independent School District 

VS~ Mest Disinfectant Company, 121 SW 2nd 661; First National 

Bank vs. Murcheson Independent School District, 114 SW 2nd 382* 

In the last cited case, the suit was upon warrant accruing one, 

two and three years after date, bearing six per cent interest, 

payable out of the local maintenance fund for furniture or money 

advanced to purchase furniture. The court stated: 

Vor were there, for the particular years over and 

above the amounts necessary to conduct the school any available fund out of these these debts could be paid.” 

We quote from the case of Harlingen Independent School 

District vs. B. H, Page & Bros., (Comm. of App. 1932) 48 SW 2d 

983, as follows: 

“From the above it is evident that the powers of the 

school board to expend the funds of the district are at 

all times limited to an available fund, and to the particular thing prescribed by the statute, The board never has 

any authority .to expend funds that are not available.* 

Opinion No. O-1387 of this department holds that an 

independent school district may use any surplus fund in its local maintenance fund for the purpose of erecting a school building, and may issue its evidence of indebtedness in contemplation 

of current revenue; but whatever the form of said evidence of 
Hon. 0. E. Gerron, page 4 

indebtedness the board of 

a deficiency debt against 

the person advancing such 

funds accumulated for the 

(O-2231) 

trustees is not authorized to create 

said fund for future years, and that 

money must look solely to the surplus 

year said obligation was created and 

. . . . ^ not to the revenue of subsequent years, tne time sor payment 

not bein 

% 

controlling. We enclose herewith a copy of opinion 

No, O-13 7 of this department. 

Article 2802e-1, Vernon’s Annotated Texas Civil Statutes, reads as followsl 

“Sect ion 1. All independent school districts, and all 

cities which have assumed the control of the public schools 

situated therein, shall have power to build or purchase 

buildings and grounds located within or without the district 

or city, for the purpose of constructing gymnasia, stadia, 

or other recreational facilities, and to mortgage and encumber the same, and the income, tolls, fees, rents, and 

other revenues therefrom, and everything pertaining thereto 9 

acquired or to be acquired, and to evidence the obligation 

therefor by.,the issuance of bonds to secure the payment of 

funds to purchase or to construct, or to purchase and construct the same, including the purchase of equipment and 

appliances for use therein, and as additional security 

therefor by the terms of such encumbrance, may grant to the 

purchaser under sale or foreclosure thereof a franchise to 

operate said properties so purchased for a term of not 

more than ten (10) years after such purchase. No such obligation shall ever be a debt of any such. school district 

or city, but solely a charge upon the property so encumbered, and shall never be reckoned in determining the power of any such school district or city, to issue bonds for 

any other purpose authorized by law; provided that no 

election for the issuance of the bonds herein authorized 

shall be necessary, but the same may be authorized by a 

majority vote of the board of trustees of such independent 

school district or the governing body of such city. 

%ece 2, Projects financed in accordance with thfs 

law are hereby declared to be self-liquidating in character and supported by charges other than taxation. 

“Sec. 3. Such bonds shall be payable from the net 

revenues of the project together with all future extensions or additions thereto or replacements thereof, and 

the governing body of such such school district, or city, 

shall provide in the ordinance or resolution authorizing 

the bonds, that the cost of maintaining and operating the 

project shall be a first charge against such revenue, the 

maintenance and operating expenses to include only such 
Hon. 0. E. Gerron, page 5 (O-2231) 

items as are set forth in said ordinance or resolution0 

After the payment of such maintenance and operating expenses a sufficient amount of the revenues remaining shall 

be set aside in a fund known as the Gymnasium or Stadium 

Bond Interest and Redemption Fund to provide for the payment of principal and interest upon such bonds plus a reasonable amount as a margin for safety. Such fund shall be 

used for no other purpose than to pay the principal of and 

interest on said bonds. Any revenues renalnine after making the payments hereinabove provided for may Ge used for 

mY lawful purpose. 

law 

“Sec. 4. Every bond issued or executed under this 

shall contain the following clause: 

“‘The holder hereof shall never have the right to demand payment of this obligation out of any funds raised 

or to be raised by taxation.’ 

“Such bonds shall be presented to the Atto-*ney General 

for his approval of other school bonds and in such cases the 

bonds shall be registered by the State Comptroller as in the 

case of other school bonds. 

“Sec. !ie No bonds authorized to be issued or executed 

under this Act shall be issued or executed after the expi-. 

ration of two t 2 1 years from the effective date of this a:t. 

“Sec. 6. No land upon which is situated any of the 

school improvements other than as described herein shall 

ever be subject to the payment of any indebtedness created 

hereunder, nor shall any encumbrance ever be executed thereon. 

“Sec. 7. That all acts performed, proceedingd had and 

contracts executed by school districts to which this Act is 

applicable, and by the governing bodies thereof, which acts, 

proceedings and contracts were unauthorized by law at the 

time of their performance or execution, but which wou1.d 

have been authorized under the terms of this Act had the 

same been in force at such time, are hereby validated, ratified, approved and confirmed in all respects, as fully as 

though they had been duly and legally performed, had and 

executed in the first instance.” 

Article 2802e-1 became effective March 25, 1939, and 

only provides for the issuance of bonds in the manner and for 

the purposes stated therein. 

with Article 2802e-1, supra, 

Any project financed in accordance 

1 s declared by the statute “to be 

self-liquidating in character and supported by charges other 

,than taxation.” The obligations created in financing any of the 
- 

Hon. 0. E. Gerron, page 6 (O-2231) 

above mentioned projects are to be evidenced “by the issuance 

of bonds to secure the payment of funds to purchase or to construct or to purchase and construct the same, including the 

purchase of equipment and appliances for use therein.” None 

of the above mentioned obligations shall ever be a debt of any 

city or school district, but solely a charge upon the property 

encumbered. 

&ticle 2827, supra, prescribes the general powers of 

boards and officers over funds belonging to school districts, 

and the manner in which those powers shall be exercised. The 

course prescribed by law must be followed to the exclusion of 

all other methods and any authority given to boards and officers 

to draw on school funds is governed and limited by the provisions of the general statute. Thompson vs. Elmo Independent 

School District, 269 SW 868; Texas Juris., Vol. 37s page 968. 

We quote from Texas Jurisprudence, Vol. 37s page 970, 

as follows: 

“Trustees are authorized to expend fund derived from 

local sources, and the Surplus from the state and county 

available school funds, for any and all the purposes enumerated by law, and for such other purposes as, in the discretion of the board, may be reasonably necessary in the 

maintenance of the schools. The powers granted are sufficiently broad to authorize the appropriation of surplus 

funds to the construction of living quarters for teachers. 

The powers of the trustees are also sufficiently broad to 

authorize the expenditure of local funds for the establishment of a health department and its maintenance as a part 

of the school system, and for the employment of an attorney to represent the trustees in legal proceedings respecting school affairs. 

“The board is authorized to use public funds to pay 

premiums upon insurance policies issued to cover every 

school building in the State, the title to which is vested 

either in the State, county or district.” 

Under the facts as stated (paragraph 2 of the statement of facts) apparently it is contemplated by the contracting 

parties that the note would not be paid from the revenues of 

current school years, but only a portion thereof would be so 

paid and the balance out of future xevanuec.. Qs above stated, 

it is clear that the trustees of school districts are authorized to expend funds derived from local sources and the surplus 

in the state and county available school funds for any and all 

purposes enumerated by law and for such other purposes as, in 

the discretion of the board, may be reasonably necessary in 

the maintenance of the schools.~ Also, the board of trustees is 
_ . . - 

Bon. 0. 6. Gerron, page 7 (O-2231) 

authorized and given the power to build or purchase building 

and grounds located within or without the atstrict for the purpose of constructing gymnasia, stadla, or other recreational 

facilities, and to mortgage and encumber the same, and the income, tolls, fees, rents, and other revenues therefrom, and 

everything pertaining thereto, acquired or to be acquired, and 

to evidence the obligation therefor by the issuance of bonds to 

secure the payment of said fund, under Article 2802e-1. 

Bs shown by the statement of facts in your inquiry the 

school district has not complied with Article 2802e-1 In that no 

“,,o;$&ave been issued in accordance with the provisions of said 

Neither is the above mentioned contract authorized by 

kticle’2827, suprae 

In view of the foregoing, you are respectfully advised 

that it is the opinion of this department that an independent 

school district has no authority to pledge or expend funds of 

the district that are not available. And that the Board of Trustees is not authorized to create a deficiency debt against 

School's Local Maintenance Fund. You are further advised that 

it is the opinion of this department that the loan obtained by 

the district was not such a loan as the district was authorized 

to negotiate, and that the above described agreement is invalid 

as it attempts to pledge future tax revenues of the school district and that no bonds have been issued in compliance with ktitle 2802e-1. 

Trusting that the foregoing fully answers your inquiry, 

we remain 

Yours very truly 

ATTORNEY GENERAL OF TEXAS 

By /s/ Ardell Williams 

graell Williams, &sistant 

APPROVED: JUN 12, 1940 

/s/ Gerald C. Mann 

ATTORNEY GENERAL OF TEXAS 

(This opinion considered and approved in limited conference) 

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