R-420 

PRICE DANIEL 

AUSDTN nit. TEXAS 

I.¶-ra.lllRT r.*:nvzlrm., 

Mag 20, 1947 

Honorable L. S, Johnson, Commissioner 

Department of Banking 

Austin 14, Texas Opinion No, V-209 

Re: Eligibility of warrant 

indebtedness of the 

Bowie County Vocational School for exemption from the loan 

limit ,of State banks 

in accordance with 

Article 342-507, V.C.S. 

Dear Sir: 

We quote the final paragraph of your request 

for an opinion as follows: 

"In order to determine whether the 

warrant indebtedness of the Bowie County 

Vocational School is eligible as an exception to the loan limit permitted to 

state banks under the provisions of Subsection 6, Article 7, Chapter 5, Texas 

Banking Code, we, therefore? request your 

opinion as to whether such indebtedness as 

created by officials of the Bowie County 

Vocational, School, under the authority of 

the Bowie County Board of Education, is a 

legally created municipal obligation. We 

should also like your opinion as to whether the indebtedness, whose repayment apparently is restricted to receipts of tuition fees from the Administrator of Veter- ~' 

ans Affairs, can be considered a general 

obligation as contemplated by Paragraph 6, 

Article 7, Chapter 5, Texas Banking Code." 

Your final paragraph is preceded by a general 

statement descriptive of the manner in which your question arises, a description of the nature of the financial activities of the Bowie County Vocational School, 
Hon. L. S. Johnson - Page 2 v-209 

and references to discussions contained in letters attached to your request frola the'State Bank of DeKalb 

and the Executive Direator, State Board for Vocational 

Edukation. 

The Texas Banking Code of 1943 was enacted as 

House Bill 79, Chapter 97, Acts of the 48th Legislature, 

Regular Semion, 1943, page‘127. Your reference is to 

Subdivision 6 of Article 7, Chapter 5, of that Act 

which $8 pub&bed as Subdivision 6 of Article 342-307 

of Vernan's Civil Statutes, The pertinent provisions 

of Article 342-507 provide: 

"No state bank shall permit any person or any corporation to become indebted 

or in any other way liable to it in an 

amount in excess of twenty-five per cent 

(255) of its capital and certified surplus. 

The phrase 'indebted or in any other way 

liable' ,shall be construed to include liability as partner or otheiwise. The above 

limit,atiens shall not apply to the following classes of indebtedness or liability: 

"6. Bonds and other legally created 

general obligations of'the State of Texas 

or of any county, city, municipality or 

political subditisian thereof and indebtedness of the United States of America, 

the Reaematructien Finance Corporation, or 

other instrumentality er agency of the 

United States GoWmment.lt 

F&tce 

Reference is made to Opinions Nos. O-6867 and 

ies 

tE: at 

of which are attached hereto, hold+ in 

the State Board for Vocational Education 

and local beards of s&e01 trustees have requisite authority to sponsor and administsr the schools designated 

and contemplated by the G, I. Bill, and incidentally to 

administer the fiuaancial phases of such activities. 

H-over, we find no authority authorieing the pledging 

of the credit ef either a local school district or 

school agency, or the credit of the State, or af the 

United States Qoverrment, or au agency thereof, and attention is called to the discussion in the attached opinions indicating that the operation of the program 
Hon. L. S. Johnson - Page 3 v&209 

shall not in any wise involve the credit of either the 

State or of a local subdivision of the State School 

System. 

Under the contract of the Bowie County Vocational School for 1946-1947, a copy of which is attached 

to your request, the sole income of the Vocational 

School is from stipulated payments of a stated amount 

per student. That contract, taken together with legislation enacted by the State of Texas and the Congress, 

providing moneys to be disbursed according to such arrangements as made by the State Board for Vocational 

Education and the Veterans ( Administration appears to 

be the only commitment of either the State or the National Government. That such a plan for financing the 

school has no direct relationship to the warrants which 

may be issued by the Vocational School authorities is 

obvious. Section 7 of Article 342-507, TV. C. S,, which 

immediately follows Section 6, above quoted, provides: 

"Any portion of any indebtedness which 

the United States Government, the Reconstruction Finance Corporation, or any other agency 

or instrumentalitv of the United States Government, has unconditionau agreed to purchase or has 

payment of both 

(Emphasis supplied). 

unconditionally guaranteed-as to 

principal snd interest." 

Reading subdivisions 6 and 7 together, we believe that similar standards should apply to the obligations under subdivision 6 as under subdivision 7. It 

is manifest that the local school officials have neither 

the means nor the authority to definitely commit themselves, the State, or the National Government, to the 

payment of the warrants of the school. The contract of 

the Bowie County Vocational School contemplates payments 

based upon the number of approved courses given to properly certified veterans. The meeting of the expenses 

of the Vocational School depends entirely upon the proper financial management of the school within such expected revenues. 

In view of the indefinite provision for meeting such expenses, we do not believe that the obligations evidenced by the warrants are of a nature contemplated by Section 6, The language "bonds and other legally created general obligationsn indicates to our minds 
Hon. L. S. Johnson - Page 4 V-209 

a type of obligation of greater dignity and conclusiveness as to validity and amount. We believe that the 

statute contemplates securities, the validity and face 

value of which are not debatable and which have been 

duly and formally issued, creating an absolute liability for the amount stipulated, and based upon a formal 

act of an agency legally authorized to incur the indebtedness, fully acknowledging the specific debt. We 

conclude then that the warrant indebtedness of the 

Bowie County Vocational School and indebtedness similarly created by other Vocational Schools under a program set up under the G. I. Bill are not eligible as 

exemptions from the loan limit of State banks under 

Article 342-507, V. C. S. 

,SUMMARY 

The warrant indebtedness of the 

Bowie County Vocational School and indebtedness similarly created by other 

Vocational Schools under a program set 

up under the G. I. Bill are not eligible as exemptions from the loan limit 

of State banks under Article 342-507, 

v. c. s. 

Yours very truly 

ATTORNEY GENERAL OF TEXAS 

BY 

Assistant. 

APPROVED MAY 21, 1947 

jiL# eaiiL.2 

ATTORNEY GENERAL 

NMc/JMc/erc