THEA~TORNEY GENERAL 

OF TEXAS 

GERALD C.MANN AUSTINU.'~%XAR 

A1TORNmcYGWBHAL 

Honorable V. J. Campbell 

County Attorney, Garza, County 

Post, Texas 

Dear Sir: Opinion No. O-5638 

Re: Whether a fee for the refunding 

of Courthouse and Jail outstanding bonds can be paid from the 

Courthouse and Jail Sinking Fund, 

under the facts set forth, 

Your letter of September 24, 1943, requesting the 

opinion of this department on the question stated therein, 

reads as fo,llows: 

"Are the County Commissioners of a named 

County authorized to pay from the Courthouse and 

Jail Sinking Fund, a fee in the sum or amount of 

$3,267.00 for refunding the Courthouse and Jail 

outstanding bonds, there is outstanding bonds in 

the sum of $66,000 and the fee as stated will be 

in the amount of $49.50 per thousand. The qucstion is, shall that fee be diverted from ,the 

Courthouse and Jail Sinking Fund to the fee exacted 

for the refunding of these bonds. 

"The County Judge and Commissioners understand that the matter is optional, as was declared 

by the Supreme Court of Texas in mandamus proceedings instituted by Cochran County, Texas." 

The contract between the county commissioners and H. 

L. Shaffer and Company, a certified copy of which accompanies 

your Inquiry, reads as follows: 

"HONORABLE CO. Judge and Commissioners' 

Court of Garza County, Texas. 

"GENTLEMGN : 

"Referring to your $82,000 Court House and 

Jail bond issue dated Feb. 15, 1927, of which 

.there are ou,tstanding $66,000, bearing 55s interest, we make you the following proposition for re- 
Honorable V. J.,Cam@bePl, page 2 0 -5638 

funding of the now outstanding bonds Into refunding 

bonds bearing 3% interest and maturing as follows: 

"Same as the now outstanding bonds. 

"We agree to use our best efforts in assembling the old bonds for exchange for new refunding 

bonds on a basis of par for par, and we will pay 

all the expenses Incurred by us in the refunding 

of the bonds. We will also pay for the attorney's 

opinion and pay for the printing of the new bonds. 

For and In consideration of our services and expenses In this connection, It Is understood and 

agreed that you will pay us at the rate of $49.50 

per $1,000 of bonds exchanged as same are exchanged. 

In event no bonds are exchanged you will owe us 

nothing. 

"It being further understood that you will cooperate with us to the end that the refunding of these 

bonds Is completed without undue unnecessary delay. 

"The County to have the privilege of paying 

off $10,000 of the bonds out of sinking fund money. 

"Respectfully submitted, 

"H. L. Shaffer & Company 

'By W. L. Shaffer 

"The above proposition is hereby accented bv 

order of the 

July, 1943." 

Article 

vides: 

Com&ssioners Court, this lst-day o? 

839, Vernon's Annotated Civil Statutes, pro- 

"No city or county treasurer shall honor 

any draft upon the interest and sinking fund provided for any of the bonds of such city or county, 

nor pay out nor divert any of the same, except for 

the purpose of paging the Interest on such bonds 

or redeeming the same, or for investment in such 

securities as may be provided by law." 

Replying to your question, as to the authority of 

the commissioners' court to pay the fees or commissions called 

for in the contract lout of the Sinking Fund of the Courthouse 

and Jail Bonds, we call your attention to the case of Elser v. 
Honorable V. Jo. Campbell, page 3 0 -5638 

City of Fort Worth, 27 S.W. 739-741, in which the Court held 

that the test of the legality of a particular use of the sinking fund is whether or not the fund is being used for the purEgEl%z,e~y 

accomplishing that result (the final reand is not being diverted from the main 

object of its creation. In that case the Court held that the 

drawing of the draft to buy securities as an investment of 

the sinking fund was a draft drawn to redeem the bonds, inasmuch as It was a step toward the final redemption of the bonds. 

In a recent case by the Kentucky Court of Appeals, 

The Governor v. Wolfe County 163 S.W. (2d) 485, the Court 

holds that the county "could'legallg contract with some agency 

to bring together the bondholder3 and persuade them to exchange their 5% bonds for others bearing a less rate, and running over a longer period, and to pay the agency to prepare 

and file application for approval of a refunding plan; work 

out plans, to prepare and deliver all legal papers necessary 

for the consummation of the plans, ,the fees for the services 

to be paid from the Road and Bridge Sinking Fund, and not 

from the proceeds of sale, since the plan provides for no sale." 

In our Opinion No. O-3320, a copy of which is enclosed herewith, we held that the Board of County and District 

Road Indebtedness has ample authority to pay a premium for 

eligible road bonds and to use the sinking fund of counties 

deposited with the Board to retire such bonds, in payment of 

such premiums. In Opinion No. O-5919, a copy of which opinion 

is enclosed herewith, this department held that the commissioners' court had authority to enter into a contract with a 

certain company in connection with the proposed plan of refunding courthouse bond3 and to pay the fees or commissions 

called for therein out of the sirking fund of the courthouse 

bonds. 

In the contract submitted by you, it appears that the 

interest will be reduced from 5$$ to about 3.45%. This figure 

(3.45) include3 the 3% interest stated in the contract and the 

fees to 'be paid for the refunding of the now outstanding bonds. 

It is a step toward the final redemption of these bonds, if 

the county can, by paying a certain amount now, save a larger 

amount in the future interest costs on these bonds. Under 

the proposed plan of refunding these 5% bonds by the issuance 

of refunding bonds bearing 3% interest, the county will reduce its obligation. Therefore, it is our opinion that the 

use of the Sinking Fund for accomplishing this result is not 

a diversion of the main object for which the fund was created 

but is wholly consistent therewith. In other words, the use 

of these funds for this purpose is inkeeping with the purpose for which the fund was created, namely, the ultimate re- 
Honorable V. J. Campbell, page 4 O-5638 

demption of the bonds. Your question is, therefore, answered 

in the affirmative. 

Yours very truly 

ATTORNEY GENERAL OF TEXAS 

By sAArdel1 Williams 

Ardell Williams 

Assistant 

AW:EP:wc 

Encls. 

APPROVED OCT 16, 1943 

s/Gerald C. Mann 

ATTORNEY GENERAL OF TEXAS 

Approved Opinion Committee By a/GPB Chairman