### TEE A'LTORNJYGENE~RAL



### OFTEXAS

Honorable 0. P. Lockhart, Chairman Board of Insurance Commissioners Austin, Texas

Dear Sir: Opinion No. 

### O-4373 '.~ Re: May a stock casualty company Sncorporatedand licensed in Texas under Ch. 

### 18,Title 

### '78,'invest its surplus funds in bonds -issued by a road district of a Texas countyunder the provisions of Article 

### 4706,Subsection (c)?

Your letter requesting the opinion of this department
on the above stated question reads as follows:

"Pleaseadvisewhether a stock casualty company, Incorporatedand licensed in Texas under Chapter 

### 18, Title 

### 78.mag,under the provisions of Article 

### 4706 subsection (c) Invest its surplus funds'inbonds lssueaby a road district of a Texas County.

"We are of'~theopinion that the question shouldbe ansvered In-thenegative. -The'com-' pany involved argues to the contrary;however, upon the contention that road districts are portlons of counties, and that, therefore,road district bonds shouldbe construed to be county bonds and as such eligible for investment. We have stated our views that the test of eligl-. blllty is not that of territorial coincidence, but one of Identityvel non of legal entitles. It seems to us that a road district is a totally different legal entity from that of a county or countles in which the road district's territory may lie, and hence in no proper sense is
a road district bona a countybond within the meaning of the statute cited. Please advise ifwe are correct in this view."
Article 

### 4706,Vernon's Annotated Civil Statutes, provides inpart:Honorable 0. P. Lockhart, page 2 O-4373

"No company, except any-.writing Life, Health, and Accident Insurance, organized under the provlslons of this Chapter shall invest its funds over and above its paid-up capital stock In any othermanner than as follows:

. . . . "(c) Inbonds or other Interest-bearing evidence of indebtedness of any county, Incorporated city, town, or school or sanitary
or navigation district, such navigationdistrict to contain a population of not les.sthan three hundred and fifty-ninethousand (359,000) according to the last precedingFederal Census, in this or any other State inwhich said company may be duly licensed to conduct an lnsurante business, if such evidences of indebtedness are issuedby authority of law and if interestupon them has never been defaulted.

Article 752a,Vernon'sAnnotated Civil Statutes, authorizes any county or any political subdivisionof a county, or any road district that has been or may hereafterbe createdby any general or special law to Issuebonds forthe purpose of construction,maintenance and operation of macadamlzed,gravel
or paved roads and turnpikes, or Ln aFa thereof, in any amount not to exceed one-fourth of the assessed valuation of the real property of such county or political subdivision or road dis' trlct, and to levy and collectad valorem taxes to pay the Interest on such bonds'and provide a sinking fund for the redemption thereof. Said statute specificallyprovides that:

11

. . . .The term 'politicalsubdivision'
as used in this Act, shallbe construed to mean any commlssloners~precinctor any justiceprecinct of a count%, now or hereafter to be created and established.
Article 778a, Vernon's Annotated Civil Statutes,-authorizes any number of adjoining countieswithin this State, parsuant to authority conferred to Section 52 of Article 3 of the Constitution, to issuebonds not exceeding one-fourth of the assessed valuation of the real property of the territory lneludedwithin such counties, and to levy and collect annually ad valorem taxes to pay the interestupon such bonds and to provide a sinking fund for the redemption thereof, for the sameHonorable 0. P. Lockhart, page 3 o-4373

purposesmentioned inArticle 752a,~'supra.-When such b'onds
are issued'byvirtue of Article 752a, supra,when issued for and on the faith and credit of political subdivisions or road district, such taxes shall be assessed and collected in the same manner as is now provided by law for the assessment and-collection of common schooldistrict taxes. 752m,Vernon 9 Annotated Civil Statutes) (Article

With reference to classification of countybonds,' Article 752s, Vernon's Annotated Civil Statutes, provides:

"When the road bonds have been Issuedby " a county as a whole, suchbonds shallbe known and designated as I CountyRoad Bonds', taking the name of the county issuing the same, and shall express on their face that they are issued, under authority of Sectlon52, of Artlde 3, of the Constitution of Texas, and laws enactedpursuant thereto."
With reference to classification of subdivisionbonds, Article 75213

provides:

"Ifthe proposition to issue the road bonds of a political subdivision or road district is adopted, such bonds shall express on their'face: The State of Texas, the' name of the ctinty, the number or corporate name of,the subdivision or district issuing suchbonds, and they shallbe designated as 'RoadBonds', and express on their face that they are issuedunder authority of Section 52, of Article 3, of the Constitution of Texas, and laws enacted pursuant thereto."

In view of the foregoing statuteswith reference to ~~. classificatlon.ofbonds, the procedure to be followed in lssuing the same, etc., it is clear to us ~thata road district is a totallydifferent legal entity from that of a c'ounty or counties inwhich the road district'sterritorymay lie and'~ hence in no proper sense is a road.distr'ict bond a countybond within the meaning of Article 4706, supra. Therefore,we respectfuIlyanswer the above stated question in the negative.

Itwill be noted that the Legislature, in subsection (c) of Article 4706, supra, specificallydesignated school or sanitary or navigation district but did not name or mention road districts. We believe that itwas the intention of the Legislature to-exclude road district bonds from subsection (c) ofArticle 4706, and did exclude such bonds by not naming them therein.Honorable 0. P. Lockhart, page 4 o-4373

.

. Artlcle‘779;Vernon's Annotated Civil Statutes; as amendedActs.1941, 47th Leg;, p. 899, ch,.552;sec: 1, the Commissioners4Court'may invest sinking funds accumulated for the redemption and payment of any bonds issuedby such county, political subaivlslon,road district or defined district thereof, in bonds of the United States, of Texas, or of any county in this State, or any schooldistrict or road district of this State, or any incorporatedcity or townof this State;
or in bonds oPthe Federal'FarmLoan Bank System, or'inWar Savings Certificates,and certificates of indebtedness lssued by the Secretary of the Treasurer of the United States. No suchbonds shall be purchasedwhich, according to their terms, mature at a date subsequent to the'time of maturity of the bonds for the payment ofwhich such sinking fundwas created.

To us, the abovementioned statute illustratesthat the Legislaturedoes not consider road district bonds as county bonds, in the sense that county bonds are ordinarilyunderstood and treatedby law. But, road district bonds and county bonds generally are consideredand treated as two distinct and separate types ofbonds.

Yours very truly

ATTORNEYGENERAL OF TEXAS

_. By s/Arde11.Williiiims Ardell~~Williams Assistant

AW:GO:wc

APPROVED FES 5, 1942 s/Grover Sellers FIRST ASSISTANT ATTORREYGRWRRAL Approved Opinion CommitteeBy s/MS Chairman