The Attorney General of Texas 

December 22, 1982 

MARK WHITE 

Attorney General 

Supreme Court Building 

P. 0. BOX 12546 

Austin. TX. 76711.2546 

512/475-2501 

Telex 910/674-1367 

Telecopier 512/475-0266 

1607 Main St., Suite 1400 

Dallas. TX. 75201.4709 

2141742.6944 

4624 Alberta Ave.. Suite 160 

El Paso, TX. 79905-2793 

915/533-3464 

1220 Dallas Ave., Suite 202 

Houston. TX. 77002.6966 

7131650.0666 

606 Broadway, Suite 312 

Lubbock, TX. 79401-3479 

6061747-5236 

4309 N. Tenth, Suite S 

McAllen, TX. 76501-1665 

5121662.4547 

200 Main Plaza. Suite 400 

San Antonio, TX. 76205.2797 

5121225~4191 

An Equal Opportunity1 

Affirmative Action Employer 

Honorable Charles Evans, Chairman 

Government Organization Committee 

Texas House of Representatives 

P. 0. Box 2910 

Austin, Texas 78769 

opinion Ro. m-522 

Iie: Whether school district 

may purchase property subject 

to lien without election 

pursuant to section 20.04 of 

the Education Code 

Dear Representative Evans: 

After providing us with the following facts: 

The Fort Worth Independent School District is 

interested in obtaining a piece of property in 

east Fort Worth commonly referred to as the 

'Oakbrook Mall.' Such property is currently owned 

by a Florida corporation called Senior 

Corporation. Senior Corporation has assumed an 

existing note, subject to a deed of trust lien, on 

the property in the amount of $1,100,000.00. This 

note is currently being paid by proceeds from a 

lease on a portion of the property to Montgomery 

Wards, such proceeds being assigned to the 

noteholder to further secure payment of the note. 

The district is attempting to negotiate with 

the owner a purchase of the owner's interest in 

the property subject to the existing $1,100,000.00 

note. Under this proposal, Senior Corporation 

would remain personally liable on the note, the 

deed of trust lien would remain to secure the note 

as well as the assignment of the Montgomery Ward 

lease proceeds, and the district would receive the 

property in fee simple subject to the lien for the 

payment of that note.[,] 

you pose the following question: 

Does the Fort Worth Independent School District 

have legal authority to purchase a piece of real 

property subject to an existing lien, where the 

p. 1891 
Honorable Charles Evans - Page 2 (MW-522) 

school district does not expressly assume the note 

secured by the lien, and where the school district 

is therefore not liable on such note, without 

obtaining the approval of a majority vote of the 

electors of the district in the manner provided by 

in section 20.04 of the Texas Education Code, or 

would such action violate either section 20.48 of 

the Texas Education Code or article 3, section 52, 

of the constitution of the state of Texas? 

Section 23.26 of the Education Code specifies that the trustees 

of independent school districts "may acquire and hold real and 

personal property" in the name of the district. Such language 

contains no restrictions and is very broad, but for reasons explained 

below we are of the opinion that it will not extend so far as to 

authorize the proposed transaction, absent voter approval. 

Subsection (a) of section 20.48 of the Education Code provides 

that "[t]he public free school funds shall not be expended except as 

provided in this section." Subsection (d) addresses school districts 

of a description that includes the Fort Worth Independent School 

District, we understand. It specifies that they: 

shall, in addition to the powers now possessed by 

them for the use and expenditure of local school 

funds and for the issuance of school bonds, be 

expressly authorized and empowered, at the option 

of the governing body of any such school district, 

in the buying of school sites and/or additions to 

school sites and in the building of school houses, 

to issue and deliver notes of the school district, 

negotiable or non-negotiable in form, representing 

all or a part of the purchase price or cost to the 

school district of the land and/or building so 

purchased or built, and to secure such notes by a 

vendor's lien and/or deed of trust lien against 

such land and/or building, and, by resolution or 

order of the governing body of the school district 

made at or before the delivery of such notes, to 

set aside and appropriate as a trust fund, and the 

sole and only fund, for the payment of the 

principal of and interest on such notes such part 

and portion of the local school funds, levied and 

collected by the school district in that year 

and/or subsequent years, as the governing body of 

the school district may determine, provided that 

in no event shall the aggregate amount of local 

school funds set aside in or for any subsequent 

year for the retirement of such notes exceed, in 

p. 1892 
Honorable Charles Evans - Page 3 (MW-522) 

any one such subsequent year, 10 percent of the 

local school funds collected during such year. 

The district may issue the notes only if approved 

by majority vote of the resident, qualified 

electors voting in an election conducted in the 

manner provided by Section 20.04 of this code for 

approval of bonds. (Emphasis added). 

The foregoing is the only provision of the statute expressly 

authorizing a school district to place a lien against its property in 

order to secure payment of an obligation. Cf. Educ. Code §§20.43 

(time warrants), 20.49 (maintenance tax notes). 

A purchaser who takes mortgaged property without assuming the 

mortgage debt is not personally liable for the debt (in the sense of 

being responsible for any deficiency beyond the value of the mortgaged 

p=op==ty) , but the property continues as the primary source for 

payment of the obligation. See Kansas City Life Insurance Company v. 

Hudson, 71 S.W.2d 574 (Tex>iv. App. - Waco 1934, writ ref'd); 

Fidelity Union Fire Insurance Company v. Cain, 28 S.W.2d 833 (Tex. 

Civ. App. - Dallas 1930, no writ); 39 Tex. Jur. 2d Mortgages and Trust 

Deeds, 5597, 98, at 122. 

In other words, if the district purchased title to the property 

while the property remained subject to an outstanding mortgage or deed 

of trust lien, the interest of the district therein would be subject 

to defeasance should the district's grantee default in payment of the 

underlying obligation secured. The fact that the district had not 

assumed the obligation so as to make itself directly liable on the 

outstanding note would not in itself prevent the loss of the 

district's investment. 

In effect, the property interest of the district would be 

mortgaged to secure the repayment of the outstanding indebtedness 

against the property -- that is, the debt of a third party. We need 

not consider the possible application of article III, section 52(a) of 

the Texas Constitution (precluding the lending of credit by a 

political subdivision to any individual, association or corporation), 

or examine the doctrine that prevents a political subdivision of the 

state from entering agreements that would potentially control or 

embarrass it in the exercise of governmental powers. See Clear Lake 

City Water Authority v. Clear Lake Utilities Company, 549 S.W.2d 385 

(Tex. 1977). In our opinion, section 20.48 provides a statutory bar 

to the proposed transaction unless the procedural requirements of 

subsection (d) thereof are met. 

Section 20.48 of the Education Code was derived from former 

article 2827, V.T.C.S., the provisions of which were interpreted as 

showing the general policy of the legislature with respect to the 

p. 1893 
Honorable Charles Evans - Page 4 (MW-522) 

expenditure of funds belonging to a school district. See Flatonia 

Independent School District v. Broesche, 176 S.W.2d 223(Tex. Civ. 

APP. - Austin 1943, writ ref'd). Cf. McKinney v. Chambers, 347 S.W.2d 

30 (Tex. Civ. App. - Texarkana 196cwrit ref'd). In our opinion, the 

provisions of subsection (d) expressly detailing the conditions under 

which school sites and school buildings may be subjected to liens 

indicates the policy of the legislature with respect to the purchase 

with school funds of property which will thereafter become or remain 

encumbered. That policy requires approval of the voters of the 

district. 

We conclude that a purchase by the Fort Worth Independent School 

District of real property subject to a continuing lien without 

obtaining voter approval in the manner required by section 20.48 of 

the Texas Education Code would constitute a violation of that statute. 

SUMMARY 

A purchase by the Fort Worth Independent School 

District of reals property subject to a continuing 

lien without obtaining voter approval in the 

manner required by section 20.48 of the Texas 

Education Code would constitute a violation of 

that statute. 

z* 

MARK WHITE 

Attorney General of Texas 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

RICHARD E. GRAY III 

Executive Assistant Attorney General 

Prepared by Bruce Youngblood 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Susan L. Garrison, Chairman 

Jon Bible 

Rick Gilpin 

Patricia Hinojosa 

Jim Moellinger 

Bruce Youngblood 

p. 1894