August I%, 1959 

Hon. Bill Allcorn, Commissioner Opinion.No. WW-678 

General Land Office 

Austin 14, Texas Re: Authority of Veterans' 

Land Board to purchase 

and cancel State of 

Texas Veterans' Land 

Dear Sir: Bonds. 

You have requested an opinion as followsr 

"Our Accounting Department advises that the 

Veterans' Land Board Division A Pund cash balance is increasing from an accumulation of 

monies received from such sources as Paid in Pull 

Contracts, Bonuses, Gravel and Timber Sales, 

Homesite Purchases, etc., in an amount considerably above our anticipated receipts from these 

sources. These additional receipts are over and 

above those normal anticipated receipts required 

as bond reserves and to retire the bonds and to 

pay interest as it falls due. 

"Prom time to time, the Veterans' Land Board 

is offered the opportunity to purchase bonds 

sold as Texas Veterans' Land Bonds Series 1949, 

1950, and 1950A. The Veterans' Land Board Division A Fund mentioned above is the Pund in the 

State Treasury in which the proceeds of the sale 

of the above series of Texas Veterans' Land Bonds 

are deposited. Returns from the purchase and resale of land to veterans and receipts from other 

sources related to this Fund are also deposited 

to the credit of this Division A Fund. 

"The Veterans' Land Board has authorized me 

to present to you the following questions for an 

official opinion: 
Hon. fill Allcorn, page #2 (WW-678) 

1. 1s the Veterans' Land Board authorized 

to purchase and cancel Texas Veterans' 

Land Bonds from Series 1949, 1950, and 

1950A in the open market at a price that 

does not exceed par, with funds which are 

now deposited in Texas Veterans' Land 

Fund Division A? 

2. If the answer to question #l is in the 

affirmative, is the Veterans' Land Board 

authorized to purchase and cancel bonds 

from other series and other funds, after 

the specified date in each specific bond 

resolution, after which the Veterans' Land 

Board cannot use any of the funds for the 

purchase of land for resale to Texas veterans, 

but must use all the receipts from any 

sources for the purpose of maintaining required bond reserves and payment of interest 

and principal on the outstanding bonds?" 

Pursuant to the provisions of Section 49b of Article III 

of the Constitution of Texas as adopted November 7, 1946, and 

Senate Bill No. 29, Chapter 318, Acts of the 51st Legislature, 

Regular Session, 1949, (Art. 5421m, V.C.S.) the Veterans' Land 

Board issued $25,000,000.00 in negotiable bonds for the purpose 

of creating a fund known as the Veterans' Land Fund to be used 

for purchasing land to be resold subsequently to Texas Veterans 

of World War II. 

These bonds were issued and sold in three installments, 

as follows: 

(a) State of Texas Veterans' Land Bonds, 

Series 1949, dated October 1, 1949, 

in the amount of $5,000,000.00. 

(b) State of Texas Veterans' Land Bonds, 

Series 1950, dated April 1, 1950, 

in the amount of $10,000,000.00. 

(c) state of Texas Veterans' Land Bonds, 
Hon. Bill Allcorn, page #3 (WW-678) 

Series 1950-A, dated August 1, 1950, 

in the amount of $10,000,000.00. 

We have re-examined the transcripts of proceedings 

underlying the issuance of these bonds, including the resolutions by the Veterans' Land Board authorizing their issuance, and your first question is answered in the affirmative, provided the required "Reserves" are maintained intact 

and, in addition, adequate moneys are retained in the proper 

division of the Veterans' Land Fund to provide for the prompt 

payment of the principal of and interest on each of the outstanding bonds when due. 

The reserves which must be maintained intact for each 

of these three issues, respectively, in accordance with covenants contained in the resolutions are as follows: 

(a) Series 1949, $600,000.00 

(b) Series 1950, $1,200,000.00 

(c) Series 1950-A, $1,200,000.00 

The constitutional provisions, the statute, and the 

resolutions of the Board all provide that from and after 

November 25, 1954, (8 years after the effective date of the 

constitutional provision) no money in the Veterans' Land Fund 

can be used except to pay the principal of and interest on the 

bonds. The purchase of these bonds prior to their maturity by 

the Board at a price not exceeding their face value is consonant with such specified use of the Fund and constitutes nothing 

more than the purchase of outstanding bonds with moneys coming 

from the applicable interest and sinking fund. 

It is clear that this portion of the Veterans' Land 

Fund, after the expiration of the 8-year period, is an interest 

and sinking fund. It is a fund specially earmarked for the 

extinction of a debt, and the object of every such fund is to 

diminish the debt whose existence warranted its foundation. 

Clark v. City of Philadelphia, Supreme Court of Pennsylvania, 

196 A. 384, 387, 388; 328 Pa. 521. Bank for Savings v. Grace, 

7 N.E. 162, 168; 102 N.Y. 313. 
Hon. fill Allcorn, page #4 (VW-578) 

At the time these "Division A'* bonds were issued 

Section 9 of Article 5421m, V.C.S., provided, in part, as 

follows: 

* 

. . . After eight (8) years from the effective date of said constitutional amendment, 

all moneys received by the Veterans' Land 

Board under the terms of this Act, or so much 

thereof as may be necessary, shall be set aside 

and used to pay principal and interest on bonds 

then outstanding as they shall mature . . . 

The moneys so set aside . D . may be invested 

by the Board in bonds of the United States, or 

the State of Texas, . . .I* 

The 55th Legislature, Regular Session, 1957, added 

Section 2(A) to this statute, which, in part, provides: 

"The duties of the Veterans' Land Board . . . 

shall be . . ~ to formulate such policies, 

rules and regulations as may be necessary, 

not in conflict with the provisions of the 

law, to insure the proper administration of 

the law and to carry out the intent and purposes thereof." 

This is a broad grant of discretionary power to the 

Board to properly administer the program. For example, when 

an opportunity is presented to the Board to purchase its own 

bonds at a price less than their face value, because the bonds 

have an attached interest coupon which is then considered 

"low* due to the fluctuations of the bond market, it would 

obviously constitute "proper administration" for the Board to 

purchase and cancel those bonds, thereby retiring that portion 

of the debt prior to maturity and realizing substantial savings 

in interest cost and principal as compared with the amounts 

which the Board would otherwise remain obligated to pay. 

The Legislature, in using the words "as they shall 

mature", was merely declaring that the Board must set aside 

such moneys -- *so much thereof as may be necessary" -- in 

order that no bond obligation would remain unpaid when due. 
. . 

Hon. Bill Allcorn, page #5 (WW-678) 

Such a default obviously could not occur in the case of a 

bond which had been purchased by the Board and cancelled 

prior to its maturity date. 

We find nothing in the Constitution, the statute or 

in the bond resolutions which either expressly, or by implication, limits the authority of the Board to follow such an 

obviously appropriate course of action, provided the Fund 

is not depleted so as to interfere with the prompt payment 

when due of those obligations which remain outstanding. 

It is the duty of the Veterans, Land Board, insofar 

as the inflow of money into the Veterans, Land Fund will 

permit, to assure the availability of sufficient money in the 

Fund so that the principal of and interest on each bond not 

so purchased and cancelled prior to maturity will be promptly 

paid when due. The Board has recognized this obligation. 

For example, in advertising the bonds for sale in a nationally 

circulated financial publication, and inviting bids for purchase of the bonds, the Board authorized the following statement: 

-It is anticipated that there will be 

some credit margin between the amount of payments which will be received from the land 

notes and the interest and principal payments 

which the State will be required to make on 

the Bonds. . . . The Reserve deposited and 

accumulated in the Fund will be further assurance." 

Section 49-b of Article III of the Constitution of 

Texas was amended in 1951 and again in 1957, authorizing additional bonds in the amounts of $75 millions and $100 millions, respectively. Purusant to these amendments bonds have 

been issued by the Board in installments as follows: 

1951 Amendment 

(a) State of Texas Veterans, Land Bonds, 

Series 1951, dated December 1, 1951, 

in the amount of $15,000,000.00. 
. . 

Hon. Bill AllCOrn, page #6 (WW-678) 

(b) State of Texas Veterans, Land Bonds, 

Series 1952, dated october 1, 1952, 

in the amount of $10,000,000.00. 

(c) State of Texas Veterans, Land Bonds, 

Series 1953, dated April 1, 1953, 

in the amount of $10,000,000.00. 

(d) State of Texas Veterans, Land Bonds, 

Series 1953-A, dated September 1, 

1953, in the amount of $15,000,000.00. 

(e) State of Texas Veterans, Land Bonds, 

Series 1954, dated April 1, 1954, 

in the amount of $15,000,000.00. 

(f) State of Texas Veterans, Land Bonds, 

Series 1954-A, dated September 1, 

1954, in the amount of $10,000,000.00. 

1957 Amendment 

(a) State of Texas Veterans, Land Bonds, 

Series 1957, dated December 1, 1957, 

in the amount of $12,500,000.00. 

(b) State of Texas Veterans, Land Bonds, 

Series 1958, dated April 1, 1958, 

in the amount of $12,500,000.00. 

(c) State of Texas Veterans, Land Bonds, 

Series 1958-A, dated July 1, 1958, 

in the amount of $12,500,000.00. 

Thus, of the authorized total of $200,000,000.00 a 

total of $137,500,000.00 of bonds has been issued and sold. 

The $75 millions of bonds authorized by the constitutional amendment of 1951 are serviced by Division B of the 

Veterans, Land Fund; the $100 millions of bonds authorized in 

1957, $37.5 millions of which have been issued and sold, are 

serviced by Division C of the Fund. 
Hon. Bill Allcorn, page #7 (WW-678) 

We have also re-examined the transcripts of proceedings pertaining to all the "Division B* issues and "Divisions 

C" issues and your second question is affirmatively answered, 

provided similar duties and precautions are observed by the 

Board as mentioned in the answer to your first question and 

the bonds are purchased at a price not exceeding their face' 

value, except that funds in Division B of the Fund may not be 

used for such purchase of Division B bonds until after December 1, 1959, and the corresponding date for the Division C 

bonds is December 1, 1965. 

SUMMARY 

The Veterans, Land Board may purchase 

and cancel State of Texas Veterans, Land Bonds 

provided certain duties and precautions are 

observed by the Board. 

Yours very truly, 

WILL WILSON 

Attorney General of Texas 

HWM-s 

APPROVBD: 

OPINION COMWITTEE: 

Geo. P. Blackburn, Chairman 

c. K. Richards 

Linward Shivers 

Robert G. Scofield 

Assistant 

RBVIBWED FOR THE ATTORNRY GEWERAL 

By: Leonard Passmore