Honorable J. O..Ward

County Attorney Hutchinslfn

County Borger, exas OpinionNo. O-6006 Re: Authority of Borger Independent School District to issue part of bonds already voted before can- .cellationof grant by Federal Works Agency.

Dear ~Slr:

Your letterof'september 6, 1945, to this department reads as;Tollows:-.

"The Borger Independent School District located in Borger, Hutchinson County, Texas, due to a rapid increase lnmpulatlon and in order to provide adequate school facilities, called a special election for the purpose of voting a bond issue to provide these facilities. Through ,negotiatlon wlth.the Federal Works Agency

. a grant.was authorized to theDistrict of $250,000 provided the DiStriCt would vote bonds in the amount of $475,000. The bondswere voted, issued and approvedby theAttorney,General. After.th.lswaa done and before any bonds were sold, the school districtpurchased land and employed architects and had the necessary archltectual and engineeringwork done. There was expended approximately $25,OOO.OO for property, archltectual and engineeringwork. ,"AfterVBDay and before any bonds.were

, sold, the Federal Works Agency cancelled the grant to the School District of $250,000. The Board of Trustees of the School District has decided not to proceedwith the work of constructing the additional facilities at this time/ ‘-

Honorable J. 0. Ward - page 2 (o-6806)

for the reason thatwithout the$250,000 grant, the proceeds of the balance of the bonds will be inadequate; therefore, the additional facilitieswill not be provided at this time.
."The$25,000 spent for property and archltectual and engineeringwork cannot be paid out of the currentmaintenance funds, and the Board of Trusteeswants to know whether or not they may legally sell enough of the bonds to pay this $25,000.

"I will thankyou for 'your,opinion as to whether or not theymay legally do this,"

On September26th, we advisedyou by letter that neither thisdepartment nor that of the Comptrollerhad any record of such bonds referred to in your letter.

On September 28th you advised us by letter thatyou were misinformed about said bonds having been issued. You further stated in said letter as follows:

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. . .Before these bonds could be printed and submitted to theAttorney General for approval, and sold, the Federal Works Agency cancelled a grant of $25.0,000that had been authorizedprevious to the calling of the election. When this grantwas cancelled the Board of Trustees realized that the $4'75,000

would be insufficient to~provide the necessarybuildings and equipment tomeet the needs of the district and Itwill be necessary to call an election and submit to the votersthe proposltion of voting additionalbonds and thiswill ' necessarilyentall~ considerabledelay.
"What the Board of Trustees want to know Is this: May they Issue and sell enough of the $475,000bond Issue previously voted to pay for property, engineering and archltectu_al work already contracted for, or:will it be necessary to call another bond election for then specificpurpose of ~voting

bonds to pay the obligationsalready contracted.

"Foryour information, I am advisedby the school

,Honorable J. 0. Ward, page 3 (o-6806)

district that the-FederalWorks Agency has agreed to pay for .one-third of the expenses already contracted in connectionwith purchasingproperty and securing the necessary engineering and architect@1 work, plans and spec.iflcations." Replying to'our request of October 5th; you have furnished us with copies of (1)~ Petition for School'Bond,Election; (~2) Order of the Board of'Trustees, dated June 12, 1945, calling such election for June '22,1945; and (3) Order of July 20,-

_ 1945, DeclaringResult of'said Bond Election. il.

It appears from said election order that no reference was made therein concerning a grant from the Federal Works Agency. It further appears fromyour communications that said Federal-Agencygrant, authorized to said school district,was conditioned.thataald dlstrlct'wouldvote bonds inthe am~ount of $475,,000,

whlch~was done.%We are furnishedno facts or I' information showing that said bondswere voted on condition 'thatsuch Federal grantwould be authorized. owe therefore ~' assume thatno such condition attached to such bonds. If we' are correct in this assumption,we know,of v reasonwhy bonds of the voted.lsSue cannot now be issued $n total or partial amounts, from which fundsmay be realizedto provide the facjl- -ftfPs'-for'which

they were voted. The foregoing conclusion is conditioned,of course, on the legality of said~bond issue. The record of same has not yet been received by,thlsdepartment.
If we are ln.error inassuming that no conditions were attached .tosaid bonds, as herelnbeforestated, a different conclusionwould result.

In this.

department's opinionHo. O-2088, approved -May 1, 1940, we held as follow's:

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. . .The authorities seem to hold thatthe approvalby theelectors of the proposed bond issue with whatever t~erm.8 ,andconditions that the governing body imposes thereon previous to,the election, ~createsa status analogous to a contractual,relation. In construing a similar order passed by a corn- '~ missloners~ court prior to a county-widebond electlon; the Supreme Court of Texas In the case of Black et al v.,Strengthet al, 246 S.W. 79;,said:,

Honorable J. 0. Ward, page 4 (.o-6806)

"'The orderwould not have been made save with a view to Its being relied on by the voters. With the bond issue authorizedby votes cast In rellance.on the order, asmust be assumed, It could not be arbitrarilyignored or repudiated without Involving the perpetration of fraud or its equivalenton the voters.
"'Under these circumstances,the order was, In effect, a contractwith the people, and good faith required that the contract be kept.'
"Any other rulewould tend to undermine public confidence in the'acts of public ofricers. See also Golden .GateBridge andHighway District v. Filmer, 21 Pac. (2d) 112;.Perry-v.Los Angeles, 2O3'Pac. 992.

. . .'I

A copy ,ofsaid opinion In full is hereto attached for your Information.

However, regardless of the fbregolng.conclusions,we are of the definite opinion that none of said iroted bonds may n& be Issued and sold for the purpose of paying for property, engineering and architectualwork already contracted for. Neither can additionalbondsbe voted fop said purpose. These conclusions are amply supportedby the following authorities:

In the case of Board of Trustees og,Alpine Independent School District, et al v. Jacob, 170 S.W. 795, (Clv.App., San Antonio), Appellee Jacob, as assignee of Phelps, sued appellant for $400 alleged to be due for plans of a schdolhouseprepared by Phelps at Instance of appellant. Appellant answegdf;;d denied .ltsauthority tomake the contract sued upon. ther alleged that Phelps knew that the~money to build the schoolhousewas to be raised from the sale of certain bonds, and agreed that he would not charge for theplans unless the bonds were sold and a contractor obtainedwho would build the house for $16,000. Appellant further alleged in Its answer that the bond Issuewas Illegal and that no responsible contractorcould be foundwho would build the house for $16,000. It was proved that the bonds that had been votedwere Invalid and couldnot be~,sold.The appellanttherefore had no funds from the sale bf bondswith which to pay Phelg&' claim. The~opinlon refers to Art. 2839 (R.C.S. lgll),which provided thatwhen such bonds have been voted for, they shall be

,. .

Honorable J. 0. Ward, page 5 (O-6806)

examined by'theAttorney General and registeredby the Camp-~1~ troller of PublicAccounts,land, when sold to the highest bidder, the purchasemoney~shall be placed in the'countyTreasury to the credit of the school district. .Theopinion-thensets forth the purposes as specified In said article, forwhich the money shouldbe used; viz: :"inpayment of accounts legally contractedfinbuying, building, equipping, or repairing the schoolhouse, or .schoolhousesfor such'dlstrlct, or in the purchase of sites therefor.".Then follows this important statement in said~opinion:

~"33is clearly contemplated~ in the law cited' that the contracts shall be made after the~bonds~~: .shallhave been issued and sold, and that.the money arislng.~.from

such~sale shall be disbursed only tb satisfy and meetsuch contracts." (Emphasis ours)
After providlng'that such bonds shall be.examlned by theAttorney General, and~if~approved registered by the Comptroller; our present %tatute,,Artlcle 271!36,~~.c.~s; 1925;as amended,provides:

"for free "All bondsshall bk'sold to the highest ' bidder for~not less than their par value'~and.i': ~:.': accrued interest, and the proceeds of such sale shall be deposited in the County .deposltoryfor the-common school districts, and in the district ~deposltoryfor the independent school districts, :. to the creditof such districts; and shall be disbursed only ,for the purpose for which said bonds were issued, q . .'I
The purposes for~which said ,bondscan-be issued are the purchase, constructio'n, repair or equipment .of'publlc school building?within the llmlts~of'suchdistricts (com-

_ .. ^

. _ mon and .inde@ndent) and tne purcnase of tne necessary sites therefor." Art..2384e, Vernon'sAnnotated Civil Statutes. (Parentheticalinsertion ours)

The Alpine~School D strict i case herelnabove.discussed further held that .the~xpense of plans and speclflcations are necessary in building a schoolhouse, and, could be paid for out of money arising from the sale of schoolhouse bonds. Such bond money,~.however, would have to be the hands of the trustees at the time the plans and specl cationswere contracted for., I

Honorable J. O.-Ward, page 6 (o-6806)

The case of Bone v. Black, et al, 174 S.W. 971 (Civ. APP., Amarillo), held that a schoolboard..cannot contract for a building afterthe bonds therefor are Issuedbut prior to their a, citing theAlpine IndependentSchool District case, supra. The following quotation from the Bone v. Black case Is very enlightening:

"Article 2842 (R.C.S.1911, the corresponding articlenow'being 2787, R.C.S.1925) indicates that until~thebonds are sold the taxes levied to pay themmay be discontinuedby vote. Ifs before they are sold the tax should be discontinued, the bond will be valueless.,Hence a contractbefore they are sold does not bind the fund. There Is no power insthe trustees to glve'bonds for the building. They must be sold, and the money placed In the treasury, and drawn out upon the proper order. The trusteeshave no power or authority over thesebonds until they are sold. No discretion is vested in themwhen they shall contract. It must be done when themoney is in the.traasury for that purpose, or Is available; otherwise, they can createno obligation againstthe district. We think It Is a general rule 'thatsuch contract can be entered Into, only to the extent of funds provided and available for that purpose,' by trustees." (ParentheticalInsertion ours)
The case of Harllngen IndependentSchool Distrlct~v. Page & Bra., 48 S.W; (2d) 983,was rendered by the Commission
Of Appeals of Texas, SectionA, in 1932.~.Afterreferring to the pertinent statutes of the 1925 codification,with then existing amendments,Judge Crltz discussedwith approval the cases of Alpine School District and Bone v. Black, above referred to, and quoted'at some length from the latter case. We now quote from the concludingportion of.JudgeCritz's opinion:

"All of the statuteswhich conferpower to expend ,bondfunds limit the power to funds that %re available,and from all of the statutes and constitutionalprovisions abovementioned,we are compelled-to the conclusion that itwas not the intention of the'Leglsl%ture to permit the board (of school trustees) to contr~act with reference to such fundsunless and until.they'are actually available,

. . ." scoring and parenthetical insertionours) (Under-,, _..Honor'ablk'J. 0. Ward, page 7 (0-6806)

In the rather recent case of City of Big Spring v. Ward, 169 S.W. (2d) 151, by the Commission of Appeals of Texas, Section A, adopted by the Supreme Court on March 3, 1943, Judge Brewster cited and quoted from the Harlingen Independent School District case hereinabove referred to. The Big Spring case lnvolved a city Instead of a school district;nevertheless, the same principle of law applied concerning contracts to expend bond money before such money became available. In said case Judge Brewster held:

"In the case at bar the city had no power to make the contract (for constructingproposed improvements)when it attempted to do so, because it then had no money on hand with which to construct the contemplated improvements and none available for that purpose." (Parentheticalinsertion ours)
Section 53 of Article 3 of our State Constitution provides:
"The Legislature shall have no power to grant, or to authorize any county or municipal authority to grant,

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. ;nor pay, nor authorize the payment of, any claim created against any county or municipality of the State, under any agreement or contracts,made without authority of law." Independent school districts<inTexas aremunicipalitieswith the powers conferred on them by law. Harlingen Independent School District v. Page & Bro., supra. The Borger Independent School District, being a municipality,was without authority of law tomake any contract concerning the expenditure of bond money until such money was available. Such money could only become availableby the bonds being approved, registered, m, and the proceeds deposited, all in accordancewith the provisions of Article 2786, Revised Civil Statutes, 1925, as amended, supra. Since none of'these requirements have been met, any contract- contractsheretoforemade by said Borger Districtwere ,ultravi,res andwithout authority of law. Hence, our conclusionsare as hereinabove announced.

Yours very truly
LHF:EP:bt APPROVED Nov. 7,1945 Carlos C. Ashley First Assistant Attorney General Encl. APPROVED Opinion Committee BWB, Chairman Attorney General of Texas

By:s/L.H. Flewellen L.H. Flewellen Assistant