Honorable Geo. H. Sheppard

State Comptroller of Pub,lic Accounts Austin, Texas OpinionNo. O-4824

Re: Should State Comptrollerdeliver a $1500.00warrant, payable to Montgomery County, prior toMontgomery County paying interest due on past-due school bonds?
Dear Mr. Sheppard:

We have your letters, aswell as the one fromMr. Gaynor Kendall, investment counsel for the State Board of Education, relative to the controversy that exists between the State Board.of Education @ridthe Commissioners'Court ofMontgomery County.

The facts, as given by you, are that the Permanent School Fund in 1940 purchased $1,500,000.00 of bonds issued by Commissioners'PrecinctNo. 2, ofMontgomery County.

A. W. Snyder & Company filed suit against the State Treasurer and the State Comptroller, in their individualcapacities, to recover possession of thesebonds, claiming that the PermanentSchool find did not have any interest therein.

The Supreme Court of Texas held againstSnyder & Company on their claim.'

During the pendency of theSnyder suit the first maturing bonds, aswell as interest' coupons,matured andwere paid. When the second series of interest coupons, amounting to $4x,712.50,became due, the county refused to pay same to the State Treasurer, and claimed that it depositedsame with the District Clerk ofMontgomery County, to be held by the clerk,pending the outcome of the litigation. After the litigation had terminated,Montgomery County paid to the State Treasurer the principal of said interest,but refused to pay any intereston the past-due interest. At the time the interest was actually pard:.totheState Treasurer therewas past-dueHonorable Geo. H. Sheppard - page 2

interest on this interest, figured at six per centper annum, amounting to the total sum of 

### $1610.19.

The State Treasurer 

### is still holding these interest coupons, and has refused to deliver same until the interest on the past-due interesthas been paid.

It further appears fromyour letters that at the time the PermanentSc~hoolFund purchased thesebonds they agreed to payMontgomery County thereforprincipal, accrued interest, and $1500.00 as a premium. The county at the time accepted thewarrants for the principal and interest for said bonds, but refused to accept the $1500.00premiumwarrant, on the theory that it should have been for $16,500.00. The county now requests that the $1500.00premiumwarrant be delivered to it, and that the Treasurerpay same.

We are further informed that the interest coupons attached to the bonds in question have no provision for the payment of interest on past-due interest, the interest couponsbeing payable on a day certain, as named in each interest coupon.

Under the above state of facts,you ask the following questions:

1. Whether the interest coupons should be released before the interest on the delinquent lnterest‘ispaid?

2. Whether the premiumwarrant for $1500.00 should be delivered and paid toMontgomery County prior to the time it pays the interest on the past-due interest?



### 3. Whether it is necessary for the State Comptroller, under Article 1660,Revised Civil Statutes of 1925, to file a formal claimwith Montgomery County for the interestwhich is claimed to be due on the past-due interest.

Article 2671, of theRevised Civil Statutes, provides that if defaultbe made in the payment of any interestdue upon bonds purchased by the Permanent School Fund, the State Board ;f Educationmay declare the principal of all unpaid bonds due:

. . .; and the payment of both such principal and interest shall in all such cases be enforced in themanner provided by law.

. . .'Honorable Geo. H. Sheppard - Page 3

Article 5079, of theRevised Civil Statutes, provides thatwhen no speoified rate of interest is agreed upon by the parties, the interest rate of six per cent per annum shall be allowed on allwritten contracts from and after the timewhen same became due and payable.

Article 4344-9, of the Revised Civil Statutes, provides that the Comptroller shall keep and settle all accounts, inwhich the State is interested, including all monies received by the State fromwhatever source, and forwhatever purpose. Article 4350, of theRevised Civil'Statutes,provides thatno warrant shall be issued to any person indebted to the State, or to his agent or assigns,until such debt is paid. Article 4378, of theRevised Civil'Statutes,provides that the State Treasurer shall be the custodian of all bonds inwhich the school funds of the State have been invested, and that he shall keep said bonds in his custodyuntil the same have been paid, andwhen the interest coupons on the bonds are paid, he is required to properly separate them from from the bonds and cancel same.

(1) In virtue of the above statutes, it is our opinion that the interest coupons attached to theMontgomery County PrecinctNo. 2 bonds should not be released or cancelled until the interest on the past-due interest at six per centper annum has been paid from the time said interestbecame due up and until the principal thereofwas paid. Since there is no rate of interestprovided for in the interest coupons, they bear the statutory rate of six per cent per annum from the time they became due.

(2~) Since Montgomery County owes the interest on the $43,712.50past-due interest from the time it became due until the time itwas paid, the $1500.00warrant should not be delivered or paid until said interest account has been paid. As stated above,Article 4350, of the Revised Civil Statutes, provides specifically that no,warrant shall be issued or paid to any one who is indebted to the State until said indebtedness is paid.

(3) By the third questionpropounded,you askwhether it is necessary, underArticle 1660, of theRevised Civil Statutes, for the State Treasurer or ~Comptrollerto present a.

Honorable Geo. H. Sheppard - page 4

claim to Montgomery County for the interest on the past-due interest,and have same approvedbefore the county can pay same. In our opinion,Article 1660 has no application to a claim of this character. The CountyAuditor has no control over thematter, and his approval or disapprovalwould add nothing thereto,nor subtract anything therefrom. The bonds have been voted and issued, and the interest Is required to be paid the same as the bonds. The law requires interest to be .paidon all past-due interestuntil same is paid.

In Nacogdoches County v. Jinkins, 140 S.W.(2) 901, the court held that itwas not necessary for the County Clerk to present his claim to the Auditor for approvalprior to the time he filed suit thereon, and used this language:

"(5) Furthermore, it is not believed that the claim here involved is such as is required by Article 1660, ,R.C.S.,to be presented to the CountyAuditor for his approval,before same can be presented to the Commissioners1Court for its approval and payment. (The opinion then quotes Article 1660). "ThisArticle must be consideredand construed in connectionwith the succeedingArticle, 1661, passed as a part of the same Act. (The opinion then copiesArticle 1661).
"A literal applicationof Article 1660 without reference toArticle 1661would require the filingwith theAuditor of claims of every nature, but under Article 1661 it is readily seen that the Auditor has no authority to audit or approve a claim of the nature here involved. It is evident that the claimswhich he is authorized to audit and approveunder Article 1661 are claimsbased upon contracts lawfully made, and accounts for supplies and material supplied and contracted for as required by law, towhich are attached the proper requisitions. There areno provisions in the lawwhich indicate that theCounty Auditor is vestedwith any authority to pass upon the merits of claims such as here. Appellee's claim being onewhich under no circumstancescould be approvedby the CountyHonorable Geo. H. Sheppard - page 5

Auditor, Article 1660 has no application to it. Southern Surety,Co. v.McGuire, 275 S.W. 845, writ ref.; Greer v. Hunt County, Tex.Com.Apps. 249 S.W. 831."
It is, therefore, our opinion that it is not necessary for either the State Treasurer or the Comptroller to file a claimwith the County Auditor or the Commissioners' Court for the interestdue on the past-due interest on the bonds in question. The county should pay this in the same way that it pays the interest and principal on said bonds. Very trulyyours, ATTORNEY GENERAL OF TEXAS

BY Geo. W. Marcus

Assistant GWB:mr:bt
Approved Sep.l8,1942 Grover Sellers First Assisant Attorney General Approved Opinion Committee R-y BWB, Chairman