OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN

Honarablr **Toa** 0. King **Stat8** Auditor Eltstr Capitol Austin, Psxer

use fn deolaration of

the faots: hs aurrrnt annual audit Or tha BOO the State Teaohers'

9, F. C. Oatra oonrayrd mm (a naabar of thhrCollegr'r nrreular form, pmp6rlf dowrcord~d,,whiah reeltad 'for ration of thr mm at firma Eiundrsd OO), to UDin hand paid by s. ?$I. r other good,~elrublo and autfiaration

. . .*

.non July 2A, 1939, 8. hi. sowell rxreutad an :netruasnt vvhldbreferred to the l b ovo doe&, **snd** continued:honorable Ton C. King, rage 2



### ' tw1~8 e matter 

### ofract #7OO.‘@Gof the aons&&tlcc for eeld ~onveykt~e was raid In cash by **-@.!id** S. Y. cewell, and the rereslnder of the oo@eratlon sas paid Inpareonel property by +,J *?:,

. . College,

. . .

“’ Aow, I, s. Lf.Sewell,

. . ., grantee in the deed above referred to, do nowhereby atate anddeclaie that .Ihold said property in trust for the use and beoetit of sald College, end that of the consideration for said property, I psid the mmof $?OO.CGin Cash, md reld College the reaalndsr snd said property was conveyed to .xewlth the follow-iog agreement and understsndlng betoeen meend said College: -I(l) If andHhen, et any time rlthln 2 ywrs from date heraof, said College paps to oae the ma of f700.00 In cash, together rlth intereat thereon froze tkzis date until paid at the rate or 65 per annum, then I ~411 imedfataly, at the request oi the proper offickle of said College, or of the Board of Clrectors of the State Teachers* Colleges of Texas, convey said property, together with the improrexents thereon, to the St,te of Texns, for the ase end benefit Of mid college, or t0 eny other @en&se in;!lcsted, such con-‘eyanoe to be IDthe ram ot a special warranty deed, andny wife, it llvhe, ~111 join meIn the execution thereof ’, lr requested by the parties above aenticned.

tr’,>"'(4) xi atthe l d or 2 yesra fraadate hark said College h8e f&led to redeem said prc&hrty by paying me the mm of $700.00 and int@Pt@., as above mpeclfled, then, et myoptlon, lt’lil to torielt all right or Interest in &aid property, together with the lmproraments than situated thereon, and the full andabsolute title will then vest in xc. * 9%~ instrument is slgnad by S. X. Serell only, and Is not acknowladged or recorded..

Honorsb1

: \t nq ‘The Collepe, by its presldant, sIPned tLla .^ Ye. &ion at the foot of the irmtrument: i.~ “The tarma end provisions of the above and fo;;ssolw trust agreanent are accepted. * qE“‘The perecml property rererred to as the psrt of the consideration paid by the College cocsisted of a house on College propert. , which was then tom downend moved away. This house was valued on the books of the College at $1,500, and s house 8ppraisc.d at the sane value was, and still is, located on the newpror,erty, the su>- ject of the instrtments above referred to. The books of the CollePe reflect thnt the trensaction F~GEregtirded as an exchanrZeof the one house to he rmoved for the other to reamin atending.

“Yor;:- opinion on the follow-Ins, questions is respectfully requested :

“(1) As or AuGust 31, 1939, whet \cesthe nsture of the interest of the college In this p;o;erty?

“(2) Fh;hRt

would be the effect of a falli:re on the pert of the college to snakeany paymert to s. v. f-ewe11within two years f ’rcw July 2L, 19397

“For the purposes cf this inquiry you msy assum such racts, not detailed, as are neceasary, I have related herein the substance of all **the** $nronaation I have. It will be helpful, hoveveyi: ir you will state the assuaptf;~ns you make.v

,-‘$a ~111 not go into the Question of the authorlt of the P&rd (;f Ee@ente to enter Into such a transac + es outliged Ianyour letter, inasmuch ae you did not apacifically ask thnt question, end as It Is not re2ulred in, order to ansver your questions. AB weunderstan& your second quastion, what you really want to k.:owIs, would paragraph (L) of t’exell’s declqration of tnist become Operative upon the college’s failing to repay hla within txo years frm July 21, 1939; that is, wo:,ld there be en lutemtlc forfeiture of the college’s title? For the purpose of this opinion add es sureested by you, wewill aeka sorie esau5ptlnns, one be that the hoard had authority to

-Eonomblr TomC. King, Page I

antar into snd wnsummete the transection In the amnn6r desoribd by you and as if it uera one between natural parPOM. * .-,

* -,.?,ooking ot the transaction a8 awhole, aa weara ooiapellmd to do under the applleable rulea of construction, It apP#n that the eollcgs roraly borrowed #7OC.O0frozn SoreIl. There ia no indication that &well purposed to ecqcire any interest in the property for hl!n8clt, but to the contrary, tha cnntenta of his decleration @f trust support the oonclueion that the transaction was entirely ror the benefit of the college and tttit all ::ewell expected was security for repayment of his @?GO.OO. Withoi:t diecussing the many reasons to support this conclusion, wewill asaune that .?ewell merely intendsd to lend the College t7OO.r

Then, If our ssaumptlon be true, and rurther aa~u01- k that the Eoard had authority to borrow moneyLr?this mnner, the college becasa Indebted **to** C-ewe11in the amount orQ;rco.co.‘rrhether or not this was a “debt” within the purview of, and prohibited by, Section J.9, .4rtlcle 3of the Conatitut Ion of Texas, wewill not pass on as it Is not nrcessary to the deterzinstion of the questlcns subnltted.

Eavinp determined Wet tie intention of the part188 tothis tr+nssction was that the wlle~a become **indet&d** to Sawall, then it is to ba construad as one where the wllepe paid all of the aonslderatlon for t&property, but took title in Sewell’s naiae. Applying the law to this conetructfon of the rectr set out In Sewell’s declaration cf trust, the college bscme the sole beneficiary of a resulting trust, with Sewell holding the property es trustee for the college -- with the entire aquit.bls title being vested in thu college. The Suprjne Court of Poxas announced this nila in MaCoyv. **Crawfci** 9 Tax. 353, and apprwed it in Eix v. kmstmng, 101 ?a 71, 106 8. K. 317. ia rorlo~: ,iga *‘Where one buyr land 

### with the moneyof dn&her and tsku the daed in Sla ownnes~e, a

was eaployed in making the 

### purch5so. Is the equitable owner of the land, end the pirohesar is a aere trustee end holds for thr banerit of himwhopaid the purchase aoney.‘” Sae alao, L2Tel. Jurls. at p. 637. The collegs ia al80 the holder <)tthe entire qp-It-L

.

. Honorable To8 C. K:ing, Pare 5

is:;!sa:;$a to the property In Sewall* hands under the

3nor tNat, 8xecuted by Sara11 aubsequant to the 

## l zscutl&~of the deed from Oat88 to ZWwell. but under an agrmaent~r:hIch weconstrue to h8ve taken place riaultantou8ly w%$hthe execution of the deed. Same11 v. Brook8 (Civ. Ilpp:) 207s. Pi.626, 8rror **reruned.** Althourh ths truust **deed** has not been recorded, **it** i8 good **as** between Sews11 and the oollage. Vernon’s 1925, Articl8 6627. **F.evlsad** Civil Statutes,

As previously stat&, vlewim the transaction as a whole, ft appear.? that In taking tltle to the property, ,Cev~ell’s sole purpose was to secure repayment of his $7cC.CC. Thereiore, the deed to Ser-cl1 was nothing morethan 8Tortgee8 andzaustbe so construed. The Suprene Court has 80 held in numerous cases andstates the rule as folloP?s:

“It zatters uot ?:hat the language used or the form Iparted to the instruaent; If it was intended tr 6ecwe the payment of aoney, it mst be COnstNed as e zortga&e.” Stenper v. Johnson. 3Tex. 1; Gray V. Shelby, 83 TCX.405, 1e s. ‘;. 805. Llke+.ise, the courts i&oldthat an instrrrmant in the form of a deed ebeolute, but executed with a contaaporafiCOWapraelaant thst it is mde merely to secure a debt, Is a mortgape. Calder v. Haasey, 66 Tex. 21S.

Yavlq held that the deed to Srwell, though absolute, Is m4rcly a mortgage, the full eqtiable tttla la in the aollegs. Toget tltl8 out of the wllrge, there would have M .be, eithsr a foreclo#ure by Sewell, or a separate COTv8yanc8~b8 the **COlleR6** to Sane11 based on a newcon8148ratlon. xeller t ‘Xlrby, 79S. E. 82;~Wfrler v. Womick, 30 Tax. 332. The cla& providing for an autbaatic forreiture at the option ti~,%well, upon tha fs5.lura of the college to ask8 thr ~~~?&%cquired

would be Ineftective to Uiyeat the colle!-e n’fthe

, thet Is 

## l

qultable’~tltle. Und8? the aseuaytlons mxde, it Is not necuuxy **to pars**  on the autho.rlty of the Board of Regents or the collgcs to perform the various acts iri connection witA this tranaact1on. Whether the party to the transaction wsre a college or ?n indIvldua1, Its title could net be automatically divested by RprovIsion In a decleratlon of trust and at the option of the aredltor-tnrstra, ae herein pointed out. By this opinim,Eonorablo Ton C. i:iag , Paqe 6

weauka noattmpt to anawer the aumyquestLons 1hich night .erfm out--of a law suit betwean Sawall ~anCthe college, upon It8 ratiaro to pay ae provided in the declaration or trust and uhich.,.doelsratlon was apparently accepted by tha college.

,;har.iors, it is tha opinion cf this Department and you,&o so adrisrd that (1) the ~011~~s got aqcitable title to the property described in your letter and (2) that i. lta title would not be autoaeticalig forfeited by feilure to nake the raymen!.: prcoidad for In Sewell’e declaration of trust.

Jams Gcel XeE Istant