A 

Opinion construing and~holding: 

1. That a commissioners court,does not have the authority to 

enter into an agrement either in or out of court to acoept 

refunding bonds bearing a lower rate of interest in lieu 

of bonds held in the Permanent School B&d of the county. 

2. That a commissioners' court-does not hare the authority to 

enter into an agremsnt either in or out of aourt to acaept 

a discount of past due interest aocrued on bonds held in 

the Permanent School Fund of the county. 

July 14, 1939 

Honorable E. A. I'Wxon 

Gounty Attorney 

Crosby county 

Crosbyton, Texas 

Dear Sir1 Opinioa hb. O-909 

Rer 'duthority of a Ccmmissioners' Court 

to enter into an agrement either in or 

out of court'to acaept refunding bonds 

bearing 8. lower rate of interest in lieu 

of bonds held in the permanent school 

fund of the county; and toaccept a discount of past due interest aocrued thereon. 

fle have your letter~of May 30, 1939, requesting our opinion in 

answer to t‘3 following questions8 

1. Can the Commissioners' Court legally enter into an 

agwrment either in or.out of the Federal District 

Court to accept refunding bonds bearing 3% interest 

in lieu of bonds now held? 

2. Can the Cormnissioners' Court legally enter into any 

agreement either in or out of the Federal District 

Court to accept 606 on the dollar for all past due 

coupons, including the ooupons'due January 1, 1939, 

and July 1, 1939) 
A: 

I 

4 f 

Hon. E. A. Watson, Page 2 (O-908) 

The faots underlying your quelstions sre briefly as follonsr 

The permanent school fund of Crosby County owns #15,000.00 City of Booker, Texas, Bonda,~ which were acquired as an investment for such fund pursuant to Section 6, Article VII, of the Constitution, and Article 2824 of 

the Revised Civil Statutes of19261 that the bonds bear interest at the 

rate of 5-l/2 per cent per annlpp: that the interest due on said bonds is 

from four to six years' delinquent, and that $2,OCC.O0 of the principal 

is likewise in default. Further, that suit thereon has been filed in 

Federal Court at Amarillo in an effort to collsct such past due sectities. This action has been taken in behalf of Crosby County and other 

creditors of the City of Booker who also hold matured and unpaid items 

of indebtedness. Further, the valuations of the City of Booker have 

been decreased by more than 5% since the indebtedness vms created. Bow, 

by way of adjustment, the City of Booker is proposing to issue refunding 

bonds bearing intsisst et the rata of S$', and to liquidate the past due 

interest at fifty cents on the dollar. 

The laws of Texas pertaining to the inveshnent of permanent 

school funds impose a trust upon the counties to safeguard these funds, 

snd only permit the use of the earnings thersfram for the operation of the 

sohools; they likeqiess prescribe the type of investments that can be made 

with said funds. 

With respect to lands granted the various counties for aducational purposes, Section 7, Article VI, of the Constitution, provides, in 

part, that: 

"Said lands and the proceeds thsrcof, when sold, 

shall.be held by said counties alone &strust for the 

benefit of the publio schools therein3 said proceeds 

to bs invested in bonds of the kited States, State of 

Texas, or counties in said State, or in such other securities and under such restrictions as may be prescribed by law; and the county shall be responsible for all 

investmentss the interest thereon and other revenue, 

except the principal, shall be available funds." 

Article 2824 of the Revised Civil Statutes of Taxas re-enacts 

the above law, and authorizes the investment of such proaeeds in other 

bonds not theretofore authorized. T,he additional authorization under th$s 

Article included bonds of cities, towns and villages of this State. 

Section 55, Article III, of the Constitution, statesr 

"The Legislature shall have no power to release~or extinguish, or to authoriee the releasing 

or extinguishing, in whole or in prt, the indetiedness, liability or obligation of any incorporation 

or individual, to thie State, or tc any ccunty or 

other municipal corporationtherein.' 
Hon. E. A. Katson, Page S (o-909) 

In our opinion the foregoing la* bears directly upon the 

proposition presented by your questions, and we find adequate authority therefor in the cases. See Delta County vs. Blackburn, 23 S.W. 418; 

Comanche Ccunty vs. Burke, 166 S.W. 4701 Riggins vs. Post, 213 S.W. 600; 

and City Rational Bank vs. Eastland County, 12 S.W. (2d) 662. 

After careful consideration of the decisions in the above 

cited cases, and a study of the language used, we have reached the conclusionthat the Cosssissioners ' Court does not have the authority tc 

enter into any kind of an agreement, either in or out of court, to relinquish or release the obligor from a full performance of his or its part 

of a contract. In support of this conclusionwe quote from the case of 

Bland, et al., vs. Orr, 39 S.E. 558, wherein Chief Justice Gaines, speaking for the Supreme Court, said: 

"It is sometimes to the interest of a creditor 

to compound his claim, and counties are no exception 

to this rule. It would xeem, therefore, that authority to receive, in satisfaction of a debt due a county, 

something other than the full amount of money, ought 

to have been given to some of 'its officers or agcntsJ 

but it is clear, we think, that the Legislature has not 

lodged the powerwith the Cmsmissioners' Courts, whether 

purposely or not xc need not inquire." 

Further -- 

"Re have found nothing in the laws existing at the 

time the present Constitution was adopted which empowered 

the County Court to ccmpound debts due the county, or 

which gave them any control over such debts." 

Wherefore, the twc questions sulmittedmust be answered in the 

negative. 

Yours very truly 

ATTORHW GENERAL OF TEXAS 

By /s/Clarence E. Crowe 

CEC:s:egw Clarence 2. Crowe 

Assistant 

'Xi.6 opinion has been considered in conference, 

approved, and ordered recorded. 

/s/W. F. Moore 

APPROVED W.F. Eoore 

Opinion r%mitc:oe First Assistant Attorney 

By ?f R Ii - Chairman Beneral