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Honorable Alwin E. Pape Opinion No. W-243 

County Attorney 

Guadalupe County Re : Whether the Commissioners J 

Seguin, Texas Court of Guadalupe County 

can sell government bonds 

belonging to the permanent 

school fund of said county 

at a discount and, rel,ated 

Dear Mr. Pape: questions, 

Your request for an cpinion, dated June 28, 1957, 

propounds the following questions for our consideration: 

“1 . Can the Commissioners’ Court of 

Guadalupe County sei~l certain government bonds 

at a discount and other bonds belonging to the 

Permanent School Furid of Guadalupe County and 

immediately purchase fro:? a bank, as an interrelated transaction, certain bonds of ,the 

Navarro Rural High School District at a .iiscount of a certain amount so t&t the Coucty 

Permanent School F’und will not be Ioh-;:-Ted? 

“2. Does the purchase of rural high 

school bonds by ti;e PO’L;nt<- Fermanerlt School 

F’und~ come within khe pu.?view of Article ‘824, 

TI . ” >*L?o c 311 . 

With respect to lands gran.ted the various counties 

for educational purposes. Smntion 6, Article VII, of the Constitution, provides, fr. part, that: 

“Said lands p and the proceeds thereof, 

when solid, shall be held by said counti,es alone 

as a trust for the benefit of public schools 

therein; said proceeds to be invested in bonds 

of the United States, the 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 counties shall be 

responsible for all investments; the in-terest 

thereon, and other revenue, except the principal 

shall be available fund.” 
-- .i. 

Honorable Alwin E. Pape, page 2 (W-243) 

Article 2824 of the Revised Civil Statutes, authorizes 

the investment of such proceeds in other bonds not theretofore 

authorized. The additional authorization under this Article includes bonds of independent or common school districts. 

The Commissioners' Court holds money belonging to the 

county permanent school fund in trust for public schools, arid 

cannot abuse this discreti.on. 

Tex. 51. 93 S.W. 419 (1906). 

Delta County v. Blackburn, 100 

The authority of the commissioners' court to sell investment securities held by the Permanent 

School Fund of the county at a price eaual to or greater than 

the amount paid for the same has been recognized, Attorney General's Opinion O-5944 (1944). Rowever, it was held by Attorney 

General's Opinion v-1089 (1950) that the Commissioners' Court 

could not cash Government bond school fund investments before 

maturity and reinvest in independent school district bonds having a lower interest rate. We quote from the foregoing opinion 

as follows: 

"Under the facts submitted, the Commissioners' 

Court would sell United States Government bonds belonging to the permanent school fund of the county 

at a discount, thereby diminishing the permanent 

school fund. It is our opinion that such a procedure 

would be in violation of Section 6 of Article'VII of 

the Constitution of Texas. 

"If, on the other hand the government bonds in 

question are sold at not less than par9 the Commissioners' Court would have authority under Article 

28.24 to invest the proceeds in bonds of independent 

school districts," (Emphasis added). 

Attorney General's Opinion O-5944 (1944) recognized 

the right of the Commissioners ' Court +o sell bonds at 85$ of 

par value which were purchased at 629% of par value. But the 

opinion only recognized the authority of the Court to sell 

bonds belonging to the Permanent School Fund "at a price 'equal 

to or greater than the amount paid for the same." 

Since the Constitution makes the Commissioners'Ccrurts 

trustees of the Permanent School Fund of a county for the benefit of public schools, it was held in Delta Countv v. Blackburn, 

m, that the Commissioners 1 Court could not reduce the interest rate on a note from seven percent to three percent. 

The proposed transaction contemplates a sale of government bonds belonging to the Permanent School Fund of Guadalupe County at a discount. It further contemplates, as a 
Honorable Alwln E. Pape, page 3 (W- 243 1 

second step in the over-all transaction the purchase of bonds 

issued by the Navarro Rural High School'District. We do not 

inquire into the ability of the Commissioners' Court to purchase bonds at such a rate of discount as to compensate for the 

loss incurred in the sale of the government bonds. Even though 

the proposed sale and purchase be interrelated from the standpoint of time, or otherwise, we think it clear and fnescapable 

that one of the basic features of the proposal is tie saie of 

government bonds belonging to the Permanent School Fund at a 

discount. This the Commissioners' Court is not authorized to 

do even though by subsequent investments, wisely Rand prudently 

made, it might be able to recoup the loss. 

Your first question is accordingly answered in the 

negative. It is therefore unnecessary that xe answer the second 

question. 

SUMMARY 

The Commissioners9 Court of Guadalupe County 

cannot sell certain government, and other bonds, 

belonging to the Permanent School Fund of said 

county for less than the purchase price thereof, 

and immediately purchase, as an interrelated 

transaction, certain bonds of the Navarro Rural 

High School District at a discount. 

Yours very truly, 

WILL WILSON 

Attorney General of Texas 

LP:pf:wb 

APPROVED: 

OPINION COMMITTEE 

H. Grady Chandler, Chairman 

C. K. Richards 

Elbert Morrow 

Howard Mays 

REVIEWED FOR THE ATTORNEY GENERAL 

BY: Geo. P. Blackburn 

Leonard Passmore 

Assistant