THE ATTORNEY GENEKAL OF TEXAS

HonorableRalph Prince Opinion NO. ww-630 Criminal District Attorney Gregg County Re: Longview, Texas Authority of the Gregg County Commlssloners~ Court to lease the Dear Sir: countyhospital.

In your recent letteryou have requested our advice as to whether Gregg Countyhas authority to enter into a certain lease of its countyhospital considering the circumstanceshereinafterquoted fromyour letter:

"GreggCounty owns and operatesa County Hospital under the authority of Article 4478which authorizes counties to provide for the care and treatment of the County's sick

. . .From time to time the hospitalhas been improvedand the facllltles expandedby the Issuance of hospital bonds, the last Issue of $500,000being dated May 15, 1955, authorized at an electionheld within the County on February 12, 1955. "GreggCounty desires to lease Its hospital to a non-profitEpiscopal Church corporation for a period in excess of fiveyears and such lease would provide that the hospital be operated as a non-profit corporation, that it would accept Gregg County charitywhich would be paid for by the Commissioners'Court at a 25% discount of the regular rates; that such lease contractwill be in all things similar to the attached contract of lease between Smith County, Texas, and the East Texas HospitalFoundation."
Article 449&L,Vernon's Texas Civil 'Statutes, provides in part:

"Section1. Any county in this State having a countyhospitalwhich Is operatedby said county, may, and such county Is hereby authorized to lease suchhospital, provided the CommissionersHonorable Ralph Prince,page 2 (~~-630)

Court of said county shall find and determine by an order entered In theminutes of said Court that it is to the best interest of said county to lease suchhospital.

. . .' Gregg County, acting by and through Its Commlssloners'Court, is thereforeauthorizedby statute to lease its county owned and operatedhospital in the manner provided in such statute. In our opinion this statute contravenesneither the Constitution of the State of Texas nor the Federal Constitution.

A county Is by Section 52 of Article III of the Texas Constitutionprohibited from lending its credit or granting publicmoney or thing of value in aid of or to any individual,association or corporationwhatsoever or becoming a stockholderin same. By Section 3 of Article III of our State Constitution,a county is enjoined from becoming a subscriber to the capital of any private sorporationor association or making any appropriationor donation or loaning Its credit to same. Thus, it Is that the Commissioners'Courts may not dispose of countyproperty so as to virtually amount to a donation.Llano Countyv. Knowles, 29 S.W. 549 (Civ.App.1895). Clearly, Article 4494L, Vernon's Texas Civil Statutes,does not violate any of these constitutionalprovisionsby authorizinga county to lease its hospital.

We do not, however,have sufficientfactsbefore us to saywhether the proposed lease contractaccompanying your letter amounts to a virtual donation of the county hospital Inasmuchas such factors as the value of the hospital and Its equipment In relation to the benefits to be derivedby the county by virtue of the lease contractwould have to be considered. The One Dollar ($1) annual rental to be receivedby the county from the lessee according to the lease contract is patently so nominal as to not be controllingon the question of whether a donation is being made by the county. Again the benefit to the county from being relieved of responsibilityof operating thehospital is a considerationwhich we cannot evaluatewithout knowing what that responsibilityhas involved in the past or would entail in the future. Bearing the aforesaid constitutional provisions in mind, the Commissioners'Court can,however, make a proper determinationof the question in light of the facts known to it.

It is apparent from the proposed lease contractHonorable Ralph Prince, page 3 (Ww-630)

that the county does not lend its credit or become a stock-

.. . holder In or subscrlber to tne capital of the lessee and does not enter upon a joint venturewith said lessee since control over the management and operation of the hospital is ceded to the lessee, all debts of the hospital are avoided by the county, and it is held safe from any liabilitywhich might arise from the operation of the hospital. Further, according to the lease contract, the county does not stand to derive any financial gain from the operation of the hospltal.
Insofar as the proposed lease contractprovides that the countywill effect a sale of the hospital to the extent that the laws of the State of Texas permit same at some time in the future, if and when the lessee elects to purchase the hospital, the Commissioners Court would be acting without authority. No statute or constitutionalprovision authorizesGregg County to sell its hospital or to contract to sell its hospital in the future. The Commlsslonerst Court is a court of limited jurisldctionand has only such powers as are conferredupon It by statute and the Constltution by express terms or by necessary implication. Childress County v. State, 127 Tex. 343, 92 S.W. 2d 1011 (1936);V Rosenberg v. Lovett, 173 S.W. 508 (Clv.App.1915, erro*f.); m.W. 289 (Civ.Anp.1925). The power to lease neither expressly nor by Implication confers the power to contract to sell. Statutes, While Article 44$+L:, Vernon's Texas Civil empowersCommissioners'Courts

. . . to lease such countyhospital to be operated as a hospitalby the lessee of same under such terms and conditionsas may be satisfactory to the CommissionersCourt

. . .)l (Section4 of the statute), the discretion thus conferredupon the Commissioners1Courts in setting the terms and conditionsof such leases is obviously limited to leases only and does not confer the power expressly or,by Implication to contract to sellby Incorporating such a provision in a lease agreement.

We assume that the Gregg County Commissioners’ Court in agreeing to '.

. . co-operate fullywith Lessee In its endeavor to maintain and operate saidhospital and assure that thehospital is one of the finest and best equipped in Texas,

. . ."means only to co-operatewith the lessee to the extent allowed by the laws of the State of Texas. No approprlation of public funds to charitable or non-charitableorganizations managed and operated or controlledby private Individuals can be made by a Commissioners'Court. Tex.Const.Art. III, Sec. 50, Sec. 51 and Sec. 52; Tex.Const.Art.VIII, Sec. 3; and Tex.Const.Art. XVI, Sec. 6. Upon the lease of the hospitalHonorable Ralph Prince,page 4 (WW-630)

it will, of course, cease to be a legitimate recipient of county funds.

The proposed lease agreement does not delegate or cede away the governmental function of providing for the care and treatment of the county's charitypatients. Our counties are not limitedby the Texas Constitution or any statute to discharging their obligation to treat the indigent sickby means of owning and operating a countyhospital. Article 4438,Vernon's Texas Civil Statutes, requires counties not operating their own hospitals to send the Indigent sick to publichospitals In the county. That, according to the lease agreement, Is what Gregg County proposes to do. Under the lease agreement the countywill stilldeterminewho is eligible for charity treatment and will send those it deems eligible for such treatment to thehospital. The county does not, however, bind itself to send charity cases to the lessee only. Further the county continues to bear the financialburden of such treatment and may determinewhen the patient is to be discharged. Clearly the county'sburden and duty toward charity patients Is not shiftedby the proposed lease agreement.

According toyour letter, the Gregg County Commissioners'Court if

roposes to lease the hospital for a period in excess of five 5)years. Leasing the hospital for a shorter termwould remove the question of constitutionalitywhich is raised by the fact that outstanding tax bonds Issued to Improve and expand thehospitalwere voted at a time when Article 4494L, Vernon's Texas Civil Statutes, authorized a lease of only five (5)years qr less.

Section 16, Article I of the Texas Constitution,and Section 10 of Article I of the Federal Constitution forbid the enactment of laws impairing the obligations of contracts. In our opinion, Article 4494L,Vernon's Texas Civil Statutes, does not authorize the impairment of contractswithin the meaning of the aforesaid constitutionalprovisions.

In Texas It has been held that a contractualrelatlonship arises between the county and the voters of a bond issue, as well as with the county and the bondholders, and that the "vital conditionsand safeguards surrounding the tax" became a part of the contract. David v. Timon, 183 S.W. 88 (Civ.App. 1916); San Saba County v. McGraw, 130 Tex. 54, 108 S.W. 2d 200 (1937). However, the statuteswhich have been held to be lncorporated into the contractbetween the voters and the county or other taxingunit by a bond electionhave dealt onlywith the tax or bonds, as distinguished from the use to which the. .

Honorable Ralph Prince,page 5 (WW-630)

public improvementmay be put once the tax is establishedand the bond money is expended. Here the money raisedby the bond issuehas been expended for the Improvementand expansion of the hospital. Hence, no question as to the diversion of public moneys arises. Further, neither the tax, nor the bonds, nor the use to which theywill be put, nor the tax liability of the voters of the bonds will be affectedb a lease of the hospital for a period in excess of five (5 7 years. Therefore, the leasing of the hospitalwould not Impair any contractual right conferredon the voters at the bond election.

The contracts intended to be protected from legislative interferenceare those involvingproperty interests. 9 Tex.Jur. 547, Sec. 112. The obligationmust be one of which value can be affirmed. Worsham v. Stevens, 66 Tax. 89, 17 S.W. 404 (1886);Texas & N.O.R. Co. v. Gross, 60 Tex. 621, 128 S.W. 1173 (1910,error ref.). Under the Texas authorities, it cannotbe said that the voters at the bond election acquired a property right In how long the hospital might be leased after the bond money was expended for the purpose announced at the election and in accordancewith the statutes then existing relative to the bonds and the tax.

As to the bondholders, our courts have held that even where a political subdivisionhas bonds outstandingand has been authorizedby statute to convey all or a portion of the property of the district there Is no Impairment of the obligation of contract, so long as a valid means of equal efficacy Is provided for paying its outstandingbonds and debts. El Dorado Independent School District v. Tisdale, 3 S.W. 2d 420 (Comm. App. 1928);Burns v. Dilley County Line Indenendent School District, 295 S.W. 1091 (Comm.App.1927); Aransas Passv. Keeling, 112 Tex. 339, 247 S.W. 818 (1923). The holders of the hospital bonds in questionwill stillhave adequate provision for the retirement of the hospitalbonds and the interest thereon as it accrues although the hospital Is leased for a period in excess of five (5)years. The tax to retire the bonds is in no way affectedby a lease in excess of five (5)years, and, there is thereforeno impairmentof any obligation to the bondholders.

SUMMARY

Based upon the informationfurnished to us, you are advised that the Commissioners' Court of Gregg Countyhas authority toHonorableRalph Prince,page 6 (~~-630)

enter Into the proposed lease contract, subject to the exception that it cannot contract to sell the countyhospital at a later time even though the obligation to sell is made contingentupon the law's then permitting such sale.

Very trulyyours,
WILL WILSON Attorney General of Texas

HGB:mg
APPROVED:
OPINION COMMITTEE

H. Grady Chandler Wallace Flnfrock Jot Hodges, Jr.
REVIEWED FOR THE ATTORNEYGENERAL By: W. V. Geppert