, 

EATTQRNEYGIENJ&AL 

OF TEXAS 

AUHTIN. T-s 78711 

March 19, 1973 

Honorable J. W. Edgar 

Commissioner of Education 

Texas Education Agency 

201 E. Eleventh Street 

Austin, Texas 78701 

Dear Dq. Edgar: 

Opinion No. H- 19 

Re: Extent of liability’on bonds 

of Proprietary Schools under 

Section 32,38(a),(b), and (c) 

of the Texas Education Code. 

The Propri&ry School Act, enacted in 1971 (Acts 1971, 62nd Leg. , 

Chapter 620, p. 2006) is found as Chapter 32 of the Education Code. 

Section 32.38(a) requires ,a bond in the amount of $25,, 000. 00 

conditioned upon the payment by the parties thereto ‘@all damages or 

expenses which the State or any governmental subdivision thereof, 

or any person may sustain resulting from a violation of statutory 

provisions or rules or o,egulations adopted pursuant thereto. The 

bond is made payable to the State for the use and benefit of any person 

or governmental subdivision of the State which may suffer expenses 

or damages. “The bond shall be filed with the administrator and 

shall be in such form as shall be approved by the administrator. I’ 

By your letter of January 19, 1973, you ask thcee questions:. 

: ., 

‘!la. Is such a bond limited to refunds due to. students .. 

for prepaid tuition; or 

b. May liabilities such as teachers’ s&larieri rent ” 

for building and equipment, other liabilitiee incident to the 

school be included? ‘I 

“2. Would the total amount of tuition paid by students 

be refundable in closed school situations, or only a pro 

rata portion based on the part of the course completed? ” 

We have beenfurnished with a copy of the bond approved by the 

administrator. It recites that the condition of the obligation assumed 

by its e%ecution is that: 

p. 91 ’ 
Honorable J. W. Edgar, page 2 (H-19). 

“If the PRINCIPAL, its officers, agents and employees, 

shall faithfully discharge all obligations, dutiee and responsibilities contained in Section 32. 33, Section 32. 38, Section 32. 39, Section 32.61 and all other applicable sections of 

House Bill 333, Acts of the 62nd Leg., Chapter 32, Texas 

Education Code, and all amendments thereto, and all applicable rules and regulations of the State Board of Education 

adopted to carry out the provisions of House Bill 333 . . . ‘I 

Section 32. 33 sets out criteria for. determining whether or not 

a school will be certified. Among the criteria are those found in 

Subsection (b) that the school have adequate space, equipment. instructional material and personnel to provide training of good quality; in 

Subsection(i) that the school be financially sound and capable of 

fulfilling its commitment for training; and so on. These are continuing obligations of the school. The administrator may revoke 

a certificate if he has reasonable cause to believe that the school 

is guilty of a violation under Section 32. 36. 

Therefore, as we read the bond in connection with Sections 32. 33 

and 32.38 of the Proprietary School Act, should any person be damaged 

or suffer expense as a result of the failure of the school to meet such 

obligations, he may recover damages and expense under the bond. 

The bond, by the provisions of Section 32. 38 of the Proprietary 

School Act, is for the benefit of “the State, any governmental 6ubdivision thereof or any person who sustains damage or expense. ” 

Liability is not limited to a pro rata share of unused tuition. Students 

of a school which closes may very well incur damages in excess of 

the “unused” portion of the tuition paid, especially if other schools 

will not give credit for the work already done toward a Certificate 

of Completion. 

It is our opinion. therefore. that Section 32.39 of the Act, governing 

refunds under certain circumstances, does not limit recovery by 

students in a “closed” school situation. The extent of damage is a 

fact question. 

p. 92 
I 

I 

Honorable J. W. Edgar, page 3 (H-19:)., 

SUMMARY 

Where a bond issued pursuant to Section 32.38 

of the Proprietary School Act provides that it is 

conditioned upon the faithful discharge of all bbligations, duties and responsibilities, contained 

in various sections of that Act, including the responsibilityto maintain adequate space, equipment, 

instructional material and personnel, and to remain 

financially sound, upon closing of the school for 

financial reasons, the sureties on the bond are 

liable for all damages and expenses incurred by 

students and others resulting therefrom and not 

merely for the refund of “unused” tuition. 

Very truly yours, 

c/ Attorney General of Texas 

DAVID M. KENDALL,, Chairman 

Opinion Committee 

p. 93 

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