Mr. R. C. Goodwin, President Opinion No. C-213 

Texas Technological College 

Lubbock, Texas Re: Authority of Texas 

Technological College 

to purchase and cancel 

its Constitutional Tax 

Dear Sir: Bonds. 

With regard to Board of Directors of Texas Technological College Constitutional Tax Bonds, Series 1958, 

Series 1958-A, and Series 1959, originally issued in the 

total amount of $1,645,000, you requested an opinion as 

follows: 

"The above bonds, which are payable out of 

the five-cent ad valorem tax levied by 

Article VII, Section 17, as amended, of the 

Texas Constitution, have matured or mature 

serially in the years 1959 to 1968, both 

inclusive. These bonds and the resolution 

authorizing same do not contain provisions 

which would give the Board of Directors of 

Texas Technological College the option to 

call such bonds prior to their stated maturities. However, there is being accumulated in 

the Interest and Sinking Fund held by the 

Comptroller of the State of Texas for the 

benefit of these bonds, moneys .in excess of 

the amount required to meet the interest and 

principal payments as such fall due and mature. 

"We are advised that the Board will save considerable money if some of such bonds outstanding can be purchased with such funds at 

prices less than the stated principal amount. 

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Mr. R. C. Goodwin, page 2 (C-273) 

"It is requested that you advise whether 

it will be permissible to employ such 

funds for the purpose of purchasing such 

bonds prior to their stated maturities. 

It is not contemplated that such funds 

would be used in a manner which would 

precipitate a default in the payment of 

principal of or interest on any of the 

outstanding bonds in accordance with the 

terms thereof". 

We have re-examined the transcripts of proceedings underlying the issuance of these bonds, including 

the resolutions by the Board of Directors of Texas Technological College which authorized the issuance of the 

bonds, and are of the opinion that it is permissible to 

employ moneys in the Interest and Sinking Funds for the 

purpose of purchasing, for cancellation, outstanding 

bonds of the three series described prior to their stated 

maturities at prices equal to or less than the stated 

principal amounts. 

All bonds of these three issues are on a parity. 

This is illustrated by Section 6 of the Resolution pertaining to issuance of the Series 1959 bonds, as follows: 

"6. Bonds of Issue on Parity. That no one 

of said Bonds shall be entitled to priority over any other Bond of this issue in 

the application of the money in the Allocated Fund which has been pledged to the payment of the principal of and interest on 

the Bonds, irrespective of the fact that 

some of the Bonds may be delivered prior 

to the delivery of other Bonds, it being 

the intent of this Resolution that all Bonds 

of this issue shall rank equally. The Bonds 

of this issue shall be in all respects on a 

parity with the Series 1958 Bonds and the 

Series 1958-A Bonds". 

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Mr. R. C. Goodwin, page 3 (C-273) 

So that none of the rights of the holders of 

any of the bonds left outstanding may be prejudiced, 

the bonds should be purchased in order of their maturities. In this way all of the bonds of all three issues 

maturing on July 1, 1964, will be retired before any of 

the bonds maturing in 1965 are retired, and so on. 

The moneys in the Interest and Sinking Fund, by 

the terms of the resolutions authorizing the bonds above 

described, are pledged ". . . solely to pay the principal of and interest on the Bonds and to defray the expense 

incident to such payments . . .'I. 

An interest and sinking fund is a fund specially 

earmarked for the extinction of a debt, and the object of 

every such fund is to diminish the debt whose existence 

warranted its foundation. Clark v. City of Philadelphia, 

328 Pa. 521 (1938); 196 A. 384, 387, 388. Bank for Savinss v. Grace, 7 N.E.162, 168; 102 N.Y. 313 (1886). The 

purchase for cancellation of some of its own outstanding 

bonds by the Board of Directors of Texas Technological College, prior to their stated maturities, is nothing'morez'than 

a partial extinction of a debt and is in keeping with the 

stated purpose for which the moneys in the Interest and 

Sinking Fund are pledged. 

SUMMARY 

The Board of Directors of Texas Technological College may, under conditions described, 

use moneys in the Interest and Sinking Fund 

for purchase and cancellation of the bonds 

in question. 

HWM.-S 

Very truly yours, 

WAGGONER CARR 

Assistant Attorney General 

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Mr. R. C. Goodwin, page 4 (C-273) 

APPROVED: 

OPINION COMMITTEE 

W. V. Geppert, Chairman 

James Strock 

Joe Long 

Charles Swanner 

Malcolm Quick 

APPROVED FOR THE ATTORNEY GENERAL 

By: Stanton Stone 

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