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

Texas Technological College Lubbock, Texas Re: Authority ofTexas Technological College topurchase and cancel its Constitutional Tax Dear Sir: Bonds.

With regard to Board ofDirectors 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:

"Theabove bonds, which are payable out of

the five-cent advalorem tax levied by Article VII, Section 17, as amended, of the Texas Constitution, have matured ormature serially in theyears 1959 to 1968,both inclusive. These bonds and the resolution authorizing same do not contain provisions which would give the Board ofDirectors of Texas Technological College the option to call suchbonds prior to their stated maturities. However, there isbeing accumulated in the Interest and Sinking Fund held by the Comptroller of the State ofTexas for the benefit of these bonds, moneys .inexcess of the amount required tomeet the interest and principal payments as such fall due andmature.

"Weare advised that the Board will save considerable money if some of suchbonds outstanding canbe purchased with such funds at prices less than the stated principal amount.

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"It is requested that you advise whether itwill be permissible to employ such funds for the purpose ofpurchasing such bonds prior to their stated maturities. It isnot contemplated that such funds would be used in amanner which would precipitate adefault 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 ofproceedings underlying the issuance of these bonds, including the resolutions by the Board ofDirectors ofTexas Technological College which authorized the issuance of the bonds, and are of the opinion that it ispermissible to employ moneys in the Interest and Sinking Funds for the purpose ofpurchasing, for cancellation, outstanding bonds of the three series described prior to their stated maturities atprices equal to or less than the stated principal amounts.

All bonds of these three issues are on aparity. This is illustrated by Section 6 of theResolution pertaining to issuance of the Series 1959bonds, 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 themoney in theAllocatedFund 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, itbeing the intent of thisResolution 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".

-1313-Mr. R. C. Goodwin, page 3 (C-273)

So that none of the rights of theholders of any of thebonds left outstanding may be prejudiced, thebonds should be purchased in order of their maturities. In thisway all of thebonds of all three issues maturing onJuly 1, 1964, will be retired before any of thebonds maturing in 1965 are retired, and so on.

The moneys in the Interest and Sinking Fund, by the terms of the resolutions authorizing thebonds above described, are pledged ".

. .solely topay the principal of and interest on the Bonds and to defray the expense incident to suchpayments

. . .'I.

An interest and sinking fund isa fund specially earmarked for the extinction ofa debt, and the object of every such fund is to diminish thedebt whose existence warranted its foundation. Clark v. City of Philadelphia, 328 Pa. 521 (1938); 196A. 384, 387, 388. Bank for Savinss v. Grace, 7N.E.162, 168; 102N.Y. 313 (1886).The purchase for cancellation of some of its own outstanding bonds by the Board ofDirectors ofTexas Technological College,prior to their stated maturities, isnothing'morez'than
apartial extinction of adebt and is inkeeping with the stated purpose forwhich themoneys in the Interest and Sinking Fund are pledged.

SUMMARY

The Board ofDirectors of Texas TechnologicalCollege may, under conditions described,
use moneys in the Interest and Sinking Fund for purchase and cancellation of thebonds in question.

**HWM.-S** Very truly yours,
WAGGONER CARR

Assistant Attorney General

-1314-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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