Court Opinion

ID: 4134092
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:45:54.031981+00
Date Added: 2024-06-11T14:07:17.301706
License: Public Domain

February 17, 1970

Mr. R. L. Coffman                   Opinion No. M-575
Administrator
Texas Employment Commission         Re:   Whether the Board
Austin, Texas                             established under the
                                          provisions of Article
                                          4405, V.C.S., may sell
                                          and transfer a judgment
                                          in favor of the Texas
                                          Employment Commission for
                                          less than the full face
Dear Mr. Coffman:                         value of the judgment.
     You have reguested the opinion of this office regarding
the above question. In this connection you have furnished
us with the following facts:
     "Gn November 5, 1953, the Attorney General took
     a judgment for the State of'Texas on behalf of
     the Texas Employment Commission against an
     individual subject to the Texas Unemployment
     Compensation Act in the amount of $5,959.26.
     Execution on this judgment has been periodically
     issued and the judgment has.,beenabstracted and
     re-abstracted, and there is no question but what
     the judgment is valid and subsisting.,atthe present
     time.  The amount owirqonthe   judgment,.including
     all court costs and accrued interest, is $6,079.35.
     "An investigation into the solvency of, the taxpayer
     has been made and there is.no doubt,that he is in-
     solvent and it is doubtful that the judgment, or
     any part of same, can be collected under any exist-
     ing process of law.     .
     "At a meeting of the Board held. in the office of the
     Comptroller on Tuesday, January 13, 1970, the taxpayer
     was present with his attorney. The attorney offered
     to buy the judgment for the taxpayer's brother at 2%

                         -2742-
Mr.   R. L. Coffman, page 2 (M-575)

      on the dollar. The member of the Board
      representing the Comptroller's Department
      could.recall only one instance in which the
      Board had actually sold a judgment of this
      type and such judgment was in fact sold for
      the full amount due and owing at the time.
      Because of this fact the members of the
      Board entertained some doubt as to whether
      they had the authority to sell a judgment for
      less than its full value in view of Article
      III, Section 55, of the Constitution."
     Article III, Section 55, of the Texas Constitution provides,
in part:
      "The Legislature shall have no power to release or
      extinguish, or to authorize the releasing or
      extinguishing, in whole or in par't,the indebtedness,
      liability or obligation of any corporation or
      individual to this State. . .except delinquent taxes
      which have been due for a period of at least ten
      years. "

      Article 4405, Vernon's Civil Statutes, provides:
      "If the principle [sic] and sureties upon any judgment
      held by the state are insolvent, so that under any
      existing process of law said judgment or any part
      thereof cannot be collected, there shall be, and is
      hereby constituted a Board consisting of one (1)
      citizen of the state appointed by the governor with
      the advice and consent of the Senate, who shall serve
      for a term of two (2) years, Comptroller and State
      Treasurer, who are hereby empowered and authorized by
      such advertising as they may deem necessary to offer
      for sale at public outcry, or by private sale, as they
      may deem to the best interest of the state, all the
      right of the state to such judgment; and, if by public
      sale, the amount bid on the same shall not be deemed
      sufficient, they shall refuse to accept the same, and
      dispose of the same in any manner deemed by them to
      the best interest of the state, and upon sale shall
      make a proper assignment of said judgment to the
      purchaser."

                          -2743-
Mr. R. L. Coffman, page 3 W- 575)

     If Article 4405 is construed to empower and authorize
the Board to sell and transfer a judgment in favor of the
State for less than full value, it would necessarily be an
exercise of the power and authority denied to the Legislature
by Article III, Section 55 of the Constitution of Texas
because the sale and transfer of such judgment for less than
full value to a purchaser would 'release or extinguish' the
'indebtedness, liability or obligation' of the judgment
debtor to the State to the extent that the amount owed by the
debtor was not fully satisfied. The exercise of such power
by the Legislature, and the authority to delegate such power
to the Board, would therefore be prohibited by the Constitution,
unless it came within the exception to the prohibition which
is found in the last phrase of Article III, Section 55:
II
 . . .except delinquent taxes which have been due for a period
Of at least ten years."
     The quoted exception has the effect of returning to
the Legislature the power to release or extinguish the liability
of any person or corporation to the State provided such lia-
bility is for 'delinquent taxes which have been due for a
period of at least ten years.' It is interesting to note that
the exception does not refer to 'judgments for delinquent
taxes' but simply to 'delinquent taxes.' This distinction is
important because, as this office stated in Attorney General
Opinion No. O-418 (1939),
     I,
      . . .The State's claim for taxes due and a
     judgment in favor of the State for taxes are
     two different things. As long as it was only
     a cause of action for taxes due, without being
     reduced to judgment, it was subject to any de-
     fense the particular taxpayer might have to
     the payment of those taxes, but when it became
     a judgment it thereby became a different kind
     of debt, which was not subject to those defenses.
     Before judgment it was a cause of action for
     taxes due, but after judgment it was a debt by
     virtue of the judgment, and the elements of
     taxation and tax law were no longer connected
     with it."
     A claim or demand that is litigated and processed to final
judgment is merged into the judgment, creating a new debt or

                         -2744-
.

    Mr. R. L. Coffman, page 4   (M-   575)

    liability distinct from the original claim or demand.
    34 Tex.Jur.2d 484, Judgments, Sec. 443. 50 C.J.S. 20,
    Judgments, Sets. 599,600. 46 Am.Jur.Zd 555, Sec. 390.
    Black, Judgments, Sets. 674,677.
         It is apparent that when the State's claim for delinquent
    taxes was reduced to judgment, the claim ceased to exist in
    its original identity as a tax claim, and became, after
    judgment, a different kind of debt completely free of the
    elements of delinquent taxes. Once transformed in this
    manner, the debt or liability of the judgment debtor ceased
    to be simply a debt for delinquent taxes and became a fixed
    indebtedness and liability, thus removing it completely from
    the exception to Article III , Section 55 of the Texas Consti-
    tution. Consequently, the general prohibition of that con-
    stitutional section applies, and the Legislature does not
    have the power to delegate to the Board the authority to sell
    or assign state judgments for less than full value.
         We hasten to add that we are not holding Article 4405
    unconstitutional. The conclusion reached above was premised
    on the assumption that if the statute was construed to
    authorize the Board to sell State judgments for less than full
    value, it would be in conflict with the prohibition contained
    in Article III, Section 55 of the Texas Constitution. The
    statute, however, is susceptible of a different construction
    which would not conflict with the Constitution, and it is
    settled that in such case the construction that renders the
    statute constitutional will be adopted. 12 Tex.Jur.Zd 389-390,
    Constitutional Law, Sec. 45. The alternate construction of
    Article 4405 to which we refer is this: If the Legislature
    may not constitutionally authorize the Board to sell State
    judgments for less than full value, it must be assumed that
    the Legislature intended to vest in the Board only that power
    which was not denied to it by the Constitution, namely, the
    power to sell State judgments to a purchaser without releasing
    any portion of the liability of the judgment debtor to the
    State. Given this construction, the statute does authorize
    and empower the Board to sell, transfer, and assign State
    judgments to purchasers, provided the consideration for such
    sales, transfers and assignments is not less than the full value
    of the judgments at the time of such sales.

                                -2745-
  . .   ’

Mr . R. L. COffman, page 5 (R-575)

                        SUMXARY
                        -----_-

        The Board established under the provisions of
        Article 4405, V.C.S., may not sell and transfer
        a yudgment in favor of the State for less than
        the full value of the judgment at the time of
        the sale.
                                           7
                                       Verjf truly yours,

Prepared by Stephen W. Ilollahan
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Kerns Taylor. Chairman
w. Ii. Allen, Co-Chairman

Sam Jones
Wardlow Lane
Charles Lind
Jirr Swearingen

XEADE F. GRIFFIN
Staff Legal Assistant

ALFRED WALKER
Executive Assistant

NOLA WBITE
First Assistant

                            -2746-