Court Opinion

ID: 4135187
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:59:20.786395+00
Date Added: 2024-06-11T09:36:33.167987
License: Public Domain

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 Tech-
nological 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 maturi-
        ties. 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 ma-
        ture.

        "We are advised that the Board will save con-
        siderable money if some of such bonds out-
        standing can be purchased with such funds at
        prices less than the stated principal amount.

                            -1312-
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 proceed-
ings underlying the issuance of these bonds, including
the resolutions by the Board of Directors of Texas Tech-
nological 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 per-
taining 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 prior-
        ity over any other Bond of this issue in
        the application of the money in the Alloca-
        ted Fund which has been pledged to the pay-
        ment 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".

                           -1313-
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 maturi-
ties. 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 princi-
pal 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 Sav-
inss 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 Col-
lege, 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 Technologi-
         cal College may, under conditions described,
         use moneys in the Interest and Sinking Fund
         for purchase and cancellation of the bonds
         in question.

                                      Very truly yours,

                                      WAGGONER CARR

HWM.-S                                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

                           -1315-