Court Opinion

ID: 4125053
Source: CourtListenerOpinion
Date Created: 2017-02-10 02:12:49.255081+00
Date Added: 2024-06-11T14:37:35.619416
License: Public Domain

KEN PAXTON
                                       ATTORNEY GENERAL OF TEXAS

                                               March 31, 2015

The Honorable Marco A. Montemayor                          Opinion No. KP-0011
Webb County Attorney
1110 Washington Street, Suite 301                          Re: Whether a public school district may
Laredo, Texas 78040                                        expend funds for the management of county
                                                           school lands to determine if a lessee of a
                                                           mineral estate is fulfilling its duty to explore
                                                           and develop the mineral estate (RQ-1225-GA)

Dear Mr. Montemayor:

         You originally requested an opinion concerning whether a public school district may
expend funds to "determine if the lessee of the mineral estate [on county school lands] is carrying
out its duty to explore and develop said mineral estate." 1 In a supplemental request, you also asked
whether a county may sell the county school lands to the school districts of the county for a nominal
fee without complying with notice and bidding requirements of the Local Government Code. 2

        Your requests concern the public school lands granted to Webb County for the benefit of
education in the county. Beginning in 1838, the Republic of Texas granted land to each county to
fund the establishment of public schools. See TEX. CONST. art. VII, § 6, interp. commentary.
While most counties in Texas have sold their county school lands and invested the proceeds in
authorized securities, Webb County continues to own county school lands and has leased the
mineral rights on those lands. See 36 David B. Brooks, Tex. Practice Series: Cnty. & Special Dist.
Law§ 30.2 (2d ed. 2002); Request Letter at 1; see also Ehlinger v. Clark, 8 S.W.2d 666, 670 (Tex.
1928) (acknowledging a commissioners court's authority to sell the mineral estate on county
school lands). You further explain that production and revenue from the lease has been minimal,
while the surrounding lands have "seen unprecedented production." Request Letter at 1. You
therefore question whether Webb County school districts may allocate funds "to obtain data
through a royalty audit, the hiring of a private gauger, and a helicopter survey to determine if the
lessee is exploring the mineral estate" as it should. Id. at 1-2.

        1
          Letter from Honorable Marco A. Montemayor, Webb Cnty. Att'y, to Honorable Greg Abbott, Tex. Att'y
Gen. at I (Oct. I, 2014), https://www.texasattomeygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").

        2
          Letter from Honorable Marco A. Montemayor, Webb Cnty. Att'y, to Honorable Greg Abbott, Tex. Att'y
Gen. at I (Jan. 13, 2015), https://www.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Supp. Request
Letter").
The Honorable Marco A. Montemayor - Page 2            (KP-0011)

       Article VII, section 6 of the Texas Constitution governs the ownership, management, and
disposition of county school lands, providing that:

               All lands heretofore, or hereafter granted to the several counties of
               this State for educational purposes, are of right the property of said
               counties respectively .... Each county may sell or dispose of its
               lands in whole or in part, in manner to be provided by the
               Commissioners Court of the county. Said lands, and the proceeds
               thereof, when sold, shall be held by said counties alone as a trust for
               the benefit of public schools therein; ... and the counties shall be
               responsible for all investments; the interest thereon, and other
               revenue, except the principal shall be available fund.

TEX. CONST. art. VII, § 6. The constitutional provision creates an "express trust" in which the
commissioners court acts as trustee of the county school lands for the benefit of the public schools
in the county. Comanche Cnty. v. Burks, 166 S.W. 470, 473 (Tex. Civ. App.-Fort Worth 1914,
writ ref'd); see also TEX. EDUC. CODE ANN. § 45.113(b) (West 2012) (making members of the
county commissioners court the "sole trustees" of the trust). As trustee, the commissioners court
has "the constitutional and statutory duty" of ensuring that contracts entered into related to county
school lands are carried out by the contracting parties. See Ehlinger, 8 S.W.2d at 674.

        Construing article VII, section 6, the Texas Supreme Court has held that a county
commissioners court may not delegate its authority and responsibility over county school lands.
See, e.g., Williams v. Pure Oil Co., 78 S.W.2d 929, 931 (Tex. 1935); Logan v. Stephens Cnty., 83
S.W. 365, 368 (Tex. 1904). With regard to school districts specifically, this office has advised that
"a county may not delegate its article VII, section 6 responsibilities to the school districts in the
county." Tex. Att'y Gen. Op. Nos. GA-0616 (2008) at 3, JC-0399 (2001) at 5.

       Furthermore, court decisions and opinions from this office have concluded that the county
must incur the expenses associated with exercising authority under article VII, section 6. In
addressing expenses incurred in selling county school lands, the Texas Supreme Court has
explained that "it was intended that such expenses should be paid by the county from its general
fund." Dallas Cnty. v. Club Land & Cattle Co., 66 S.W. 294, 297 (Tex. 1902) (prohibiting a
county from conveying a portion of county school land as consideration for surveying it). The
Court then explained its rationale:

               [I]t may be urged that, since the county is made a mere trustee, it is
               unreasonable to suppose that it was intended to charge it in its
               individual capacity with the expense of administering the trust fund.
               The answer is that while, in legal contemplation, the county is but a
               trustee, and the school fund the beneficiary, the county has an
               important interest in the maintenance of public schools within its
               limits; and that it is not unreasonable ... to make the expense of
               administering a fund set apart for the support of public schools in
               the county a charge upon its general revenue.
The Honorable Marco A. Montemayor - Page 3               (KP-0011)

Id. A more recent opinion from this office, relying on Dallas County, likewise concluded that "a
county must bear its expenses to administer the constitutional trust under article VII, section 6."
Tex. Att'y Gen. Op. No. GA-0616 (2008) at 4 (concluding that a county and school districts in the
county may not jointly develop or sell rights to natural resources and minerals in county school
land). Although we find no authority specifically addressing the county's ability to recoup
expenses associated with the investigation of a mineral lessee's exploration and development on
county school lands, these authorities suggest that a court would likely conclude that the county,
not the school districts within the county, should pay out of county funds any expenses incurred in
fulfilling its constitutional duties as trustee of county school lands.

         With regard to your first question, you ask whether a school district may allocate funds for
these purposes under Education Code section 45 .105. Request Letter at 1. Section 45 .105
authorizes local school funds to be used, among other reasons, for "purposes necessary in the
conduct of the public schools determined by the board of trustees." TEX. EDUC. CODE ANN.
§ 45.105(c) (West 2012). While this provision gives a board broad discretion to use local school
funds, "school funds cannot be expended . . . unless the trustees first determine that such an
expenditure is 'necessary."' City of Garland v. Garland Indep. Sch. Dist., 468 S.W.2d 110, 111-
12 (Tex. Civ. App.-Dallas 1971, writ ref d n.r.e.) (interpreting prior version of section 45.105).
It will be up to the board of trustees to determine, in the first instance and subject to judicial review,
whether an expenditure to investigate mineral production on county school lands is necessary.
Because a county must bear its expenses to administer the constitutional trust under article VII,
section 6, however, a court could have reason to conclude that a school district's allocation for
such purposes is not necessary and therefore not authorized under section 45.105. This opinion
does not address the issue of whether a school district may expend funds to ensure that the trustee
is carrying out its fiduciary obligations to the school district or whether the school district could
recover any costs to enforce these rights as a beneficiary against the trustee.

        Your supplemental request asks whether Webb County may sell the Webb County School
Lands to the school districts of Webb County for a nominal fee. Supp. Request Letter at 1. While
article VII, section 6 expressly authorizes a commissioners court to sell county school lands, the
county "alone" must hold the proceeds of the sale "as a trust for the benefit of public schools
therein; ... and the counties shall be responsible for all investments; the interest thereon, and other
revenue, except the principal shall be available fund." TEX. CONST. art. VII,§ 6. Numerous court
opinions and opinions of this office emphasize the fiduciary nature of a county's duty with regard
to county school lands and the county school land fund. See, e.g., Delta Cnty. v. Blackburn, 93
S.W. 419, 422 (Tex. 1906) (concluding that counties are trustees for the benefit of the state's public
schools), Cnty. Sch. Trs. v. Brazoria Cnty., 240 S.W. 675, 676 (Tex. Civ. App.-Galveston 1922,
no writ); see also Tex. Att'y Gen. Op. Nos. JC-0004 (1999) at 2-3 (holding the county, as trustee
of county school lands, to the prudent investor standard), H-506 (1975) at 2 (explaining that the
commissioners court acts in a fiduciary capacity as trustee of the county permanent school fund).

        A county acting as trustee of the county school lands is "held to the same rules of law that
are applicable to other trustees." Comanche Cnty., 166 S.W. at 474. Selling the county school
lands for a nominal fee would be inconsistent with the trustees' duty to manage the property "as a
prudent investor would." TEX. PROP. CODE ANN.§ 117.004(a) (West 2014) (describing the general
The Honorable Marco A. Montemayor - Page 4             (KP-0011)

standard of care under the Texas Trust Code); see Tex. Att'y Gen. Op. No. JC-0004 (1999) at 3
(concluding that certain investments were not consistent with the county's fiduciary duty with
regard to the county permanent school fund). The fact that the county desires to sell the county
school lands to the school districts, the beneficiaries of the trust, does not alter this analysis. As
discussed above, members of the commissioners court are the "sole trustees" of the trust
established for the permanent school fund, and they may not delegate their authority and
responsibility to the county's school districts. TEX. Eouc. CODE ANN. § 45.l 13(b) (West 2012).
Selling county school lands to the school districts for a nominal fee would, in essence, delegate
the commissioners' responsibility as trustees, violating long-established case law to the contrary.
Thus, Webb County may not sell the county school lands to the school districts within Webb
County for a nominal fee.
The Honorable Marco A. Montemayor - Page 5           (KP-0011)

                                     SUMMARY

                      The Texas Supreme Court has concluded that article VII,
              section 6 of the Texas Constitution requires the county to pay out of
              its own funds any expenses incurred in fulfilling the county's
              constitutional duties as trustee of county school lands. Thus, a court
              could have reason to conclude that a school district's allocation of
              funds to determine if a lessee is exploring and developing the
              mineral estate on county school lands is not necessary and therefore
              not authorized under section 45.105 of the Education Code.

                     A county commissioners court acts as sole trustee of the
              county school lands for the benefit of the public schools in the
              county. The commissioners court may not delegate its trustee
              responsibilities to the school districts in the county. Selling county
              school lands for a nominal fee to the county school districts would
              be inconsistent with the trustees' duty to manage the property as a
              prudent investor would.

                                             Very truly yours,

                                              IL 'f/CA/)<[hiAJ
                                             KEN PAXTON
                                             Attorney General of Texas

CHARLES E. ROY
First Assistant Attorney General

BRANTLEY STARR
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee
Assistant Attorney General, Opinion Committee