Court Opinion

ID: 4143224
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:31:06.961827+00
Date Added: 2024-06-11T12:59:45.201079
License: Public Domain

Honorable Campbell ILFord
County Attorney
San Saba County
San Saba, Texas
                                      ;iinion Nunber O-3149
                                        : Investment of sinking fund in
                                      obunty warrants payable out of Gen-
Dear Sir:                             eral~Fund at a l$,discount.

        Wfi acknowledge reoeipt of your opinion request of February 7, end
quote frm your letter as followsr

           "The County Treasurer has on hand about $26,000
        in the sinking fund of which there,is about #17,0OC
        surplus over and above the amount that will be need-
        ed to pay prinpipal and interest oneSan Saba County
        road and bridge bonds end wa will have all of 1941
        collections to~take oare of 1942 principal and in-
        terest on these bonds.

           "Ileare desirous to know if we'-   use this sur-
        plus to buy county warrants payable outof the Gen-
        eral Dmd at a 1% or more,diecount. 'These general
        fund warrants will be payable and paid before April
        1942 which would be, of course, before this surplus
        could or would be needed.

           '"Ihave given the Canmissioners' Court and Treas-
        urer a written opinion end brief on all I have been
        able to find on this question. I em inclosing a copy
        as a brief on this particular question and would ap
        preaiate your opinion on this question as soon as
        you find St possible to do so."

        You are respectfully advised at the outset that we believe that
the conclusiolsstated by you in your opinion are correct.

        Sinae the Texas Constitution (Am. 11, Seo. 7) declares that “no
debt for any purpose sha~liever be inourred in any manner by any oity or
county unless provisionis made at the time of,oreating the same, for
levying and colleoting a sufficient tax to pay the interest thereon and
provide at least tvo per cent as asinking~fund," the Camsissionersl
Court is required to levy annual ad valorm taxes sufficient to pay the
                                                                           .

Honorable Campbell E. Ford, Page 2 (O-314$

interest on all oounty bonds and to oreate a sinking fund for their
payment at maturity. (Art. 723, Vernon's Revised Civil Statutes).

        It seems to be a well settled prinaiple of law that the funds
derived fmm a tax levy for the purpose of paying the interest on and
retiring a particular issue of bonds may be used only for that purpose,
and the diversion and use of such funds for a different purpose is un-
authorized end unlawful.

       Article 839 of Vernon's Revised Civil Statutes provides:

             "No oity or county treasurer shall honoe any
       draft upon the interest and sinking fund provided
       for any of the bonds of such oity or oounty, nor pay
       out or divert any of the same, except for the purpose
       of paying the interest on such bonds or for redem-
       ing the same, or for investment in such securities as
       may be provided by law."

        The Cossnissionars'Court, being a court of limited jurisdiotion,
is without any powers except Such as are expressly conferred and have no
authority to invest sinking funds except as provided by the Legislature.
In Vernon's Revised Civil Statutes of Texas we find that there are three
artioles which provide for the investment of sinking funds:

             "Artiale 779. Investment of'einking funds. -- The
       Commissioners' Courts may invest sinking funds aocmulat-
       ed for the redemption end payment of any bonds issued by
       such county, political subdivision or defined district
       thereof, in bonds of the United States, of Texas, or any
       county in this State; or in bonds of the Federal Pam Loan
       Rank System, No such bonds shall be uurohased which. ao-
       oordinartheir    terns. mature at a d&e subsequent & the
       time o?maturity of the bonds for the payment of which
       suah sinking fund was created."

             "Article 636. Investments.
                                      -. -- The legally authorised
       governing body of any county, city or tow, or the trustees
       of any school district or school community, may invest their
       respective sinking funds for the redemption end payment of
       the outstanding bonds of such county. citv or town. or oom-
       munity, in bonds of the Wted   States, war-savings oertifi-
       e,     and oertifioates of indebtedness issued by the
       Seoretary of the Treasury of the United States, and in bonds
       of Texas, or any county of this State, or of any incorporated
       ;5.ztzrt;om.   No such bonds shall be purchased which, aocord-
                ezr terns. mature at a date subsequent to the time
       of-maturity of the-bonds for the payment of which such sink-
       ing fuud was created."
Honorable Campbell K. Ford, Page 3 (O-31@)

              slirtic1e837. Secondary Investments. -- In the
        event a governing body is unable to purchase securities
        of the character mentioned in the preoeding article,
        which mature at a date prior to the time of maturity of
        the bonds for the payment of ehioh such sinking fund was
        created,,then they may invest such flrndsinthe bonds of
        any sohool distriot or school oosmumity authorized to
        issue bonds, under the same restrictions as provided in
        %he preae&g   article.'

        We note that the above quoted statutes specifically name the type
of bonds in which the Commissioners' Court may invest sinking funds, and
wars     are not included.

        Therefore, it is the opinion of this department that a county
cannot invest its sinking fund in any kind of warrants. Said funds may
only be invested in the securities specifically nemed in Articles 779,
636 and 637, Vernon's Revised Civil Statutes of Texas.

        Trusting that this answers your question, we are

                                       Very truly yours

                                   ATTORNEY GENERAL OF TEXAS

                                    By /s/ Claud 0. Boothman

                                             Claud 0. Boothnan
COB-s,egnr                                           Assistant

APPROVED FEB 19, 1941
/s/Gerald C. k%ann
~ATl’ORNEY GENERAL OF TEKAS
                                                 Approved Opinion
                                                 Committee By BW
                                                 Chainsan