Honorable Henry Wade Opinion No. M-4
District Attorney
Dallas County Se: Use of bond proceeds.
Dallas, Texas
Dear Mr. Wader
You have requested our opinion concerning the use
of the proceeds of $7,500,000 of bonds issued by Dallas
County Hospital District' under the certain facts submitted
with your opinion request.
The Board of Hospital Managers2 of the District offi-
cially concluded that certain specific improvements to the
District should be made. AII amount for each specified im-
provement was set forth in the Board's minutes and the total
amount for all improvements was $7,500,000. The Board re-
solved that the Dallas County Commissioners' Court3 be
requested to call an election on October 13, 1964, on the
question of issuance of $7,500,000 in bonds "for said Hospital
District improvements". On December 12, 1964, the Commis-
sioners' Court submitted the following proposition, as relevant
herein, to the electorate:
"Shall the Commissioners' court of Dallas
County, Texas, have the power and authority
to issue the bonds of the Dallas County
Hospital District, . . . in the aggregate
principal amount'of $7,500,000, . . . for
the purpose of constructing enlargements
and improvements to the District's hospital
. . .'I.
Hereinafter referred to as "the District".
Hereinafter referred to as "the Board".
3Hereinafter referred to as "the Commissioners' Court".
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Honorable Henry Wade, Page 2 (~-4)
You further state that there is no reference in
the Minutes of the Commissioners' Court to the meeting or
minutes of said meeting of the Board at which the resolu-
tion was made concerning the improvements. A private
group of citizens interested in the approval of these bonds
circulated a brochure setting out proposed purposes and
"estimated costs" similar to those in the Board's resolu-
tion. The voters of the District approved the issuance of
the bonds. Thereafter an official "Notice of Sale" of
~these bonds was published which stated that the bond prc-
ceeds would be used "substantiallyN as specified therein and
set forth purposes and amounts similar to those in the Board"s
resolution. The bonds were subsequently issued, sold and
delivered and the proceeds received by the District.
It now appears that the lowest and best bids for
constructing certain of the specified improvements will
exceed the amounts previously contemplated. You ask:
"In light of the stated fact situation,
may the Dallas County Hospital District
use a greater amount of bond proceeds than
are earmarked for a listed project even
though this may cause a shortage of funds
for the later projects on the list of im-
provements?"
It must first be determined whether there were
valid designations upon which the voters could rely as to
the particular improvements to be made and the amount to be
spent on each. Once valid designations have been made and
relied upon, they cannot be ignored or repudiated without
perpetrating a fraud or its equivalent on the voters.
Black v. Strength, 112 Tex.188, 246 S.W. 79 (1922). All
valid pre-election orders, and not only the voted proposi-
tion, must be considered in determining whether there has
been a valid designation. There must be compliance with
all valid pre-election orders to insure that the electorate
will receive the benefits expected at the time of the elec-
tion. Thaver v. Greer, 229 S.W.Zd 833(Tex.Civ.App. 1950,
error ref. n.r.e.). See also Moore
--. v. Coffman, 109 Tex. 93,
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Honorable Henry Wade, Page 3 (~-4)
200 S.W. 374 (1918) and Fletcher v. ~lv, 53 S.W.Zd 817
(Tex.Civ.App. 1932, error ref.). Where the proceeds of
a bond issue are designated for a particular use or uses
either in an order calling a bond election or in a con-
temporaneous order, then such order or orders must be
treated as a contract between the governing body, the
Commissioners' Court in this instance, and the electorate.
Wriqht v. Allen, 257 S.W. 980 (Tex.Civ.App. 1924, error
ref.). Under the facts submitted, the only order entered
by the Commissioners' Court was the order calling the
election which clearly did not make any designations re-
a, garding the use of the bond proceeds.
The District was created pursuant to the provi-
sions of Article 4494n, V.C.S., which authorizes the Com-
missioners' Court to issue bonds for the purposes set forth
in the proposition which was submitted to the voters. Under
Section 3 of Article 4494n the Commissioners' Court may call
a bond election on its own motion or it shall call an elec-
tion at the request of the Board.
Since there was no specific designation by the
Commissioners' Court regarding the use of the proceeds of
the bonds in question, it must be determined whether the
Commissioners' Court was acting at the request of the Board
in calling the election or in any way adopted or ratified
the Board's resolution in the pre-election proceedings.
Under the submitted facts, the Commissioners' court did not
refer to the Board's resolution to request the Commissioners'
Court to call an election in either the order calling the
election or in the minutes of the meeting at which the
election was called. There is no indication in the fact
statement set forth in your opinion request that the Com-
missioners' Court adopted or ratified the Board's resolu-
tion, either directly or indirectly, prior to the election
which authorized the issuance of the bonds in question.
The proposition which was submitted to the electorate asked
only whether they would approve the issuance of $7,500,000
of bonds "for the purpose of constructing enlargements and
improvements to the District's hospital". The Commissioners'
court did not set forth various projects, or the amount of
money to be expended on each project, at any time prior to
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Honorable Henry Wade, Page 4 (K-4)
the election, although such designation could have been
made had the Commissioners' Court so desired. Further,
the Commissioners' Court did not call the election on the
date mentioned Ln the Board's resolution. In the light
of the fa'cts set forth in your opinion request we must
conclude that the Commissioners' Court was acting on its
own motion in calling the bond election on December 12,
1964. We accordingly hold that the only restriction
placed on the District in the expenditure of the proceeds
from the sale of the bonds in question is that the funds
must be spent on constructing enlargements and improvements
of the District's hospital in compliance with the provisions
of Article 4494n. So long as the funds are so expended, the
voters are not being deprived of any benefits which could
have been expected by them at the time of the election.
See Lewis v. City of Fort Worth, 126 Tex. 458, 89 S.W.Zd 975
(1936) and Garcia v. Duval County, 354 S.W.Zd 237 (Tex.Civ.
App. 1962, error ref. n.r.e.).
Under the facts submitted, the pre-election publi-
city brochure was never adopted or ratified by appropriate
order of the Commissioners' Court, and it is therefore
merely an expression of opinion by those who signed it and
does not constitute a pre-election promisf by the Board or
the Commissioners' Court. Conrad v. Pendleton County, 209
Ky. 509, 273 S.W.57 (1925). Clearly the notice of sale of
the bonds could not have been relied upon by the electorate,
as it was published subsequent to the election authorizing
the issuance of the bonds.
SUMMARY
Under the facts submitted, the only re-
striction placed upon the expenditure of
the proceeds of the bonds in question is
that the funds must be expended on con-
structing enlargements and improvements
of the District's hospital.
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Honorable Henry Wade, Page 5 (n-4)
truly yours,
JWPJr-s
Prepared by JOHN W. FAINTER, JR.
Assistant Attorney General
AFFROvEDr
OPINION COMMITTEE
Hawthorne Phillips, Chairman
W. V. Geppert, Co-chairman
Robert Flowers
Pat Bailey
Ralph Raeh
John Reeves
Staff Legal Assistant
A. J. Carubbi, Jr.
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