Honorable J. O..Ward
County Attorney
HutchinslfnCounty
Borger, exas
Opinion No. O-6006
Re: Authority of Borger Independent
School District to issue part of
bonds already voted before can-
.cellation of grant by Federal
Works Agency.
Dear ~Slr:
Your letterof'september 6, 1945, to this department
reads as;Tollows:-.
"The Borger Independent School District
located in Borger, Hutchinson County, Texas,
due to a rapid increase lnmpulatlon and in
order to provide adequate school facilities,
called a special election for the purpose of
voting a bond issue to provide these facilities.
Through ,negotiatlonwlth.the Federal Works Agency
. a grant.was authorized to the District of
$250,000 provided the DiStriCt would vote bonds
in the amount of $475,000. The bonds were voted,
issued and approved by the Attorney,General.
After.th.lswaa done and before any bonds were
sold, the school district purchased land and em-
ployed architects and had the necessary archl-
tectual and engineering work done. There was ex-
pended approximately $25,OOO.OO for property,
archltectual and engineering work.
,"After VBDay and before any bonds.were
, sold, the Federal Works Agency cancelled the
grant to the School District of $250,000. The
Board of Trustees of the School District has
decided not to proceed with the work of con-
structing the additional facilities at this time
/ ‘-
Honorable J. 0. Ward - page 2 (o-6806)
for the reason that without the$250,000 grant,
the proceeds of the balance of the bonds will
be inadequate; therefore, the additional facil-
ities will not be provided at this time.
."The $25,000 spent for property and archl-
tectual and engineering work cannot be paid out
of the current maintenance funds, and the Board
of Trustees wants to know whether or not they
may legally sell enough of the bonds to pay this
$25,000.
"I will thank you for 'your,opinionas to
whether or not they may legally do this,"
On September26th, we advised you by letter that
neither this department nor that of the Comptroller had any
record of such bonds referred to in your letter.
On September 28th you advised us by letter that you
were misinformed about said bonds having been issued. You
further stated in said letter as follows:
t,. . . Before these bonds could be printed and
submitted to the Attorney General for approval, and
sold, the Federal Works Agency cancelled a grant of
$25.0,000that had been authorized previous to the
calling of the election. When this grant was can-
celled the Board of Trustees realized that the
$4'75,000would be insufficient to~provide the ne-
cessary buildings and equipment to meet the needs
of the district and It will be necessary to call
an election and submit to the votersthe proposl-
tion of voting additional bonds and this will '
necessarily entall~considerable delay.
"What the Board of Trustees want to know Is
this: May they Issue and sell enough of the
$475,000 bond Issue previously voted to pay for
property, engineering and archltectu_alwork al-
ready contracted for, or:will it be necessary to
call another bond election for thenspecific purpose
of ~votingbonds to pay the obligations already con-
tracted.
"For your information, I am advised by the school
,
Honorable J. 0. Ward, page 3 (o-6806)
district that the-Federal Works Agency has agreed
to pay for .one-thirdof the expenses already con-
tracted in connection with purchasing property and
securing the necessary engineering and architect@1
work, plans and spec.iflcations."
Replying to'our request of October 5th; you have fur-
nished us with copies of (1)~Petition for School'Bond,Election;
(~2)Order of the Board of'Trustees, dated June 12, 1945, call-
ing such election for June '22, 1945; and (3) Order of July 20,- _
1945, Declaring Result of'said Bond Election. il.
It appears from said election order that no reference
was made therein concerning a grant from the Federal Works
Agency. It further appears from your communications that said
Federal-Agency grant, authorized to said school district, was
conditioned.thataald dlstrlct'would vote bonds inthe am~ount
of $475,,000,whlch~was done. % We are furnished no facts or I'
information showing that said bondswere voted on condition
'that such Federal grantwould be authorized. owe therefore
assume that no such condition attached to such bonds.~' If we'
are correct in this assumption, we know,of v reasonwhy bonds
of the voted.lsSue cannot now be issued $n total or partial
amounts, from which funds may be realized to provide the facjl-
-ftfPs'-for'whichthey were voted. The foregoing conclusion
is conditioned, of course, on the legality of said~bond issue.
The record of same has not yet been received by,thlsdepart-
ment.
If we are ln.error inassuming that no conditions
were attached .to said bonds, as herelnbefore stated, a different
conclusion would result.
In this.department's opinion Ho. O-2088, approved
-May 1, we held as follow's:
1940,
t,
. . . The authorities seem to hold thatthe
approval by theelectors of the proposed bond issue
with whatever t~erm.8,and conditions that the govern-
ing body imposes thereon previous to,the election,
~creates a status analogous to a contractual,relation.
In construing a similar order passed by a corn- '~
missloners~ court prior to a county-wide bond elec-
tlon; the Supreme Court of Texas In the case of Black
et al v.,Strength et al, 246 S.W. 79;,said:
,
Honorable J. 0. Ward, page 4 (.o-6806)
"'The order would not have been made
save with a view to Its being relied
on by the voters. With the bond issue
authorized by votes cast In rellance.on
the order, as must be assumed, It could
not be arbitrarily ignored or repudiated
without Involving the perpetration of
fraud or its equivalenton the voters.
"'Under these circumstances, the order
was, In effect, a contract with the people,
and good faith required that the contract
be kept.'
"Any other rule would tend to undermine public
confidence in the'acts of public ofricers. See also
Golden .GateBridge and Highway District v. Filmer,
21 Pac. (2d) 112;.Perry-v. Los Angeles, 2O3'Pac. 992. . . .'I
A copy ,ofsaid opinion In full is hereto attached for
your Information.
However, regardless of the fbregolng.conclusions, we
are of the definite opinion that none of said irotedbonds may
n& be Issued and sold for the purpose of paying for property,
engineering and architectual work already contracted for.
Neither can additional bonds be voted fop said purpose. These
conclusions are amply supported by the following authorities:
In the case of Board of Trustees og,Alpine Independent
School District, et al v. Jacob, 170 S.W. 795, (Clv.App., San
Antonio), Appellee Jacob, as assignee of Phelps, sued appellant
for $400 alleged to be due for plans of a schdolhouse prepared
by Phelps at Instance of appellant. Appellant answegdf;;d de-
nied .lts authority to make the contract sued upon.
ther alleged that Phelps knew that the~money to build the
schoolhouse was to be raised from the sale of certain bonds,
and agreed that he would not charge for the plans unless the
bonds were sold and a contractor obtained who would build the
house for $16,000. Appellant further alleged in Its answer
that the bond Issue was Illegal and that no responsible con-
tractor could be found who would build the house for $16,000.
It was proved that the bonds that had been voted were Invalid
and could not be~,sold. The appellant therefore had no funds
from the sale bf bonds with which to pay Phelg&' claim.
The~opinlon refers to Art. 2839 (R.C.S. lgll), which provided
that when such bonds have been voted for, they shall be
,
. .
Honorable J. 0. Ward, page 5 (O-6806)
examined by'the Attorney General and registered by the Camp-~1~
troller of Public Accounts , land,when sold to the highest
bidder, the purchase money~shall be placed in the'county Treasu-
ry to the credit of the school district. .The opinion-then sets
forth the purposes as specified In said article, for which the
money should be used; viz: :"in payment of accounts legally
contracted fin buying, building, equipping, or repairing the
schoolhouse, or .schoolhousesfor such'dlstrlct, or in the pur-
chase of sites therefor.". Then follows this important state-
ment in said~opinion:
~"33 is clearly contemplated~in the law cited'
that the contracts shall be made after the~bonds ~~:
.shall have been issued and sold, and that.the money
arislng.~.fromsuch~sale shall be disbursed only tb
satisfy and meetsuch contracts." (Emphasis ours)
After providlng'that such bonds shall be.examlned
by the Attorney General, and~if~approved registered by the Comp-
troller; our present %tatute,,Artlcle 271!36,~~.c.~s;
1925;as
amended, provides:
"All bondsshall bk'sold to the highest '
bidder for~not less than their par value'~and .i':~: .':
accrued interest, and the proceeds of such sale
shall be deposited in the County .deposltoryfor
the-common school districts, and in the district
~deposltoryfor the independent school districts, :.
to the creditof such districts; and shall be dis-
bursed only ,for the purpose for which said bonds
were issued, q . .'I
The purposes for~which said ,bondscan-be issued are
"for the purchase, constructio'n,repair or equipment .of'publlc
free school building? within
_ .. the llmlts~of'such
^ . districts_(com-
mon and .inde@ndent) and tne purcnase of tne necessary sites
therefor." Art..2384e, Vernon's Annotated Civil Statutes.
(Parenthetical insertion ours)
The Alpine~School D strict case herelnabove.dis-
ixpense of plans and speclfl-
cussed further held that .the~
cations are necessary in building a schoolhouse, and,could
be paid for out of money arising from the sale of school-
house bonds. Such bond money,~.however,would have to be
the hands of the trustees at the time the plans and specl
cations were contracted for.
, I
Honorable J. O.-Ward, page 6 (o-6806)
The case of Bone v. Black, et al, 174 S.W. 971 (Civ.
APP., Amarillo), held that a school board..cannotcontract for
a building afterthe bonds therefor are Issued but prior to their
a, citing the Alpine Independent School District case, supra.
The following quotation from the Bone v. Black case Is very en-
lightening:
"Article 2842 (R.C.S.1911, the corresponding
article now'being 2787, R.C.S.1925) indicates that
until~the bonds are sold the taxes levied to pay
them may be discontinued by vote. Ifsbefore they are
sold the tax should be discontinued, the bond will be
valueless., Hence a contract before they are sold
does not bind the fund. There Is no power insthe trus-
tees to glve'bonds for the building. They must be sold,
and the money placed In the treasury, and drawn out
upon the proper order. The trustees have no power
or authority over these bonds until they are sold. No
discretion is vested in them when they shall contract.
It must be done when the money is in the.traasury for
that purpose, or Is available; otherwise, they can
create no obligation againstthe district. We think
It Is a general rule 'that such contract can be
entered Into, only to the extent of funds provided
and available for that purpose,' by trustees."
(Parenthetical Insertion ours)
The case of Harllngen Independent School Distrlct~v.
Page & Bra., 48 S.W; (2d) 983, was rendered by the Commission
Of Appeals of Texas, Section A, in 1932.~ .After referring to the
pertinent statutes of the 1925 codification, with then existing
amendments, Judge Crltz discussed with approval the cases of
Alpine School District and Bone v. Black, above referred to,
and quoted'at some length from the latter case. We now quote
from the concluding portion of.Judge Critz's opinion:
"All of the statutes which confer power
to expend ,bond funds limit the power to funds
that %re available, and from all of the sta-
tutes and constitutional provisions above men-
tioned, we are compelled-to the conclusion that
it was not the intention of the'Leglsl%ture to
permit the board (of school trustees) to con-
tr~actwith reference to such funds unless and
until.they'are actually available, . . ." (Under-
scoring and parenthetical insertion ours)
,, _..
Honor'ablk'J.0. Ward, page 7 (0-6806)
In the rather recent case of City of Big Spring v.
Ward, 169 S.W. (2d) 151, by the Commission of Appeals of Texas,
Section A, adopted by the Supreme Court on March 3, 1943, Judge
Brewster cited and quoted from the Harlingen Independent School
District case hereinabove referred to. The Big Spring case ln-
volved a city Instead of a school district; nevertheless, the
same principle of law applied concerning contracts to expend
bond money before such money became available. In said case
Judge Brewster held:
"In the case at bar the city had no power to
make the contract (for constructing proposed im-
provements) when it attempted to do so, because it
then had no money on hand with which to construct
the contemplated improvements and none available for
that purpose." (Parenthetical insertion ours)
Section 53 of Article 3 of our State Constitution pro-
vides:
"The Legislature shall have no power to grant,
or to authorize any county or municipal authority
to grant, . ; . ; nor pay, nor authorize the pay-
ment of, any claim created against any county or
municipality of the State, under any agreement or
contracts, made without authority of law."
Independent school districts