OFFICE OF THE AITORNEY GENERAL OF TEXAS
AUSTIN
‘cnorable Yverrtt R. Cain
bcunty ?ttornry, Chambers County
inehuao, TOXOS
-‘earMr. Csln: oplnlon No. O-7045
Rer -%ea the Chambers-Liberty
Counties Nerlgqaibn Cistrlot
hare the authokitf to finrnoe
end oonatruot 4 belt railroad
imately hwlre milda to X088
a121 ‘trik*aAqrall )&~&or the development bf the lower
eo Son of’,theTrlnltg 3lrtr and a part of Trinity Bay
a&d Gq,loest~ \3 y for navigation purpoaea. It Is also
a neae aar,y/par,tof the iIiatriot*aplan to develop the
tcrfito
\ y’elong the river and on the bayshore ior in-
duetr$al and oomsrolal purposes. The road will rirst
be use&.&marilg to haul sulohur from a new nulphur
mine being developed et Z’oae huff, but it 14 antiolpet4d
that rioe, oattls end patroleum produota in the are4 will
also be transported to oonnaot with the routhorn ?eoillo
Lines at Liberty.
"The Fsdsral ‘:‘or!cs:.genoghas requested the Slstrlot
to 44our4
an opinion from you 4a to the Slstrtot’s legal
authority to finanoe snd oonatruot this belt railroad.
.icopy or the ?ederal :':or&4.igonay9sletter is attachsd.
::on. .verett H. Cain - ?aeo 2
"The Dietriot wsa orgnnlzod under Artlolea 826jh, 8247a
?nd 52476 of Vernon's imnotatod Tex44 %atutea, snd ths
sreatlon or the Xatriot has heretofore born approved by
your Zeoartmont in OOMOOtiOn with the 144UOnO4 of 5100,000
:levlqatlonAid 3ondr early In 1945.
"The iYlstrlotla apooliloally authorized by Qotlon 1
31 .!rtlolo8247s to aoqulro, purohaae, oonetruot and opsrato
1. ..belt railroads...., and everything appurtenant thereto,
together with 411 othsr feoilitler or alda lnoldsnt to or
ua4rul In th4 opsratlon or development of the Dlatrlot’s
torts and waterways or in eld of navigation and oomnero~
thereon....' The Xstriot proposes to Issue revonuo bonds
untisrthat atatuto for the puf~$lfrof fln4nolng the oon-
:truotlon or the belt line.
The aooy oi the Pederal Yorks ;igenoy*sletter, which you statad
'J'Sztceohed to your requoat, was never received by this oiiIo4.
irtlale 82678, Vernon's Annotated Civil Statutes, provldos in
72rt 69 follows:
$9"40 , 1. Any navicatlon dlatrlot heretofor organized
or heraartierto bs organized undar any of the provlslons
of the Constitution or laws of the Ptate of Texas, In
addition to all other powers aonferred by law is hereby
!:lvenauthority and shell hereafter ham powor in ths
nonner heroinafter provided to aoqulro, purchase, oonatruot,
enlarge, ortend, rspolr, maintain, operato or develop whorvca,
dooks, warehouses, grain elevators, bunkering faollltles, be
dlroada, floating plants, and iaollltle.4, lightorlng ieollit 3 4s
and towing faolllti4s, and everything appurtenant thereto, to-
gether with all other taollitles or aide Incident to or uaerul
In the operatloa or development oi the dlatrlot*a ports and
watsrwaya or In aid of navigation and oommros thereon.
Toa. 3. The Eoard of Naviaation and Canal Commissioners
of 9 such nav~tiondl~r~ct Ica hors T from the
sderalxrqenoy Administretion-4
o m .bors or the
Ctetea, or from any clthordepartment or agenoy oi the
'.'nlted
Znlted :?tates.or from any other scuroo, end In evidence thereof
issue the notes, werrants, certifloates z indebtedness or other
forma of obligation or suoh 21strSot rayat)lf,sol+g TT.R
-- out of -the
revenues to bs derfvxiron shad introvenen%a ant rao111cle5
for the nEpos4 -Lof obtamqmds
--. to acculr4.,purchaae. CCjnstruct,
enlarge, extecd, repair, meinGi5iY Gorate 0:i:-dbvelopwharves,
decks, warehounes, grain elevetol:i, bunkorinG faollitlss, belt
r?il;'oads,floatlnq clants and fscl~ltlea', li&terlnq faoiT3Xoa,
205
Uon. herott H. caln - paer 3
towine,faoilitias, and everything SppUrtSASAt thereto,
i,oq.thbrwith 811 other f8OiUti48 or 8id8 IAOidOAt to
or usaiul IA th4 oparatiOA or d4valopmeAt of the dls-
trict'a port8 and watorwayr or in aid of AaligatioA
RAd OOmmb?O. thor.iA.
"Ceo. 4. Zaoh iasu8 of obligntiona authorized
hereunder Shall OOAStItUtO 4 SbpSrCitbaoriee SAd shall
be ap~roprlataly designated. C.‘uoh obligations ohaU not
OOA3tItUt8 .A IAdebt8dn888 or pl8Qe of the oredlt of
suoh dietriot, sh8l.lA4Par be paid in whole or in part
out ot any fund8 rafsad or to be raioad by taxation,
and shall oontain 8 rroital to thet offrot.*
““40. 5. nA)fOblI@3tIOA8 iSSue& h4reuAd4r may be
issued gayable from snd 84our4d bl the pledge of all the
rev4nu48 dsrirrd from the ooeretloA of the lmprotea4nte
cad isoilftIe8 of the distriot, aroluaite of any mvenuo8
dorived from taxation or aaa48amaAta, or may bo payable
from and aaoured by the plodgo of only luoh r4v4nuea se
my be derived from t&4 OporatfoA Oi the imprOvemeAts and
faoilltlea aoquIr4d with the proo44dr of the sale of suoh
OblIqStiOAa, Or mm7 ba payable Sr081SAd 8eOured by the
pledge of a soboifled part of thr relcnuea derived from
the OperatiOA Oi th8 lJQrOt4BI4AtS4Ad faOilfti88 Of th4
dlatrlot, all as my be iworldad in the proowcll~gr
authoriziAg the iSSUSAO4 Of auoh tbll@tiOA8.
vao.17. 'Phi8Plotshall bS OOA8trusd 88 oU&tiatito
authority for the ~OOO!S~lfSblllSAtOf the ~lirpOSS8heroin
m4AtiOAad Snd I8 AOt t0 bS Oonrtrusd t0 :894ai SAP 4ti9Jt-
fng law8 011the 8a1naaubjsot matter, it b4iAg thr purpose
SAd b:bnt hereot to orest4 SA addltimal and 8lt4rA8tO
method for +h4 SOOOIII~118hlSSAtOf 8UOh 9WQO848. 'Phi8
Aot, without rsfsranob to other statute8 of the State of
Tame, ah811 OOAStitUtO full authority ror th4 euthorlm-
tiOA SAd faauaAO@ Of OblIgatIoAa herounder SAd iOr the
aocomplIahmeAt of all thIAgs herein authorized to be doAb,
SAd no QrooesdIAg8 r4latIAg t0 th4 SuthorIzetIoA Or
IsSusAO4 of aueh obligatfOA or the dOIAg of auah thing8
shall b4 A4oeaaary sxoept 8UOh aa are hsrrln required,
sAd AaIthOr the Bond and :'iSrraAt LOW Of 1931 or OAY othsr
provisions or the laws of the Stat0 Of TSXS8 PertiAOAt
to the authorization or 18sua~04 oi obligations, thr
OperatioA end meiAtenaAo4 of ports, 0aASl.aand water wsg,
tb4 granting offraAohIs48 or permits, the right t0 eleOtion8
or r4f4raAdum petitions, or In aAywis8 Impeding Or r4atrIOt-
jog the oarrylaq out of tha sot8 authorized to be done
hereunder or sots done pUrSU4At thereto.***”
:?OA. :yerett H. coin - Taga 4
"4 nota that Art1018 82670 euthorlzea AaVigatfm dlatrlota to
5aoulra , purchase, and oonstruot oortaln taollltlea without tsxa-
tion and to aoouro funds for auoh purpoeo by the lasuanoa of
obllqetlona oi the dlatrlot payable rolsly from th4 ravenuoa to
be derived from th4 improvamanta and faoilitira of auoh dietriot.
"'aal80 note that the Sot do48 AOt sp4oi?ioally authorize the
issusnoe of the bonds. It is well aottlad iA thir "tat. that
countlea, mu~loipal oorporatlona, and pOlftfO@l aubdlviaioA8
03MOt lSSU4 nsgotiablr bond8 urile888uoh power i8 expr6aaly @On-
ierred by law. Mere power to borrow money oarrlea wlth it no
suthorlty to ia8ua negotiabla bond8 therefor. 34 Texas Jurl8-
nrudence 6390 Robertson v. Rreedloro, 61 T8xsa 3161 Laaater v, Lopez,
217 --!.
';'*37h
:!owevar, we do not believe that tho type obllgstlon authorlzgd
here iS a nagotiabla fAatrUQ4At. !74 quota from Jon68 011*Bonds and
?OAd ~4O~ftfOS", vol. 1, ~4OtiOA 289, peg4 302:
nZl~oS the status or muniolpal bands as nogbtiebl4
seouritiaa 1s to bs datermiAad by the provlalona OS the
1:AiiormMegotlable InrrtrumantaLaw, it follows, as of
course, that they must oontain the eoaeAtiela daelgnated
by thet law, OAd sinoe the UAiiOrEIaot 18 but, iA the
seln, a oodifioatlAn of the law QerohaAt, Suoh bond8 must
therefore oontain the aaa4Atlal8 Of 8 A4gOtiSbl8 instrument
as understood at oommon law. This lnoludea en uAooAditional
promlao to pay a sum oertsln in money. If they are made
payable only upon a oontkigenoy whloh may A4var ooour, S
oondltion 18 thereby ln~ootad fAt0 tha prOmi88, making
tha ultimate paymsnt problematloal, thur d4atroyiAg the
uAoonditloAa1 oharaotor of the agreemoAt to pay at all
events, SAd, at the Sam8 time, daatroyiAg the Aagotiability
of ths lnatrumanta. Tuoh a altuatloA is damonqtrated where
the bonds err made payable 8olely out of a apaoial iUAd to be
derived from da8ignSt6d aouroaa~ which louroas may dry up
before they hero yielded th4 prooeadr nooessary to liquidate
their amount in rull. Hero the prepondsranoa of judiolal
thought ha8 arrived at the oonoluaion that auoh aA arranngem4At,
though oreating a probSblllty that the promlsod paymant
will be made in full, still leavea a poealblllty that it may
not be, aAd this poaalblllty 16aV4a the 9rOQiS4 itB4lf UA-
certain and, therefore, not UAaOAditiOnel~ The Aejiotirbflity
of such bonds la not Saved by the faot that they are made
payable to bearer."
207
Hon. 7veratt Ha Cain - Pago 5
IA view of the SOrSgolAg, you are advised that ln our
oolnlon the Chambora-Liberty Countle8 N8vlgatloA Dlatiiot
hss authority under Artlols 82470 to issue obllgtloAo oalled
-ravonuo bond8" for the puxpoao 0s ffA8AOfAg the oonatruatlon
o? a bolt railroad.
'2uatlng this snmwera your ~u4atlona, we art)
Very truly yours,
ATTOFGYOENERAL CF ?EXX3
3T: