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TEE ATTORNEY GENERAL
OF TEXAS
Gerald C. Mann
Hon. Gaynor Kendall Opinion No. O-705
State Board of Education Aer Collectability of 6% Interest
Austin, Texas on delinquent interest coupons of
municipal bonds belonging to the
Dear Sir: Permanent Free School Fund.
Under date of April 26, 1939, you submit for the opin-
ion of this department the following question;
“The City of Brownsville Texas, is in default on
interest coupons attache h to bonds belonging to the
Permanent Free School Fund. The City Manager chal-
lenges the authority of the State to collect 6% in-
terest on delinquent interest coupons due the school
fund.
“4 previous Attorney General advised that defaulted
coupons owing to the State School Fund bear 6% in-
terest on delinquent interest has been charged and
collected by the State Treasurer on delinquent inter-
est on municipal bonds, Mr. Runyon, City Manager of
the City of Brownsville, has asked that we inquire as
to your opinion in the matter. Will you please ad-
vise whether 6% interest on delinquent interest should
be charged and collected on behalf of the school fund?”
A particular description of the municipal bonds in ques-
tion as to maturities, interest rates, etc., is not embodied in
your letter, nor do we deem such information necessary. Your in-
quiry does not involve the collectability of interest upon the
principal amount of the bonds upon maturity, but rather the col-
lectability of interest upon interest coupons after maturity there-
of.
In answering this question, we shall assume as correct,
information which we have obtained independent of your letter, to
the effect that the interest coupons in question contain no provi-
sions within themselves for the payment of interest ‘at a fixed
rate after the maturity of such coupons. This is the determina-
tive fact rather than the rate of interest which the principal ob-
ligation bears.
Under date of February 9, 1931, Honorable Moore Lynn,
then State Auditor, submitted for the opinion of this Department
the following questiont
. ..
Hon. Gaynor Kendall, page 2 (O-705)
“The permanent school funds of the State are
holding a large amount of bonds of ‘cities, counties,
and districts, In some cases the interest is not
paid when due and in other cases the principal re-
mains unpaid after the due date.
“(1) When an interest coupon is not paid on the
due date, after demand is made, and the coupon con-
tains no stipulation as to interest after maturity
thereof, has the Treasurer a right to demand, and is
it his duty to demand, that the city, county or dis-
trict pay interest on the past due payment after its
maturity and if so, at what rate should the interest
be comput.ed?”
In a well-considered opinion amply supported by author-
ities, Assistant Attorney General Soot4 Gaines ruled as follows:
“Answering your inquiry No. 1, it is the opinion
of the writer that the State Treasurer not only has
the right to demand, but it is his duty to require,
and demand interest to be paid on past due interest
coupons on all municipal securities held and owned by
the permanent fund, after presentation, demand and re-
fusal has been made by any city, county or district
from whom said indebtedness is due, said interest to
be computed at the legal rate of six per centum per
annum from the date of maturity of said interest in-
stallment for which said coupon was given. This
would be the case in the event provision is not made
in the coupon for payment of interest thereon after
maturity thereofen
To the same effect is an opinion by Assistant Attorney
General Whitehurst to Gregory Hatcher of date February 7, 1930,
and an opinion by Assistant Attorney Eeneral Victor Bouldin di-
rected to Judge Simpson, State Auditor, some time during 1935.
The records of this office do not reveal any oplnion holding to
the contrary.
An independent research by this Department upon receipt
of your inquiry convinces us that the three opinions adverted to
announce the correct rule of law upon this subject, and in view
of the full and able discussion .of the statutes and authorities
therein, we do not deem it either advisable or necessary to fur-
ther elaborate thereon in this opinion. It appearing that you
Hon. Gay-nor Kendall, page 3 (O-705)
have copies of these opinions in your files, it will suffice
to refer you thereto for guidance.
Yours very truly
ATTOBNEYGENWAL
OFTEXAS
By /s/ Pat M. Neff, Jr.
Pat M, Neff, Jr., Assistant
APPROVED:
/s/ Gerald C. Mann
ATTORNEYGENERAL OF TEX4S
APPROVED:W&NI~~4"
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