OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
Honarablr Toa 0. King
Stat8 Auditor
Eltstr Capitol
Austin, Psxer
use fn deolaration of
the faots:
hs aurrrnt annual audit
Or tha BOO the State Teaohers'
9, F. C. Oatra oonrayrd mm
(a naabar of thhr Collegr'r
n rreular form, pmp6rlf do-
wrcord~d,,whiah reeltad 'for
ration of thr mm at firma Eiundrsd
OO), to UD in hand paid by s. ?$I.
r other good, ~elrublo and autfi-
aration . . . *
.non July 2A, 1939, 8. hi. sowell rxreutad an
:netruasnt vvhldb referred to the lb o vodoe&, snd
continued:
honorable Ton C. King, rage 2
' tw1~8e matter of ract #7OO.‘@Gof the aon-
s&&tlcc for eeld ~onveykt~e was raid In cash
by -@.!id S. Y. cewell, and the rereslnder of the
oo@eratlon sas paid In pareonel property by
+,J *?:, . . College, . . .
“’ Aow, I, s. Lf. Sewell, . . ., grantee in
the deed above referred to, do now hereby atate
and declaie that .I hold said property in trust
for the use and beoetit of sald College, end
that of the consideration for said property, I
psid the mm of $?OO.CG in Cash, md reld Col-
lege the reaalndsr snd said property was convey-
ed to .xe wl th the follow-iog agreement and under-
stsndlng betoeen me end said College:
-I(l) If and Hhen, et any time rlthln 2
ywrs from date heraof, said College paps to oae
the ma of f700.00 In cash, together rlth inter-
eat thereon froze tkzis date until paid at the
rate or 65 per annum, then I ~411 imedfataly,
at the request oi the proper offickle of said
College, or of the Board of Clrectors of the
State Teachers* Colleges of Texas, convey said
property, together with the improrexents there-
on, to the St, te of Texns, for the ase end bene-
fit Of mid college, or t0 eny other @en&se
in;!lcsted, such con-‘eyanoe to be ID the ram
ot a special warranty deed, and ny wife, it llv-
he, ~111 join me In the execution thereof’, lr
requested by the parties above aenticned.
tr’,>
"'(4) xi a t th eld or 2 yesra fraa date
hark said College h8e f&led to redeem said
prc&hrty by paying me the mm of $700.00 and in-
t@Pt@., as above mpeclfled, then, et my optlon,
lt’lil to torielt all right or Interest in &aid
property, together with the lmproraments than
situated thereon, and the full and absolute
title will then vest in xc. *
9%~ instrument is slgnad by S. X. Serell
only, and Is not acknowladged or recorded.
.
Honorsb 1
‘The Collepe,
: .^Ye. by its presldant, sIPned tLla
nq\t&ion at the foot of the irmtrument:
i.~“The tarma end provisions of the above and
fo;;ssolw trust agreanent are accepted. *
qE “‘The perecml property rererred to as the
psrt of the consideration paid by the College
cocsisted of a house on College propert. , which
was then tom down end moved away. This house
was valued on the books of the College at $1,500,
and s house 8ppraisc.d at the sane value was, and
still is, located on the new pror,erty, the su>-
ject of the instrtments above referred to. The
books of the CollePe reflect thnt the trensac-
tion F~GE regtirded as an exchanrZe of the one house
to he rmoved for the other to reamin atending.
“Yor;:- opinion on the follow-Ins, questions
is respectfully requested :
“(1) As or AuGust 31, 1939, whet \ces the
nsture of the interest of the college In this
p;o;erty?
“(2) Fh;hRtwould be the effect of a falli:re
on the pert of the college to snake any paymert
to s. v. f-ewe11 within two years f’rcw July 2L,
19397
“For the purposes cf this inquiry you msy
assum such racts, not detailed, as are necea-
sary, I have related herein the substance of all
the $nronaation I have. It will be helpful, hov-
eveyi: ir you will state the assuaptf;~ns you make. v
,-‘$a ~111 not go into the Question of the authorlt
of the P&rd (;f Ee@ente to enter Into such a transac +
es outliged Ian your letter, inasmuch ae you did not apacif-
ically ask thnt question, end as It Is not re2ulred in,
order to ansver your questions. AB we understan& your
second quastion, what you really want to k.:ow Is, would
paragraph (L) of t’exell’s declqration of tnist become Op-
erative upon the college’s failing to repay hla within txo
years frm July 21, 1939; that is, wo:,ld there be en lute-
mtlc forfeiture of the college’s title? For the purpose
of this opinion add es sureested by you, we will aeka sorie
esau5ptlnns, -one be that the hoard had authority to
Eonomblr Tom C. King, Page I
antar into snd wnsummete the transection In the amnn6r
desoribd by you and as if it uera one between natural par-
POM. * .-,
*
-,.?,ooking ot the transaction a8 a whole, aa we ara
ooiapellmd to do under the applleable rulea of construction,
It apP#n that the eollcgs roraly borrowed #7OC.O0 frozn
Sore Il. There ia no indication that &well purposed to ec-
qcire any interest in the property for hl!n8clt, but to the
contrary, tha cnntenta of his decleration @f trust support
the oonclueion that the transaction was entirely ror the
benefit of the college and tttit all ::ewell expected was se-
curity for repayment of his @?GO.OO. Withoi:t diecussing
the many reasons to support this conclusion, we will asaune
that .?ewell merely intendsd to lend the College t7OO.r
Then, If our ssaumptlon be true, and rurther aa~u01-
k that the Eoard had authority to borrow money Lr? this
mnner, the college becasa Indebted to C-ewe11 in the amount
or Q;rco.co. ‘rrhether or not this was a “debt” within the
purview of, and prohibited by, Section J.9, .4rtlcle 3 of the
Conatitut Ion of Texas, we will not pass on as it Is not nrc-
essary to the deterzinstion of the questlcns subnltted.
Eavinp determined Wet t ie intention of the part188
to this tr+nssction was that the wlle~a become indet&d to
Sawall, then it is to ba construad as one where the wllepe
paid all of the aonslderatlon for t& property, but took
title in Sewell’s naiae. Applying the law to this conetruc-
tfon of the rectr set out In Sewell’s declaration cf trust,
the college bscme the sole beneficiary of a resulting trust,
with Sewell holding the property es trustee for the college --
with the entire aquit.bls title being vested in thu college.
The Suprjne Court of Poxas announced this nila in MaCoy v.
Crawfci 9 Tax. 353, and apprwed it in Eix v. kmstmng,
101 ?a 71, 106 8. K. 317. ia rorlo~:
,ig a *‘Where one buyr land with the money of
dn&her and tsku the daed in Sla own nes~e, a
was eaployed in making the purch5so.
Is the equitable owner of the land, end the pir-
ohesar is a aere trustee end holds for thr bane-
rit of him who paid the purchase aoney.‘” Sae
alao, L2 Tel. Jurls. at p. 637.
The collegs ia al80 the holder <)t the entire qp-It-
L .
Honorable To8 C. K:ing, Pare 5
is:;!sa:;$ a to the property In Sewall* hands under the
3n or tNat, 8xecuted by Sara11 aubsequant to the
lzscutl&~of the deed from Oat88 to ZWwell. but under an
. agrmaent~r:hIch we construe to h8ve taken place riaultan-
tou8ly w%$h the execution of the deed. Same11 v. Brook8
(Civ. Ilpp:) 207 s. Pi. 626, 8rror reruned. Althourh ths
truust deed has not been recorded, it i8 good as between
Sews11 and the oollage. Vernon’s F.evlsad Civil Statutes,
1925, Articl8 6627.
As previously stat&, vlewim the transaction as
a whole, ft appear.? that In taking tl tle to the property,
,Cev~ell’s sole purpose was to secure repayment of his $7cC.CC.
Thereiore, the deed to Ser-cl1 was nothing more than 8 Tort-
gee8 and zaust be so construed. The Suprene Court has 80
held in numerous cases and states the rule as folloP?s:
“It zatters uo t ?:hat the language used or
the form Iparted to the instruaent; If it was
intended tr 6ecwe the payment of aoney, it
mst be COnstNed as e zortga&e.” Stenper v.
Johnson. 3 Tex. 1; Gray V. Shelby, 83 TCX. 405,
1e s. ‘;. 805.
Llke+.ise, the courts i&old that an instrrrmant in
the form of a deed ebeolute, but executed with a contaaporafi-
COW apraelaant thst it is mde merely to secure a debt, Is
a mortgape. Calder v. Haasey, 66 Tex. 21S.
Yavlq held that the deed to Srwell, though absol-
ute, Is m4rcly a mortgage, the full eqtiable tttla la in
the aollegs. To get tltl8 out of the wllrge, there would
have M .be, eithsr a foreclo#ure by Sewell, or a separate COT-
v8yanc8~ b8 the COlleR6 to Sane11 based on a new con8148ratlon.
xeller t ‘Xlrby, 79 S. E. 82;~Wfrler v. Womick, 30 Tax. 332.
The cla& providing for an autbaatic forreiture at the op-
tion ti~,%well, upon tha fs5.lura of the college to ask8 thr
would be Ineftective to Uiyeat the colle!-e n’f the
~~~?&%cquired , thet Is l qultable’~tltle.
Und8? the aseuaytlons mxde, it Is not necuuxy to
pars on the autho.rlty of the Board of Regents or the collgcs
to perform the various acts iri connection witA this tranaac-
t1on. Whether the party to the transaction wsre a college or
?n indIvldua1, Its title could net be automatically divested
by R provIsion In a decleratlon of trust and at the option of
the aredltor-tnrstra, ae herein pointed out. By this opinim,
Eonorablo Ton C. i:iag , Paqe 6
we auka no attmpt to anawer the aumy questLons 1 hich night
.erfm out--of a law suit betwean Sawall ~anCthe college, upon
It8 ratiaro to pay ae provided in the declaration or trust
and uhich.,.doelsratlon was apparently accepted by tha college.
,;har.iors, it is tha opinion cf this Department
and you ,&o so adrisrd that (1) the ~011~~s got aqcitable
title to the property described in your letter and (2) that
i. lta title would not be autoaeticalig forfeited by feilure
to nake the raymen!.: prcoidad for In Sewell’e declaration
of trust.
Jams Gcel
XeEIs tant