Case Information

*1 Gerald C. Mann

Hon. T. F. Slack County Attorney Opinion Number O-5584

Re: ~1s the recent Act of the Legisla- Reeves County ture, which grants to the State Board Pecos, Texas of Eduaation an option to purchase re-

funding bonds, issued to refund bonds owned by the State Permanent School Fund applicable to the refunding of the Beeves County Courthouse and Jail Dear Sir: Bonds in question?

We are in receipt of your letter of recent date read- ing as follows:

“On November 2.5, 1942, Reeves County entered into a contract with B. V. Christie & Company to refund $92,500. Reeves County Courthouse end Jail Bonds of an issue now.outstanding in the amount of $105 000, the remainder to be discharged out of vai able sinking funds. Under this contract, B.V, i! i hristie & Company was granted an option to pur- chase the refunding bonds, bearing interest at the rate of 3 l/2$ per annum, at par and accrued inter- est. B. V. Christie & Company has recently exer- cised the optiongranted by the contract to purchase these bonds. of this contract, the

“Subsequent to the makin Legislature enacted Chapter 2 6 8, Acts of the 48th Legislature, RegularSession, which grants to the State Board of Education an option to purchase re- funding bonds issued to refund bonds owned by the State Permanent School Fund. The State Permanent School Fund now owns $93,000 in principal amount of the County’s Courthouse and Jail Bonds which have been called for redemption on September 30, 1943 pursuant to the opinion of the Supreme Court in {he recent case of Co&ran County v. Mann.

“I would appreciate your valued opinion as to whether or not this recent Act of the Legislature is applicable to these particular bonds and whether or not it is necessary for the County Judge to com- ply with the terms of that statute in regard to *2 notifying the Board of the terms under which the County has agreed to sell the refunding bonds to B. V. Christie & Company.

"Article I, Section 16, of the Constitution of Texas, and Article I, Section 10 of the Constitu- forbid the enactment of tion of the United States t, laws impairing the obliga ions of contracts. These

constitutional provisions apply to the contracts be- tween States and individuals. The State of Indiana ~63",3,"'~~l~5fS~~rt;~~d~o~E1z~o:o~~)v* They also Apply ti Contracts between political sub&vi- sions of States and individuals. Shauleigh v. Sag eteiQL 15: U.S. 646, 42 L.Ed. 310, Payne v. First

I n 1 B nk, 291 S.W. 209 (Comm. App.).

"In 9 Texas Jurisprudence $3, the nature of the protection of contracts agains impairment afforded t

by both Constitutions is stated as follows:

"'The constitutional provision is violated when- ever there is any invasion of the effect of a con- tract "in however small a particula9'; the contract need not be entirely or even materially impinged upon.

""'The utmost freedom to enter into any contract permitted by existing law is the inherent right of every citizen, and when he exercises that right in a lawful way, no Legislature has the power to disturb the purposes or effect, or in any manner rewrite any of the provisions of that contract, er make a new contract for him, and the right to comply with and enforce its provisions as written is fixed and vested. The degree in which the offending statute may impair the obligation of contract is immaterial. The only question is, Has the obligation been encroached upon in any respect?"'

"Under its contract with the County, B. V. Chris- tie & Company is given the right to purchase the re- funding bonds. This right is a creature of the con- tract. If the above mentioned Act of the Legislature grants a prior right to the State Board of Education, it seems clear that the rights of B. V. Christie & Company are thereby impaired. Since this is prohib- ited by both Constitutions, it is my opinion that this statute does not apply to the bonds covered by the preexisting contract.

"The State Board of Education meets again on September 6th and I would greatly appreciate your opinion on this question before that date if it is conveniently possible. Please send a copy of your opinion to the State Board of Education."

Replying to the above you are advised that under the facts as stated, it is our opinion that the authorities cited by you sustain your position. Both the State and the United States Constitutions forbid the enactment of laws impairing the obligation of contracts. It follows that if B. V. Chris- tie & Company entered into a valid contract with Reeves County prior to the passage of Chapter 248 Acts of the Forty-eighth Legislature, Regular Session, said E hapter 248 is not applica- ble to these bonds and it is not necessary for the County Judge to comply with the terms of same in regard to notifying the Board of Education of the terms under which the county has agreed to sell the refunding bonds to B. V. Christie & Company, but it is sufficient if it be made known to the Board that a valid contract had been made prior to the passage of said Chap- ter 248, giving to said Company the option to purchase the re- funding bonds.

Very truly yours ATTORNEY GENERAL OF TEXAS By /s/ C. F. Gibson C. F. Bigson, Assistant APPROVED SEP 3, 1943

/s/ Gerald C. Mann

ATTORNEY GENERAL OF TEXAS

APPROVED: OPINION COMMITTEE

BY: BWB, CHAIRMAN

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