THEA~TORNEY                    GENERAL
                                OF   TEXAS

 GERALD C.MANN                  AUSTINU.'~%XAR

A1TORNmcYGWBHAL




     Honorable V. J. Campbell
     County Attorney, Garza,County
     Post, Texas
     Dear Sir:                  Opinion No. O-5638
                                Re: Whether a fee for the refunding
                                     of Courthouse and Jail outstand-
                                     ing bonds can be paid from the
                                     Courthouse and Jail Sinking Fund,
                                     under the facts set forth,
              Your letter of September 24, 1943, requesting the
     opinion of this department on the question stated therein,
     reads as fo,llows:
              "Are the County Commissioners of a named
         County authorized to pay from the Courthouse and
         Jail Sinking Fund, a fee in the sum or amount of
         $3,267.00 for refunding the Courthouse and Jail
         outstanding bonds, there is outstanding bonds in
         the sum of $66,000 and the fee as stated will be
         in the amount of $49.50 per thousand. The qucs-
         tion is, shall that fee be diverted from ,the
         Courthouse and Jail Sinking Fund to the fee exacted
         for the refunding of these bonds.
              "The County Judge and Commissioners under-
         stand that the matter is optional, as was declared
         by the Supreme Court of Texas in mandamus proceed-
         ings instituted by Cochran County, Texas."
              The contract between the county commissioners and H.
     L. Shaffer and Company, a certified copy of which accompanies
     your Inquiry, reads as follows:
              "HONORABLE CO. Judge and Commissioners'
         Court of Garza County, Texas.
                 "GENTLEMGN:
              "Referring to your $82,000 Court House and
        Jail bond issue dated Feb. 15, 1927, of which
        .there are ou,tstanding$66,000, bearing 55s inter-
        est, we make you the following proposition for re-
Honorable V. J.,Cam@bePl, page 2         0 -5638


    funding of the now outstanding bonds Into refunding
    bonds bearing 3% interest and maturing as follows:
         "Same as the now outstanding bonds.
         "We agree to use our best efforts in assemb-
    ling the old bonds for exchange for new refunding
    bonds on a basis of par for par, and we will pay
    all the expenses Incurred by us in the refunding
    of the bonds. We will also pay for the attorney's
    opinion and pay for the printing of the new bonds.
    For and In consideration of our services and ex-
    penses In this connection, It Is understood and
    agreed that you will pay us at the rate of $49.50
    per $1,000 of bonds exchanged as same are exchanged.
    In event no bonds are exchanged you will owe us
    nothing.
         "It being further understood that you will co-
    operate with us to the end that the refunding of these
    bonds Is completed without undue unnecessary delay.
         "The County to have the privilege of paying
    off $10,000 of the bonds out of sinking fund money.
                              "Respectfully submitted,
                              "H. L. Shaffer & Company
                              'By W. L. Shaffer
         "The above proposition is hereby accented bv
    order of the Com&ssioners Court, this lst-day o?
    July, 1943."
         Article 839, Vernon's Annotated Civil Statutes, pro-
vides:
         "No city or county treasurer shall honor
    any draft upon the interest and sinking fund pro-
    vided for any of the bonds of such city or county,
    nor pay out nor divert any of the same, except for
    the purpose of paging the Interest on such bonds
    or redeeming the same, or for investment in such
    securities as may be provided by law."
         Replying to your question, as to the authority of
the commissioners' court to pay the fees or commissions called
for in the contract lout of the Sinking Fund of the Courthouse
and Jail Bonds, we call your attention to the case of Elser v.
Honorable V. Jo.Campbell, page 3         0 -5638


City of Fort Worth, 27 S.W. 739-741, in which the Court held
that the test of the legality of a particular use of the sink-
ing fund is whether or not the fund is being used for the pur-
                   accomplishing that result (the final re-
EgEl%z,e~y         and is not being diverted from the main
object of its creation. In that case the Court held that the
drawing of the draft to buy securities as an investment of
the sinking fund was a draft drawn to redeem the bonds, inas-
much as It was a step toward the final redemption of the bonds.
         In a recent case by the Kentucky Court of Appeals,
The Governor v. Wolfe County 163 S.W. (2d) 485, the Court
holds that the county "could'legallg contract with some agency
to bring together the bondholder3 and persuade them to ex-
change their 5% bonds for others bearing a less rate, and run-
ning over a longer period, and to pay the agency to prepare
and file application for approval of a refunding plan; work
out plans, to prepare and deliver all legal papers necessary
for the consummation of the plans, ,thefees for the services
to be paid from the Road and Bridge Sinking Fund, and not
from the proceeds of sale, since the plan provides for no sale."
         In our Opinion No. O-3320, a copy of which is en-
closed herewith, we held that the Board of County and District
Road Indebtedness has ample authority to pay a premium for
eligible road bonds and to use the sinking fund of counties
deposited with the Board to retire such bonds, in payment of
such premiums. In Opinion No. O-5919, a copy of which opinion
is enclosed herewith, this department held that the commis-
sioners' court had authority to enter into a contract with a
certain company in connection with the proposed plan of re-
funding courthouse bond3 and to pay the fees or commissions
called for therein out of the sirking fund of the courthouse
bonds.
         In the contract submitted by you, it appears that the
interest will be reduced from 5$$ to about 3.45%. This figure
(3.45) include3 the 3% interest stated in the contract and the
fees to 'be paid for the refunding of the now outstanding bonds.
It is a step toward the final redemption of these bonds, if
the county can, by paying a certain amount now, save a larger
amount in the future interest costs on these bonds. Under
the proposed plan of refunding these 5% bonds by the issuance
of refunding bonds bearing 3% interest, the county will re-
duce its obligation. Therefore, it is our opinion that the
use of the Sinking Fund for accomplishing this result is not
a diversion of the main object for which the fund was created
but is wholly consistent therewith. In other words, the use
of these funds for this purpose is inkeeping with the pur-
pose for which the fund was created, namely, the ultimate re-
Honorable V. J. Campbell, page 4         O-5638


demption of the bonds.   Your question is, therefore, answered
in the affirmative.
                                Yours very truly
                             ATTORNEY GENERAL OF TEXAS


                                By sAArdel1 Williams
                                     Ardell Williams
                                           Assistant
AW:EP:wc
Encls.

APPROVED OCT 16, 1943
s/Gerald C. Mann
ATTORNEY GENERAL OF TEXAS
Approved Opinion Committee By a/GPB Chairman