Texas Public Bldg. Authority v. Mattox, C-3793

• Decision Date: 20 March 1985
• Docket Number: No. C-3793,C-3793
• Parties: TEXAS PUBLIC BUILDING AUTHORITY, Relator, v. Jim MATTOX, Attorney General, Respondent.
• Court: Texas Supreme Court

Page 924

686 S.W.2d 924

TEXAS PUBLIC BUILDING AUTHORITY, Relator, v. Jim MATTOX, Attorney General, Respondent.

No. C-3793.

Supreme Court of Texas.

March 20, 1985.

Reynolds, Allen & Cook, Joe H. Reynolds, M. Paul Martin and John W. Fainter, Jr., Houston, for relator.

Jim Mattox, Atty. Gen., Susan Lee Voss and Bruce Youngblood, Asst. Attys. Gen., Austin, for respondent.

HILL, Chief Justice.

In this original proceeding the Texas Public Building Authority seeks a writ of mandamus directing the Honorable Jim Mattox, Attorney General of the State of Texas, to approve the issuance of $10,500,000 in revenue bonds. The bonds are designated as Texas Public Building Authority Revenue Bonds (Texas Youth Council, Texas Rehabilitation Commission State Office Building Project), Series 1984. The Authority submitted the bonds to the Attorney General who refused to approve them, stating his opinion that the proposed issuance is in direct conflict with the provisions of Article III, Sections 49 and 49a of the Texas Constitution. We hold that neither the bond issuance nor the Act authorizing the issuance contravenes the Texas Constitution. We conditionally grant the requested relief.

There is no dispute as to the relevant facts concerning the matter before us. In the dozen years from 1972 to 1984, the office space requirements of state agencies quartered in Travis County more than tripled. The accompanying rental obligations necessary to meet this growing need for space more than quadrupled during the same time frame. In this context, the Legislature enacted the original version of the Texas Public Building Authority Act in 1983. See Texas Public Building Authority Act, Ch. 700, 1983 Tex.Gen.Laws 4360, repealed by Act of July 12, 1984, Ch. 5, § 34, 1984 Tex.Gen.Laws, 2nd Called Session 10, 20.

Shortly after passage of the Act in the Regular Session of the 68th Legislature, the Attorney General expressed several reservations concerning the propriety of the issuance of bonds under that act. In response, the Governor included in his call for the Second Called Session of the 68th Legislature an amendment to the original act. The Authority, as it presently exists, was created by an act of the Legislature during this special session in the summer months of 1984. See TEX.REV.CIV.STAT.ANN. art. 601d (Vernon Supp.1985) (the Act).

The Authority is empowered to provide for the financing, acquisition, construction, repair, and renovation of buildings used by state agencies. TEX.REV.CIV.STAT.ANN. art. 601d, § 2 (Vernon Supp.1985). The Act provides for a Board of Directors composed of three members, each of whom is appointed by the Governor and confirmed by the Senate, to serve as the Authority's governing body. Section 9 of the Act authorizes the Board to issue and sell bonds to finance the acquisition, construction or improvement of buildings used by state agencies. Section 10 requires the Legislature to authorize each specific project for which the bonds are to be issued and the maximum amount of bonded indebtedness that may be incurred by the Authority through the issuance and sale of bonds for a specific project.

Section 12 of the Act addresses the manner of repayment of bonds. Subsection 12(a) permits the Board to provide for the payment of the principal of and interest on the bonds by (1) pledging all or any part of the designated rents, issues and profits from leasing a building to the state through the State Purchasing and General Services Commission (the Commission) or occupying or using state agency, or (2) obtaining funds from any other source lawfully available to the Authority. Section 26 of the Act provides for the payment of rents and fees to the Authority by the Commission from the State Lease Fund. Subsection 12(d) provides as follows:

All lease contracts entered into under this Act shall be subject to the appropriation by the legislature of funds necessary to cover the provisions of the lease, except that if at any time the state fails or refuses to pay the rental provided in such a lease contract or fails or refuses to renew an existing lease contract at a rental provided to be paid, the board may lease or sublease the property covered by the lease contract to any person or entity on terms that the board determines.

Section 13 of the Act expressly provides that:

(a) Bonds issued under this Act are not debts of the state or any agency, political corporation, or political subdivision of the state and are not a pledge of the faith and credit of any of them. The bonds are payable solely from revenue as provided by this Act.

(b) The bonds must contain on their face a statement to the effect that:

(1) neither the state nor an agency, political corporation, or political subdivision of the state is obligated to pay the principal of or interest on the bonds except as provided by this Act; and

(2) neither the faith and credit nor the taxing power of the state or any agency, political corporation, or political subdivision of the state is pledged to the payment of the principal of or interest on the bonds.

[Emphasis added.]

Faced with the need to provide buildings and office space in which to house state agencies, the Legislature expressly approved two high priority projects in section 24 of the Act--the purchase and renovation of the Texas Employment Commission property and the project involved in this case--construction related to the Texas Youth Commission, Texas Rehabilitation Commission state office building. Pursuant to this section, the Board adopted a resolution authorizing the issuance of bonds to finance the construction of the Texas Youth Commission, Texas Rehabilitation Commission state office building. In its resolution, the Board approved (1) a Lease Agreement between the Authority and the Commission to provide the revenues necessary to pay the bonds, (2) a Trust Indenture with Allied Bank of Texas, as Trustee, providing the details of the bond issuance, and (3) a Bond Purchase Agreement submitted to the Authority by a group of underwriters.

The Lease Agreement provides in section 7.1 that it shall remain in effect until the bonds have been fully paid. Section 5.10 recognizes that payments under the Lease Agreement shall be made from the State Lease Fund and that $7,000,000 has already been appropriated by the Legislature for that purpose. Section 7.2 deals with the termination of the Lease Agreement and provides that the Authority may exclude the Commission from possession of the project and lease the project to another party in the event the Commission is unable to perform its duties under the Lease Agreement. Finally, the Authority, in section 5.6, expressly acknowledges that the Commission's obligation to make payments under the Lease Agreement is subject to, and dependent upon, appropriations by the Legislature of funds necessary to make such payments.

The Trust Indenture, in several important instances, reiterates many of the key provisions of the Act and the Lease Agreement. For example, section 2.05 states that the bonds "are not and shall never in any event become general obligations of the Authority but are special and limited obligations payable solely and only from the Pledged Revenues ...." This section also provides that the State of Texas does not pledge either its faith and credit or its taxing power to the payment of the bonds.

Section 4.01 provides, in pertinent part, as follows:

No recourse shall be had for any claim based on this Indenture or the Bonds, including but not limited to the payment of the principal of, or premium, or interest on, the Bonds, against any director, member, officer, agent, or employee, past, present, or future, of the State of Texas, any political subdivision or other entity created thereby, or the Authority or the Commission, as such, either directly or through the Authority or the Commission, under any constitutional provision, statute, or rule of law, or by the enforcement of any assessment or penalty or by any legal or equitable proceeding, or otherwise, all such liability and claims being hereby expressly waived and released by the Trustee and the Bondholders as a condition of, and as consideration for, the execution of this Indenture and the issuance of the Bonds.

In the event of default, section 6.03 of the Indenture provides that the Trustee may, among other things, enforce the rights of the bondholders and the Authority or bring suit upon the agreement or the bonds, but any judgment it obtains against the Authority will be enforceable only against the specific assigned payments, funds, and accounts in the custody of the Trustee. Additionally, no deficiency judgment may be obtained against any assets of, or the general credit of, the Authority, the Commission or the State of Texas.

The bonds themselves prominently provide the following notice to bond purchasers:

THE OWNER HEREOF SPECIFICALLY UNDERSTANDS by acceptance of this Bond that the Bonds are not debts of the State of Texas or any agency, political corporation, or political subdivision thereof and are not a pledge of the faith and credit of any of them, but are payable solely from the Pledged Revenues. Neither the State of Texas nor an agency, political corporation, or political subdivision of the State is obligated to pay the principal of, premium, if any, or the interest on the Bonds except as provided in the Act and neither the faith and credit nor the taxing power of the State or any agency, political corporation, or political subdivision of the State is pledged to the payment of the principal of, premium, if any, or interest on the Bonds.

[Emphasis added.]

Pursuant to section 16 of the Act, the Authority submitted the bonds to the Attorney General for examination and he refused to approve their issuance citing Article III, Sections 49 and 49a of the Texas Constitution. The Attorney General has not questioned the sufficiency or adequacy of the procedural steps followed by the...