                                    QBffice      of tQe !Zlttornep              QBeneral
                                                    &tste of llCexae
DAN MORALES
 AITORNEY
       GENERAL                                         February 2,199s


   The Honorable Bruce Isaacks                                   Opinion No. DM-467
   Criminal District Attorney
   Carroll Courts Building, 5th Floor                            Re: Whether a hold and save harmless provision
   P.O. Box 2344                                                 that requires a county to indemnify another party
   Denton, Texas 76202                                           for damages creates a debt within the meaning of
                                                                 article XI, section 7 of the Texas Constitution
                                                                 (RQ-1001)

   Dear Mr. Isaacks:

            On behalf of Denton County, you ask whether article XI, section 7 of the Texas Constitution
   precludes a county from entering into a s:ontract with the United States Army Corps of Engineers
   (the “corps”) that would require the counly to hold and save the corps harmless from liability. The
   scope of the hold and save harmless prov.sion is unclear. We conclude that to the extent it requires
   the county to indemnify the corps for damages arising from acts of the corps, the hold and save
   harmless provision creates a debt within the meaning of article XI, section 7 and is therefore an
   obligation that the county may not undertake without taking certain steps. We do not resolve
   whether the hold and save harmless provision creates a debt to the extent it requires the county to
   indemnify the corps only for damages arising from acts of the county and does not expand the
   county’s liability beyond its liability unc.er existing law.

           You explain that the corps owns Lake Lewisville’ in the county and in previous years has
   entered into a “plan of operation” with the county whereby the county has agreed to provide
   additional law enforcement personnel on %,elake during the summer months.2 In 1996, unlike prior


              1See Gov’t Code cb. 2204, sub&. F (str~:e’s consent to federal acquisition of land for flood control in Trinity
   River watched).      The state has retained concurrent jurisdiction over this land for certain purposes. See id. 5 2204.505
   (“This state retains concurrent jurisdiction with fx United States in and over acquired land so that civil process in all
   cases and criminal process issued under the authority of this state against a person charged with the commission of a
   crime in or outside of the territory of the land ma) be executed on tbat land in the same manner as if this subchapter did
   not exist.“).

             We assume for purposes of tbis opinion that the county is authorized to enter into an agreement of this kid.
   Tbe legislature bas enacted statutes expressly autboiizing a county to enter into contIIlCts regarding the provision of law
   enforcement services with other local governmen ts, see, e.g., Gov’t Code ch. 791 (Inter&al Cooperation Act); Attorney
   General Opinion H-296 (1974) (concluding tiat statutory predecessor to Gov’t Code ch. 791 authorized local
   governments     to contract to provide cooperative: :Iaw enforcement services); Local Gov’t Code ch. 362, or even a
   “nongovemmemtal a.wxiation,“see       Local Gov’t Code ch. 351, s&h. D (purporting to authorize commissioners           court
   to contract with nongovernmental      association fbr provision of law enforcement services by the county).          But see
   Attorney General Opinions JM-509 (1986) (concluding tbat stahltory predecessor to Local Gov’t Code ch. 35 1, subch.
                                                                                                                 (continued...)
The Honorable Bruce Isaacks - Page 2                 @M-467)




years, the corps asked the county to execute, in addition to a plan of operation, a “cooperative
agreement” containing the following prclvision:

             Release of Q&,       The Cooperator [Denton County] agrees to hold and save
             the Corps, its officers, agent!; or employees, harmless from liability of any
             nature or kind, for or on account of any claims for damages that may arise
             during the performance of the law enforcement services by the Cooperator
             under this agreement.

Proposed Cooperative Agreement Between the United States of America and Denton County, Texas
for the Provision ofAdditional Law Enforcement Services, (Agreement No. CooPLAw-        DENTO)
art. 8 (1996) (referred to as “the release” or “the hold and save harmless provision”).

        The scope of the release is uncleru,. We have received a letter’ l?om the corps contending that
the hold and save harmless provision doer not create a debt within the meaning of article XI, section
7 because the provision would not require the county to indemnify the United States for acts of
negligence of the corps, but rather only jbr acts of negligence of the county:

             Denton County is only saving and holding the United States harmless from
             liability associated with acts ‘)fnegligence of employees of Denton County
             during their performance of 1aw enforcement activities while at Lewisville
             Lake. The United States does not intend for Denton County to indemnify the
             United States for acta of negli gence of the United States. All Denton County
             is being asked to do is take financial responsibility for its own acts of
             negligence in carrying out its obligations under the agreement.

                 . . . Denton County assuming tinancial responsibility for its own acts of
             negligence does not create an unconstitutional debt. Denton County is only
             agreeing to take responsibili ;4’for potential legal liability that, in general,
             could arise in association with the day-to-day provision of law enforcement
             services and other governmental services to the public. As a matter of law,




D unconstih~tionally  attempts to delegatelegislzive powerto privateentity),JM-57 (1983) (county may not contract
away sheriffs discretionaryduty regardingdepla!rmentof peaceofficersto privateentity). We are not aware of any
statute expressly authorizing a county to contract to provide law enforcement services to the United States.

         ‘See Letter from Joel R. Trautmann, Deputy District Engineer, Fort Worth District, Corps of Engineers, United
States Department of the Army, to Mary R. Crcuter, Assistant Attorney General, Opinion Committee, Offke of the
Texas Attorney General (July 15, 1997).



                                                     p.   2627
The Honorable Bruce Isaacks - Page 3                  (DM-467)




              Denton County can be held responsible (within the statutory limits of the
              Texas Tort Claims Act) for damages that may arise as the result of the
              negligent acts of County employees in the course of providing services to the
              public. The proposed clause: does not create any financial obligation that
              Denton County does not alrefuly have as a matter of law.4

The county, on the other hand, appears to construe the provision more broadly to obligate the county
“to hold the Corps hannlessfiom Iiubili{v ofany nature OYkind for damages that might arise f?om
the performance of law enforcement services by the Cour~ty.“~Because this office does not construe
contracts, we cannot resolve this ambiguity. Rather, we consider both the corps’ narrow and the
county’s broad reading in addressing whc:ther the release creates a debt under article XI, section 7.6

         Article XI, section 7 provides in pertinent part as follows:

              [N]o debt for any purpose sh,%llever be incurred in any manner by any city
              or county unless provision is made, at the time of creating the same, for
              levying and collecting a suffic,ient tax to pay the interest thereon and provide
              at least two percent (2%) as a sinking fund . . . .

Two Texas Supreme Court cases address whether a release creates a debt for purposes of article XI,
section 7.

        In Texas &New Orleans Railrocdv. Galveston County,’169 S.W.2d 713 (Tex. 1943), the
court concluded that a hold and save harmless provision created a debt for purposes of this
constitutional limitation. In 1908, Galvec ton County and several private railway companies entered
into a contract to construct a causeway and a drawbridge. The county was to construct the project
with both county and private funds. The private parties and their assignees were to enjoy a 999-year
lease on the part of the causeway not used by the county road. Across the causeway was a




         ‘Letter from Carmen Rivera-Worley, Assistant Distxict Attorney, Denton Civil Division, to Kenneth Howell,
Reservoir Manager, Fort Worth District, Corps or Engineers, United States Department of the Army, (Mar. 20,1996)
(emphasis added).

          6You are concerned about the debt issue;; you do not ask whether the county is authorized to enter into the
release in tbe first place. We note that in 1942, a Texas appellate court ruled that a county was not authorized to agree
to indemnify a railroad company against certain losses. See Galvesfon, H. & S.A. Ry. v. Uvalde County, 167 S.W.2d
305 (Tex. Civ. App.--San Antonio 1942, writ Iel?d w.o.m.). In a 1958 opinion relying on that ruling, this office
concluded that a soil conservation district was not authorized to indemnify a third party for damage caused by district
employees.     See Attorney General Opinion WVI-423 (1958) at 3-4 (citing Uvalde County, 167 S.W.2d 305). The
supreme court’s subsequent opinion in Brown 1’. Jefferson County, 406 S.W.2d 185 (Tex. 1966). however, did not
question the authority of a county to enter into an lndenmity agreement. See infra pp. 4-5 (discussing Jefirmn   County);
see also County of Ector Y. City of Odessa, 492 S.W.Zd 360,362 (Tex. Civ. App.--El Paso 1973, no writ) (assuming
county authorized to enter into indemnity agrsement); Attorney General Opinion Jh4-908 (1988) at 6-7 & n.2
(suggesting that Uvalde Comfy holding that county may not agree to indemnify corporation for risks has been
undermined by Jefferson County).

                                                      p.   2628
The Honorable Bruce Isaacks - Page 4             (DM-467)




drawbridge for both the county road aid the railway tracks. The railway companies were to
maintain, repair, and operate the drawbridge, prorating the costs between the parties to the contract,
including the county. The railway company employees operating the drawbridge were deemed to
be joint employees of the parties to the contract. See id. at 714.

        The contract contained a provision :pursuant to which Galveston County agreed to indemnify
the private railway companies Tom liability arising from use of the drawbridge in connection with
travel over the county road. Id. In 1936, an assignee of one of the private railway companies settled
a suit for injuries alleged to have been caused by the assignee’s negligent operation of the
drawbridge and then filed suit against the county for indemnification under the contract. Id. at 714-
15. The court held that the clause was Ad under article XI, section 7, reasoning as follows:

                The Supreme Court ha; said that the word debt, as used in the
           Constitution, means any pecuniary obligation imposed by contract, except
           such as was, at the time of th: agreement, within the lawful and reasonable
           contemplation of the parties, to be satisfied out of the current revenues for the
           year or out of some fbnd then within the immediate control of the county. In
           other words, if the obligat:on does not arise as an item of ordinary
           expenditure in the daily functioning of the county government or if it is not
           to be paid out of funds then in the county treasury legally applicable thereto,
           it is a debt and falls under thf: condemnation of the Constitution, unless the
           required provision for its payment is made at the time the obligation is
           iIlCUlTd.


Id. at 715 (citing McNeil1 v. City of Wac’o,33 S.W. 322 (Tex. 1895) and Stevenson v. Blake, 113
S.W.2d 525 (Tex. 1938)). This case suggests that a hold and save harmless provision creates an
unascertainable obligation that, by its very nature, cannot be satisfied out of current revenues and
is therefore impermissible.

        More recently, in Brown v. Jefikrpson County, 406 S.W.2d 185 (Tex. 1966), the Texas
Supreme Court addressed an agreement between the United States and Jefferson County regarding
replacement of a bridge in the county. Id, at 186. The United States agreed to pay three-fourths of
the cost of the bridge, id. at 188, and, it appears, to construct the bridge. Upon completion, the
county would assume all obligations of cwnership, operation, and maintenance of the new bridge.
Id. Jefferson County agreed to hold and save the United States free from damages resulting from
construction of the project. Id. at 186-87. The agreement and a commissioners court resolution also
provided for levying and collecting a tm: to pay interest upon and creating a sinking fund for the
retirement of any debt arising from the hold and save harmless provision. Id. at 187. The court
concluded that the agreement and resoluion did not run afoul of article XI, section 7, stating:

           The Galveston case is to be restricted to its essential holdings, namely, that
           an indemnity agreement is a “debt” within the constitutional sense, and that,
           as a corollary thereto, provision must be made for the payment of any interest
           that may accrue thereon and for the retirement of the obligation. This was



                                                p.   2629
The Honorable Bruce Isaacks - Page 5                    (DM-467)




             done in the Jefferson County I,esolution. . The [Galveston County] opinion
             should not, however, be consuued . as condemning any and all indemnity
             contracts which a county might enter into in carrying out its legitimate
             functions.

Id. at 188. Brown v. Jefirson County t,olds that hold and save harmless provisions are debts for
purposes of article XI, section 7, but arc: permissible if the requisite steps are taken to satisfy any
resulting obligation.

        It is clear fiorn these cases that a county’s agreement to indemnity a third party for damages
arising from acts of the third party creams, a debt within the meaning of article XI, section 7. The
Galveston County case involved a suit t’y a private railway company seeking to recover damages
the company had paid to settle suit bas:d on the company’s alleged negligence in operating the
drawbridge.7 The agreement at issue in the Jefferson County case clearly obligated the county to
indemnify the United States for damages arising from the federal government’s construction of the
bridge.8 Therefore, the proposed corps c:ontract, to the extent it obligates the county to indemnify
the corps for damages arising from acts of,the corps, creates a debt within the meaning of article XI,
section 7.

         It is less clear whether the proposled corps contract creates a debt within the meaning of
article XI, section 7 to the extent it merely obligates the county to assume liability for acts of its own
personnel. We have not found any case squarely addressing whether article XI, section 7 debt is
created by a hold and save harmless provision that obligates a county to indemnity a third party only
for damages arising Tom county acts and does not expand the county’s liability beyond its liability
under existing law. First, it is not clear whether the hold and save harmless provisions in Texas &
New Orleans Railroad and Brown v. Jeftimon County obligated the counties to hold parties to the
contracts harmless for damages arising from county acts. The contractual provisions at issue may
have obligated the counties to indemnify third parties for damages arising from acts of the counties
as well as others. The Galveston County contract, for example, purported to make the employees
operating the drawbridge joint employees of the both the private companies and the c~unty.~ In the
Jefferson County case, the county was to help finance construction of the bridge and was, perhaps,
to have some role in designing and co:u:tructing the roadway over the bridge.‘O Neither case,
however, distinguishes between indenlnification for damages arising from county acts and
indemnification for damages arising from the acts of others.




        ‘See Texas & New Orleans R.R., 169 S.W.Zd at 714.

        Se   Brown v. Jefferson   County, 406 S.‘W.Zd at 187.

        ?&TeeTexas&New     Orleans R.R., 169 S.W.Zd at 714.

         ‘%e All Persons Interested v. Jeffermr County, 397 S.W.Zd 241,248-49,250   (Tex. Civ. App.--Beaumont
1965), afd, Brown v. Jefferson County, 406 S.\V.Zd 185.


                                                       p.   2630
The Honorable Bruce Isaacks - Page 6                  (DM-467)




         Moreover, even if Texas & New t?irleansRailroad and Brown v. Jefferson County could be
construed to address counties’ agreemeni to indemnify others for damages arising f?om county acts,
both cases predate the 1969 enactment elf the Texas Tort Claims Act,” which has significantly
altered county tort liability. Until the e:nactment of the Texas Tort Claims Act, counties were
generally immune from suit in negligenca actions. I2 Prior to 1969, any attempt to create county
liability for county negligence by contract was an attempt to create a liability that did not otherwise
exist. Now, however, county immunity to isuit has been waived, at least to some extent, by the Texas
Tort Claims Act.”

        Given the sea change in the count, ,tort liability since the Texas Supreme Court last examined
these issues, this office cannot predict wbetber a court would conclude that the fact that a release
applies only to damages arising Tom the negligence of the county saves the provision tirn creating
a debt within the meaning of article XI, s x:tion 7. On the one hand, courts have held that the Texas
Tort Claims Act does not create a “debt” within the meaning of article XI, section 7.14 In addition,
the Texas Tort Claims Act has been construed to permit a third-party plaintiff to implead a
governmental       entity ss a third-party defendant for a claim of contribution        or indemnity.‘5   Thus, a
court might conclude that such a release merely restates the county’s liability under existing lawI
and therefore does not create a debt witk,in the meaning of article XI, section 7.

        On the other hand, Texas courts l.ave construed the term “debt” in article XI, section 7 and
its counterpart applicable to cities, article XI, section 5, broadly. Again, it is commonly understood
that “the word debt, as used in the Ccsnstitution, means any pecuniary obligation imposed by
contract, except such as was, at the ti:n.e of the agreement, within the lawfbl and reasonable
contemplation of the parties, to be satisfiezd out of current revenues.” Texas & New Orleans R.R.,
169 S.W.2d at 715 (emphasis         added and citations omitted).      Tort liability and contractual     liability
are not necessarily the same. Your query provides an example of one of the many possible and


         “See Act of May 14, 1969,61st Leg., I:.:?..,ch. 292, Tex. Gen. Laws 874,874.

        ‘%See generally Harris County FIood Control Dist. v. Mihelich, 525 S.W.Zd 506, 508 (Tex. 1975); Harris
County V.Dowlearn, 489 S.W.Zd 140 (Tex. ApI’.--Houstonll4th Dist.] 1973, writ ret’d n.r.e.).

        ‘>‘Atcommon law governmental immulity from tort was absolute. me Texas Tort Claims Act] merely set
aside governmental immunity in limited areas 2nd up to a limited dollar amount.” City of Heame v. Wiknns, 715
S.W.Zd 375, 377 (Tex. App.--Waco 1986, titlefdn.r.e.).

         “Harris   County V.Dowlearn, 489 S.W.Zdat 145; City of Dallas V.Miller, 27 SW. 498,500 (Tex Civ. App.
1894, no wit).

          %e Ci(v of Denton Y. Mathes, 528 SW .2,d625,632 (Tex. Civ. App.-Fort Worth 1975, tit ref d n.r.e.); see
also Ketfer v. Southern Pac. Tramp. Cu., 486 F. Supp. 798,800 (E.D. Tex. 1980);F/ores v. Norton & Ramsey Lines,
Inc., 352 F. Supp. 150 (W.D. Tex. 1972).

         ‘%I 1982, for example, this ofIke opkd that to the extent a contractual release merely reinforces a state
university’s existing legal obligations and dotis not expand or increase the university’s liability “it is harmless
surplusage.” Attorney General Opinion MW-47.‘;(1982) at 1. Attorney General Opinion MW-475 did not address
article XI, section 7, and it is not d&positiveher:.

                                                      p.   2631
‘Ihe Honorable Bruce Isaacks - Page 7                    (DM-467)




perhaps significant differences: Whereas the county would be sued for negligence under the Texas
Tort Claims Act, a state law, contract claims arising under or relating to the proposed contract would
be subject to federal law, the Contract Uisputes Act of 1978,41 USC. $4 601-613.” Although
courts have recognized that article XI, section 7 “debt” does not embrace an obligation arising from
tort, a court might conclude that a release that transforms existing tort liability into a contractual
liability creates a “pecuniary obligation imposed by contract” and therefore creates a debt for
purposes of article XI, section 7.

         In sum, we believe a court would conclude that the hold and save harmless provision creates
a debt for purposes of article XI, section 7 to the extent the provision obligates the county to
indemnify the corps for damages arising born acts of the corps. Whether article XI, section 7 debt
is created by a hold and save harmless Imvision that requires a county to indemnify a third party
only for damages arising from acts of tlu: county and that does not expand the county’s liability
beyond its liability under existing law is; a question of first impression that we do not resolve.
Therefore, if, as the corps contends, the hold and save harmless provision requires the county to
indemnify the corps only for damages ,uising from acts of the county and does not expand the
county’s liability beyond its liability und :r existing law, we cannot definitively determine whether
the provision creates a debt within the treaning of article XI, section 7.

        Finally, we note that a county is not precluded thorn entering into an agreement creating a
debt if certain steps are taken. The mquirements of article XI, section 7 are satisfied by a
commissioners court order or resolution, adopted at the time the commissioners court creates the
debt, providing for the levy and collectionsof taxes sufficient to pay the interest and create a sinking
fund for the debt. Until some liability ascertainable in amount arises, no money need be collected.
See generally Brown v. Jefferson County, 406 S.W.2d at 188-90.”




         “See Proposed Cooperative Agrermen; ,rupra p. 2, art. 5.

          l*ArticleXI, section 7 limiti the authority of a county to incur debt; it does not affitively authorize counties
to levy taxes for any purpose. See Mitchell County v. C~~JJNat? Bank, 43 S.W. 880, 883 (Tex. 1898) (Tex. Coast. art.
XI, 5 7 “containsno grantof authorityto levya tiuc”).‘I&refore,beforeprovidingfor a levy and sinking!iaid in order
to complywith articleXI, section7, a countyshorddfust verify that it is authorizedto levy the tax.

                                                         p.   2632
The Honorable Bruce Isaacks - Page 11           (DM-467)




                A hold and save harmlescl provision that obligates a county to indemnity
           a third party for damages arism.g Tom the acts of the third party creates a debt
           within the meaning of article XI, section 7 and is therefore an obligation that
           the county may not undertake without taking certain steps. Whether article
           XI, section 7 debt is createli by a hold and save harmless provision that
           requires a county to indemn fy a third party only for damages arising from
           county acts and does not exp;md the county’s liability beyond its liability
           under existing law appears t J be a question of first impression that has not
           been addressed by the courts.




                                               DAN MORALES
                                               Attorney General of Texas

JORGE VEGA
First Assistant Attorney General

SARAH J. SHIRLEY
Chair, Opinion Committee

Prepared by Mary R. Crouter
Assistant Attorney General




                                                p. 2633
