       OFFICE    OF THE     ATTORNEY    GENERAL    OF TEXAS

                               AUSTIN




Honoz+oble K. II. Dally
county Attorney
Hutahinron county
Borgar, Texan




              We have re    ived   our 1   te    of recent date wkieh
r,   QUOts,    In *mt&g\5

                                                &AdeAt school
                                            writ8 you ror
                                             UOStiOAC 'CfiA
                                             lot purchare
                                             8 and hold them
                                            41 Refunding BondaPt

                          ndent Sohool Dletriot refund-
                          II in 1937 to mmre   a better
                          nag~?aduatod reals. 'i?MA, iA
                          OAd8, lem prlnoipal retired,
                         ed to seoure a better rate of
                      f%aced scale and serial retiremAt.
                    refundin& $27,000 S&led to oone in,
       and the interert rate on there bonds rairer     to
       4% OA June 15, 1942, and to 5% on June l.6, 1846.
       Our lwal depoaitorg doea not pay any intamat oxi
       ~daily baltmoee, and In ardor to save interest, A&
       Trustees would like to call in CIOZUOof the 1983
       Rofundlng Bonds which are oallable &waytime,
Honorable K. ii. Dally, -Se   fi




         "The refunding ai;reement with 1941 refund-
     ln~ aS8nta (R. A, UrMerwood & Co.) provldee that
     one year's requfrenent shall be on hand before
     surplus may be used to call 1941 bonds over and
     beyond the requirement aa atlpulated in the bonds."


         While it haus been held that a munlclpallty may pur-
chase part of lte om bonds of one lasue as an lnv88tmontof
the ainking tUnd of another 1~~8, y8t if boi~d$, the sapu
issue for whloh the ai~lclni;fund wae oi?eated, are purchae8d
with AOAeyS from suah sl~kl~ hmd, euch purchase act6 a6 a
oanoelIatioA or redemption of the boAda.   See Eleer v. City
of Fort Worth (Writ of error refused), e7 S. W. 739.

          We are of the opinion that the purohase of the 1937
bonds would fall in the latter alaar.    IA other words, the
1941 lmaue purports to refmd the 1937 issue. When tne 1941
rerundIng bonds were lamed in lieu of the 1937 bonds which
rere taken in (Art. 2789, Vernonfa Annotated Oivll Statutea),
such 1937 bonds were cancelled. Rowever, "bonds lseaed to
refuAd out8tandinE bonds do not areate a net indebtedneea.w
DalIaai County v. Lockhart, 96 S. 111.(ed) 80. It is our opin-
ion that the purchase of bonds of a former issue with Aoneya
of the slnkln~ fund of a aubaequent lame refundlng the former
lsruf 'acte as a cancel.latlon or r8d8AptioA of the bonda of the
'former Iseue.

          You state that tae I937 bonds are callable at Amy
time. Ke call your attention     to the decision of the Suprme
Court in Dallas County v. Lockhart, supra. In that aa       a
writ of mandamus was c,rantsd to aonzpel the State Treaeurer   to
permit the redemption of certain optional bonds held by him
by the lssuanoe  of refundin    bonds.  IA other words, the bonds
oouId be redeemed either    by payment or by the lssuanoe of re-
f’undlns bcnde.
