,
                      EATTQRNEYGIENJ&AL
                           OF TEXAS
                          AUHTIN.   T-s       78711




                               March 19, 1973


    Honorable J. W. Edgar                     Opinion No. H- 19
    Commissioner of Education
    Texas Education Agency                    Re:   Extent of liability’on bonds
    201 E. Eleventh Street                          of Proprietary Schools under
    Austin, Texas 78701                             Section 32,38(a),(b),  and (c)
                                                    of the Texas Education Code.
    Dear Dq. Edgar:

       The Propri&ry     School Act, enacted in 1971 (Acts 1971, 62nd Leg. ,
    Chapter 620, p. 2006) is found as Chapter 32 of the Education Code.

        Section 32.38(a) requires ,a bond in the amount of $25,, 000. 00
    conditioned upon the payment by the parties thereto ‘@all damages or
    expenses which the State or any governmental subdivision thereof,
    or any person may sustain resulting from a violation of statutory
    provisions or rules or o,egulations adopted pursuant thereto.     The
    bond is made payable to the State for the use and benefit of any person
    or governmental subdivision of the State which may suffer expenses
    or damages.    “The bond shall be filed with the administrator and
    shall be in such form as shall be approved by the administrator. I’

       By your letter of January 19, 1973, you ask thcee questions:.
                                                                                 :       .,
              ‘!la. Is such a bond limited to refunds due to. students          ..
          for prepaid tuition; or
                 b. May liabilities such as teachers’ s&larieri rent        ”
          for building and equipment, other liabilitiee incident to the
          school be included? ‘I

              “2.   Would the total amount of tuition paid by students
          be refundable in closed school situations, or only a pro
          rata portion based on the part of the course completed? ”

        We have beenfurnished with a copy of the bond approved by the
    administrator.   It recites that the condition of the obligation assumed
    by its e%ecution is that:



                                      p. 91                                          ’
Honorable J. W. Edgar, page 2 (H-19).



          “If the PRINCIPAL, its officers, agents and employees,
      shall faithfully discharge all obligations, dutiee and res-
      ponsibilities contained in Section 32. 33, Section 32. 38, Sec-
      tion 32. 39, Section 32.61 and all other applicable sections of
      House Bill 333, Acts of the 62nd Leg., Chapter 32, Texas
      Education Code, and all amendments thereto, and all applic-
      able rules and regulations of the State Board of Education
      adopted to carry out the provisions of House Bill 333 . . . ‘I

     Section 32. 33 sets out criteria for. determining whether or not
a school will be certified.   Among the criteria are those found in
Subsection (b) that the school have adequate space, equipment. instruc-
tional material and personnel to provide training of good quality; in
Subsection(i) that the school be financially sound and capable of
fulfilling its commitment for training; and so on. These are con-
tinuing obligations of the school. The administrator may revoke
a certificate if he has reasonable cause to believe that the school
is guilty of a violation under Section 32. 36.

    Therefore, as we read the bond in connection with Sections 32. 33
and 32.38 of the Proprietary School Act, should any person be damaged
or suffer expense as a result of the failure of the school to meet such
obligations, he may recover damages and expense under the bond.

    The bond, by the provisions of Section 32. 38 of the Proprietary
School Act, is for the benefit of “the State, any governmental 6ub-
division thereof or any person who sustains damage or expense. ”
Liability is not limited to a pro rata share of unused tuition. Students
of a school which closes may very well incur damages in excess of
the “unused” portion of the tuition paid, especially if other schools
will not give credit for the work already done toward a Certificate
of Completion.

    It is our opinion. therefore. that Section 32.39 of the Act, governing
refunds under certain circumstances,    does not limit recovery by
students in a “closed” school situation. The extent of damage is a
fact question.




                                  p. 92
    I

I
                                                                        .

        Honorable J. W.   Edgar, page 3 (H-19:).,



                                SUMMARY

                  Where a bond issued pursuant to Section 32.38
              of the Proprietary School Act provides that it is
              conditioned upon the faithful discharge of all bb-
              ligations, duties and responsibilities, contained
              in various sections of that Act, including the res-
              ponsibilityto maintain adequate space, equipment,
              instructional material and personnel, and to remain
              financially sound, upon closing of the school for
              financial reasons, the sureties on the bond are
              liable for all damages and expenses incurred by
              students and others resulting therefrom and not
              merely for the refund of “unused” tuition.

                                            Very truly yours,




                                      c/    Attorney General of Texas


                                                                            i




        DAVID M. KENDALL,,    Chairman
        Opinion Committee




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