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Honorable David M. Williams

County Attorney

San Saba County Courthouse

San Saba, Texas 76877Letter Opinion No. 90-099 Dear Mr. Williams: You ask about the authority of San Saba County to guarantee aloan from a bank to a private business. You have provided us witha copy of the minutes of a special meeting of the San Saba CountyCommissioners Court held on December 19, 1988, indicating thatthe court at that meeting adopted a resolution that "San SabaCounty guarantee the $75,000 loan to San Saba National Bank forSan Saba Hospital for a term of 120 days." You have also supplieda copy of a document, titled "Specific Guarantee," dated December20, 1988, and signed by the county judge, purporting to be anagreement by the county to guarantee payment of a $75,010 loanfrom the San Saba National Bank (hereinafter, the "bank") toRural Health Associates, Inc. You advise that San Saba Memorial Hospital (hereinafter, the"hospital") was operated as a county hospital until the mid-1970swhen it was sold by the county to a private entity. That entitythen mortgaged the hospital to the bank. When it subsequentlydefaulted on the loan, it surrendered the hospital property tothe bank. The bank then established a corporation, wholly-ownedby the bank, to operate the hospital. The bank, or its wholly-owned corporation, eventually agreed with Rural HealthAssociates, a private firm, for the latter's operation of thehospital. Rural Health Associates then borrowed $75,010 from thebank, which loan was purportedly guaranteed by the county underthe terms of the above-mentioned document titled "SpecificGuarantee." Shortly after receiving the proceeds of the loan,however, Rural Health Associates stopped operating the hospitaland defaulted on the loan. You say the county has had "no legalinterest" in the hospital since the county sold the facility inthe mid-1970s. We think it is clear that the purported guarantee by the countyof the bank's loan to a private entity would violate theprovisions of the Texas Constitution prohibiting a county fromlending its credit. See Tex. Const. art. III, s 52 ("Except asotherwise provided . . . the Legislature shall have no power toauthorize any county . . . to lend its credit"); art. XI, s 3("No county . . . shall . . . in anywise loan its credit"). (1) Because the guarantee contract violates article III, section52, and article XI, section 3, it is void and unenforceableagainst the county. Parties contracting with the county arecharged with knowledge of the law, and if they enter into acontract which the county has no authority to make, they do so attheir own risk. Galveston H. & S.A. Ry. Co. v. Uvalde County, 167S.W.2d 305 (Tex.Civ.App.--San Antonio 1942, writ ref'd wantmerit). In that regard, you point to paragraph 4 of the guaranteecontract in which the county purports to waive its defenses toenforcement of its guarantee. You ask whether the waiver iseffective. We think it is clear that the county may not avoidthose constitutional limitations by stating that it will notraise them in its own defense. The purpose of those provisions isto prohibit the use of public funds for private purposes.Counties do not have the option of waiving those provisions.Baldwin v. Travis County, 88 S.W. 480 (Tex.Civ.App.--1905, writref'd), and Limestone County v. Knox 234 S.W. 131 (Tex.Civ.App.--Dallas 1921, no writ) (county contract which is void because thecounty had no authority to make it cannot be made valid byratification).Very truly yours,Sarah Woelk

Chief

Letter Opinion SectionRick Gilpin

Chairman

Opinion CommitteePrepared by:William WalkerApproved:Opinion Committee

Present for all or part of the meeting: Howard Beeman, Mary Berg, Max Blanchet, Brian Edwards Tiekert, Riva Enteen, Ted Friedman, Sherry Gendelman, Annie Hallatt, Chandra Hauptman, Sepideh Khosrowjah, Attila Nagy, Eric Park, Richard Phelps, Rosalinda Palacios, Sarv Randhawa, Willie Ratcliff, Fadi Saba, Bonnie Simmons, Debbie Speer, Lisa Rothman, Marnie Tattersall, William Walker, Joe Wanzala, LaVarn Williams; Roy Campanella, General Manager; David Mezzera, parliamentarian. Notes taken by Eric Klein.

Chandra moves that her resolution on disability access be moved to a time sensitive matter after the meeting date discussion under special orders of he day. Seconded. 6 yes, 11 no, 4 abstentions. Fails.

They stayed in touch after Saba left the company. Instead of meeting for coffee, Saba began going to the Pavlou house where Mario introduced him to his son. Peter Pavlou had heard a great deal about Saba from his father and eagerly sought his advice about career, school, and anything else he could think of. Soon, Saba became a mentor to the son of the man who had supported and encouraged him. More and more often, when he went to the Pavlou house, Saba and Peter would shoot hoops while talking and planning, sharing hopes and dreams that inspired the other. 2351a5e196