January 24; 1963 

:!onorable D. C. Greer 

State Highway Engineer 

~cxas Highway Department 

Austin, Texas 

Dear Mr. Greer: 

Opinion No. c-6 

ie: Construction of Article 

6674m and related statutes 

as to the amount to be 

withheld on highway construction contracts under 

-stated facts. 

Your recent letter&quests the. opinion of this office 

concerning the referenced statutes, under the following situation: . . 

"On a project.whioh has been recently completed, our contractor went bankrupt and defaulted. 

Hia surety took over and completed the job and, in 

addition', paid off such claims for materials and 

wages aswere deemed to have qualified under the 

payment bond provlded.for in Article 5160. .~This 

Department has notice'of 8ome $13,OOO.OC.worth of 

alleged claims which are still unpaid and consequently ha8 withheld thia amount from it8 ypayment 

to the .contractor." : 

"Since the job in .uestion was a small one 

and only totaled some $ 2 O,OOO.OO. it has been 

suggested that the subject of Article 6674m belng~ 

retainage it only requires that 5%. or $3,000.00, .. 

be withheld until It is shown tha't all. bills have 

been paid. Would you please advise us whether we 

should withhold an amount equal to the alleged 

unpaid bllls.or whether'we can pay the contra,ctor 

all but 5.5 of the~contract price." 

. Article 6674m, Vernon's Civll Statutes, requires the 

FOllowring retalnage 

Cstracts: 

from final payment of highway construction 

"Said contracts“may provide for partial payments to anamount not exceeding ninety-five per 

-19; 
: - 

.HOll. D. c. cireer, Page 2 (C- 6 ) 

o&t (95%) of the value of the work done. Five 

per cent (5s) of the contract price shall be 

retained until the entire work has been comple-' 

ted and accepted, and final payment shall not 

be made until It 18 shown that all sums of. 

money due for any labor, materials, or equipment furnished for 'the purpose 'of such improve-' 

ments made under any such contract have been 

paip2 

Article 5160, Vernon's Civil Statutes, requires prime. 

contractors entering into contract with public agencies of 

the State for public works involving an amount in excess of 

$200 to execute a performance bond and a payment bond. 

Section B of Article 5360 provides: 

.%very claiinant who'has furnished labor 

.'or material in the prosecution of the .work provided for in such,contract in which.a Payment 

Bond is furnnished as required hereinabove, and 

who ha¬ been paid in full therefor,, shall 

have the right, if his claim remains unpaid 

after the .explration .of sixty (60).days after 

the filing'of the claim as herein required, to 

sue the principal andthe surety..or sureties on, 

.the Payment Bond.'. . .";;, 

Article !%?%a, Ve.rnon's Cd.&.1 Statutes, authorizes one 

furnishing any material, apparatus; fixtures;,,machinery, or 

labor to a contractor under .a prime contract for,any public 

improvement not exceeding $2000 to perfect a lien on the 

money,,bonds, or warrants due or to become due .to the contractor for' the improvement by giving pr.oper and timely noticc 

of unpaid c,laimS to the public official responsib$e for payment on the zontract. The procedure to perfect such a lien ir 

,set forth in some ,detall. Article %72b, Vernon's Civil Statutes, states: 

"Tha.t no publld official, when so notified 

in writing, shall pay all of said moneys, bonds 

ortiarrants, due.said contractor, but shall 

retain enough of said moneys, bonds or warrants 

to pay said claim, in case it is established-by' 

judgment in a court of proper jurisdiction." 

Under,the prior 'law, one furnishing labor or materials 

-2% 
!ion..D. C. Greer, Page 3 (c- 6 ) 

could proceed against the payment bond (Article 5160) or perfect a lien on money due the contractor under the prime cont:sact (Article 5472a). Since the 1959 amendment, however, 

actions pursuant to Article 5160 are limited to contracts in 

c:xcess of $2000 and liens pursuant to Article g72a are limlted to contracts which do not exceed $2000. Acts 56th Leg.. 

i?jg, oh. 93, Pa 155: 

336 S.W.2d 779 (Civ. 

See Cacanay Corporation v. Shepherd, 

App.'19bO., 

_ 

error dism. w.0.j.). 

Conaldering the 1959 amendment, the question presented 

,- 1s whether the retalnage provision of Article !5472b relates 

exclusively to Article 972a liens and; as a consequence, 18 

applicable solely to prime contract8 not exceeding $2000. 

Articles $k72a and 5472b were each sections of the same act 

In their original enactment. Acts.39t.h Leg. 1925,'ch. 17, p.44, 

SCCS. 1 and'2. As noted in Metropolitian Casualty Insurance 

company v. Cheaney, 55 S.W.2d 553 (1932) both articles were 

sections of the same,act but were codif&d separately by Vernon's. The two articles are considered by the courts as.parts 

of the 8ame. law. and as providing a remedy In the nature of a 

lien or garnnishment, which i8. in addition to that 'of Article 

5160.. smith v..Texz~%'Co.,:53 S.W..2d 774 (1932); .Massachusetts 

3. & .InS. Co. v. Farmer8 &.M. State Bank, 13g.!kX. 310 lb2 

r;.Y.2d b57 (1942)' Fr nklin I3ros:v. Standard Mfg. Co.: 78 S.W.2d 

294 (Civ. App. l&j, kit dism )* U S.:v. 'Peden Iron & Steel Co., 

330 'S.W.2d 635 (Clv,.'App. 1959;~&& ref.,n.r.e.) 

Corporation v. Shepherd, supra. : 

; Cacanay 

Further, the 1959 amendment to Article. 5472a Indicates 

that 'the~Legislature'~consldered the two articles.as parts of 

the same act and the first section was amended, ,as follows: 

(8 Sebtion 1, Chapter 17,'Acts of 

the Th&y%.nth Legislature, 1925 (compiled 

as titicle 547@, Chapter 2, Vernon's Civil 

Statutes) Is amended. . . ." 

In view .of the above, we are of the opinion that Article. 

9472b refers exclusively to unpaid claims for whlch'notice Is 

Clven in accordance with Article *72a, and that retainage of 

funds sufficient to cover such claims is required only.where 

th? prime contract does not exceed $2000.. 

*_ 

Attorney General's Opinion No. o-6241 (1944). states: 

"Articles 5472a, 5472b-1, and 6674m, are 
:. 

Hon. D. c. Greer, Page 4 (C- 6 ) 

. 

In pari materla and should be construed ~together. 

~dWd;$8t.t & Work v. Kennedy, Clv. App.. 57 

These Articles, In general, providi additional security for the payment of 

claims against a contractor in favor of those 

who furnish any material, equipment or labor 

to any contractor for any public improvements 

In this State, by means of either (1) a lien 

against funds designated for the payment of 

said contractor, or (2) a bond which the contractor makes In lieu of-said lien.' 

Attorney General's Opinion No. O-4453 (1942) states: 

"In the case of Huddleston & Work v. 

Kennedy, 57 S.W.2d 258 the court held that 

'Article -2160 and Article 6674m were inpari 

materia. _. 

:&ulth vi Te$s $a~~~ held.'tha,t the statutes con- ’ 

cerning the fixing f 1 or material8 and labor furnished 

in‘the construction of permane.nt Improvements of the State 

should be liberally construed. 

. 

Ai+icJe 6674m was .&nended'by the Legislature In then 

same'sessldn'but later in time than Articles. 5160, and 5472a. 

Acts 56th Deg. 1959;ch. ,434, p.: 138. 

~The prio? construction that. these atatutes,are in par1 

.materia .and should be~liberally conatrued,.together with the 

fact that the amendments of Article 6674m was later in time 

than the amendment of Articles 5160 and %72a, compels the 

'~ conclusion that the Texas liighway.Department should retain 

five .percent of the contract price of al.1 highway constructior

contracts'untll,the work has been completed and accepted and 

that final payment should not be tendered until a showing is 

made that all money due for labor and material furnished for 

the purpose of the project has been paid. 

SUkARY 

Article 5472b~requires public officials to 

retain funds due under prime contracts .for public 

improvements sufficient to xover unpaid claims 

for which notice is recelved.only in those situatlons where the amount of the prime contract does 

-22- . 

‘ 
Hon. D. C. Greer, Page 5 (c- 6 ) 

no.t exceed $2000. Article 6674m requires the 

Texas Highway Department to retain five percent of the contract price of highway construction-contracts until a showing is made 

that all money due for labor and material 

furnished for the purposes of the project has 

been paid. 

Sincerely, 

WAGGONER CARR 

Attorney General of Texas 

By .JH& 

F. -R:.Booth 

Assistant Attorney General 

: 

FRB:ab : 

APPROVED: 

OPINION COMMITTEE 

W. V. Geppert, Chairman 

BenHarrison - 

Arthur Sandlin ~' 

Tom Peterson 

Grady Chandler 

APPROVED FOR'TRE ATTORNBY GRNERM, 

BY: Stanton Stone 

-23;