. 

THE A ORNEY ;ENERAL 

OFTEXAS 

Arrn~rrv ~LTEXAS 

Honorable D. C. Greer 

State Highway Engineer 

Texas Highway Department 

Austin, Texas 

Dear Sir: Opinion No. O-6291 

Re: Is a freight demurrage charge, presented to the Highway Department by 

a rallroadcomoanv aizalnst a highway 

contractor, a iiehabie claim? 

We are In receipt of your letter of a recent 

requesting the opinion of this department on the above 

question. Your letter reads, in part, as follows: 

"In order that the Texas Highway Department 

may correctly handle freight demurrage claims 

against Highway Contractors, when submFtted to us 

brr Railroad Companies, we request that you please 

date 

stated 

render an official opinion on 

tion: 

"Is a freight demurrage 

to the Highway Department 

Company against a Righway 

lienable claim?" 

the following-quescharge , presented 

by a RaIlroad 

Contractor, a 

Articles 5472a, 547213, 5472b-1 and 6674m, Vernon's 

Annotated Civil Statutes, are the Texas Statutes pertinent to 

your inquiry. 

Article 5472a, V. A. C. S., provides: 

"That any person, firm or corporation, or trust 

estate, furnishing any material, apparatus, fixtures, 

machinery or labor to any contractor for any bubllc 

improvements in this State, shall have a lien on the 

moneys, or bonds, or warrants, due or to become due 

to such contractors for such Improvements; provided,- 

such person, firm, corporation, or stock association, 

shall, before any payment is made to such contractor, 

notify in writing the officials of the State, county, 

town or munlcipallty whose duty It is to pay such 

Contractor of his.claim. Acts 1925, 39th Leg., ch. 

17, p. 44, 81." 
. . . 

Honorable D. C. Greer, page 2 o-6291 

Article 547213, V. A. C. S., provides: 

"That no public official, when so notified in 

writing, shall pay all of said moneys, bonds or warrants, 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. Acts 1925, 39th Leg., ch. 17, 

p. 44, 8 2." 

Article 5472b-1, V. A. C. S., provides: 

"Sec. 1. That whenever any claim or claims shall 

be filed attempting to fix a lien, secured or claimed 

by any instrument filed under the provisions of Chapter 17, of the General Laws of the State of Texas, 

passed by the Thirty-ninth Legislature in Regular 

Session, that the contractor or contractors against 

whom such claim or claims are made, may file a bond 

with the officials of the State, county, town or municipality whose duty it Is to pay the moneys, bonds 

or warrants to such contractor or contractors. Said 

bond shall be double the amount of the claims filed, 

and shall be payable to the claimant or claimants. It 

shall be executed by the party filing same as principal, 

and by a corporate surety authorized under the laws of 

Texas to execute such bond as surety, and shall be conditioned substantially that the principal and surety 

will pay to the obllgees named, or their assigns, the 

amount of the claim or claims, or such portion or portions thereof as may be proved to have been liens, under 

the terms of Chapter 17, General Laws of the State of 

Texas , passed by the Regular Session of the Thirtyninth Legislature. The filing of said bond and its 

approval by the power official of the State, county, 

town or municipality, shall release and discharge all 

Nens fixed or attempted to be fixed by the filing of 

said claim or claims, and the official or officials 

whose duty it is to pay the moneys, bonds or warrants 

shall pay or dellver the same to the contractor or 

contractors or their assigns. Said official shall 

send by registered mail an exact copy of said bond 

to all clalmants. 

"Sec. 2. At any time within six months from 

the date of filing of said surety bond, the party 

making or holding such claim or claims may sue upon 

such bond, but no actlon shall be brought on such 

bond after the expiration of such period. One action 

upon said bond shall not exhaust the remedy thereon, 
Honorable D. C. Greer, page 3 o-6291 

but each obligee or assignee of an obligee named 

therein may maintain a separate suitthereon in any 

court and In any jurisdiction. If any claimant or 

claimants in an action establish the fact that they 

were entitled to a lien under the provisions of 

Chafiter 17 of the General Laws of the State of Texas, 

passed at the Regular Session of the Thirty-ninth 

Legislature, and shall recover judgment for not less 

than the full amount for which claim was made, the court 

shall fix a reasonable attorney's fee in favor of the 

claimant or claimants, which shall be taxed as'part of 

the costs in the case. The bond provided in Section One 

of this Act shall also be conditloned that the principal 

and surety will pay all court costs adjudged against the 

principal in actions brought by claimant or claimants 

thereon. 

78.” 

Acts 1929, 41st Leg., 2nd C.S., p. 154, ch. 

Article 6674m, V. A. C. S., provides: 

"Said contracts may provide for partial payments 

to an amount not exceeding (90%) of the value of the 

work done. Ten per centum of the contract price shall 

be retained until the entire work has been completed 

and accepted, and final payment shall not be made until 

If is shown that all sums of money due for any labor, 

materials, or equipment furnished for the purpose of such 

improvements made under any such contract have been paid." 

Articles 5472a, 5472b, 5472b-1, and 6674m, are in 

pari materia and should be construed together. Huddleston & 

Work v. Kennedy, Civ. App., 57 S. W. (2d) 255. These articles, 

in general, provide 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 pavment of said contractor, 

or (2) a bond which the contractor makes in lieu of said 

lien. 

With reference to your question as to whether a 

charge for demurrage Is a lienable claim, it is necessary to 

determine whether demurrage is included withln the meaning 

of the language, "furnishing any material, apparatus fixtures 

5472aS, 

machinery or labor to any contractor . . .' t Article 

and whether money due a railroad company for demurTage charges comes within the meaning of the language, 

. . . all sums of money due for any labor, materials or 

equipment furnished for the purposff of such improvements 

made under any such contracts. . . (Article 6674m). Although 
Honorable D. C. Greer, page 4 o-6291 

the precise question here raised has not been passed upon by 

the appellate courts of this State, the construction of similar 

language by our federal courts and the courts of other states 

is highly persuasive as to the construction to be given the 

above language In our statutes. 

We point out here that it has been held that demurrage charges are to be construed as a part of the charges for 

transportation service. Philadelphia B. & W. R. Co. v. Quaker 

City Flour Mills Co., 

Lumber. .Co. 

127 A. 845, 846; 282 Pa. 362; Mllne 

v. Michigan Cent. B. Co., MO. App., 

732, 735. 

57 S. W. @d), 

In many of the cases hereinafter cited, "freight 

and "demurrage" are considered together in the determination 

as to whether a claim for transportation costs is an allowable claim within the meaning of statutes providing additional 

security for the payment of those who furnish labor, material 

or equipment to a public works contractor. 

In the federal statute (40 U. S. C. A., Sec. 270) 

which required the contractor to make a bond to secure the 

payment of the claims of those who furnished labor or materials 

to contractors on public works, we find the following language similar to that of our statutes: 'Supplying him or them 

with labor and materials in the prosecution of the work." 

The early construction of these words by the federal courts 

were rather strict. In United States v. Hyatt (C. C. A.) 

92 F. 442, the court concluded that the services of a railroad were not "labor". This decision was followed in Mandel 

v. United States (C.C.A.) 4 F. (2d) 629. But the foregoing 

strict rule of construction has been set aside by the holdings 

in later cases. 

In case of City of Stuart v. American Surety Co., 

5 Cir., 38 F. (2d) 193, 194, a Florida statute required contractors for public work to execute a bond with the obligation that 'such contractor, or contractors, shall promptly 

make payments to all persons supplying him, or them, labor, 

material and supplies, used directly or indirectly by the 

said contractor . . . or sub-contractors in the prosecution 

of the work provided for in said contract." Under this 

statute, suit was brought against a contractor's surety to 

recover7for freight, switching and demurrage charges on carload material used in the oerformance of said contract. In 

this case it was held that-such charges were within the 

liability of the contractor's bond. 

In discussing the matter as to whether charges for 

freight and demurrage were claims charged against the contractor's bond within the meaning of the language, 'supplying 

him or them, labor, material and supplies" (40 U.S.C.A., Sec. 

2703, the court, in part, said: 
Honorable D. C. Greer, page 5 o-6291 

"Protection is expressly extended to all oersons 

who furnish the named thinRS. whether under lien or not. 

whether Individual or corp&ation, rich or poor, supplyl 

ingin person or through agents and representatives . . . . 

A railroad company is not excluded. In point of fact, 

many persons who have a lien enforceable by retention 

have been held to be wlthin the statute. Nor is the 

nature of the work done in transportation such as to 

prevent its being labor. Much of what 1s done by the 

agents of the railroad company is hard labor, and the 

doing of the work, even by the use of machines, is 

recognized as labor under the statute . . . . . . . Transportion of materials by cart and towboat is uniformly 

allowed as labor. United States Fidelity & Guaranty 

CO. V. United States, 231 U. 5. 237, 34 9. Ct. 88, 58 

L. Ed. 200; Title Guaranty & Trust Co. v. Crane Co., 

219 U. S. at page 34, 31 3. Ct. 140, 55 L. Ed. 72. 

In what way can the distance of the transportatlon or 

the fact that it is over a specially prepared rail 

track make it any the less labor? It was held in 

Illinois Surety Co. v. John Davis Co~.,~244 U. 3. 376, 

37 3. Ct. 614, 61 L. Ed. 1206, that, where track and 

cars and equipment were rented by the contractor, and 

used by him in transportation for the job, the rental 

was protected by the bond. If he should charter a 

rallroad or a train, the railroad company could, under 

this decision, recover. Why not when it furnishes 

single cars? By all the cases~, when a furnisher of 

material pays the freight, whether bound to do so or 

because the contractor does not pay, the freight is 

added to the cost of the material, and protected. 

See Ear land Casualty Co. v. Ohio River Gravel Co. 

(C.C.A.7 20 F. (2d) 514. The same 'place value' is 

given the material by the transportation, no matter 

who pays the freight, and to the same extent,13 

material furnished. 

"The decisions ,of the Supreme Court reject the 

theory of strict construction, and adopt that of liberal 

construction in the allowance of claims above alluded to. 

Illinois Surety Co, v. John Davis Co., 244 U.S. 376, 37 

s. ct. 614, 61 L. Ed. 1.206; United States Fidelity & 

Guaranty Co. v. United States, 231 U.S. 237, 34 S. Ct. 

88, 58 L. Ed. 200; Brogan v. National Surety Co., 246 

U. 3. 257, 38 S. Ct. 250, 62 L. Ed. 703, L.R.A. 1918D, 

776. . . . ." 

In construing the language, "prompt payment to any 

person or persons doing work or furnishing skill, tools, 

machinery or materials under ahd for the purpose of said con- 
Honorable D. C. Greer, page 6 o-6291 

tract', the court stated that railroad transportation of 

materials combined the furnishing of work, skill, and machinery for the purpose of the contract, even if not labor in the 

narrow sense originally attributed to the word in eariler 

cases. 

In Standard Ins. 

58 3. Ct. 314, 82 L. Ed., 

Co. v. United States, 302 U.S. 442, 

the court held that a claim of a 

common carrier by railroad for unpaid charges due for transportation of materials used in the construction of a federal 

building is one for "labor and materials' within the meaning 

of the Act requiring a bond for the prompt payment by the 

contractor to "all persons supplying him, or them, with labor 

and materials in the prosecution of the work provided for in 

said contract" (40 U.S.C.A., Sec. 270). In this connection 

the court said: 

"'Certainly labor is rsqulred for loading 

freight on railroad cars, moving these over the 

road, and unloading at destination. A,carrier who 

has procured the doing of all this in respect of 

material has "furnished labor". If a contractor 

had employed men to move the same kind of material 

in wheelbarrows, there could be no doubt that he 

furnished labor. In principle the mere use of 

cars and track and a longer haul creates no materially different situation. Nor do we find reason 

for excluding the carrier from'the benefit of the 

bond because it might have enforced payment by 

withholding delivery. The words of the enactment 

are broad enough to include a carrier with a lien. 

Nothing in its purpose requires exclusion of a 

railroad. Refusal by the carrier to deliver 

material until all charges were paid might seriously impede the progress of public works, possibly frustrate an important undertaking.' . ...' 

This case was appealed to the Circuit Court of Appeals, Fifth 

Circuit, and in Standard Accident Ins. Co. v. United States, 

89 F. (2d) 658, April 14, 1937, the Court affirmed the holding 

by the district court (82 L. E., supra) and expressly approved 

the ruling in City of Stuart v. American Surety Co., supra. 

In the recent (1940) case of Sommers Const. Co. et 

al. v. Atlantic Coast Line R. Co., 7 3. E. (2d) 429, Court of 

Appeals of Georgia, Division No. 2, February 15, 1940, the 

court held that there was no substantial difference between 

the phrase" doing work or furnishing skill, tools, machinery 

or materials under or for the purpose of such contract", as 

used in the state statute, and the phrase "supplying him or 
Honorable D. C. Greer, page 7 o-6291 

them with labor and materials in the prosecution of the work", 

as used in the federal statute (40 U.S.C.A., Sec. 27O), 

under which a claim for unpaid freight charges has been construed to he a claim for "labor and materials". The court 

further held that a claim by a railroad company for unpaid 

freight and demurrane charges for shipments used in construction of a state highway uroject was a claim for 'doing work 

or furnishing sklli, toois,-machinery or materials" wythin 

the State statute and the contractors' bond given pursuant 

thereto, and that the railroad company could recover on the 

bond, notwithstanding it had a carriers's lien which it could 

have exercised by withholding delivery. 

The fact that a railroad company already has a 

special lien which it could exercise by withholding delivery, 

when a charge for freight or demurrage is unpaid, does not 

exclude a railroad company from the security afforded those 

who furnish labor, material, or equipment to a contractor on 

public improvements. City of Stuart v. American Surety Co., 

supra. State of Delaware v. Aetna Casualty & Surety Co. 

(Del.) 145 A 172, 176; Sommers Const. Co. v. Atlantic Coast 

Line R. Co., supra. In this connection, in the case of State 

of,Delaware v. Aetna Casualty & Surety Co. (Del.) 145 A. 172, 

176, the court said: 

"'The argument that it would be inequitable 

to allow a carrier to surrender the lien and collect 

from the surety does not appeal to us. What is a 

carrier's lien? It is simply the right to hold the 

consignee's cargo until payment is made for the work 

of transporting it. In simple terms it is the right 

to withhold the enjoyment by another of the fruits of 

work done in his behalf until he pays therefore. The 

carrier is authorized by the law of liens to say in 

substance what an ordinary laborer or vendor of goods 

is In position to say, VIZ., pay me for my labor in 

advance or for my goods before delivery, otherwise 

you shall not enjoy the benefits of the one or passess the other. The carrier, notwithstanding the 

cargo is the consignee's, can similarly say--before 

I complete the labor of transportation by delivery 

to you, pay me for my work. That is all the lien Is. 

It does not follow the goods when delivered, nor can 

the consignee be compelled to pay until they are delivered. Now what reason can there be in holding 

that a laborer or a materialman may deliver his labor 

or materials on credit and go against the surety In 

case of nonpayment, but a transporter If he surrenders 

the cargo may not? If he may not, then this is the 

result, the very a,ct of surrendering the cargo which 
Honorable D. C. Greer, page 8 o-6291 

will give rise to the debt, will relieve the surety 

company of its guaranty of payment, and carriers when 

they are afraid to extend credit to the contractor 

will therefore hold back the materials and obstruct 

the work, a result which must be inharmonious with 

the statute's purpose'". 

That our Texas statutes, providing additional security for the payment of claims of those who furnish materials, equipment or labor for public Improvements contractors 

are to be liberally construed is shown by several decisions. 

In Smith v. Texas Co., Comm. App., 53 S.W. (26) 774, it was 

held that article 5472a, giving a lien in favor of persons 

furnishing materials, equipment and labor to public improvements contractors should be liberally, not strictly construed, and that the benefits of said act were applicable to 

thosefurnishing materials to sub-contractors. In Foty v. 

Rotchstein, Civ. App., 60 S.W. (2d) 892, It was held that 

when groceries were furnished a contractor and consumed by 

laborers on public work, the seller is entitled to a lien on 

funds due the contractor, if it is shown that necessity 

exists for furnishing such supplies In the construction of 

public improvements. In Thurber Construction Co. v. Kemplin, 

Civ. App., 81 S.W. (2d) 103, it was held that claims for feed 

furnished for teams of subcontractors were allowable as lien 

against funds due general contractor in the hands of the 

State Highway Commission. 

It is apparent that the language in the Texas 

Statutes with reference to the additional security afforded 

those who furnish material, equipment and labor to a contractor 

on public improvements is substantially the same as to meaning and purpose as that of the legislative acts interpreted 

by the federal courts and courts of other states in the various 

cases herein cited. From an analysis of Articles 5472a, 547213, 

547213-1, and 6674m, It is apparent that the broad purposes end 

intentions of said legislation are twofold: (1) to protect 

the honest claims of all persons or corporations who have contributed to the performance of the work in connection with a 

contract for public improvements, and (2) to minimize lmpediments and delay of the work, and facilitate procurement of 

materials,, e uipment and labor through the security afforded 

by the lien 't Article 5472a) or the bond in liew of said lien 

(Article 5472b-l).' If the carrier's legitimate Claims against the contractor are included in the benefits provided, 

the foregoing purposes and intentions will be better served. 

If such claims are not included, the carrier could hold the 

freight until payment is made, and if not paid, sell it for 

charges, and thereby embarrass the progress of the work. We 

can see no intention to exclude those who furnish transporta- 
. 

Honorable D . C . Greer, page 9 o-6291 

tlon service from the benefits afforded by the Act. The 

authorities have recognized the transportation as being 

very vital in the prosecution of contracts for public improvements, as demonstrated by their construction of the 

language “labor, materials, and equipment.” In U.S. v. 

Hercules Co., 52 F. (26) 451, the court pointed out that 

the instances In the authorities where claims for transportation charges have been allowed against the surety under a 

statute requiring a bond for the prompt payment of all 

claims for labor, material and equipment against a public 

contractor are of three classes. 

(1) The first class is where the seller of materials 

furnished has paid the transportation costs or agreed to pay 

the transportation costs, and said materials have been actually 

and practically consumed In the process of construction. In 

these cases, the transportation charges have been allowed the 

seller of the material as representing substantially a part 

of the purchase price, and the claims for transportation 

charges were allowed the seller for "materials" furnished 

within the intent of that word as used in the statute. U.S. 

v. Morgan, (~C.C.) 111. F. 474, 488; Maryland Casualty Co. v. 

Ohio River Gravel Co. (C.C.A.) 20 F. (2d) 514; 21 F. (2d) 744. 

(2) The second class is where the contractor has 

agreed to pay the transportation costs, and the material is 

actually and practically consumed in the process of that particular construction. In these instances, the services performed by the carrier in transportation have been regarded as 

"labor" furnished the contractor, as that word is used in the 

statute granting security for the payment of claims against 

the contractor for "labor", because the full value of the services is furnished the contractor and inures to the benefit 

of the work. Cite of Stuart v. American Suretv Co. (C.C.A.) 

38 F. (2d) 193; state v. Aetna Casualty & Surety Co: (Del 

Sup.) 145 A. 172, 173. 

(3) Claims have been allowed against the surety 

for transportation costs upon hired teams, tools, machinery 

or plant equipment. The use of such property is deemed labor 

furnished the contractor. The transportatlon costs on such 

equipment are regarded as an item of the rental and as a fair 

rental value for such equipment, during the period of that 

particular construction, goes into the work, the transportation costs, as an ingredient thereof, are likewise included. 

U.S. v. Illinois Surety co. (C.C.A.) 226 F. 653, 662.. U.S. 

v. Post Deposit Quarry Co. (D.C.) 272 F. 698; 277 F. 1019. 

It should be noted that, generally, an unpaid claim 

is allowable withln a statute providing additional security 
. 

Honorable D. C. Greer, page 10 o-6291 

for those who furnish labor, materials or equipment In carrging out the provisions of highway construction contracts, if 

it is such that a cost accountant would charge it as a direct 

expense item to a particular job, and not to the capital investment off the contractor. 

(2d) 513, 515. 

Margulies v. Ogdie, S.D., 10 N.W. 

As stated heretofore, "demurrage charges' have been 

held to be an ingredient of and considered in connection with 

"transportation charges". A proper charge for demurrage is 

considered as a charge incident to transportation (8 Tex. Jur., 

196, 204), and the holdings with reference to claim for transportation services would likewise be applicable to claims for 

freight demurrage charges. 

In view of the foregoing, it is the opinion of this 

department that a freight demurrage charge, presented to the' 

State Highway Department by a railroad company against a highway contractor, is a lienable claim within the meaning of our 

statutes, provided the claim represents a direct expense item 

in carrying out the provisions of a particular highway construction contract. 

Trusting that the above satisfactorily answers your 

inquiry, we are 

Yours very truly 

ATTORNEY GENERAL OF TEXAS 

By s/J. A. Ellis 

J. A. Ellis 

Assistant 

JAE:fo 

APPROVED DEC 7, 1944 

s/Grover Sellers 

ATTORNEY GENERAL OF TEXAS 

Approved Opinion Committee by s/BWB Chairman