JIM MAnOX 

Attorney General 

Supreme Gael Building 

P. 0. Box 1x49 

Austin. TX. 78711. 254 

51214752SOl 

Telex 910/974.13S7 

Telecopier 51214754298 

714 Jackson. Suite 7W 

Dallas, TX. 75202-4SOS 

2141742-99U 

4924 Alberta Ave., Suite 10 

El Paso, TX. 799052793 

9151S33.w 

301 1exu. swe 700 

rlouston. TX. 77002-3111 

713/223ea9S 

808 Broadway, Suite 312 

Lubbock. TX. 79401-3479 

909i747.5239 

4309 N. Tenth. Suite B 

McAllen. TX. 7SSOl-1SP.S 

512/a&?-4547 

200 Mel Plaza. Suite 400 

San Antonlo, TX. 7&?0%?797 

512a2S.4191 

An Equal Opportunltyl 

Altirmatlva Actlon EI@OYW 

The Attorney General of Texas 

Oct,cmber 24, 1984 

Aonorable David Cain 

Chairman 

Committee on Transportation 

Texas House of Representatives 

P. 0. Box 2910 

Austin. Texas 78769 

Dear Representative Cain: 

Opinion No. JM-215 

Re: Bond requirements for 

motor vehicle dealers under 

article 6686, V.T.C.S. 

You have asked this office for its opinion on matters relating to 

the bond requirement for motor vehicle dealers under article 6686. 

V.T.C.S. Specific.%:Lly, you ask first whether article 6686 or any 

other law implicitl.>~ requires that a particular kind of bond be filed 

pursuant to articll! 6686. Second, you ask whether the Texas Department of Highways ancl Public Transportation has the authority to limit 

the type of bond filed under the act. 

Article 6686, section (a). describes the procedures to be 

followed by applicants for an original dealer’s and manufacturer’s 

general distinguirh,ing number or master dealer’s license plate. 

Subsection (a)(7), in particular. was rigniflcantly amended by the 

Sixty-eighth Legisl.c:ture in 1983. See Acta 1983, 68th Leg., ch. 941, 

at 5174. The atnentlrtents. which marked a number of changes from prior 

law. were analyzed by this office in an earlier opinion. See Attorney 

General Opinion 13-136 (1984). Nonetheless, severalquestions 

concerning article 6686(a)(7) rerrmin, the most significant of which 

are the subject of J’our inquiry. 

The present controversy arises from the newly enacted bond 

requirement of art:lcIe 6686(a) (7). As a condition to the issuance of 

a license under thti! act, subsection (a)(7) now requires each applicant 

to 

procure culd file with the Department [of Bighways 

and Public Transportation] a good and sufficient 

bond in I:he amount of Twenty-five Thousand Dollars 

($25.000:‘. (Emphasis added). 

The bond is condit::oned oo (1) the applicant’s satisfactory payment of 

all valid bank dralta drawn for the purchase of motor vehicles in 

dealer-to-dealer trrhnsactions and (2) the applicant’s transfer of good 

p. 965 
Ronorable David Cain - Page ii (JM-215) 

title to each motor vehi:le he or she sells. V.T.C.S. art. 

6686(a) (7). The act does no1: specify the type of bond to be submitted 

by applicaote. but merely tluLt it be “good and sufficient.” Thus, YOU 

ask in connection with you,’ first question whether the bond required 

under the act “may be either a cash bond, surety bond, or bank letter 

of credit that indemnifies :ln the same manner as a surety bond.” 

In answer to your first question. it is our opinion that neither 

article 6686(a)(7) nor any other law acts to limit the type of bond 

filed under the act. Our conclusion rests, in part, on the fact that 

no particular meaning or 1in:ttation is inherent in the words “good and 

sufficient bond.” 

Rule 364 of the Texa:, Rules of Civil Procedure, for example, 

requires persons seeking to suspend the execution of an adverse 

judgment to file a “good and sufficient bond” approved by the court 

clerk, prior to prosecuting an appeal or writ of error. The supreme 

court, interpreting the prt:decessor to Rule 364, held that if one of 

the sureties on the bond wa.8 financially able to pay the amount of the 

bond in the event of default, and if the district clerk was willing to 

accept the bond, then this Inside the bond “good and sufficient” for the 

purposes of the rule. 

1942). 

Ex I’arte Wrather, 161 S.W.2d 774, 775 (Tex. 

On the other hand, a bond which provides no security other 

than the solvency of the principal obligor is not a “good and 

sufficient bond” within thtz meaning of the rule. Elliot v. Lester, 

126 S.W.Zd 756, 759 (Tex. CL’?. App. - Dallas 1939. no writ). 

Article 4201, V.T.C.S. (repealed, see Probate Code 1346). 

formerly authorized the su1.e of estate property. It required the 

guardian of the estate to post a “good and sufficient bond” prior to 

the sale. In a case coastc%ing this requirement, one court of civil 

appeals concluded that theoc! words “relate to [the bond’s] terms and 

conditions and the solvt!r.cy and sufficiency of its sureties.” 

Jarnagin v. Garrett, 69 S.J.Zd 511, 514 (Tex. Civ. App. - Texarkana 

1934, writ ref’d). The colrrt indicated that the duty of the officer 

accepting the bond was not: merely to require the bond; rather, the 

officer was to “formulat(? . . . an order requiring a bond of a 

particular character,* one which satisfied the requirements of the law 

under vhich it was filed. Id. Such bonds should be liberally 

construed in order to effec,tuatehe purposes the bond is intended to 

serve. Scroggs v. Morgan, LO7 S.W.2d 911 (Tex. Civ. App. - Beaumont 

1937). rev’d on other grounds 130 S.W.Zd 283 (Tex. 1939). But see 

Setttgast v. Barris Count]5759 S.W.2d 543, 547 (Tex. Civ. App. - 

Galveston 1942. writ rl?:l’d) (bonds are strictly construed). 

Accordingly, we believe that the discretion, if any, of the Department 

of Highways and Public Tr~lsportation in accepting or refusing the 

bond required by article 6686(a)(7) must be determined by reference to 

the language of the act and the purpose it is intended to accomplish. 

p. 966 
” 

Honorable David Cain - Page :I (Jn-215) 

As we noted in AttorncG General Opinion JM-136 (1984). the bond 

required by article 6686(a)(7) is intended to provide security to 

consumers and auto dealers doing business with persons licensed under 

the act. In this respect, Ihe purpose of subsection (a)(7) is similar 

to thet of laws in other atates vhich require bonds from applicants 

for motor vehicle dealer licenses. 

5320.27(10) (West 1984); Iowa Code Ann. %$i%; :2;t %%I; %: 

Transp. Code AM. 1glS-103, U-308 (1984-85); Mich. Camp. Laws Ann. 

$257.248(7) (West 1984); 1I.C. Gen. Stat. 120-288(e) (1983); Okla. 

Stat. tit. 47, 0583(E) (1981). In this state, bonds of this kind are 

coavnon prerequisites to the issuance of operating permits or licenses 

for other occupations. See, e.g.. V.T.C.S. arts. 911b. 513 (motor 

carriers); 4413(29bb), S4bs,rivate investigators and private security 

agencies); 5221f. 513 (mobiLa! home dealers and manufacturers); 8501-l. 

68(b) (boxing and wrestling; promoters); 8700. 05 (auctioneers). Our 

research indicates that under the ~majority of these statutes, only 

surety bonds sponsored by corporations licensed to conduct business in 

the state are acceptable. IJe are also informed that following this 

lead, the Department of Highways and Public Transportation has engaged 

in a similar practice under article 6686(a)(7). 

The language of article 6686(a)(7) does not, in our opinion, 

support the limitation imposed by the Department of Highways and 

Public Transportation. Whereas the act stipulates only that bonds 

submitted thereunder be “good and sufficient,” those previously cited 

statutes for which only corporate surety bonds are accepted expressly 

impose this requirement or provide for alternative forms of security. 

fgp&b;l;Ti;$; 

‘allb, 113; 4413(29bb), 140; 522lf. 113; 

;;‘.‘“’ Set! also, Iowa Code Ann. 1322.4 (West 1984); 

Md. Transp. Code Ann. 515-308 (1984); N.C. Gen. Stat. 520-288(e) 

(1983). Furthermore, the rule urging the liberal construction of 

statutory bonds, Scroggs v. Morgan, supra, compels the rejection of 

any rule or policy stricter than the statutory schame, particularly if 

it does not serve the public interest. Although a corporate surety 

bond arguably may provide the best form of security for consumers and 

dealers, it does not necc!ssarily follow that the other forms of 

security described in your ::c!quest cannot equally accomplish the goals 

of article 6686(a)(7). Moreover, because neither the courts nor the 

legislature has seen fit to impart a particular meaning or limitation 

on the words “good and sufficient bond,” this office is without 

authority to approve au ‘:I action by an administrative body. 

Accordingly, we answer both your first and second questions in the 

negative. 

Finally, we caution that our conclusions should not be read to 

require the Department of Righways and Public Transportation to 

abandon its discretion over l:he approval of bonds filed under the act. 

It is clear that the legislature intended to impose on the department 

the duty to determine the su:! ficiency of bonds submitted by applicants 

p. 967 
Eonorable David Cain - Page 4 (JM-215) 

for dealer's licenses and ta88. This necessarily entails the exercise 

of some discretion by the department in determining whether a 

particular bond in fact provides the security intended. Given the 

number of applications the department must process every year, it is 

understandable that the de?.lrtment would adopt a practice which not 

only indemnifies adequately but is also the most administratively 

convenient. Cf. Bullock v. Rewlett-Packard Co., 628 S.W.2d 754 (Tex. 

1982). HowevE until article 6686(a)(7) expressly authorizes such a 

practice, the department say not place limits on the type of bond 

acceptable under the act. 

SUMMARY 

Neither article 6686 nor other law implicitly 

requires the bor,d filed pursuant to subsection 

(a)(7) to be of a particular kind. The Texas 

Department of Hi:~lways and Public Transportation 

may not, therefore, limit the type of bond filed 

under the act. 

TOM GREEN 

First Assistant Attorney General 

DAVID R. RICRARDS 

Executive Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Rick Gilpin 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Rick Gilpin, Chairman 

Colin Carl 

Susan Garrison 

Tony Guillory 

Jim Moellinger 

Nancy Sutton 

JIM MATTOX 

Attorney General of Texas 

p. 968