JIMMAnOX AttorneyGeneral

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AnEqualOpportunltyl Altirmatlva Actlon EI@OYW 

# The Attorney General ofTexas

Oct,cmber24, 1984

Aonorable David Cain Chairman Committee onTransportation 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.

Youhave 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 Departmentof Highways anclPublic 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 numberof 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) nowrequires each applicant to

procure culdfile with the Department [of Bighways

and Public Transportation] a good and sufficient bond in I:heamountof Twenty-five Thousand Dollars ($25.000:‘

. (Emphasis added).
Thebond 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

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title to each motor vehi:le he or she sells. V.T.C.S. art. 6686(a) (7). Theact does no1:specify the **type** of bond **to** be submitted by applicaote. but merely tluLtit be “good andsufficient.” Thus, YOU ask in connection with you,’ first question whether the bond required under the act “maybe either a cash bond, surety bond, or bank letter of credit that indemnifies :lnthe samemanneras 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.** Ourconclusion rests, in part, on the fact that
noparticular 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 bondwa.8financially able to pay the amountof the bond in **the** event of default, and if the district clerk waswilling to accept the bond, then this Insidethe bond “good andsufficient” for the purposes of the rule. 1942). ExI’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 thtzmeaning **of** the rule. Elliot v. Lester, 126 S.W.Zd 756, 759 (Tex. CL’?.App. - Dallas 1939. nowrit).
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, LO7S.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, webelieve 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.

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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. $257.248(7) (West 1984); 1I.C. Gen. Stat. 120-288(e) (1983); Okla. Stat. tit. 47, 0583(E) (1981). In this state, bonds of this kind are coavnonprerequisites to the issuance of operating permits or licenses for other occupations. See, e.g.. V.T.C.S. arts. 911b. 513 (motor carriers); 4413(29bb), S4bs,rivate investigators andprivate security agencies); 5221f. 513 (mobiLa!homedealers andmanufacturers); 8501-l. 68(b) (boxing and wrestling; promoters); 8700. 05 (auctioneers). Our research indicates that under the~majority of these statutes, only surety bonds sponsored by corporations licensed to conduct business in the state are acceptable. IJeare also informed that following this lead, the Department of HighwaysandPublic Transportation has engaged in a similar practice under article 6686(a)(7).
The language of article 6686(a)(7) does not, in our opinion, support the limitation imposed by the Department of Highways and Public Transportation. Whereas the act stipulates only that bonds submitted thereunder be “good and sufficient,” those previously cited statutes for which only corporate surety bonds are accepted expressly impose this requirement or provide for alternative forms of security. fgp&b;l;Ti;$; ‘allb, 113; 4413(29bb), 140; 522lf. 113; ;;‘

.‘“’ Set!also, Iowa CodeAnn. 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 mayprovide 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:heapproval 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

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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 maynot, therefore, limit the type of bond filed under the act.

TOMGREEN First Assistant Attorney General

DAVIDR. RICRARDS Executive Assistant Attorney General

RICKGILPIN Chairman, Opinion Committee Prepared by Rick Gilpin Assistant Attorney General

APPROVED: OPINIONCOMMITTEE
Rick Gilpin, Chairman Colin Carl SusanGarrison Tony Guillory JimMoellinger NancySutton JIM MATTOX Attorney General of Texas

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