OWKE OF THE *TTORNEY GENERAL. STATE OF TEXAS JOHN CORNYN

October 13, 1999

The Honorable Arthur C. Eads District Attorney 27th Judicial District of Texas P.O. Box 540 Belton. Texas 76513 Opinion No. JC-0128

Re: Whether a county bail bond board may require a corporate surety to furnish a separate letter of credit for each of its licensed agents in the county o(Q-0071-X)

Dear Mr. Eads:

On behalf of the Bell County Bail Bond Board, you ask whether a county bail bond board may require a corporate surety to furnish a separate letter ofcredit for each of its licensed agents in the county. We conclude that chapter 1704ofthe Texas Occupations Code, formerly article 2372p-3 of the Revised Civil Statutes,’ requires a corporate surety to furnish one letter of credit in order to be licensed in the county. Chapter 1704 does not authorize a county bail bond board to require a corporate surety to furnish additional security for its licensed agents.

We begin with abrief review of chapter 1704’s licensing provisions, which provide for the licensing ofboth individuals and corporations. In acounty with abail bond board, no “person” may act as a bail bond surety except a person licensed under chapter 1704 or, in certain limited circumstances, an attorney. See TEX. Oct. CODE ANN.$8 1704.15 1, ,163. For purposes ofchapter 1704, a “person” is either an individual or a corporation. Id. $ 1704.001(5) (defining the term

“person” to mean “an individual or a corporation”); 5 1704.154(a) (providing for licensing of “a person”). In order to execute bail bonds in acounty, both individuals and corporations are required to obtain licenses from the county bail bond board as provided by subchapter D of chapter 1704. See id. $5 1704.001(5), .151, .154.

The licensing requirements for individual and corporate licenses are different. Tobe eligible to be licensed, an individual must be aresident ofthis state and a citizen of the United States, be at least eighteen years of age, and possess sufficient financial resources. See id. 5 1704.152(a). A corporation must be chartered or admitted to do business in the state and qualified to write bonds under the Insurance Code. See id. 5 1704.152(b). Both individuals and corporations desiring “[t]o

‘The Texas Occupations Code enactedby the76thTexas Legislatureisthecodification of avarietyof licensing statutes,including formerarticle2372p-3. SeeActofMay 13, 1999,76tbLeg.,R.S., ch. 388,s 1,sets. 1704.001-.306, 1999Tex. Sess. Law Serv. 1431.2279; id. 5 6(a), 1999 Tex. Sess. Law Serv. at 243940 (repealing article 2372p-3 of theRevised Civil Statutes). For ease of citation, tbis opinion will refer totbe provisions of chapter 1704 asthey will be codified in tbe Texas Occupations Code.The Honorable Arthur C. Eads - Page 2 (X-0128)

be licensed under [chapter 17041

. .must apply for a license by filing a sworn application with the board.” Id. 5 1704.154(a). An individual applicant must provide, among other things, three letters ofrecommendation, see id. 3 1704.154(b)(4)(C), (c), while acorporate applicant must provide three letters of recommendation for “the person who will be in charge of the applicant’s business in the county,” id. 5 1704.154@1)(4)(C)(ii),(c).

After the board tentatively approves an application, an individual (in a county with a population less than 250,000) must deposit cash (or a cash equivalent) with the county treasurer, or execute in trust deeds to the board, in an amount not less than $10,000. See id. 5 1704.160(b). We believe the purpose ofthis deposit remains as stated in former article 2372p-3: “to secure payment of any obligations incurred by the applicant in the bonding business if the license is granted.“* A corporation, on the other hand, must “provide to the sheriff an irrevocable letter of credit as a cash equivalent to pay any final judgment of a forfeiture on abail bond executed by the applicant.” Id. 5 1704.160(a)(2). In one of the few cases construing licensing requirements for corporate sureties, Klevenhagen v.InternationalFidelity Insurance Company, 861S.W.2d 13(Tex. App.-Houston [lst Dist.] 1993,no writ), the court noted that, in acounty with apopulation less than 250,000, the letter of credit must be in the amount of $10,000, see id. at 19n.5. The court further concluded that this requirement is exclusive; a county may not require a corporate surety to post additional security. See id. at 19-20 (concluding that Harris County sheriff could not require corporate sureties to “post
a dollar-for-dollar letter of credit before approving abond”).
Chapter 1704 also requires the licensing of corporate agents. A corporation that acts as a surety must file in the office of the county clerk a power of attorney designating an agent of the corporation authorized to execute bail bonds onbehalfofthe corporation. See TEX. Oct. CODE ANN. 5 1704.21l(a). “An agent designated by apower ofattorney under Subsection (a) must be a license holder under this chapter.” Id. $ 1704.21I@). However, chapter 1704 does not expressly provide licensing requirements for corporate agents. This office construed chapter 1704’s predecessor, former article 2372p-3, to require a corporation to obtain a corporate surety license and a separate license for each of its agents. See Tex. Att’y Gen. Op. Nos. DM-224 (1993) at 2, MW-507 (1982) at 3. An agent is subject to all of the statutory licensing requirements, except the security requirements for individual bail bond sureties, and “his or her application must be separately considered and approved by the board.” Tex. Att’y Gen. Op. No. DM-224 (1993) at 2. An individual who is licensed only as adesignated agent for acorporate surety isnot licensed to execute bail bonds in an individual capacity or in any capacity other than as designated agent for the corporate surety. See id. at 3 n.3.

You ask, in essence, whether a corporation must finnish a separate letter of credit for each of its licensed agents. We do not believe that chapter 1704 requires a corporate surety to do so, because, aswe explain below, the letter ofcredit is arequirement for a corporate surety license. No

2Formerarticle2372p-3,section6(a)(5) ofthcRevisedCivilStatutes,menactedbyActofMay29,1981,67th Leg.,R.S., ch. 312.5 1,sec. 6(a)(5), 1981 Tex. Gen. Laws 875,879,repeoledbyActofMay 13, 1999,76thLeg.,R.S., ch. 388, 5 1, sets. 1704.001-.306, 1999Tex. Sess. Law Serv. 1431.2279.The Honorable Arthur C. Eads - Page 3 (JC-0128)

provision in chapter 1704requires acorporation to obtain more than one corporate surety license in each county. Furthermore, the sufficiency of a corporate surety’s security is evidenced by its certificate to do business in the state, rather than the amount of security it has deposited with the county.
First, chapter 1704 contemplates that a corporation will obtain only one corporate surety license in a county. To act as abail bond surety in acounty, a corporation, like an individual, must obtain a license from,the county bail bond board. See TEX. OCC. CODE ANN. $5 1704.001(2), (5), .151. In order to obtain a corporate surety license, acorporation must furnish a letter of credit. See id. 4 1704,160(a)(2). After a corporation has obtained acorporate surety license, itmust also ensure that its agent is licensed. See id. § 1704.21l(b) (“An agent designated by a power of attorney

. must be a license holder under this chapter.“). But an agent’s license is separate from the corporate surety license. See Tex. Att’y Gen. Op. No. DM-224 (1993) at 2. Again, an agent is subject to all ofthe statutory licensing requirements, and‘% orher application mustbe separately considered and approved by the board.” Id. The fact that the corporation’s corporate surety license and an agent’s license are separate is underscored by the fact that chapter 1704regulates the conduct of a licensed corporate surety apart from the conduct of its agents. For example, section 1704.212 provides that

“[a] corporation may not act as abail bond surety in a county in which the corporation is in default

on five or more bail bonds,” TEX. Oct. CODE ANN.9 1704.212(a); see also id. §§ 1704.001(2), (5), .I5 1-a prohibition that would affect all ofacorporation’s licensed agents in the county, even those who have not executed any of the bonds in default.

Furthermore, itisthe application for acorporate surety license that triggers the letter ofcredit requirement. After a corporation has furnished a letter of credit and obtained a corporate surety license, a county bail bond board may not require it to supply additional security. Chapter 1704 prohibits individual bail bond sureties from executing bonds that exceed amultiple of the value of property held as security orheld in trust. See id. 5 1704.203(a), asamended byAct ofMay 25,1999, 76th Leg., R.S., ch. 1096,§ I,1999 Tex. Sess.Law Serv. 3962.3 An individual bail bond surety may post additional security at any time to increase his or her limit. See id. $j1704.203(d), as amended by Act ofMay 25,1999,76th Leg., R.S., ch. 1096, $1,1999 Tex. Sess. Law Serv. 3962,3963. But this limitation does not apply to acorporate surety. Id. 9 1704.203(e) (“This section does not apply to a license holder that is a corporation.“); Klevenhagen, 861 S.W.2d at 19-20. Rather, section 1704.160(g) provides that “[tlhe certificate of authority to do business in this state issued under Article 8.20, Insurance Code, to an applicant that is a corporation is conclusive evidence” as to the sufficiency of the security, the corporation’s solvency, and its credits. TEX. Oct. CODE ANN. 5 1704.160(g). In addition, chapter 1704 requires a county bail bond to “promptly notify the Texas Department of Insurance of adefault by a corporation on a financial obligation undertaken by the corporation in the county.” Id. 5 1704.108. Furthermore, section 1704.212 provides that a corporation that is in default on five or more bail bonds in a county may not act as abail bond surety

‘The repeal of a statute by a code does not affect anamendmentof thestatute by thelegislaturethatenacted thecode. The amendmentispreserved andgiven effect aspartoftbecode provision thatrevised tbestatute soamended. TEX.Gov’~ CODE

ANN. 5 311.031(c) (Vernon 1998).The Honorable Arthur C. Eads - Page 4 (~~-0128)

in that county. See id. $ 1704.212(a). The court concluded in Klevenhugen that the legislature intended these provisions to be the exclusive mechanisms to protect counties from default by a corporate surety and that therefore a county may not require acorporation topost additional security beyond the letter of credit required by section 6(f)(3) of former article 2372p-3. SeeKlevenhagen, 861 S.W.2d at 19-20.
Finally, no security is required for an agent’s license because the agent merely acts as the corporation’s agent and, in dealing with an agent, the county relies on the corporation’s security. When the agent of a corporate surety executes a bail bond, the agent does not do so in his or her personal capacity, but rather as an agent of the corporation. The agent’s signature binds the corporate surety. See TEX. OCC.CODEANN.5 1704.211. If abail bond executed by a corporate agent is forfeited, the county looks to the corporation’s assets and not those of the agent for satisfaction. See Harris County Bail Bond Bd. v. Blackwood, No. 01-97-01178-CV, 1999 WL 425954, at *3 (Tex. App.-Houston [lst Dist.] June 10, 1999, no pet. h.) (not designated for publication), reh. overruled, 1999 WL 771549 (Tex. App.-Houston [lst Dist.] Sept. 30,1999); see also Tex. Att’y Gen. Op. No. DM-224 (1993) at 2 (concluding that individual who acts merely as the agent of a corporate surety need not post security under former section 6(f)(l), (2),now section 1704.160 of the Occupations Code; “Such a requirement would serve no purpose because the corporate surety itself must be licensed by virtue of section 7(a) [now section 1704.21l(b)] and therefore will have already posted its own security under section 6(f) [now section 1704.160], and because the designated agent merely executes bail bonds onbehalf ofthe corporate surety, not in his

or her individual capacity.“); Tex. Att’y Gen. LO-96-019, at 3 (bail bond board need not consider solvency of agent applying for license to act as agent ofcorporate surety). Nothing in chapter 1704 expressly requires acorporate surety to provide a separate letter ofcredit for each ofits agents in the county. And, given that chapter 1704expressly provides in section 1704.160(g) that the sufficiency of acorporate surety’s security is evidenced by its certificate of authority to dobusiness in the state rather than the amount of security it has deposited with the county, we do not believe such a requirement may be implied.The Honorable Arthur C. Eads - Page 5 (JC-0128)

SUMMARY

Acorporate surety must furnish aletter ofcredit tobe licensed
as a bail bond surety under chapter 1704 of the Occupations Code. A county bail bond board may not require a corporate surety to furnish an additional, separate letter of credit for each of its licensed agents in the county.

Attorney General of Texas

ANDY TAYLOR First Assistant Attorney General

CLARK RENT ERVIN Deputy Attorney General - General Counsel

ELIZABETH ROBINSON Chair, Opinion Committee
Mary R. Crouter Assistant Attorney General - Opinion Committee