* TWE ATTORNEY GENERAL 

OF TEXAS 

Aun-rx~. ?I-RXAS 78711 

August 22, 1975 

The Honorable Jackie W. St. Clair 

Commissioner, Texas Department 

of Labor and Standards 

Box 12157. Capitol Station 

Austin, Texas 78711 

Opinion No. H- 673 

Re: Bonding provisions of 

the Texas Mobile Homes 

Standards Act of 1975.’ 

Dear Commissioner St. Clair: 

The 64th Legislature adopted Senate Bill No. 397 (not otherwise published at the date of this opinion) revising in a number of respects, the 

Texas Mobile Home Standards Act, Acts 1969, 6lst Legislature,Regular 

Session, Chapter 656 (art. 5221f. V. T. C.S. ). Among other things 

section 13 of S. B. 397 (hereafter referred to as the Act) requires manufacturers, dealers and salespersons to file a bond with your office “to 

insure compliance with the intent of this Act. ” 

Section 13 of the Act, entitled “Bond Required” is as follows: 

(a) As of the effective date of this Act and annually 

thereafter, subject to such a schedule as the department may provide, all mobile home manufacturers, 

dealers, and salespersons are required to file a 

performance bond with the commissioner, along 

with such information the department may deem 

necessary to insure compliance with the intent of 

this Act. 

(b) The bond shall be a surety bond issued by a 

company authorized to do business in the state. and 

shall be in conformity with the Insurance Code. 

(c) The bond shall be to the state for the use by 

a consumer, the state, or any political subdivision 

thereof who establishes liability against a manufacturer, dealer, or salesperson for damages, 

p. 2930 
The Honorable Jackie W. St. Clair, page 2 

penalties, or expenses, including reasonable 

attorney’s fees, resulting from a cause of action 

connected with the sale or lease of a mobile home. 

A consumer, the state, or any political subdivision thereof may recover against the principal or 

surety jointly and severally for such damages, 

penalties, or expenses. The bond shall be open 

to successive claims up to the amount of face value. 

(d) Any .~manufacturer or dealer who maintains 

a place of business at one or more locations shall 

file with the department a separate bond for each 

location. 

(e) A manufacturer shall be bonded in the amount of 

$100,000. A dealer shall be bonded in the amount of 

$25,000. A salesperson shall be bonded in the amount 

of $2,000. 

(I) The bonding company is required to provide 

written notification to the department at least 30 days 

prior, to the cancellation of any bond required by this 

Act. 

Section 14 of the Act, entitled “Warranties” provides: 

(a) After the effective date of tlis, Art, all new mobile 

homes sold by a manufacturer or dealer to consumers 

shall be covered by the mobile home warranty set 

forth in this Act. 

(b) The mobile home warranty provided for in this 

Act shall apply to the manufacturer of the mobile 

home as well as to the dealer who sells the mobile 

home to the buyer, except as otherwise provided. 

(c) The mobile home warranty shall be set forth 

in a separate written document entitled ‘Mobile 

Home Warranty’i shall be delivered to the consumer 

by the dealer at the time the contract of sale is 

signed; and shall contain, but is not limited to, the 

following terms: 

p. 2931 
, 

\ 

. 

. 

The Honorable Jackie W. St. Clair, page 3 

(1) that the mobile home complies with 

the code; 

(2) that the warranty shall be in effect 

for a period of at least one year from date 

of initial set-up; 

(3) that the mobile’ home and all appliances 

and other equipment installed and included 

therein”~by the manufacturer or dealer are 

free from defects in materials or workmanship; 

(4) that set-up and tie-down operations 

performed on the mobile home are performed 

in compliance with this Act, and other applicable state and local requirements, provided 

that only a dealer, his agent, or a manufacturer selling mobile homes directly to consumers shall be liable for the performance 

of the requirements in this subsection; 

(5) that the manufacturer or dealer or both 

shall take appropriate corrective action within 

a reasonable period of time in instances of 

defects in materials or workmanship, or 

failures to comply with the cade; 

(6) that the manufacturer and dealer shall be 

jointly and severally liable to the consumer 

for the fulfillment of the: terms of the mobile 

home warranty, except as provided in Part (4), 

Subsection (c) of this section, and that the 

consumer may notify either one or both of the 

need for appropriate corrective action in 

instances of defects of workmanship, or 

failures to comply with the code; 

(7) that the warranty contains the. address and 

telephone number of the dealer and manufactuber where notices of defects may be given. 

p. 2932 
The Honorable Jackie W. St. Clair. page 4 

As you state in your request for our opinion, questions have 

arisen regarding the nature and interpretation of these provisions. 

You suggest that clarification of these provisions by our office would 

be helpful to the industry in securing the required bonds. 

Your first question is: 

Section 13, subsection (a), states that all 

manufacturers, dealers and salespersons must 

file a performance bond annually. The bond form 

the Department is using is continuous and contains 

a clause to the effect that the aggregate liability 

of the Surety may not exceed the penalty stated 

in the bond. Is this a cumulative liability or 

would the maximum liability be limited to the 

penalty sum of the particular bond which 

covered the conduct that gave rise to the cause 

of action? 

If there is any discrepancy between the printed terms of the bond form 

and the requirements of the Act it would appear quite obvious that the 

Act will control and any bond given to fulfill its requirements will have to 

be interpreted to conform to the Act. 

The Act in section 13(a) provides that the bond shall be filed annually. 

This, coupled with the provision of section 13(c) that the bond “shall be 

open to successive claims up to the amount of face value,” would surely 

indicate an intent upon the part of the Legislature that bonds be filed 

annually, each with limits or “face value” as provided in section 13(e). 

It is our opinion that the liability under the bond would be limited to 

the total required during the period of the bond; i.e., during any one 

year the total liability on a bond issued to a dealer would be $25,000. to 

a manufacturer $100,000 and to a salesperson $2,000. 

Your second question is: 

Section 13, subsection (c), states that the bond 

may be used by a consumer. the state or a political 

subdivision who ‘establishes liability’ against a mobile 

p. 2933 
. 

. . 

. 

The Honorable Jackie W. St. Clair, page 5 

home dealer, manufacturer or salesperson. What 

is meant by establishing liability through a ‘cause 

of action’ connected with the sale or lease of a 

mobile home? 

Section 13(c), in our opinion, refers to a final judgment being entered 

against the principal on the bond through judicial process. 

Your third question is: 

If a valid claim or judgment is made in connection with a particular mobile home at a point in 

time after termination of the bond which covered 

the manufacture or sale of the mobile hbme. would 

there be liability under that bond or alternatively 

would there be liability under the bond in force at 

the time the loss occurred? 

Section 17(d) dealing with penalties, provides that a contract between 

a consumer and a mobile home salesperson, dealer or manufacturer, is 

voidable if there was no bond as required by the Act “at the time the 

contract was consummated. ” It is our opinion that this evidences a clear 

intent upon the part of the Legislature that the bond to which recourse 

may be had by the consumer or dh’ers is the bond which was in effect at the 

time the sale,was consummated, and not the bond in force at the time the 

loss occurred, although the two might be the same in some instances, if 

not in most. 

Your fourth question asks: 

What period of time must elapse after termination of the annual bond when a’claim may no longer 

be recovered under that bond? 

Since the answer to this question necessarily must turn on the terms 

of the contract of sale with the consumer and of any express warranty 

which may be given, it is impossible for us to give an answer. The extent 

to which a principal may limit his warranties as to duration is an involved 

question requiring the consideration of several statutes, both state and 

federal, as well as numerous court decisions. Without being exhaustive, 

p. 2934 
‘I 

The Honorable Jackie W. St. Clair. page 6 

we would direct your attention to chapters 2 and 17 of the Texas 

Business and Commerce Code and especially to sections 2.313 

through 2. 318, 2.607, 2. 719, 2.725; and 17. 50; to articles 5545 

and 5546, V. T. C. S.;. to the recentlyenacted Magnuson-MossWarrantyFederal Trade Commission Improvement Act, Public Law 93-637, 88 

Stat. 2138 (1975) to be codified as 15 U.S. C. section 2301; and to the 

following decisions: Sherwin Williams Company v. Perry Company, 

424 S. W. 2d 940 (Tex. Civ. App. --Austin 1968 writ ref’d. n. r. e3, 

431 S. W. 2d 310 (Tex. Sup. 1968); Griffin v. H. L. Peterson Company, 

427 S. W. 2d 140 (Tex. Civ. App. --Dallas 1968, no writ); John Desxe Company 

of Kansas City v. Tenberg, 445 S. W. 2d 40 (Tex. Civ. App. --Beaumont 

1969, no writ); Lankford v. Rogers Ford Sales, 478 S. W. 2d 248 (Tex. Civ. 

APP. --El Paso 1962, writ ref’d. n. r. e. ); Mobile Housing, Inc. v. Stone, 

490 S. W. 2d 611 (Tex. Civ. App. --Dallas 1973. no writ); &Ielody Home 

Manufacturing Company v. Morrison, 502 S. W. 2d 196 (Tex. Civ. App. -- 

Houston [lst Dist.] 1973, writ ref’d. n. r. e. ); Brown v. Young, 507 

S. W. 2d 600 (Tex. Civ. App. --El Paso 1974, no writ). 

Your fifth question asks: 

Section 14 requires that the mobile home 

warranty to the consumer provide for joint and 

several liability. If the surety has bonded only 

one of these parties, for example the dealer, 

would the surety be liable- under the bond for a 

violation of the statute by the party, e. g. manufacturer whom he had not bonded? 

- 

The provision to which you refer is found in subsection (c)(6) of 

section 14 of the Act and requires that the manufacturer and dealer “shall 

be jointly and severally liable to the consumer for the fulfillment of the 

terms of the mobile home warranty. ” 

It is conceivable that a bond might be issued fulfilling the bond requirements of section 13 as to both the manufacturer and one or more of its 

dealers. Your question, we assume, is directed, however, at a bond 

issued to only one principal. For example, if issued to a dealer, it will 

cover the liability of the dealer which will include defects built into the 

mobile home by the manufacturer for which the dealer is jointly liable 

p. 2935 
The Honorable Jackie W. St. Clair, page 7 

under section 14(c)(6). A bond issued to the manufacturer will, to 

a certain extent, cover faults resulting from failures of the dealer, 

but not all. It specifically will not be responsible for set-up and 

tie-down operations performed by a dealer [section 14(c)(4)]. Otherwise, the manufacturer will be responsible for the warranty of the 

dealer that the mobile homes comply with the code, that the homes 

and all appliances and other ‘equipment installed and included therein 

are free from defects in materials and workmanship, even if they 

were installed and included by the dealer and not the manufacturer, 

and that both the manufacturer and the dealer shall take appropriate 

corrective action within a reasonable time in instances of defective 

materials or workmanship or failure to comply with the code. 

On the other hand, there are other penalties assessed against a 

principal for which there is no joint liability and for which the surety 

of one would not be liable for the breach of the other. These would 

include civil penalties under section 17 of the Act. 

We would further call your attention to the obvious fact that both 

at common law and by agreement, the party secondarily liable may 

seek indemnification from the one primarily liable. For a discussion 

of this question, see Ford Motor Company v. Russell and Smith Ford 

Company, 474 S.Gd 549 (Tex. Civ.App. --Houston [14th Dist.] 1971, 

no writ). 

Your sixth question asks: 

If the original consumer-purchaser sells 

the mobile home to another within the warranty 

period applying to that mobile home, does the 

liability of the dealer and/or manufacturer and 

their respective sureties extend to the new 

consumer-purchaser? 

Section 13(c) provides that the bond shall be for the use of a consumer, 

the state or any polttical subdivision thereof who establishes liability. 

The Act, in section 3, defines a consumer to be “any person who seeks 

or acquires by purchase of lease a mobile home from a manufacturer, 

dealer or salesperson. ” Unless a person purchasing a mobile home can 

p. 2936 
r 

> 

. 

The Honorable Jackie W. St. Clair. page 8 

qualify under this definition, i. e., unless he acquires the mobile home 

from a manufacturer, dealer or a salesperson as defined, then we 

cannot see how he is an obligee under the bond, even though under the 

warranty provisions of the Act he may have a cause of action against 

the manufacturer, dealer or salesperson for breach of warranty. 

In answering these questions, we have done so based upon our 

construction of section 13 that the bond called for is not intended to 

replace or fulfill the functions of a liability insurance policy, and, 

thus would not pay losses established against the manufacturer, dealer 

or salesperson for personal injury as the result of negligence. 

We base this conclusion on language of section 13 referring to the 

bond both as a “performance bond” and as a “surety bond, ” language 

whi~ch certainly speaks more in the terms of suretyship than of liability 

insurance. 

The legislature, when it has wanted to require insurance has used 

that term. See e.g., art. 6701h. sec. 19, V. T. C.S. The Insurance 

Code, in discussing the jurisdiction of the Insurance Board over 

casualty insurance companies, speaks both in terms of insurance and 

surety bonds. Ins. Code. art. 5.13. 

Thus, even though the dealer or manufacturer may be liable, not 

only to the consumer, but to third persons for damages resulting from 

negligence in the manufacture or installation of a mobile home, we do 

not believe that it was the intent of the Legislature that the bond 

required by section 13 cover that liability except insofar as it grows 

out of the warranty of the manufacturer or dealer. In any event, the 

surety on the bond may minimize any such liability by requiring that 

its principal carry products liability insurance insuring against any 

such loss. 

SUMMARY 

With reference to the bond required by section 13 

of article 5221f. V. T. C. S., as amended in 1975: (11 the 

bonds are to be filed annually and liability on them is 

p. 2937 
The Honorable Jackie W. St. Clair. page 9 

to be limited to the stated penalty as a total for 

each year: (2) liability of the surety on the bond 

is fixed only when liability of the principal is 

established by a final judgment; (3) the bond in 

force during the period when the contract of 

sale is consummated for a particular mobile 

home is the bond against which any claim 

would be filed growing out of the sale of that 

home; (4) the period of time during which a 

claim may be filed against a bond after its termination depends on the contract of sale and 

the express warranty, subject to various 

statutory provisions; (5) to the extent that the 

manufacturer arrl dealer may each be liable 

in warranty for the derelictions dal the’~ otheY,:,the 

surety on the bond may also be liable: and 

(6) liability on the bond does not extend to 

purchasers from a consumer. 

/3(ery truly yours, 

Attorney General of Texas 

APPROVED: 

DAVID M. KENDALL, First Assistant 

ad 

C. ROBERT HEATH, Chairman 

Opinion Committee 

p. 2938