OFFICE OF THE ATTORNEY GENERAL OF TEXAS 

AUSTIN 

Honorable D. C. Greer 

State El&way En&nesr 

Texas Highway Depsrtment 

Auetin, Texas 

Dear Sir: 

ju4gwnt in caum 

n the 98th Dirtrlot 

ik County, Texau, 

4ePont deN&aoure & 

laintitie .va. Brady 

J, Chairnan of the State 

CowmllrEtlon OS TsxfM, et 

ridante, and a relate4 

Tom Arohsr an4 

improvement an4 a oontraat was awarded to him for 

thle work on May 27, 1932. The oontraotor began 

work on July 18, 1932 but after perf'orming one montha 

work on thle contract he defaulted an4 a receiver wae 
505 

gon. D. C. Greer~, l’age 2 

appointed. This receiver proceeded with the rtifill&ant or this contract but at the request of 

the eurety company the reoelvsrship was dissolved 

and the surety oompany took over the oonetruot~on 

Or the project on Deoembsr 31, 1932. On or about. 

I;ay 4, 1933 t&e surety oompany defaulted an4 aft6ir 

having been given notloe by the Stats Highway Duv 

partmcmt to oomplat@ this projeot ati they tail&& 

to raaume work In l ooordanoe with the oontraot the 

State took over the completion of thla oontraot on 

N&J 13, 1933. To oomplete this oontraot the State 

NoalVs4 bids and awarded a oontraot to thr womaa)tHenning Construotlon Compsny for the remaining work. 

OR June 29, 1033. h’hlle the work as required by 

thlr oontraot was phpsioally oomplotod on Ootober 

10, 1935 the oontraot has not as of thlr data, been 

oomplrted duo to the iaOt that the State wlthheld 

frosmbnfae due ths oontraotor funds on aooount or 

labor and materials olalma having been illed with 

thr Department. 

“After paylag to the Womack-Henning Construotion Company the amount due thti far the oompletlon 

oi thin oontraot tha State now ho148 a balanae ai 

Ql,g+S.CS of the monies due the oontraotor on aoaount of this projeot. Rsoently &. I. DuPont Do 

Nemours and Company fllsd a suit agalnet the oontraotor, his surety oompany and the State Highway 

Department to establish a llan against the oontnctorr funds tbat wo now hold. on Novanber 3, 1943 

the Dirtrlct Judge of the 9Sth Dirtriot Court of 

Travla County’ entered a judgment against the OOOtraotor and the surety oonpany and the State Or 

Texas for the #1,835.44. The requirement6 of tbir 

ju4gmant are that the Stats of Texas pay into the 

iiegiatery of tha Court the funds of the oontraotor 

that it now holds to be distributed to the various 

persona who have filed and did establish In thi8 

oourt their claim ror labor $$.n4 mataridls in eonneotion with the oon8truotion 0r thir projeot. 

#hen the State Highway ComQiOaiOn raOOivO4 Oikrt%on 

in oonneotion with thir suit this iniOrlUEition was 
pk. D. C. Grew, Face 3 

passed to your ofilcs an4 your oifioe made a 

oonstruotire tendei of the $1,835.46 funds OS 

the oontraotor into the Flegirtary of tha Court. 

“In oonneotion with the $1.835.45 fun48 that 

the State now holds, It is our thought that this 

money is the property of the oontraotor ati 10 

bring hel4 In the Trraaurp althor to pay to him 

or to pay to olalmantr In the event that the olaim 

la eatabllsho4 In a oourt of oompeteat jurladiotlon, 

the Stats being maraly a ataka holdar of the8a runas, 

Vln quortion haa now been ralae4 as to *ether 

the aontraotora run48 oan be wlthdiuwn rrom the Stata 

Treasurer duo to tha oonatltutlonal provision tbat 

the Lsglalature baa authority to appropriate funds 

not lon(;er than two yeara. 

*The Leglalaturo every two years reapproprlatoa 

all State highway funds not previously expanded am 

roll as all new run46 oualug Into the Trearury an4 

it 18 our thought that all unexpm4ed funda ror oontraotual obligationa are reappropriated by the Leglalature eaoh two years for the payment o? tha State’s 

&~-stlonr on woh oontraot as well as otha obllga- 

. 

WArtiola 5472 (b) requlraa *that no pub110 

offlolal, wha 80 notlfie4 ln wrIti!&, #hall pay all 

of%ati monies bond or warrants 80 said oontraotor, 

btit shall ret& enough of asi4 W&88, bonds or 

warrants to pay oaid olalm, In 0866 it 18 l atablirhe4 

by ju4gmant in a court or proper jur1a4iotlon----*. 

Under thlr statute fund@ that were 4ua the oontraotor 

wern retained on account of the filing of labor and 

material claims an4 tha Stata would bare bean in 

violation of the statute6 had lt paid all tha monies 

to the oontraotor upon phyaleal omplrtlon of the 

work oallod ror by the v4ontraotor. -The State only 

now is $0 a position to lagally di~poae or tha funda 

or +b ocntraotor, a judgment having been rendered 

on November a, 1943 agalnrrt the aontraotor In favor 

of the Olalmants. It is %hWght that the state la 
Hon. D. C. Graer’, Page 4 

n_ot at thia time barred from the oompletion of 

Its oontraotual obligation. 

WSaotlon 0 0s Article VIII 0r the State 

Constitution provider that *no money shall be 

drawn from the Treasurer but in purauanor of the 

~peoIfie4 appropriation made by law; nor shell 

any qqropriatlon of money be 11~340 for a longer 

terma than two year+----*. 

“We would llkr an opinion from your ortioe 

as to whether or not funds are available for the 

payment of the balanoe or the funds due under thl8 ’ 

‘OontMot at this time. 

wArtiola 4SS7 provides that *no olati shall 

Abe pal4 from approprlatlona unleaa proa@nted to 

tha Comptroller for paymakt withln two yemra 0s 

the SlsOal yeara for whloh auah approprlati,on was 

m&e---- * , 

we ~~14 further like to have an opinion from 

your offloe as to whather or not the Stats la barred 

from making payments on aooo*unt of a oontraat wha% 

fund8 were held by the State on aooount Of the flllng 

of olal~ under Article 5478 (a) au4 (b) when payment 

00~14 not have been ~aa4e wdthln two year8 from the 

oloae of the fleaal year from whloh auoh appropriation 

was made duo to the fact that the claim had not been 

released or a~ judgmalt entered prior to this time. 

*For your Information thora la attaehed hereto 

a oopy of the judgmmt In Cause No. 68639 In the 98th 

Diatriot Court oi Travla County,’ Texar in the suit 

styled E. I. DeFont De Nemoure and Company et al. Vs. 

B&y y. tintry, Chairman of the State Highway CODDmlraion or Texas et al.* 

#e shall anawer both of your ques~tlona together a8 

the first question la speolflo an4 the asoond queetlon la merely a general one dealing with ths mame aubjeot matter. 
HOI%. J-ii. Creel', PsigS 5 

Ant% your lottar Ik18 set out In detail the provision8 of the Conrtltution and the Aatute8, we will not 

burden your tint8 by relteratlng the came herein. 

In the oa8e of Texae Colnpeny P. Sahriewer, 38 3. w. 

(Ed) 161, the Court hold that Art~ciee 5478a end 547Zb, Vermm'8 

tinnotated Civil iitatuter, gave nub-oontreator8, es well a8 geaera1 elmtraCor8, a 11~ oa money paid for public improve.aQnta. 

That Court III that oaoe further held that the tit&to Elghway Deportment in rlew of iirticle8 6078 to 6674, and nrtiole8 66140, 

66748, 66741 and 6694, hev8 8upervl8loa over the expenditure 

of hlghuay funds and that the State Reaeurer I8 merrly a 

depooltory of suoh fundr. 

It ha8 been held by the aourtr of Tara that all state 

hi&hwayr are under the oxolusl~o ooatrol and management of the 

Ytnte Blghwey Department. 

The Court held In the 0a8a ot Atkin V. Texar Highway 

Department, 801 3. W. i%6, that the Legirlature la deelerlng th5t 

all funds malag into tb head8 of the tjtete Blghwap Coaslr8lon 

derived iron ro@8tratIoa fee8 prerorlbed for motor vehloler, 

or froa nap other 8ouroe. shall bo deposited with the State 

Treasurer to a 8pealal aoaorurt de8igAated as the "State Highway 

Fund" aooount, and that 8srtlu I8 a valid approprfetlon, though 

not, bf oourse, 8peolfylng the ammats to be realized; 8imilar 

prorIslon8 for oontlngent amount.8 having long been reOW!iiZsd a8 

valid approprlatioar. 

ktia~le 4357, Vernon’8 j¬ated CIvIl Statutes, provider a8 Sollow8: 

** *'* No olalm shall be paid fiosl OQprOprietlona unle88 praaented to tke Oonptroller for paymnt within two (8) yeer8 from the olO8e o? the 

ilace year far whIoh such epWoprIatIon8 were made, 

but any alala not presented for payment within 8uoh 

period smy bs preeented to the Legl8leture a8 other 

al~ims tar which no appropriation8 ere l vall*ble.* 

* 5" 

In the ou8e of winder t&08. v. Sterling, 18 S. K. (Ed) 

127, the Court, on page UO, in dealing with lien olaiaentr r,im.i- 
IX=* 2. c. Crder, pug0 6 

i 

zdto these ao pirtles in the aaae presented ia your inquiry, 

:- 

CTho ~rorlslon for wlthholdlng Boney, warrants, l to., ror paymeat ,0r a olala 88 and wh8a 

redwad to judgznnt, wlth laak of requirement for 

Judfgant wlthla say given t&110, it i8 said, render8 

the statute IndePlalte. To this 18 added a ohrlrge 

of axbitrariLtO88 ia forOh$& th8 OOUtreOtOr t0 aWatt 

the plecIi.un of the oiaimat In respeot to time of 

juegmnt. ‘&a statuSe, however, but Paw8 a oaatueacy upoa time eoourreaoe in ad l pproprlato 

oa84 awneye, eta., become due and payable to the aoatraator, and for rhloh, OS noted, the part.ie8 to the 

aoatraot (by reference and inputation) stipalata. 88- 

aldee, no Teasoa 18 l g p a p afor yep*eoluaIn6 nt adjudi- 

.oatIon oi the okaita or its Ir&vaJ.idStr oa 1o1e of th8 

eontra&tor, It he becoa88 di88oti8fled with pxvorestlaatloa of tha Olal0sa:~,* 

da apia on pago 189, the Court Said; 

*+ + * ?baia(l the SUbjOOtS of ii&LB and ttm * 

OOOdltIO~S for their regI8tretloa ana l nforoemeat 

is a tamillar legI8latlre p0wer. We are glrea a0 

ratfaronoe to preoedentr (and wa know 0r none) against 

lnclu8ion 0r pub110 moneys aad SOO~itieS or tE8 

legI8latln('8overeIga, (a8 and whoa payable or deliverable to oontraotors, eta.) within the StAb3OOt 

mttor of llens deolsred for materialmen. meohanIor. 

l to. irncl when the Mea (in this ehuter-proriaed) - 

ottao&ea. t&a 0xODer8y to which it l ttaohes la thr, 

pr~r~W of the OOntreOtInR debt&r and WA or the 

state or muaialpal~ty. tlm latter being debtor 0Z that 

aebtor or baIlo8. eta. 00rr0x00, there is a0 ooatempt 

of the letter or spirit of Section 2W. artiolo 3. OS 

the Constitution, to whloh we a8eWDI oounsel Intsnded 

to refer.* 
In the ease oft Wepubllo Niatlonel Bunk an&'Trust ComWY v. YasBaohuOetts Bonding t fnsurenee Company, 68 Ted. (8d) 

d3, Honorable Judge Sibley of the Cirault Court of kppeals, in 

&lIng with the okso in which the surety oa the bond of th eontraaetor wna suing to recdl aoneys that had been paid out by the 

oity on tha RTOPOSea a*slgrrpLsnt 0s the aontraotor to a bank, before tba urriaavit about mentioned in proof 0s pay:wnt 0s all 

@lab8 hed beed -a., said in plain la~gurrg8 at pago 447, with 

nferenoo to that rbet sItuotIoA, a8 fOisOW88 

Wls (the sursty*a) equity originates in the 

agreement of the bltf and the contrmtor, relnrorcea 

by the aot 0s 1989 to the am8 errrot, thrt oertaln 

peroentages 0s the earsed papwmts uhall be remned 

for Y final payaent.ror the maurlty of th, olty and 

sumty, and equity treating this fund as a trprt will 

see to Its protectloadna appllaatloq, raoalling it ii 

f3iSappliad. This IS the hOart of tbs bill. Prairlo 

State fiatlonal Bank v. United States, l&d 0. S. Ic.27; 

Olader County v. Dotraft Fldallty k Surety Co., 57 F. 

(Ed) 449; pirat rational Baak v. lfdellty & Deposit 

$4 v. Claiborne Parrlrh bohool Board, 11 F. (zd) 

65 P. (8a) 9b9$ Fideiit~ Lh DepOSit CO. Of Lbp 

404.” 

In tb8 0~86 Of Jsaith t. TUB ciW&~~y, 33 8. W. (3d 

8t page 797, the Court said: 

1 774, 

"Senate 3iil 94~, kOt8 39th L8gISlaturO (lU3S) 

c. le6, P. 456 (Y.A.C.S. ( Arts. 6694a-6d74n) was *aaotoa by the amme LegiS&Gum whloh paarea krtieler 

547er ana 5470b. 

*It provides that the State shall retain 10% 0s 

the oontrpaet price tmtll the work htrr been aooepted, 

and it exm=eooly r0rbIas fIAal paywnt of tha retained 

SUm until it 18 shows that *all 8~8 of monel due for 

any labor, materills, or equIpmAt furnished for the 

purpoue Of SuOh iroprOvtiUiOAt8 sado under any Such aoatrvot have bOOA paid.* 

iat. dd7apl) . 

sad. 13 0s the ket (v.~.c.ii., 

It IS groper to ooaet~ue this xot 50 a 

;‘art 0s the lo@iletlon pravldlng for the lion In questlOA, 88 it rehte8 tQ the BeiM SUbdebt BurttaT and %?+a 

&Weed at the 8811, !I8selon JI the Lsgf81ature.m 
511 

nnd again nt the top of Pugh 777, the Court said: 

"It was the lnteiltion of the hglslature 

to enable those lurnlehlng L:bor, mterlal, eto. 

to a sub-oontraofor for any‘~ubLlo im2rove~nt 

to receive paymat theretor to the extent 0r any 

unpcrld balance due raid cub-oontreotor at the 

tlu@ notice required by 8tatute 18 given. 

Vie 6180 oonolube thht the ruin6 or the 

notloo wlth the stuto Highway CoPsef88lon *a8 a 

8triOt 0~3piianQe With the WOVl8iOn Or th8 8Ot, 

which r8qulre8 the 8.aa8 to be riled with the Orrloiel, whove duty it 1s to p&y the orlglnal oontractor. Ihinder i&08. v. sterling, ll0 Tex. 2bB, 

12 6. ik. (2d) 127, 14 Y. W. (2d) 808; !detropolltan 

La8ualty In8. Co. v. Chean8y, et al., (Tex.,Clv. 

..&I.) 92 a. n. (2d) 801; iseet Chicago Perk Com*r8. 

v. iiestern &mite Co., eoo Ill. 527, 66 I@. P. 37; 

JaUu38 p. iidi, ILlLO., ‘I.. Jer8ey City, 62 N. J. Ea. 

489, 60 n. 603. 

n. . * 

*all sonay deposlted to the oredlt Or the 

highway rUnd IS by the teXYII8 Of artiole 66740 

made subject to approgrlatlon ror tba 8;reOiriO 

purpoee 0r oaid iqrovetint or 8ald ay8tem or 

8tat.e hi&way8 by the highw8y d8partmant. 

"It thua a?pamr thnt the Legislature has 

eatabllshed a 4epart:snt and clotbed it with iull 

and complete authority to sake oontmat8 ror the 

is2roverpnnt of ekte hi5bwayS and created a epeoial 

fund out of which the ObligntlOa8 *de by such deptirt3xmt 8bU11 -be dlschiirged. 'i'he hlshway 000!3&8- 

slon ie charged with the duty or laying thee8 obllgationr from this epaoia]. fund. shea oonalderatlon 

is given to the sttrtutes ve8tlng control over design&ted stiite highway* in the atate hi&my ooml8- 

alon, and uuthorlzlng suoh body to oontmot and expmd fun%u eet ag~!irt for that purpose. it beeowe 

obvious that such dep0t:mnt is the cne whoee duty 
it 13 to pay oontnctora tar work perrome upon 

et&to highways. It is true that the 8tnte tredm-er 

actually pay8 outthe mcdy on depoelt to the oredit 

of the highway department, a8 is generally the oase 

ath au obligations izk&e by a 8tate de'partmnt ror 

ana on behdr 0r the stite. Ete does thi8, however, 

E;S a mre dlsburrrlog officer and on VoUOhsr8 issued 

and agi.~roved by a majority of the highway SoimIi8SlOlI. 

iie ha8 no di8OretiOn in paying olelms 0r oontrtsotorr 

when they are properly approved by the highway Oo!uniSslon. CertAnly suoh dlsoretlon wa8 intended to be 

lodged with the official Who80 duty it 18 to pay Orr 

and dl8oharge suoh obli~ation8. The Leglalrtture might 

kve nmde ~rovlslon for the 8paolal highway iund~to 

be deposited in 8oae prlviite banking institution. 

Ii it bud done 8o, stio~h bank would actually pay the 

vouchers iseuad by the hi&way departaent, but under 

such CirOWZStiMiCe8 it Could in ru) proper 8eD88 b8 0011- 

sldered the oiflolal whose duty it un8 to pay ooatraotor8 fur 8erViOe8 perromed Under th8ir oontract8." 

In the case of F. C. Crane v. Chue. C. Bellar, 195 

6. iii‘. (id) 167, the Court held that a materialman* aotlon to 

establish a llen on money8 due or to beooze due to a pub110 

eontroctor under the statute authoricing such a llsn on the 

riling or notice .i8 a specie8 0r "gsrnlrhnnnt;" Vernon*8 

iuxmtated .itatUte8, tirticle8 5150, 5372a, 547Eb, 6674~ 

By reason or the toregoing authorltle8, it is the 

opinion of this aepartinent that the Legiednture hn8 put the 

money ordered paid by the oourt in the judgwmt in the o&80 or 

Ii. I. duPor,t deNemour8 k, Company, et al, v. Brcidy P. tintry, 

Cholman of the ktute iii&may Comrslsslon, et al, beyond their 

rurttrer pox-er to reapproprlate the 8a:~. 

Th8 money retain66 by the Hlgharccy l;epartmnt on the 

original cmtruet, a8 uwae fsll due and becnse impounded by 

the filiug of oOtiOe8 by lien Ck.3iiWlt8, hje placed such fund8 

upon which such lien8 attached at the tii2.e 0r the riling 0r 

such notloee, out of the hands ot the Legiskture and the r;t,::e 

of Texes, an& said ;noney then 6eom5 the property of the aontruotlng debtur or hi8 8ub-oontraotor or lien o,laimant8 as the 
F 

513 

oourt may decree, and wae no l.onP,ar property of the .Xate, 

t& Litat& belag raer6ly a dobtot or debtor abovr ballee and 

8uoh money bocam ln law a trust fund held by the State offioia1.a Tar floe1 payment in acoordance with the judgwnt of 

the court in da 0aiU. We are, theretore, or the opinion 

tbt gha dlsburziemsnt oT euch fund8 at thla time in accordance 

with the judezent of the oourt in such aaae would not be in 

eontraventlon or drtlale 8, Section 5 or the Conatitutldn at 

‘PU~I, end, thereforr, Article 4357, 8ugra, would not epply. 

gusting that thl8 letter an8vmr8 your inquiries 

utlrfnctorily, we be6 to remain 

Your8 very truly