Hon. J. W.Calhoun

Comptroller University of Texas Austin, Texas

Dear Sir: Opinion No. O-1268 Re: Method of final payment of contract price to Woodand Scurlock, Contractors under contract dated September 24, 1938--P.W.A. Docket 9107-F (Texas).

Your letter of August 10, requesting an opinion from this department andaccompanied by correspondence contained in your file, along with an executed copy of the contract between the Board of Regents of the University of Texas andWoodand Scurlock, Contractors, a copy of the Contractor’s Bondwith Standard Accident Insurance Companyas surety, and complete folder designated as ‘Specifications for the Mechanical Contract, Men’s Dormitory Building, Unit 3, University of Texas”

, with the latter containing the contract documents which compose the contract above mentioned, has received our attention.

The following are substantially the facts as weunderstand them, taken from the above documents:

Under the above contract, dated September 29, 1938, the project specified therein of constructing and completing in every detail a men’s dormitory hUnit No. 3 for the University of Texas, was complete byWoodani Scurlock, Contractors, with final payment under the contract yet to be paid said contractors. Underdate of May29, 1939, the following notice was received by you: ~~Comptroller University of Texas Austin, .Texas Attention: Mr. C. D. Simmons
Gentlemen,

“Wewish to advise that wehave a balance dueus for the tile andmarble work installed byus in the Men's Dormitory, Docket Texas-9107F-1.

“Werequest that whenmaking settlement w.ith the general contractor, have himpresent youwith a statement paid in full from our office.

“Thanking you very kindly, we areHon. J. W.Calhoun, page 2 (O-1268)

Yours very truly, TRAFION

TILE&MARBLE

CO. (Signed) Forrest Trafton Mgr.‘! Supplementing this letter you were presented with a copy of an l,nvolde showing the amountdue by the contr.actors to the Trafton Tile &Marble Co. in the sumof $l,OOO.CO. The situation stands at present with the contractors demanding the balance due under the contract less the $11, 000.00 ton Tile &Marble Co. or anoffer claimed by the Trafy the contractors to put up a release bond as provided in Article %72b-1, Vernon’s Annotated Civil Statutes, cumulative supplement, andreceive the entire retainage fund due by the University. At this stage, you request our advice as to the proper legal procedure to follow.

provides: Article 5l60, Revised Civil Statutes, 1925, as amended,

“Anyperson or persons, firm or corporation, entering into a formai contract with this State or its counties
or school districts or other subdivisions thereof or any municipality therein for the construction of any public building or the prosecution and completion of any,public work shai1 be required before commencing suchwork ai i to execute the usual~Pen Bond, with the additional oligatlon that such contractor shall promptly makepayments to all persons supplying himor themwith labor and materials in the prosecution of the work provided for in such contract. Anyperson, company, or corporation whohas furnished labor or materials used in the construction or repair of any public building or public work, andpayment for which has not been made, shall have the right to intervene andbe madeaparty to any action instituted by the State or anymunlclpallty on the bond of the contractor, and to have their rights and claims adjudicated in such action andjudgment rendered thereon, subject hhowever, to the priority of the claims andjudgment o the State or municipality. If the full amountof the liabllity of the surety on said bond is insuffficient to pay the full amountof said claims and demands then, after paying the full amountdue the State or municipality the remainder shall be distributed pro rata amongsaid lntervenors. Provided further, that all claims for labor andmaterial furnished to said contractor, and all claims for labor and material furnished to any contractor shall be itemized and sworn to as required by statutes as to mechanic’s lien claims, andsuch claims shall be filed with the County Clerk of the County, in which said work is being prosecuted,Hon. J. W.Calhoun, page 3 (O-1268)

within ninety days from the date of the delivery of said material andthe performance of said work. TheCounty Clerk shall note on the mechanic’s lien record the nameof the claimant, the amount claimed, the nameof the contractor andthe nameof the county, school district, other subdivisions, or municipality with which the contract was made; and the County Clerk shall index the claim under the nameof the contractor andunder the nameof the county, school district, other subdivisions or municipality; with which the contract was made.

tlProvlde’d further that after completion and acceptance of completed prolject all moneys due contractor under said contract shall be held by the State or Its counties or school districts or other subdivision thereof or any municipality until such atime that satisfactory evidence is submitted and affidavits made by the contractor that all just bills for labor and material under this contract has been paid In full by the contractor

.‘I

Article %72a and Article 5472b, Revised Civil Statutes, 1925, provide :

“That. anyperson,, firmor Corporation9 or:trust,B estate, furnishing any material, apparatus, fixtures, machinery or labor to any contractor for any public improvements In this state, shall have a lien on the moneys, or bonds, or warrants, due or to become due to such contractors for such improvements; provided, such person, firm, corporation anypayment is maieor stock association, to such contractor, shall, before notify in writing the officials of the State, county, town or municipality whose duty it is to pay such contractor of his claim.”

“That no public official, when so notified in writing, shall pay all of said moneys, bonds; or warrants, due said contractor, but shall retain enough of said moneys bonds,

or warrants to pay said claim, in case It Is estabilshed byjudgment in a court of proper jurisdiction.”

Article 5472b--1, Revised Civil Statutes, 1925, as amended, provides:

“Section 1. That whenever any claim or claims shall be filed attempting to fix a lien, secured or claimed by any instrument filed under the provisions of Chapter 17, of the General Lawsof, the.State of Texas, passed bytheHon. J. W. Calhoun, page 4 (O-1268)

Thirty-ninth Legislature In Regular Session, that the contractor or contractors against vhom,such claim or claims are made mayfile a bond with the officials of the State, coo&y, town or municipality whose duty it 1s to pay the moneys, bonds or’warrants to such contractor
or contractors. Said bond shall be double the amountof the claims filed, and shall be payable to the claimant or clalmant9. It shaI.1be executed by the party filing same as principal !t andby a corporate surety authorized under the laws of exas to execute such bond as surety, and shall be conditioned substantially that the principal and surety will pay to the obligees named, or their assigns, the amountof the claim or claims, oresuch portion or portions thereof as maybe proved to have been liens, under the terms of Chapter 17, General Lawsof the State of Texas, passed by the Regular Session of the Thirty-ninth Legislature. Thefiling of said bond andIts approval by the proper official. of the State, county town or munlclpallty shall release and discharge all liens fixed or attempted to be fixed bythe piling of said claim or claims, and the official or officials whose duty it is to pay the moneys, bonds or warrants shall pay or deliver the same to the contractor or contractors or their assigns. Said official shall send byregistered mail anexact copy of said bond to .a11 claimants.

ttSec. 2. At any time within six months from the date. of filing of said surety bond, the party making or holding such claim or claims maysue upon such bond but no action shall be brought on such bond after the exp ration of such 1 period. Oneaction upon said -bond shall not exhaust the remedy thereon, but each obligee or assignee of an obligee namedtherein maymalnta1n.a separate suit thereon In any court end in anyjurisdiction. If any claimant or claimants in an action establish the fact that they vere entitled to
a lien under the provisions of Chapter 17 of the General Laws of the State of Texas, passed at the Regular Session of the Thirty-ninth Legislature, and shall recover judgment for not less than the full amountfor which claim was made the court shall fix areasonable attorney’s fee in favor o1 the claimant or claimants, which shall be taxed as part of the costs In the case. The bond provided In Section Oneof this Act shall also be conditioned that the principal and surety will pay all court costs adjudged against the prlncipal In actions brought by claimant or clalmants thereon.”

The above statutes pertlnent to the matters herein lnvolved, being in existence w henthe contract In question was entered intot samewould beheld’s part of such contract--Metropolltan Casual y Insurance Companyvs. Cheaney, 55 S.W.(2d) 5%.Hon. J. W.Calhoun, page 

### 5 (O-1268)

In the case of 0. A. DurhamCompanyvs. McKee, et al, (C.C.App.) 57 S.W.(2d) 1132, writ refused the court referring In its opinion to Articles 5160, $72a, &72b, %72b--1, above quoted, held that such statutes enacted to protect furnishers of labor endmaterial on public works must be considered together as In par1 materla In construing any one of them,

While the contract documents contain numerous provisions affording ample protection to the parties and the language of sameis clear andunambiguous, yet where such clauses conflict with the above statutes as to rights and duties, such statutes should be followed. It appears that all of the above quoted statutes have been construed by our courts, thereby furnishing ample legal authority for proceeding in the matter of makingfinal payment of the contract price.

It is evident that the surety bond of WoodandScurlock, Contractors, meeting the requirements of Article 960, supra snures to the benefit of such person, firms or corporations Chat have claims for labor andmaterial furnished to said contractors andwhocomply with Its provisions. It will be noted that this Article requires that all such claims shall be filed with the County Clerk of the county in which the work is being prosecuted, within ninety (90) days from the date such material andlabor are furnished to said contractors. It also provides that after completion and acceptance of completed projects, all moneys due contractor under said contract shall be held bv the State or its
m or school districts or other subdivisionthereof or u l?&PlC~D~ltY ‘a&d such a me that satlsfactorv evidence Is &- mitted and affidavits madebv the contractor that all lust bll& for labor andmaterial under this contract has been uald in RQ& by the contract=.

Promthe instruments submitted byyou wepresume that the contractors have not complied with the provIslons of the aforementioned statutes which clearly makes it the statutory duty of a public official to require satisfactory evidence to be submitted and affidavit madeby the aontractor that ell just bills for labor andmaterial under the contract have been paid In full by the contractor before releasing any retalnage funds payable under the contract. Correlating this statutory provision, we find the following paragraph, apart of the general conditions of the contract:

“Art. 26. Payments Withheld.--The Architect maywithhold or, on account of subsequently discovered evidence, nullify the whole or a part of any certificate to such extent
as maybe necessary to protect the Ownerfrom loss on account of:Hon. J. W. Calhoun, page 6 (O-1268)

“(a) Defective work not remedied.

“(b) Claims filed or reasonable evidence indlcatlng probable filing of claims. l’(c) Failure of the Contractor to makepayments properly to subcontractors or for material

or labor.

“(d) Areasonable doubt that the contract can be completed for the balance then unpaid.

“(e) Damageto another Contractor.

“Whenthe above grounds are removed payment shall be madefor amountswithheld because of them.”

In the matter of final payment to the contractors by the University, with particular reference to the notice received and claim of the Trafton Tile &Marble Co., it appears that under the authorities reviewed no prior or greater rights are given one claimant whohas gIven statutory notice over other claimants whohave not, yet maybe entitled to someportion of the retalnage fund on hand.

In the case of Smith VS. Texas Company(Comm.App.) 53 S.W.(2d) 774 it was held that the notice provided In Articles !$+72aand 54$2b need ‘not be filed with the proper official before payment of any moneyto the contractor in order to fix lien on fund due him. To the sameeffect, certified question was answeredby the Commission of Appeals, in Huddleston andWork, et al,
vs. .Kennedy, et al, 53 S.W.(2d) 1009.

The statutes donot provide for any specific time in which written notice of labor andmaterial claims shall be given the officials whose duty it is to pay a public works contractor. Fromthe case of Franklin Brothers vs. Standard Manufacturing Company, 78 S.W.(2d) 294, by the Austin Court of Civil Appeals,
wequote:

II*** In this circumstance a reasonable time after the completion and acceptance of the public’ works project will be implied andallowed for giving such notice. That this should be the rule Is apparent when these statutes are considered with article 5160, supra, which requires the state to hold all moneyduethe contractor wafter completion andacceptance of completed project *** until such atime that satisfactory evidence is submitted andaffidavits madeby the contractor that all just bills for labor andmaterial *** have been paid in full. ’ This statute does not makenotice prerequisite to the duty of the state t,owithhold moneydue the contractor after the completion andacceptance of the work,Hon. J. W. Calhoun, page 7 (O-1268)

andto require satisfactory proof andaffidavit that all labor andmaterial claims have been paid. It further provides ‘that all claims for labor andmaterial *** shall be itemized and swornto as required by Statutes as to mechanic’s lien claims, and such claims shall be filed vith the County Clerk of the County, in which said work is being prosecuted, within ninety days from the date of the delivery of said material andthe performance of said work.’ Themechanic’s lien statutes referred to (article 5452 andart. 5453, as amended by Acts 1929 c. 478, sec. 1 (Vernon’s Ann.Civ.St. art; 54533)provide that the sworn Itemized account of materiel furnished shall be filed with the county clerk within ninety days after the indebtedne~ss accrues. Appellee fully complied with the requirements of the registration statutes.

I’*** It was agreed that neither the state nor any of Its agents, after the completion and acceptance of the construction work, andbefore payment of the retainage fund to the contractor, secured from the contractor satisfactory proof and affidavits that all claims for labor and material hadbeen paid In full as required by article 5160, and In consequence of this &each of duty the state Is liable to appellee for the amountof the retainage fund. Andsince the contract Imposed the
sameduty with regard to retaining the fund until satlsfactory proof was madethat all labor andmaterial claims had been paid, nonecessity exists for a determination of such contract liability of the state; nor for a determination of the question of whether anynotice of appellee’s claim was necessary to fix the contract liability.”

In answer to your request you are respectfully advised that you should require the contractor to furnish satisfactory evidence andaffidavits madebyhim that all just bills for labor and material under the oontract has ieen paid in full by the contractor. Article 5472a provides that whena claim Is filed under such artlcle no public official shall pay all of said moneys due said contractor’but shall retain enough of said moneys to pay said claim. Therefore, if the contractors comply with the requirements of the statute as to furnishing satisfactory evidence andaffidavits that all just claims have been paid except that of the Tile Company, the University should retain enough to pay that claim that IS, the amountof the claim with a small sumIn addition for contingencies andpay to Wood&Scurlock, Contractors, the remainder.

It is further ouropinion that where aportion of the retainage fund or balance of the contract price withheld, Is charged. . ,

Hon. J. W. Calhoun, page 8 (O-1268)

by statutory notice with the claim by a subcontractor, the general contractors have a right to furnish a release bond under the visions of Article $t72b--1 Revised Civil statutes, 1925, asproamended, andbe paid said claimed portion along vith the balance of the retainage fund, provided the evidence is satisfactory that there are.no other claimants to the retainage fund.

In connection with the foregoing, wefurther respectfully advise that this department Is unable to sanction or speclfically answer any one or all of the propositions Number2, 3 and 4 outlined in the third paragraph on page 2of your letter same being questions controlled by facts directly bearing upon Che proof to be submitted by the contractors under the contract and statutes quoted herein, upon which we are unable to pass.

Trusting the above answers your request, weremain

Yours very truly

ATTORNEY

GENERAL

OFTEXAS By/s/ Wm.J. R. King Wm.J. R. Klng,~Assistant

APPROVED

AUG25, 1939 /s/ Gerald C. Mann ATTORNEY

GENERAL

OFTEXAS

APPROVED:

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