Opinion ID: 1757346
Heading Depth: 1
Heading Rank: 3

Heading: The Extent of the Bond Coverage

Text: Surety claims that it is only liable on its bond for violation of the Texas Mobile Homes Standards Act, and cannot be held liable for a violation by its principal of only the Deceptive Trade Practices Act. The liability of a surety on its bond is normally determined by the language of the bond itself. Harrison v. Barngrover, 118 S.W.2d 415 (Tex.Civ.App.Beaumont 1938, writ ref'd). In the present case the bond in pertinent part states: THAT WE, Mobile Market Homes , ... as (Dealer) PRINCIPAL, and Surety Corporation of America (Surety) as SURETY, duly authorized and qualified to do business as a surety company in this State, are firmly bound unto THE STATE OF TEXAS in the sum of $25,000.00 dollars payable at Austin, Travis County, Texas, for the use by a consumer, the State, or any political subdivision thereof who establishes liability against a dealer for damages, penalties, or expenses, including reasonable attorney's fees, resulting from a cause of action connected with the sale or lease of a mobile home, and for the payment of which, well and truly to be made, we bind ourselves,... jointly and severally, firmly by these presents. NOW, THEREFORE, the CONDITION OF THIS OBLIGATION is such that the PRINCIPAL shall faithfully discharge all obligations, duties and responsibilities under Sections 4, 5, 6, 7, and paragraph (b) of Section 8, and all other applicable sections of Article 5221f, VACS, and all amendments thereto, and all applicable rules and regulations of the Commissioner of the Texas Department of Labor and Standards adopted to carry out the provisions of Article 5221f, as amended. The first paragraph of the bond is taken from the Act itself. The second paragraph was recommended by the Texas Department of Labor and Standards. We construe the bond as a whole and the intent of the Legislature in requiring it. It is a statutory bond; and as such, the Texas Mobile Homes Standards Act is made part of the bond and is controlling regardless of the bond's language. Globe Indemnity Co. v. Barnes, 288 S.W. 121 (Tex. Com.App.1926, judgmt adopted). The Texas Mobile Homes Standards Act was first enacted in 1969. It was entitled: Uniform Standards Code for Mobile Homes. It was a limited act, passed to protect the consumer public by providing minimum standards for the manufacture and sale of mobile homes. It was amended in 1971 and in 1973. The 1971 amendments created the Performance Certification Board and dealt primarily with the inspection of mobile homes; they also changed the Act's name to the Mobile Homes Standards Act. Acts 1971, 62nd Legislature, ch. 896, p. 2765. The 1973 amendment added the sections dealing with tie-down standards, and provisions for inspections, fees, and penalties. Acts 1973, 63rd Legislature, ch. 606, p. 1673. The bonding provisions which are pertinent to this case were added in 1975. Acts 1975, 64th Legislature, ch. 674, p. 2036. In general the provisions require that each manufacturer, dealer and salesperson be bonded so as to insure compliance with the intent of the Act. [7] The bonding provisions were added as part of Senate Bill 397 which was authored by Senator Doggett and sponsored in the House by Representative Uher. [8] This bill added for the first time a declaration of purpose to the Act which states: ... to improve the general welfare and safety of the citizens of this state. The legislature finds that mobile homes have become a primary housing resource of many of the citizens of the state; that a growing awareness exists that many consumers are injured by unprincipled and dishonest members of the mobile home industry, that current warranties are deficient, that existing means of remedying these injustices are inadequate and do not provide a viable means for protecting the consumer, and that it is the responsibility of the state to provide for the protection of its citizens through the imposition of certain regulations on the mobile home industry. In recognition of these findings, the legislature deems it necessary to expand various regulatory powers to deal with these problems. The legislature finds this to be the most economical and efficient means of dealing with this problem and serving the public interest. Accordingly, this Act shall be liberally construed and applied to promote its underlying policies and purposes. [9] As stated above, section 13(a) requires bonds to be filed to insure compliance with the intent of this Act. Furthermore, section 13(f) states quite broadly that the bonds are to cover any deceptive act or misrepresentation connected with the sale or lease of a mobile home. [10] Read together these provisions provide a guide as to how the Act should be interpreted: 1. The bonds should insure compliance with the intent of the Act. 2. The bonds cover any cause of action connected with the sale or lease of a mobile home. 3. One of the stated purposes of the Act is to protect consumers who are injured by unprincipled and dishonest members of mobile home industry. 4. The Act is to be liberally construed to promote its stated purposes. In the present case the conclusion that coverage existed is inescapable. Howze was injured by an irresponsible mobile home dealer who, in connection with his purchase of a new mobile home, agreed to assume his liability for the traded-in mobile home, did not do so, and sold the traded-in mobile home to third parties. The dealer has since become unaccountable for his deceptive acts. This is precisely the situation which the Act was meant to cover, i. e., protecting the consumer from an irresponsible dealer. The language of the statute and its legislative history plainly indicate the intent that the bond was meant to cover deceptive acts such as the one perpetrated upon Howze. It is clear to us that the Legislature not only was aware of, but intended to make these bonding provisions cover more than just a breach of warranty. The consumer remedies available were not helpful when the defendant-dealer was either insolvent or unaccountable. This was the situation that the Legislature sought to cure by requiring bonds. Our conclusion is that these provisions are intended to cover deceptive acts and misrepresentations connected with the sale or lease of a mobile home, as the Act says, when these amounted to violations of the Texas Deceptive Trade Practices Act. We, therefore, reverse the judgments of the trial court and Court of Civil Appeals and render judgment that Surety is liable to Howze for the face amount of the bond.