Court Opinion

ID: 4145144
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:53:24.295712+00
Date Added: 2024-06-11T14:29:20.226911
License: Public Domain

Hon. J. W. Calhoun           Opinion No. O-1268
Comptroller                  Re:   Method of final payment of
University  of Texas         contract price to Wood and Scur-
Austin, Texas                lock, Contractors    under contract
                             dated September 24, 1938--P.W.A.
Dear Sir:                    Docket 9107-F (Texas).

            Your letter     of August 10, requesting    an opinion from
this department and accompanied by correspondence          contained in
your file,     along with an executed copy of the contract between
the Board of Regents of the University         of Texas and Wood and
Scurlock,   Contractors,     a copy of the Contractor’s    Bond with
Standard Accident Insurance Company as surety, and complete
folder designated as ‘Specifications        for the Mechanical Con-
tract,   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 we un-
derstand    them, taken from the above documents:
           Under the above contract,      dated September 29, 1938,
     the project   specified    therein of constructing    and com-
     pleting   in every detail    a men’s dormitory     Unit No. 3
     for the University      of Texas, was complete h by Wood ani
     Scurlock,   Contractors,    with final payment under the con-
     tract yet to be paid said contractors.         Under date of
     May 29, 1939, the following       notice was received by you:
      ~~Comptroller
      University  of Texas
      Austin, .Texas         Attention:      Mr. C. D. Simmons
      Gentlemen,
      “We wish to advise that we have a balance due us
      for the tile and marble work installed  by us in the
      Men's Dormitory, Docket Te xas-9107F-1.
      “We request that when making settlement w.ith the
      general contractor,  have him present you with a state-
      ment paid in full from our office.
      “Thanking you very kindly,    we are
Hon. J. W. Calhoun, page 2        (O-1268)

      Yours very truly,
      TRAFIONTILE & MARBLECO.
      (Signed)  Forrest Trafton Mgr.‘!
Supplementing this letter  you were presented with a copy of an
l,nvolde showing the amount due by the contr.actors   to the Traf-
ton Tile & Marble Co. in the sum of $l,OOO.CO. The situation
stands at present with the contractors   demanding the balance
due under the contract less the $1 000.00 claimed by the Traf-
ton Tile & Marble Co. or an offer 1,y the contractors    to put up
a release bond as provided in Article   %72b-1, Vernon’s Anno-
tated Civil Statutes,  cumulative supplement, and receive the
entire retainage fund due by the University.     At this stage,
you request our advice as to the proper legal procedure to fol-
low.

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

             “Any person    or persons, firm or corporation,        enter-
      ing 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 sh ai 1 be required     before commencing such work to
      execute the usual~ Penai Bond, with the additional          o i liga-
      tlon that such contractor       shall promptly make payments to
      all persons supplying him or them with labor and materials
      in the prosecution     of the work provided for in such con-
      tract.    Any person, company, or corporation        who has furn-
      ished labor or materials used in the construction           or re-
      pair of any public building or public work, and payment
      for which has not been made, shall have the right to in-
      tervene and be made a party to any action instituted              by
      the State or any munlclpallty        on the bond of the contrac-
      tor, and to have their rights and claims adjudicated              in
      such action and judgment rendered thereon,          subject     how-
      ever, to the priority     of the claims and judgment o h the
      State or municipality.       If the full amount of the liabll-
      ity of the surety on said bond is insuffficient          to pay the
      full amount of said claims and demands then, after paying
      the full amount due the State or municipality            the remain-
      der shall be distributed       pro rata among said lntervenors.
      Provided further,     that all claims for labor and material
      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, and such 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 and the performance of said work.
     The County Clerk shall note on the mechanic’s lien
     record the name of the claimant, the amount claimed,
     the name of the contractor    and the name of the county,
     school district,   other subdivisions,  or municipality
     with which the contract was made; and the County
     Clerk shall index the claim under the name of the
     contractor   and under the name of the county, school
     district,  other subdivisions   or municipality; with
     which the contract was made.

            tlProvlde’d further that after completion     and ac-
     ceptance of completed prolject all moneys due contrac-
     tor under said contract      shall be held by the State or
     Its counties or school districts        or other subdivision
     thereof or any municipality       until such a time 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. any person,, firmor    Corporation9    or: trust,B
     estate,   furnishing   any material,   apparatus, fixtures,
     machinery or labor to any contractor        for any public im-
     provements In this state,      shall have a lien on the moneys,
     or bonds, or warrants, due or to become due to such con-
     tractors   for such improvements; provided,       such person,
     firm, corporation      or stock association,     shall,    before
     any payment is maie to such contractor,         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 estab i lshed
      by judgment in a court of proper jurisdiction.”
           Article    5472b--1,   Revised    Civil   Statutes,    1925, as amend-
ed, 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 Laws of, the.State  of Texas, passed by the
Hon. 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 may file 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 amount of
     the claims filed,       and shall be payable to the claimant or
     cl almant 9. It shaI.1 be executed by the party filing             same
     as principal        and by a corporate      surety authorized under
     the laws of !texas 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 amount of the claim or claims, ore such portion or
     portions      thereof as may be proved to have been liens,          un-
     der the terms of Chapter 17, General Laws of the State of
     Texas, passed by the Regular Session of the Thirty-ninth
     Legislature.        The filing   of said bond and Its approval
     by the proper official.        of the State, county      town or munl-
     clpallty       shall release and discharge all liens fixed or
     attempted to be fixed by the 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 by registered       mail an exact 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 may sue upon such bond but no action
     shall be brought on such bond after the exp 1ration of such
     period.     One action upon said -bond shall not exhaust the
     remedy thereon, but each obligee or assignee of an obligee
     named therein may malnta1n.a separate suit thereon In any
     court end in any jurisdiction.       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 amount for which claim was made
     the court shall fix a reasonable 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 One of
     this Act shall also be conditioned       that the principal  and
     surety will pay all court costs adjudged against the prln-
      cipal In actions brought by claimant or clalmants thereon.”
           The above statutes    pertlnent to the matters herein ln-
volved, being in existence when the contract In question was en-
tered into    same would be held’s part of such contract--Metropoll-
tan Casual t y Insurance Company vs. Cheaney, 55 S.W.(2d) 5%.
Hon. J. W. Calhoun,   page 5    (O-1268)

           In the case of 0. A. Durham Company vs. 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 end material on public works must be considered togeth-
er as In par1 materla In construing    any one of them,
           While the contract documents contain numerous provi-
sions affording   ample protection  to the parties and the language
of same is clear and unambiguous, 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 making fi-
nal payment of the contract price.
             It is evident that the surety bond of Wood and Scurlock,
Contractors,    meeting the requirements of Article      960,   supra
snures to the benefit of such person, firms or corporations           Chat
have claims for labor and material furnished to said contractors
and who comply 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 and labor are
furnished to said contractors.       It also provides that after com-
pletion   and acceptance of completed projects,      all moneys due con-
tractor   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     made bv the contractor    that all lust bll&
 for labor and material under this contract has been uald in RQ&
by the contract=.
            Prom the instruments submitted by you we presume that
the contractors    have not complied with the prov I slons of the afore-
mentioned statutes which clearly      makes it the statutory duty of a
public official    to require satisfactory     evidence to be submitted
and affidavit   made by the aontractor     that ell just bills    for labor
and material under the contract have been paid In full by the con-
tractor  before releasing    any retalnage funds payable under the con-
tract.   Correlating   this statutory    provision,   we find the following
paragraph, a part of the general conditions         of the contract:
             “Art. 26.  Payments Withheld.--The   Architect    may with-
      hold or, on account of subsequently discovered       evidence,
      nullify   the whole or a part of any certificate     to such extent
      as may be necessary to protect    the Owner from loss on account
      of:
Hon. J. W. Calhoun,   page 6   (O-1268)

     “(a)    Defective  work not remedied.
     “(b)    Claims filed or reasonable evidence indlcat-
             lng probable filing  of claims.
     l’(c)   Failure of the Contractor to make payments
             properly to subcontractors    or for material
             or labor.
     “(d)    A reasonable doubt that the contract can be
             completed for the balance then unpaid.
     “(e)    Damage to another Contractor.
          “When the above grounds are removed payment shall      be
     made for amounts withheld 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 un-
der the authorities   reviewed    no prior or greater rights are
given one claimant who has g I ven statutory notice over other
claimants who have not, yet may be entitled      to some portion 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
!$+72a and 54$2b need ‘not be filed with the proper official    before
payment of any money to the contractor     in order to fix lien on
fund due him. To the same effect,    certified    question was answer-
ed by the Commission of Appeals, in Huddleston and Work, et al,
vs. .Kennedy, et al, 53 S.W.(2d) 1009.
             The statutes do not provide for any specific time in
which written notice of labor and material claims shall be given
the officials    whose duty it is to pay a public works contractor.
From the case of Franklin Brothers vs. Standard Manufacturing
Company, 78 S.W.(2d) 294, by the Austin Court of Civil Appeals,
we quote:
           II*** In this circumstance a reasonable time after
     the completion and acceptance of the public’ works pro-
     ject will be implied and allowed for giving such notice.
     That this should be the rule Is apparent when these stat-
     utes are considered with article     5160, supra, which re-
     quires the state to hold all money due the contractor
      wafter completion and acceptance of completed project
     *** until such a time that satisfactory     evidence is
     submitted and affidavits    made by the contractor   that all
     just bills    for labor and material *** have been paid in
     full. ’ This statute does not make notice prerequisite
     to the duty of the state t,o withhold money due the con-
     tractor   after the completion and acceptance of the work,
Hon. J. W.   Calhoun, page 7     (O-1268)

     and to require satisfactory       proof and affidavit  that
     all labor and material claims have been paid.         It
     further provides      ‘that all claims for labor and mater-
     ial *** shall be itemized and sworn to 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 and the
     performance of said work.’        The mechanic’s lien stat-
     utes referred    to (article    5452 and art. 5453, as amend-
     ed 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.         Ap-
     pellee fully complied with the requirements of the reg-
     istration   statutes.
            I’*** It was agreed that neither the state nor any
     of Its agents, after the completion and acceptance of
     the construction       work, and before payment of the re-
     tainage fund to the contractor,          secured from the con-
     tractor    satisfactory    proof and affidavits     that all claims
     for labor and material had been paid In full            as required
     by article     5160, and In consequence of this &each of
     duty the state Is liable        to appellee for the amount of
     the retainage fund.        And since the contract Imposed the
     same duty with regard to retaining          the fund until satls-
     factory proof was made that all labor and material claims
     had been paid, no necessity        exists for a determination     of
     such contract liability        of the state; nor for a determi-
     nation of the question of whether any notice 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      evi-
dence and affidavits      made by him that all just bills       for labor and
material under the oontract has i een paid in full by the contractor.
Article    5472a provides that when a claim Is filed under such artl-
cle no public official      shall pay all of said moneys due said con-
tractor’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 and affidavits      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 amount of the claim with a small sum In addition for contingen-
cies and pay to Wood & Scurlock,        Contractors,   the remainder.
            It is further our opinion that where a portion         of the re-
tainage   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 pro-
visions   of Article $t72b--1  Revised Civil statutes, 1925, as
amended, and be 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,    we further respect-
fully advise that this department Is unable to sanction or specl-
fically  answer any one or all of the propositions     Number 2, 3 and
4 outlined in the third paragraph on page 2 of 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,   we remain
                                     Yours very truly
                                     ATTORNEY
                                            GENERAL
                                                  OF TEXAS
                                     By /s/ Wm. J. R. King
                                     Wm. J. R. Klng,~ Assistant

APPROVED  AUG25, 1939
/s/ Gerald C. Mann
ATTORNEY  GENERALOF TEXAS
APPROVED:;X’&NIg;A;zT”
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