Court Opinion

ID: 4131874
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:20:30.92443+00
Date Added: 2024-06-11T14:33:31.843017
License: Public Domain

The Attorney                  General of Texas
                                             June     4,   1980
MARK WHITE
Attorney General

                   Honorable Warren G. Harding                    Opinion No.     NW-187
                   State Treasurer
                   P. 0. Box 12608, Capitol Station               Re: Whether       the     distributor’s
                   Austin, Texas 78711                            cigarette    tax   surety     bond is
                                                                  ineffective    on receipt        of     a
                                                                  cancellation notice.

                   Dear Mr. Harding:

                          You ask for an interpretation   of a Distributor’s Cigarette Tax Surety
                   Bond. Payment of the cigarette tax required by article 7.02, Taxation-
                   General, is evidenced by stamps purchased from the Treasurer and affixed to
                   each package of cigarettes.      Tax.-Gen. art. ‘7.02(2). The distributor must
                   file a surety bond with the State Treasurer conditioned upon payment in full
                   for the stamps or meter settings within the time specified by statute. Tax.-
                   Gen. art. 7.08(S).

                          You inform us that a bonding company sent a cancellation notice
                   stating the date they wished to be released from further liability on the
                   bond.    You ask whether the bonding company will be responsible for
                   purchases of stamps made after the cancellation date it specified if the
                   State Treasury Department wishes to continue the bond past that date.

                          You have submitted a copy of the cancellation notice and the bond
                   form.    The answer to your question depends on an interpretation       of the
                   provisions of the bond form. Bonds are construed in accordance with the
                   rules governing the construction of written contracts.       Crane County v.
                   Bates, SO S.W.2d 243 (Tex. 1936). The Treasurer may cancel the bond for
                   failure of the distributor to comply with article 7.08(g) Taxation-General
                   and all rules and regulations promulgated thereunder.           The following
                   provision from the bond in question relates to cancellation by the surety.

                              The Surety on this bond shall be released and
                              discharged from any end all liability accruing under
                              this bond by written request to the State Treasurer of
                              Texas, provided, however that such request shall not
                              operate to relieve, or release or discharge such surety
                              from any liability already accrued or which may
                              accrue until request is granted by the State Treasurer
                              of Texas.

                                                      P.   597
Honorable Warren G. Harding - Page Two          (HW-187)

      In our opinion, this provision clearly states that the surety is subject to liabilities
which accrue until his request is granted by the Treasurer.    Although the first clause of
the sentence states that the surety shall be released, this must be read together with the
proviso, which conditions release on the granting of the surety request by the Treasurer.
See University Interscholastic    League v. Midwestern University, 255 S.W.2d 177 (Tex.
1953) (contract must be construed as a whole). We believe the State Treasury Department
may continue the bond past the specified cancellation date so that the bonding company
remains responsible for purchases of stamps after that date until the Department grants
the request for cancellation.

       We believe the parties may validly enter into such an agreement.          The quoted
provision effectively  permits termination by mutual consent on the instigation of the
surety. Even a provision which allows only one party an option to terminate is permissible
where supported by sufficient consideration.     Thomas v. Western Indemnity Co., 246 S.W.
345 (Tex. 1922). We do not believe the termination provision is invalid. However, in order
to render it meaningful, we believe the Treasury Department must terminate within a
reasonable time and not withhold its consent and extend the surety’s liability indefinitely.
See Pace Corp. v. Jackson, 275 S.W.2d 849 (Tex. Civ. App. - Austin), mod. on other
Funds,    284 S.W.2d 340 (Tex. 1955) (law implies a reasonable time for performance).

                                       SUMMARY

           The surety cn the Distributor’s      Cigarette   Tax Surety Bond
           presented for our consideration remains liable for purchases of
           stamps made until the time his request for cancellation is accepted
           by the State Treasury Department provided the Treasury Depart-
           ment &es not withhold its consent for an unreasonable length of
           time.

                                              Very truly yours,
                                                                     .
                                                                   Y-7

                                           24 MARK     WHITE
                                              Attorney General of Texas

JOHN W. FAINTER, JR.
First Assistant Attorney General

TED L. HARTLEY
Executive Assistant Attorney General

                                               p.   598
Honorable Warren G. Harding - Page Three    (MW-187)

Prepared by Susan Garrison
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

C. Robert Heath, Chairman
Bill Campbell
Susan Garrison
Rick Gilpin
Myra McDaniel

                                           P.   599