Court Opinion

ID: 4132567
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:28:05.109724+00
Date Added: 2024-06-11T14:06:59.164216
License: Public Domain

The Honorable James Ii.Harwell       Opinion No. ~-813,
Executive Director
Texas Industrial Commission          Re: Contractors' perfor-
814 Sam HoustoriState Office Bldg.   mance and payment bonds
Austin, Texas 78711                  required under articles
                                     5160 and 5472a, V.T.C.S.
Dear   Mr. Harwell:
     you have requested our opinion regarding the applicability
of article 5160, V.T.C.S., to contracts not in excess of
$15,000. The statute provides:
               A.  Any person or persons, firm, or
            corporation, hereinafter referred to as
            "prime contractor," entering into a formal
            contract in excess of $15,000 with this
            State, any department, board or agency
            thereof; or any county of this State,
            department, board or agency thereof: or
            any municipality of this State, department,
            board, or agency thereof: or any school
            district in this State, common or independent,
            or subdivision thereof: or any other governmental
            or quasi-governmental authority, whether
            specifically named herein or not, authorized
            under any law of this State, general or
            local, to enter into contractual agreements
            for the construction, alteration or repair of
            any public building or the prosecution or
            completion of any public work, shall be
            required before commencing such work to
            execute to the aforementioned governmental
            authority or authorities, as the case may
            be, the statutory bonds as hereinafter
            prescribed. Each such bond shall be executed
            by a corporate surety or corporate sureties

                            p.3431
The Honorable James H. Harwell - page 2 (H-813)

          duly authorized to do business in this State.
          In the case of contracts of the State or a
          department, board, or agency thereof, the afore-
          said bonds shall be payable to the State and shall
          be approved by the Attorney General as to form.
          In case of all other contracts subject to this
          Act, the bonds shall be payable to the govern-
          mental awarding authority concerned, and shall
          be approved by it as to form. Any bond
          furnished by any prime contractor in an
          attempted compliance with this Act shall be
          treated and construed as in conformity with
          the requirements of this Act as to rights
          created, limitations thereon, and remedies
          provided.
             (a) A Performance Bond in the amount
          of the contract conditioned upon the faithful
          performance of the work in accordance with the
          plans, specifications, and contract documents.
          Said bond shall be solely for the protection
          of the State or the governmental authority
          awarding the contract, as the case may be.
              (b) A Payment Bond, in the amount of the
          contract, solely for the protection of all
          claimants supplying labor and material as
          hereinafter defined, in the prosecution of the
          work provided for in said contract, for the use
          of each such claimant.

Between 1959 and its amendment in 1975, the statute required
bonds for any contract in excess of $2000. Prior to 1959,
performance and payment bonds were mandatory for all public
contracts, without regard to their amount. you ask whether
the "prime contractor" may be required by the contracting
governmental authority to execute any bond for contracts not
in excess of $15,000.
     The principal argument against the applicability of
article 5160 to contracts under $15,000 is the statute's
failure to require bonds for such contracts. It appears to
be settled, however, that a contracting governmental authority
may on its own initiative require a contractor to post bond
even in the absence of statute. In Mosher Manufacturing Co.

                           p.3432
. .

      The Honorable James H. Harwell   - page 3   (H-813)

      V. Equitable Surety Co., 229 S.W. 318 (Tex. Sup. 1921), the
      contract at issue hameen   negotiated prior to the effective
      date of the statute requiring-contractor bonds.  Nevertheless,
      the court held that
                independent of any statute, a municipality
                which has the power to contract for the
                construction of public,buildings has the
                implied authority to bind the contractors
                to pay the claims.of materialmen and
                laborers. . . . &,    at 320.
      As the court stated in N.O. Nelson Co. v. Ste henson
      S.W. 61 (Tex. Civ. App.TSan    Anto=       , wr t ref'd),
                                             ml a-+---'     168 the
      effect of the statute was to require a contractor to give
      bond. But prior to the statute, the contracting authority had
      the option of requiring bond. -Id., at 62.
            If the contracting authority requires a bond when one is
       not required by statute, the bond is to be construed as a
       common-law obligation
       of New York v. Texas sa/m             ~S%%an~,%2
      -EerCiv.Az.      -- Wax934,    writiem'd).     AS such, it is
       not subject to the provisions of article 5160, but depends
       rather upon the terms of the bond itself. Johnson Service
       Co. v!fCinbar Engineering 5,   409 S.W.Zd 4m473-4.
       civ. App. -- Austin 1966, no writ). C.f. United Tile Co.
       v. Kermit Independent School DistrictT3~dm             [Tex.
       Ev. App. -- El Paso l-writ      ref’d  n.r.e.).
            The other argument against permitting the contracting
       governmental authority to require bonds on contracts of less
       than $15,000 is the existence of article 5472a, V.T.C.S. It
       has been established that article 5160 is in pari materia
       with article 5472a, and that the two statu=s must be construed
       together. C.A. Dunham Co. v. McKee, 57 S.W.Zd 1132, 1135
        (Tex. Civ. E   -- El Paso n33,writ   ref'd); Trinity
       Universal Insurance Co. v.
       7Tex. Civ. App. --
       provides, in-pertinent part:

                                  p.3433
The Honorable James H. Harwell - page 4 (H-813)

          Any person, firm, corporation, or trust
          estate, furnishing any material,  apparatus,
          fixtures,  machinery, or labor to any
          contractor under a prime contract where
          such prime contract does not exceed the sum
          of $15,000 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 contractor for such improvements
          provided such person, firm, corporation,
          trust estate, or stock association shall before
          any payment is made 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, such written notice
          to provide and be given within the prescribed
           time as follows. . . .
The historical development of article 5472a closely parallels
that of article 5160. Prior to 1959, a lien under article
5472a was authorized on all public contracts. From 1959
until 1975, the lien was applicable to all such contracts of
less than $2000. And in 1975, the amount was raised to $15,000.

     In Huddleston and Work v. Kenned
Civ. App. -- EastTaxlm      -  7f7-;r;h~7c~;:;'$~~~s~~~x'
                            no wr
itself to the relationship between article 5160 and article
.5472a,and concluded that article 5472a "provides for an
additional lien to that provided in article 5160." Id.
at 258. In our opinion, the purpose of article 5472x13 to
protect subcontractors in the event the contracting govern-
mental authority does not require the prime contractor to
execute a payment bond. When a payment bond is required as
part of a prime contract of less than $15,000, a subcontractor
has the option of proceeding against a defaulting prime
contractor pursuant to that bond, or, alternatively, by
perfecting his lien under article 5472a.
     Thus, on the basis of all the foregoing, we conclude
that a contracting governmental authority may require a
prime contractor to execute a bond for contracts not in
excess of $15,000.

                          p.3434
.    I

    The Honorable James H. Harwell - page 5 (H-813)

         You also ask whether contracts for maintenance, such as
    painting a courthouse, are subject to the provisions of articles
    5160 and 5472a. Article 5160 applies to contracts for the
    "construction, alteration, or repair of any public building or
    the prosecution or completion of any public work.' Article
    5472a speaks in terms of "public improvements." As noted
    above, the two statutes are & pari materia and must be construed
    together.
         In R.C. Cverstreet v!fHouston County, 365 S.W.2d 409
    (Tex. Cinpp.    -- Houston 1963, writ ref'd n.r.e.1. the
    court held that a contract for the air conditioning-of a
    county courthouse constituted "public works" under article
    5160 where central system air conditioners were to be installed
    as fixtures. or imurovements of a fixed nature. Id.. at
    412-13. In-Mayer <. Texas Tire 6 Rubber Co.~, 223TW.    874,
    (Tex. Civ. App. --Tort Worth910,    no wrm,   "alteration,"
    as applied to a building, was defined as "a substantial
    change therein." Id., at 875. Most other jurisdictions
    agree that "alterasn"   means a modification or variation
    that does not destroy the identity of the thing affected.
    $$4?&d~9%,~H%%'                         :::h:;::y$:'&12
               80 Cal.Rptr.      n9 +Ct.
                                      Ca       App. 19-j
    smilton G. Link-Hellmuth, 146 N.E.Zd 615, 618 (Ohio Lt.
    App. 1957r   In our opinion, a contract for painting a
    courthouse could be included within those contracts affected
    by articles 5160 and 5472a. As to maintenance contracts in
    general, we believe that whether a particular contract is
    embraced within the coverage of those two statutes depends
    upon whether such contract calls for a "substantial change"
    to a "public work" or "public building.'
         As to your third question , we express no opinion as to
    the recourse which might be available to a prime contractor
    in the event a governmental authority requires a bond for a
    public contract under $15,000.

                               p.3435
.

    The Honorable James H. Harwell - page 6 (H-813)

                            SUMMARY
                A contracting governmental authority may
                require a prime contractor to execute a bond
                for contracts not in excess of $15,000.
                Whether a particular maintenance contract is
                subject to the provisions of article 5160 and
                article 5472a depends upon whether such
                contract calls for a "substantial change" to
                a "public work" or "public building."

                                      Attorney General of Texas
    APPROVED:

    jwb

                                p.3436