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