*
TWE ATTORNEY GENERAL
OF TEXAS
Aun-rx~. ?I-RXAS 78711
August 22, 1975
The Honorable Jackie W. St. Clair Opinion No. H- 673
Commissioner, Texas Department
of Labor and Standards Re: Bonding provisions of
Box 12157. Capitol Station the Texas Mobile Homes
Austin, Texas 78711 Standards Act of 1975.’
Dear Commissioner St. Clair:
The 64th Legislature adopted Senate Bill No. 397 (not otherwise pub-
lished at the date of this opinion) revising in a number of respects, the
Texas Mobile Home Standards Act, Acts 1969, 6lst Legislature,Regular
Session, Chapter 656 (art. 5221f. V. T. C.S. ). Among other things
section 13 of S. B. 397 (hereafter referred to as the Act) requires manu-
facturers, dealers and salespersons to file a bond with your office “to
insure compliance with the intent of this Act. ”
Section 13 of the Act, entitled “Bond Required” is as follows:
(a) As of the effective date of this Act and annually
thereafter, subject to such a schedule as the depart-
ment may provide, all mobile home manufacturers,
dealers, and salespersons are required to file a
performance bond with the commissioner, along
with such information the department may deem
necessary to insure compliance with the intent of
this Act.
(b) The bond shall be a surety bond issued by a
company authorized to do business in the state. and
shall be in conformity with the Insurance Code.
(c) The bond shall be to the state for the use by
a consumer, the state, or any political subdivision
thereof who establishes liability against a manu-
facturer, dealer, or salesperson for damages,
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The Honorable Jackie W. St. Clair, page 2
penalties, or expenses, including reasonable
attorney’s fees, resulting from a cause of action
connected with the sale or lease of a mobile home.
A consumer, the state, or any political subdivi-
sion thereof may recover against the principal or
surety jointly and severally for such damages,
penalties, or expenses. The bond shall be open
to successive claims up to the amount of face value.
(d) Any .~manufacturer or dealer who maintains
a place of business at one or more locations shall
file with the department a separate bond for each
location.
(e) A manufacturer shall be bonded in the amount of
$100,000. A dealer shall be bonded in the amount of
$25,000. A salesperson shall be bonded in the amount
of $2,000.
(I) The bonding company is required to provide
written notification to the department at least 30 days
prior, to the cancellation of any bond required by this
Act.
Section 14 of the Act, entitled “Warranties” provides:
(a) After the effective date of tlis, Art, all new mobile
homes sold by a manufacturer or dealer to consumers
shall be covered by the mobile home warranty set
forth in this Act.
(b) The mobile home warranty provided for in this
Act shall apply to the manufacturer of the mobile
home as well as to the dealer who sells the mobile
home to the buyer, except as otherwise provided.
(c) The mobile home warranty shall be set forth
in a separate written document entitled ‘Mobile
Home Warranty’i shall be delivered to the consumer
by the dealer at the time the contract of sale is
signed; and shall contain, but is not limited to, the
following terms:
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The Honorable Jackie W. St. Clair, page 3
(1) that the mobile home complies with
the code;
(2) that the warranty shall be in effect
for a period of at least one year from date
of initial set-up;
(3) that the mobile’ home and all appliances
and other equipment installed and included
therein”~by the manufacturer or dealer are
free from defects in materials or workman-
ship;
(4) that set-up and tie-down operations
performed on the mobile home are performed
in compliance with this Act, and other appli-
cable state and local requirements, provided
that only a dealer, his agent, or a manufac-
turer selling mobile homes directly to con-
sumers shall be liable for the performance
of the requirements in this subsection;
(5) that the manufacturer or dealer or both
shall take appropriate corrective action within
a reasonable period of time in instances of
defects in materials or workmanship, or
failures to comply with the cade;
(6) that the manufacturer and dealer shall be
jointly and severally liable to the consumer
for the fulfillment of the: terms of the mobile
home warranty, except as provided in Part (4),
Subsection (c) of this section, and that the
consumer may notify either one or both of the
need for appropriate corrective action in
instances of defects of workmanship, or
failures to comply with the code;
(7) that the warranty contains the. address and
telephone number of the dealer and manufac-
tuber where notices of defects may be given.
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The Honorable Jackie W. St. Clair. page 4
As you state in your request for our opinion, questions have
arisen regarding the nature and interpretation of these provisions.
You suggest that clarification of these provisions by our office would
be helpful to the industry in securing the required bonds.
Your first question is:
Section 13, subsection (a), states that all
manufacturers, dealers and salespersons must
file a performance bond annually. The bond form
the Department is using is continuous and contains
a clause to the effect that the aggregate liability
of the Surety may not exceed the penalty stated
in the bond. Is this a cumulative liability or
would the maximum liability be limited to the
penalty sum of the particular bond which
covered the conduct that gave rise to the cause
of action?
If there is any discrepancy between the printed terms of the bond form
and the requirements of the Act it would appear quite obvious that the
Act will control and any bond given to fulfill its requirements will have to
be interpreted to conform to the Act.
The Act in section 13(a) provides that the bond shall be filed annually.
This, coupled with the provision of section 13(c) that the bond “shall be
open to successive claims up to the amount of face value,” would surely
indicate an intent upon the part of the Legislature that bonds be filed
annually, each with limits or “face value” as provided in section 13(e).
It is our opinion that the liability under the bond would be limited to
the total required during the period of the bond; i.e., during any one
year the total liability on a bond issued to a dealer would be $25,000. to
a manufacturer $100,000 and to a salesperson $2,000.
Your second question is:
Section 13, subsection (c), states that the bond
may be used by a consumer. the state or a political
subdivision who ‘establishes liability’ against a mobile
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The Honorable Jackie W. St. Clair, page 5
home dealer, manufacturer or salesperson. What
is meant by establishing liability through a ‘cause
of action’ connected with the sale or lease of a
mobile home?
Section 13(c), in our opinion, refers to a final judgment being entered
against the principal on the bond through judicial process.
Your third question is:
If a valid claim or judgment is made in con-
nection with a particular mobile home at a point in
time after termination of the bond which covered
the manufacture or sale of the mobile hbme. would
there be liability under that bond or alternatively
would there be liability under the bond in force at
the time the loss occurred?
Section 17(d) dealing with penalties, provides that a contract between
a consumer and a mobile home salesperson, dealer or manufacturer, is
voidable if there was no bond as required by the Act “at the time the
contract was consummated. ” It is our opinion that this evidences a clear
intent upon the part of the Legislature that the bond to which recourse
may be had by the consumer or dh’ers is the bond which was in effect at the
time the sale,was consummated, and not the bond in force at the time the
loss occurred, although the two might be the same in some instances, if
not in most.
Your fourth question asks:
What period of time must elapse after termina-
tion of the annual bond when a’claim may no longer
be recovered under that bond?
Since the answer to this question necessarily must turn on the terms
of the contract of sale with the consumer and of any express warranty
which may be given, it is impossible for us to give an answer. The extent
to which a principal may limit his warranties as to duration is an involved
question requiring the consideration of several statutes, both state and
federal, as well as numerous court decisions. Without being exhaustive,
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The Honorable Jackie W. St. Clair. page 6
we would direct your attention to chapters 2 and 17 of the Texas
Business and Commerce Code and especially to sections 2.313
through 2. 318, 2.607, 2. 719, 2.725; and 17. 50; to articles 5545
and 5546, V. T. C. S.;. to the recentlyenacted Magnuson-MossWarranty-
Federal Trade Commission Improvement Act, Public Law 93-637, 88
Stat. 2138 (1975) to be codified as 15 U.S. C. section 2301; and to the
following decisions: Sherwin Williams Company v. Perry Company,
424 S. W. 2d 940 (Tex. Civ. App. --Austin 1968 writ ref’d. n. r. e3,
431 S. W. 2d 310 (Tex. Sup. 1968); Griffin v. H. L. Peterson Company,
427 S. W. 2d 140 (Tex. Civ. App. --Dallas 1968, no writ); John Desxe Company
of Kansas City v. Tenberg, 445 S. W. 2d 40 (Tex. Civ. App. --Beaumont
1969, no writ); Lankford v. Rogers Ford Sales, 478 S. W. 2d 248 (Tex. Civ.
APP. --El Paso 1962, writ ref’d. n. r. e. ); Mobile Housing, Inc. v. Stone,
490 S. W. 2d 611 (Tex. Civ. App. --Dallas 1973. no writ); &Ielody Home
Manufacturing Company v. Morrison, 502 S. W. 2d 196 (Tex. Civ. App. --
Houston [lst Dist.] 1973, writ ref’d. n. r. e. ); Brown v. Young, 507
S. W. 2d 600 (Tex. Civ. App. --El Paso 1974, no writ).
Your fifth question asks:
Section 14 requires that the mobile home
warranty to the consumer provide for joint and
several liability. If the surety has bonded only
one of these parties, for example the dealer,
would the surety be liable- under the bond for a
violation of the statute by the party, e. g. manu-
facturer whom he had -not bonded?
The provision to which you refer is found in subsection (c)(6) of
section 14 of the Act and requires that the manufacturer and dealer “shall
be jointly and severally liable to the consumer for the fulfillment of the
terms of the mobile home warranty. ”
It is conceivable that a bond might be issued fulfilling the bond require-
ments of section 13 as to both the manufacturer and one or more of its
dealers. Your question, we assume, is directed, however, at a bond
issued to only one principal. For example, if issued to a dealer, it will
cover the liability of the dealer which will include defects built into the
mobile home by the manufacturer for which the dealer is jointly liable
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The Honorable Jackie W. St. Clair, page 7
under section 14(c)(6). A bond issued to the manufacturer will, to
a certain extent, cover faults resulting from failures of the dealer,
but not all. It specifically will not be responsible for set-up and
tie-down operations performed by a dealer [section 14(c)(4)]. Other-
wise, the manufacturer will be responsible for the warranty of the
dealer that the mobile homes comply with the code, that the homes
and all appliances and other ‘equipment installed and included therein
are free from defects in materials and workmanship, even if they
were installed and included by the dealer and not the manufacturer,
and that both the manufacturer and the dealer shall take appropriate
corrective action within a reasonable time in instances of defective
materials or workmanship or failure to comply with the code.
On the other hand, there are other penalties assessed against a
principal for which there is no joint liability and for which the surety
of one would not be liable for the breach of the other. These would
include civil penalties under section 17 of the Act.
We would further call your attention to the obvious fact that both
at common law and by agreement, the party secondarily liable may
seek indemnification from the one primarily liable. For a discussion
of this question, see Ford Motor Company v. Russell and Smith Ford
Company, 474 S.Gd 549 (Tex. Civ.App. --Houston [14th Dist.] 1971,
no writ).
Your sixth question asks:
If the original consumer-purchaser sells
the mobile home to another within the warranty
period applying to that mobile home, does the
liability of the dealer and/or manufacturer and
their respective sureties extend to the new
consumer-purchaser?
Section 13(c) provides that the bond shall be for the use of a consumer,
the state or any polttical subdivision thereof who establishes liability.
The Act, in section 3, defines a consumer to be “any person who seeks
or acquires by purchase of lease a mobile home from a manufacturer,
dealer or salesperson. ” Unless a person purchasing a mobile home can
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The Honorable Jackie W. St. Clair. page 8
qualify under this definition, i. e., unless he acquires the mobile home
from a manufacturer, dealer or a salesperson as defined, then we
cannot see how he is an obligee under the bond, even though under the
warranty provisions of the Act he may have a cause of action against
the manufacturer, dealer or salesperson for breach of warranty.
In answering these questions, we have done so based upon our
construction of section 13 that the bond called for is not intended to
replace or fulfill the functions of a liability insurance policy, and,
thus would not pay losses established against the manufacturer, dealer
or salesperson for personal injury as the result of negligence.
We base this conclusion on language of section 13 referring to the
bond both as a “performance bond” and as a “surety bond, ” language
whi~ch certainly speaks more in the terms of suretyship than of liability
insurance.
The legislature, when it has wanted to require insurance has used
that term. See e.g., art. 6701h. sec. 19, V. T. C.S. The Insurance
Code, in discussing the jurisdiction of the Insurance Board over
casualty insurance companies, speaks both in terms of insurance and
surety bonds. Ins. Code. art. 5.13.
Thus, even though the dealer or manufacturer may be liable, not
only to the consumer, but to third persons for damages resulting from
negligence in the manufacture or installation of a mobile home, we do
not believe that it was the intent of the Legislature that the bond
required by section 13 cover that liability except insofar as it grows
out of the warranty of the manufacturer or dealer. In any event, the
surety on the bond may minimize any such liability by requiring that
its principal carry products liability insurance insuring against any
such loss.
SUMMARY
With reference to the bond required by section 13
of article 5221f. V. T. C. S., as amended in 1975: (11 the
bonds are to be filed annually and liability on them is
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The Honorable Jackie W. St. Clair. page 9
to be limited to the stated penalty as a total for
each year: (2) liability of the surety on the bond
is fixed only when liability of the principal is
established by a final judgment; (3) the bond in
force during the period when the contract of
sale is consummated for a particular mobile
home is the bond against which any claim
would be filed growing out of the sale of that
home; (4) the period of time during which a
claim may be filed against a bond after its ter-
mination depends on the contract of sale and
the express warranty, subject to various
statutory provisions; (5) to the extent that the
manufacturer arrldealer may each be liable
in warranty for the derelictions dal the’~otheY,:,the
surety on the bond may also be liable: and
(6) liability on the bond does not extend to
purchasers from a consumer.
/3(ery truly yours,
Attorney General of Texas
APPROVED:
DAVID M. KENDALL, First Assistant
ad
C. ROBERT HEATH, Chairman
Opinion Committee
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