OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
Honorable D. C. Greer
State El&way En&nesr
Texas Highway Depsrtment
Auetin, Texas
Dear Sir:
ju4gwnt in caum
n the 98th Dirtrlot
ik County, Texau,
4ePont deN&aoure &
laintitie .va. Brady
J, Chairnan of the State
CowmllrEtlon OS TsxfM, et
ridante, and a relate4
Tom Arohsr an4
improvement an4 a oontraat was awarded to him for
thle work on May 27, 1932. The oontraotor began
work on July 18, 1932 but after perf'orming one montha
work on thle contract he defaulted an4 a receiver wae
505
gon. D. C. Greer~, l’age 2
appointed. This receiver proceeded with the rti-
fill&ant or this contract but at the request of
the eurety company the reoelvsrship was dissolved
and the surety oompany took over the oonetruot~on
Or the project on Deoembsr 31, 1932. On or about.
I;ay 4, 1933 t&e surety oompany defaulted an4 aft6ir
having been given notloe by the Stats Highway Duv
partmcmt to oomplat@ this projeot ati they tail&&
to raaume work In looordanoe with the oontraot the
State took over the completion of thla oontraot on
N&J 13, 1933. To oomplete this oontraot the State
NoalVs4 bids and awarded a oontraot to thr womaa)t-
Henning Construotlon Compsny for the remainingwork.
OR June 29, 1033. h’hlle the work as required by
thlr oontraot was phpsioally oomplotod on Ootober
10, 1935 the oontraot has not as of thlr data, been
oomplrted duo to the iaOt that the State wlthheld
frosmbnfae due ths oontraotor funds on aooount or
labor and materials olalma having been illed with
thr Department.
“After paylag to the Womack-Henning Construo-
tion Company the amount due thti far the oompletlon
oi thin oontraot tha State now ho148 a balanae ai
Ql,g+S.CS of the monies due the oontraotor on ao-
aount of this projeot. Rsoently &. I. DuPont Do
Nemours and Company fllsd a suit agalnet the oon-
traotor, his surety oompany and the State Highway
Department to establish a llan against the oontnc-
torr funds tbat wo now hold. on Novanber 3, 1943
the Dirtrlct Judge of the 9Sth Dirtriot Court of
Travla County’ entered a judgment against the OOO-
traotor and the surety oonpany and the State Or
Texas for the #1,835.44. The requirement6 of tbir
ju4gmant are that the Stats of Texas pay into the
iiegiatery of tha Court the funds of the oontraotor
that it now holds to be distributed to the various
persona who have filed and did establish In thi8
oourt their claim ror labor $$.n4mataridls in eon-
neotion with the oon8truotion 0r thir projeot.
#hen the State Highway ComQiOaiOn raOOivO4 Oikrt%on
in oonneotion with thir suit this iniOrlUEition was
pk. D. C. Grew, Face 3
passed to your ofilcs an4 your oifioe made a
oonstruotire tendei of the $1,835.46 funds OS
the oontraotor into the Flegirtary of tha Court.
“In oonneotion with the $1.835.45 fun48 that
the State now holds, It is our thought that this
money is the property of the oontraotor ati 10
bring hel4 In the Trraaurp althor to pay to him
or to pay to olalmantr In the event that the olaim
la eatabllsho4 In a oourt of oompeteat jurladiotlon,
the Stats being maraly a ataka holdar of the8a runas,
Vln quortion haa now been ralae4 as to *ether
the aontraotora run48 oan be wlthdiuwn rrom the Stata
Treasurer duo to tha oonatltutlonal provision tbat
the Lsglalature baa authority to appropriate funds
not lon(;erthan two yeara.
*The Leglalaturo every two years reapproprlatoa
all State highway funds not previously expanded am
roll as all new run46 oualug Into the Trearury an4
it 18 our thought that all unexpm4ed funda ror oon-
traotual obligationa are reappropriated by the Legla-
lature eaoh two years for the payment o? tha State’s
&~-stlonr on woh oontraot as well as otha obllga-
.
WArtiola 5472 (b) requlraa *that no pub110
offlolal,wha 80 notlfie4 ln wrIti!&, #hall pay all
of%ati monies bond or warrants 80 said oontraotor,
btit shall ret& enough of asi4 W&88, bonds or
warrants to pay oaid olalm, In 0866 it 18 latablirhe4
by ju4gmant in a court or proper jur1a4iotlon----*.
Under thlr statute fund@ that were 4ua the oontraotor
wern retained on account of the filing of labor and
material claims an4 tha Stata would bare bean in
violation of the statute6 had lt paid all tha monies
to the oontraotor upon phyaleal omplrtlon of the
work oallod ror by the v4ontraotor. -The State only
now is $0 a position to lagally di~poae or tha funda
or +b ocntraotor, a judgment having been rendered
on November a, 1943 agalnrrt the aontraotor In favor
of the Olalmants. It is %hWght that the state la
Hon. D. C. Graer’, Page 4
n_ot at thia time barred from the oompletion of
Its oontraotual obligation.
WSaotlon 0 0s Article VIII 0r the State
Constitution provider that *no money shall be
drawn from the Treasurer but in purauanor of the
~peoIfie4 appropriation made by law; nor shell
any qqropriatlon of money be 11~340for a longer
terma than two year+----*.
“We would llkr an opinion from your ortioe
as to whether or not funds are available for the
payment of the balanoe or the funds due under thl8 ’
‘OontMot at this time.
wArtiola 4SS7 provides that *no olati shall
Abe pal4 from approprlatlona unleaa proa@nted to
tha Comptroller for paymakt withln two yemra 0s
the SlsOal yeara for whloh auah approprlati,on was
m&e---- *,
we ~~14further like to have an opinion from
your offloe as
to whather or not the Stats la barred
from making payments on aooo*unt of a oontraat wha%
fund8 were held by the State on aooount Of the flllng
of olal~ under Article 5478 (a) au4 (b) when payment
00~14 not have been ~aa4e wdthln two year8 from the
oloae of the fleaal year from whloh auoh appropriation
was made duo to the fact that the claim had not been
released or a~ judgmalt entered prior to this time.
*For your Information thora la attaehed hereto
a oopy of the judgmmt In Cause No. 68639 In the 98th
Diatriot Court oi Travla County,’ Texar in the suit
styled E. I. DeFont De Nemoure and Company et al. Vs.
B&y y. tintry, Chairman of the State Highway CODD-
mlraion or Texas et al.*
#e shall anawer both of your ques~tlona together a8
the first question la speolflo an4 the asoond queetlon la mere-
ly a general one dealing with ths mame aubjeot matter.
HOI%.J-ii.Creel',PsigS5
Ant% your lottar Ik18 set out In detail the pro-
vision8 of the Conrtltution and the Aatute8, we will not
burden your tint8 by relteratlng the came herein.
In the oa8e of Texae Colnpeny P. Sahriewer, 38 3. w.
(Ed) 161, the Court hold that Art~ciee 5478a end 547Zb, Vermm'8
tinnotated Civil iitatuter, gave nub-oontreator8, es well a8 gea-
era1 elmtraCor8, a 11~ oa money paid for public improve.aQnta.
That Court III that oaoe further held that the tit&to Elghway De-
portment in rlew of iirticle8 6078 to 6674, and nrtiole8 66140,
66748, 66741 and 6694, hev8 8upervl8loa over the expenditure
of hlghuay funds and that the State Reaeurer I8 merrly a
depooltory of suoh fundr.
It ha8 been held by the aourtr of Tara that all state
hi&hwayr are under the oxolusl~o ooatrol and management of the
Ytnte Blghwey Department.
The Court held In the 0a8a ot Atkin V. Texar Highway
Department,801 3. W. i%6, that the Legirlature la deelerlng th5t
all funds malag into tb head8 of the tjtete Blghwap Coaslr8lon
derived iron ro@8tratIoa fee8 prerorlbed for motor vehloler,
or froa nap other 8ouroe. shall bo deposited with the State
Treasurer to a 8pealal aoaorurt de8igAated as the "State Highway
Fund" aooount, and that 8srtlu I8 a valid approprfetlon, though
not, bf oourse, 8peolfylng the ammats to be realized; 8imilar
prorIslon8 for oontlngent amount.8 having long been reOW!iiZsd a8
valid approprlatioar.
ktia~le 4357, Vernon’8 j¬ated CIvIl Statutes, pro-
vider a8 Sollow8:
** *'* No olalm shallbe paid fioslOQprOprie-
tlona unle88 praaented to tke Oonptroller for pay-
mnt within two (8) yeer8 from the olO8e o? the
ilace year far whIoh such epWoprIatIon8 were made,
but any alala not presented for payment within 8uoh
period smy bs preeented to the Legl8leture a8 other
al~ims tar which no appropriation8 ere lvall*ble.*
* 5"
In the ou8e of winder t&08. v. Sterling, 18 S. K. (Ed)
127, the Court, on page UO, in dealing with lien olaiaentr r,im.i-
IX=* 2. c. Crder, pug0 6
zdto these ao pirtles in the aaae presented ia your inquiry,
:-
CTho ~rorlslonfor wlthholdlng Boney, war-
rants, lto., ror paymeat ,0r a olala 88 and wh8a
redwad to judgznnt, wlth laak of requirement for
Judfgant wlthla say given t&110, it i8 said, render8
the statute IndePlalte. To this 18 added a ohrlrge
of axbitrariLtO88 ia forOh$& th8 OOUtreOtOr t0 aWatt
the plecIi.un of the oiaimat In respeot to time of
juegmnt. ‘&a statuSe, however, but Paw8 a oaa-
tueacy upoa time eoourreaoe in ad lpproprlato
oa84 awneye, eta., become due and payable to the aoa-
traator, and for rhloh, OS noted, the part.ie8 to the
aoatraot (by reference and inputation) stipalata. 88-
aldee, no Teasoa 18 lg p a p a for y ep*eoluaIn6
nt adjudi-
.oatIon oi the okaita or its Ir&vaJ.idStr oa 1o1e of th8
eontra&tor, It he becoa88 di88oti8fledwith pxvores-
tlaatloa of tha Olal0sa:~,*
da apia on pago 189, the Court Said;
*+ + * ?baia(l the SUbjOOtS of ii&LB and ttm *
OOOdltIO~S for their regI8tretloa ana lnforoemeat
is a tamillar legI8latlre p0wer. We are glrea a0
ratfaronoe to preoedentr (and wa know 0r none) against
lnclu8ion 0r pub110 moneys aad SOO~itieS or tE8
legI8latln('8overeIga, (a8 and whoa payable or de-
liverable to oontraotors, eta.) within the StAb3OOt
mttor of llens deolsred for materialmen. meohanIor.
lto. irncl when the Mea (in this ehuter-proriaed) -
ottao&ea. t&a 0xODer8y to which it lttaohes la thr,
pr~r~W of the OOntreOtInR debt&r and WA or the
state or muaialpal~ty. tlm latter being debtor 0Z that
aebtor or baIlo8. eta. 00rr0x00, there is a0 ooatempt
of the letter or spirit of Section 2W. artiolo 3. OS
the Constitution, to whloh we a8eWDI oounsel Intsnded
to refer.*
i
In the ease oft Wepubllo Niatlonel Bunk an&'Trust Com-
WY v. YasBaohuOetts Bonding t fnsurenee Company, 68 Ted. (8d)
d3, Honorable Judge Sibley of the Cirault Court of kppeals, in
&lIng with the okso in which the surety oa the bond of th eon-
traaetor wna suing to recdl aoneys that had been paid out by the
oity on tha RTOPOSea a*slgrrpLsnt 0s the aontraotor to a bank, be-
fore tba urriaavit about mentioned in proof 0s pay:wnt 0s all
@lab8 hed beed -a., said in plain la~gurrg8 at pago 447, with
nferenoo to that rbet sItuotIoA, a8 fOisOW88
Wls (the sursty*a) equity originates in the
agreement of the bltf and the contrmtor, relnrorcea
by the aot 0s 1989 to the am8 errrot, thrt oertaln
peroentages 0s the earsed papwmts uhall be remned
for Y final payaent.ror the maurlty of th, olty and
sumty, and equity treating this fund as a trprt will
see to Its protectloadna appllaatloq,raoalling it ii
f3iSappliad. This IS the hOart of tbs bill. Prairlo
State fiatlonal Bank v. United States, l&d 0. S. Ic.27;
Olader County v. Dotraft Fldallty k Surety Co., 57 F.
(Ed) 449; pirat rational Baak v. lfdellty & Deposit
65 P. (8a) 9b9$ Fideiit~ Lh DepOSitCO. Of Lbp
$4 v. Claiborne Parrlrh bohool Board, 11 F. (zd)
404.”
In tb8 0~86 Of Jsaith t. TUB ciW&~~y, 33 8. W. (3d 1 774,
8t page 797, the Court said:
"Senate 3iil 94~, kOt8 39th L8gISlaturO (lU3S)
c. le6, P. 456 (Y.A.C.S. ( Arts. 6694a-6d74n) was *a-
aotoa by the amme LegiS&Gum whloh paarea krtieler
547er ana 5470b.
*It provides that the State shall retain 10% 0s
the oontrpaet price tmtll the work htrr been aooepted,
and it exm=eooly r0rbIas fIAal paywnt of tha retained
SUm until it 18 shows that *all 8~8 of monel due for
any labor, materills, or equIpmAt furnished for the
purpoue Of SuOh iroprOvtiUiOAt8 sado under any Such aoa-
trvot have bOOA paid.* sad. 13 0s the ket (v.~.c.ii.,
iat. dd7apl) . It IS groper to ooaet~ue this xot 50 a
;‘art 0s the lo@iletlon pravldlng for the lion In ques-
tlOA, 88 it rehte8 tQ the BeiM SUbdebt BurttaT and %?+a
&Weed at the 8811, !I8selon JI the Lsgf81ature.m
511
nnd again nt the top of Pugh 777, the Court said:
"It was the lnteiltion of the hglslature
to enable those lurnlehlng L:bor, mterlal, eto.
to a sub-oontraofor for any‘~ubLlo im2rove~nt
to receive paymat theretor to the extent 0r any
unpcrld balance due raid cub-oontreotor at the
tlu@ notice required by 8tatute 18 given.
Vie 6180 thht the ruin6 or the
oonolube
notloo wlth the stuto Highway CoPsef88lon *a8 a
8triOt 0~3piianQe With the WOVl8iOn Or th8 8Ot,
which r8qulre8 the 8.aa8to be riled with the Or-
rloiel, whove duty it 1s to p&y the orlglnal oon-
tractor. Ihinder i&08. v. sterling, ll0 Tex. 2bB,
12 6. ik. (2d) 127, 14 Y. W. (2d) 808; !detropolltan
La8ualty In8. Co. v. Chean8y, et al., (Tex.,Clv.
..&I.) 92 a. n. (2d) 801; iseet Chicago Perk Com*r8.
v. iiestern &mite Co., eoo Ill. 527, 66 I@. P. 37;
JaUu38 p. iidi, ILlLO., ‘I..Jer8ey City, 62 N. J. Ea.
489, 60 n. 603.
n. . *
*all sonay deposlted to the oredlt Or the
highway rUnd IS by the teXYII8Of artiole 66740
made subject to approgrlatlonror tba 8;reOiriO
purpoee 0r oaid iqrovetint or 8ald ay8tem or
8tat.e hi&way8 by the highw8y d8partmant.
"It thua a?pamr thnt the Legislature has
eatabllshed a 4epart:snt and clotbed it with iull
and complete authority to sake oontmat8 ror the
is2roverpnnt of ekte hi5bwayS and created a epeoial
fund out of which the ObligntlOa8 *de by such de-
ptirt3xmt 8bU11 -be dlschiirged. 'i'he hlshway 000!3&8-
slon ie charged with the duty or laying thee8 obll-
gationr from this epaoia]. fund. shea oonalderatlon
is given to the sttrtutes ve8tlng control over de-
sign&ted stiite highway* in the atate hi&my ooml8-
alon, and uuthorlzlng suoh body to oontmot and ex-
pmd fun%u eet ag~!irt for that purpose. it beeowe
obvious that such dep0t:mnt is the cne whoee duty
it 13 to pay oontnctora tar work perrome upon
et&to highways. It is true that the 8tnte tredm-er
actually pay8 outthe mcdy on depoelt to the oredit
of the highway department, a8 is generally the oase
ath au obligations izk&e by a 8tate de'partmnt ror
ana on behdr 0r the stite. Ete does thi8, however,
E;S a mre dlsburrrlog officer and on VoUOhsr8 issued
and agi.~roved by a majority of the highway SoimIi8SlOlI.
iie ha8 no di8OretiOn in paying olelms 0r oontrtsotorr
whenthey are properly approved by the highway Oo!uniS-
slon. CertAnly suoh dlsoretlon wa8 intended to be
lodged with the official Who80 duty it 18 to pay Orr
and dl8oharge suoh obli~ation8. The Leglalrtture might
kve nmde ~rovlslon for the 8paolal highway iund~to
be deposited in 8oae prlviite banking institution.
Ii it bud done 8o, stio~h bank would actually pay the
vouchers iseuad by the hi&way departaent, but under
such CirOWZStiMiCe8 it Could in ru) proper 8eD88 b8 0011-
sldered the oiflolal whose duty it un8 to pay ooa-
traotor8 fur 8erViOe8 perromed Under th8ir oontract8."
In the case of F. C. Crane v. Chue. C. Bellar, 195
6. iii‘. (id) 167, the Court held that a materialman* aotlon to
establish a llen on money8 due or to beooze due to a pub110
eontroctor under the statute authoricing such a llsn on the
riling or notice .i8a specie8 0r "gsrnlrhnnnt;" Vernon*8
iuxmtated .itatUte8, tirticle8 5150, 5372a, 547Eb, 6674~
By reason or the toregoing authorltle8, it is the
opinion of this aepartinent that the Legiednture hn8 put the
money ordered paid by the oourt in the judgwmt in the o&80 or
Ii. I. duPor,t deNemour8 k, Company, et al, v. Brcidy P. tintry,
Cholman of the ktute iii&may Comrslsslon, et al, beyond their
rurttrer pox-er to reapproprlatethe 8a:~.
Th8 money retain66 by the Hlgharccy l;epartmnt on the
original cmtruet, a8 uwae fsll due and becnse impounded by
the filiug of oOtiOe8 by lien Ck.3iiWlt8, hje placed such fund8
upon which such lien8 attached at the tii2.e 0r the riling 0r
such notloee, out of the hands ot the Legiskture and the r;t,::e
of Texes, an& said ;noneythen 6eom5 the property of the aon-
truotlng debtur or hi8 8ub-oontraotor or lien o,laimant8 as the
F
513
oourt may decree, and wae no l.onP,ar property of the .Xate,
t& Litat& belag raer6ly a dobtot or debtor abovr ballee and
8uoh money bocam ln law a trust fund held by the State of-
fioia1.a Tar floe1 payment in acoordance with the judgwnt of
the court in da 0aiU. We are, theretore, or the opinion
tbt gha dlsburziemsnt oT euch fund8 at thla time in accordance
with the judezent of the oourt in such aaae would not be in
eontraventlon or drtlale 8, Section 5 or the Conatitutldn at
‘PU~I, end, thereforr, Article 4357, 8ugra, would not epply.
gusting that thl8 letter an8vmr8 your inquiries
utlrfnctorily, we be6 to remain
Your8 very truly