Hon. J. W. Calhoun Opinion No. O-1268
Comptroller Re: Method of final payment of
University of Texas contract price to Wood and Scur-
Austin, Texas lock, Contractors under contract
dated September 24, 1938--P.W.A.
Dear Sir: Docket 9107-F (Texas).
Your letter of August 10, requesting an opinion from
this department and accompanied by correspondence contained in
your file, along with an executed copy of the contract between
the Board of Regents of the University of Texas and Wood and
Scurlock, Contractors, a copy of the Contractor’s Bond with
Standard Accident Insurance Company as surety, and complete
folder designated as ‘Specifications for the Mechanical Con-
tract, Men’s Dormitory Building, Unit 3, University of Texas”,
with the latter containing the contract documents which compose
the contract above mentioned, has received our attention.
The following are substantially the facts as we un-
derstand them, taken from the above documents:
Under the above contract, dated September 29, 1938,
the project specified therein of constructing and com-
pleting in every detail a men’s dormitory Unit No. 3
for the University of Texas, was complete h by Wood ani
Scurlock, Contractors, with final payment under the con-
tract yet to be paid said contractors. Under date of
May 29, 1939, the following notice was received by you:
~~Comptroller
University of Texas
Austin, .Texas Attention: Mr. C. D. Simmons
Gentlemen,
“We wish to advise that we have a balance due us
for the tile and marble work installed by us in the
Men's Dormitory, Docket Te xas-9107F-1.
“We request that when making settlement w.ith the
general contractor, have him present you with a state-
ment paid in full from our office.
“Thanking you very kindly, we are
Hon. J. W. Calhoun, page 2 (O-1268)
Yours very truly,
TRAFIONTILE & MARBLECO.
(Signed) Forrest Trafton Mgr.‘!
Supplementing this letter you were presented with a copy of an
l,nvolde showing the amount due by the contr.actors to the Traf-
ton Tile & Marble Co. in the sum of $l,OOO.CO. The situation
stands at present with the contractors demanding the balance
due under the contract less the $1 000.00 claimed by the Traf-
ton Tile & Marble Co. or an offer 1,y the contractors to put up
a release bond as provided in Article %72b-1, Vernon’s Anno-
tated Civil Statutes, cumulative supplement, and receive the
entire retainage fund due by the University. At this stage,
you request our advice as to the proper legal procedure to fol-
low.
Article 5l60, Revised Civil Statutes, 1925, as amended,
provides:
“Any person or persons, firm or corporation, enter-
ing into a formai contract with this State or its counties
or school districts or other subdivisions thereof or any
municipality therein for the construction of any public
building or the prosecution and completion of any,public
work sh ai 1 be required before commencing such work to
execute the usual~ Penai Bond, with the additional o i liga-
tlon that such contractor shall promptly make payments to
all persons supplying him or them with labor and materials
in the prosecution of the work provided for in such con-
tract. Any person, company, or corporation who has furn-
ished labor or materials used in the construction or re-
pair of any public building or public work, and payment
for which has not been made, shall have the right to in-
tervene and be made a party to any action instituted by
the State or any munlclpallty on the bond of the contrac-
tor, and to have their rights and claims adjudicated in
such action and judgment rendered thereon, subject how-
ever, to the priority of the claims and judgment o h the
State or municipality. If the full amount of the liabll-
ity of the surety on said bond is insuffficient to pay the
full amount of said claims and demands then, after paying
the full amount due the State or municipality the remain-
der shall be distributed pro rata among said lntervenors.
Provided further, that all claims for labor and material
furnished to said contractor, and all claims for labor
and material furnished to any contractor shall be itemized
and sworn to as required by statutes as to mechanic’s
lien claims, and such claims shall be filed with the County
Clerk of the County, in which said work is being prosecuted,
Hon. J. W. Calhoun, page 3 (O-1268)
within ninety days from the date of the delivery
of said material and the performance of said work.
The County Clerk shall note on the mechanic’s lien
record the name of the claimant, the amount claimed,
the name of the contractor and the name of the county,
school district, other subdivisions, or municipality
with which the contract was made; and the County
Clerk shall index the claim under the name of the
contractor and under the name of the county, school
district, other subdivisions or municipality; with
which the contract was made.
tlProvlde’d further that after completion and ac-
ceptance of completed prolject all moneys due contrac-
tor under said contract shall be held by the State or
Its counties or school districts or other subdivision
thereof or any municipality until such a time that
satisfactory evidence is submitted and affidavits made
by the contractor that all just bills for labor and
material under this contract has been paid In full by
the contractor .‘I
Article %72a and Article 5472b, Revised Civil Statutes,
1925, provide :
“That. any person,, firmor Corporation9 or: trust,B
estate, furnishing any material, apparatus, fixtures,
machinery or labor to any contractor for any public im-
provements In this state, shall have a lien on the moneys,
or bonds, or warrants, due or to become due to such con-
tractors for such improvements; provided, such person,
firm, corporation or stock association, shall, before
any payment is maie 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.”
“That no public official, when so notified in writing,
shall pay all of said moneys, bonds; or warrants, due said
contractor, but shall retain enough of said moneys bonds,
or warrants to pay said claim, in case It Is estab i lshed
by judgment in a court of proper jurisdiction.”
Article 5472b--1, Revised Civil Statutes, 1925, as amend-
ed, provides:
“Section 1. That whenever any claim or claims shall
be filed attempting to fix a lien, secured or claimed by
any instrument filed under the provisions of Chapter 17,
of the General Laws of, the.State of Texas, passed by the
Hon. J. W. Calhoun, page 4 (O-1268)
Thirty-ninth Legislature In Regular Session, that the
contractor or contractors against vhom,such claim or
claims are made may file a bond with the officials of
the State, coo&y, town or municipality whose duty it 1s
to pay the moneys, bonds or’ warrants to such contractor
or contractors. Said bond shall be double the amount of
the claims filed, and shall be payable to the claimant or
cl almant 9. It shaI.1 be executed by the party filing same
as principal and by a corporate surety authorized under
the laws of !texas to execute such bond as surety, and
shall be conditioned substantially that the principal and
surety will pay to the obligees named, or their assigns,
the amount of the claim or claims, ore such portion or
portions thereof as may be proved to have been liens, un-
der the terms of Chapter 17, General Laws of the State of
Texas, passed by the Regular Session of the Thirty-ninth
Legislature. The filing of said bond and Its approval
by the proper official. of the State, county town or munl-
clpallty shall release and discharge all liens fixed or
attempted to be fixed by the piling of said claim or claims,
and the official or officials whose duty it is to pay the
moneys, bonds or warrants shall pay or deliver the same
to the contractor or contractors or their assigns. Said
official shall send by registered mail an exact copy of
said bond to .a11 claimants.
ttSec. 2. At any time within six months from the date.
of filing of said surety bond, the party making or holding
such claim or claims may sue upon such bond but no action
shall be brought on such bond after the exp 1ration of such
period. One action upon said -bond shall not exhaust the
remedy thereon, but each obligee or assignee of an obligee
named therein may malnta1n.a separate suit thereon In any
court end in any jurisdiction. If any claimant or claimants
in an action establish the fact that they vere entitled to
a lien under the provisions of Chapter 17 of the General
Laws of the State of Texas, passed at the Regular Session
of the Thirty-ninth Legislature, and shall recover judgment
for not less than the full amount for which claim was made
the court shall fix a reasonable attorney’s fee in favor o1
the claimant or claimants, which shall be taxed as part of
the costs In the case. The bond provided In Section One of
this Act shall also be conditioned that the principal and
surety will pay all court costs adjudged against the prln-
cipal In actions brought by claimant or clalmants thereon.”
The above statutes pertlnent to the matters herein ln-
volved, being in existence when the contract In question was en-
tered into same would be held’s part of such contract--Metropoll-
tan Casual t y Insurance Company vs. Cheaney, 55 S.W.(2d) 5%.
Hon. J. W. Calhoun, page 5 (O-1268)
In the case of 0. A. Durham Company vs. McKee, et al,
(C.C.App.) 57 S.W.(2d) 1132, writ refused the court referring
In its opinion to Articles 5160, $72a, &72b, %72b--1, above
quoted, held that such statutes enacted to protect furnishers
of labor end material on public works must be considered togeth-
er as In par1 materla In construing any one of them,
While the contract documents contain numerous provi-
sions affording ample protection to the parties and the language
of same is clear and unambiguous, yet where such clauses conflict
with the above statutes as to rights and duties, such statutes
should be followed. It appears that all of the above quoted
statutes have been construed by our courts, thereby furnishing
ample legal authority for proceeding in the matter of making fi-
nal payment of the contract price.
It is evident that the surety bond of Wood and Scurlock,
Contractors, meeting the requirements of Article 960, supra
snures to the benefit of such person, firms or corporations Chat
have claims for labor and material furnished to said contractors
and who comply with Its provisions. It will be noted that this
Article requires that all such claims shall be filed with the
County Clerk of the county in which the work is being prosecuted,
within ninety (90) days from the date such material and labor are
furnished to said contractors. It also provides that after com-
pletion and acceptance of completed projects, all moneys due con-
tractor under said contract shall be held bv the State or its
m or school districts or other subdivisionthereof or u
l?&PlC~D~ltY ‘a&d such a me that satlsfactorv evidence Is &-
mitted and affidavits made bv the contractor that all lust bll&
for labor and material under this contract has been uald in RQ&
by the contract=.
Prom the instruments submitted by you we presume that
the contractors have not complied with the prov I slons of the afore-
mentioned statutes which clearly makes it the statutory duty of a
public official to require satisfactory evidence to be submitted
and affidavit made by the aontractor that ell just bills for labor
and material under the contract have been paid In full by the con-
tractor before releasing any retalnage funds payable under the con-
tract. Correlating this statutory provision, we find the following
paragraph, a part of the general conditions of the contract:
“Art. 26. Payments Withheld.--The Architect may with-
hold or, on account of subsequently discovered evidence,
nullify the whole or a part of any certificate to such extent
as may be necessary to protect the Owner from loss on account
of:
Hon. J. W. Calhoun, page 6 (O-1268)
“(a) Defective work not remedied.
“(b) Claims filed or reasonable evidence indlcat-
lng probable filing of claims.
l’(c) Failure of the Contractor to make payments
properly to subcontractors or for material
or labor.
“(d) A reasonable doubt that the contract can be
completed for the balance then unpaid.
“(e) Damage to another Contractor.
“When the above grounds are removed payment shall be
made for amounts withheld because of them.”
In the matter of final payment to the contractors by
the University, with particular reference to the notice received
and claim of the Trafton Tile & Marble Co., it appears that un-
der the authorities reviewed no prior or greater rights are
given one claimant who has g I ven statutory notice over other
claimants who have not, yet may be entitled to some portion of
the retalnage fund on hand.
In the case of Smith VS. Texas Company (Comm.App.) 53
S.W.(2d) 774 it was held that the notice provided In Articles
!$+72a and 54$2b need ‘not be filed with the proper official before
payment of any money to the contractor in order to fix lien on
fund due him. To the same effect, certified question was answer-
ed by the Commission of Appeals, in Huddleston and Work, et al,
vs. .Kennedy, et al, 53 S.W.(2d) 1009.
The statutes do not provide for any specific time in
which written notice of labor and material claims shall be given
the officials whose duty it is to pay a public works contractor.
From the case of Franklin Brothers vs. Standard Manufacturing
Company, 78 S.W.(2d) 294, by the Austin Court of Civil Appeals,
we quote:
II*** In this circumstance a reasonable time after
the completion and acceptance of the public’ works pro-
ject will be implied and allowed for giving such notice.
That this should be the rule Is apparent when these stat-
utes are considered with article 5160, supra, which re-
quires the state to hold all money due the contractor
wafter completion and acceptance of completed project
*** until such a time that satisfactory evidence is
submitted and affidavits made by the contractor that all
just bills for labor and material *** have been paid in
full. ’ This statute does not make notice prerequisite
to the duty of the state t,o withhold money due the con-
tractor after the completion and acceptance of the work,
Hon. J. W. Calhoun, page 7 (O-1268)
and to require satisfactory proof and affidavit that
all labor and material claims have been paid. It
further provides ‘that all claims for labor and mater-
ial *** shall be itemized and sworn to as required by
Statutes as to mechanic’s lien claims, and such claims
shall be filed vith the County Clerk of the County, in
which said work is being prosecuted, within ninety days
from the date of the delivery of said material and the
performance of said work.’ The mechanic’s lien stat-
utes referred to (article 5452 and art. 5453, as amend-
ed by Acts 1929 c. 478, sec. 1 (Vernon’s Ann.Civ.St.
art; 54533) provide that the sworn Itemized account of
materiel furnished shall be filed with the county clerk
within ninety days after the indebtedne~ss accrues. Ap-
pellee fully complied with the requirements of the reg-
istration statutes.
I’*** It was agreed that neither the state nor any
of Its agents, after the completion and acceptance of
the construction work, and before payment of the re-
tainage fund to the contractor, secured from the con-
tractor satisfactory proof and affidavits that all claims
for labor and material had been paid In full as required
by article 5160, and In consequence of this &each of
duty the state Is liable to appellee for the amount of
the retainage fund. And since the contract Imposed the
same duty with regard to retaining the fund until satls-
factory proof was made that all labor and material claims
had been paid, no necessity exists for a determination of
such contract liability of the state; nor for a determi-
nation of the question of whether any notice of appellee’s
claim was necessary to fix the contract liability.”
In answer to your request you are respectfully advised
that you should require the contractor to furnish satisfactory evi-
dence and affidavits made by him that all just bills for labor and
material under the oontract has i een paid in full by the contractor.
Article 5472a provides that when a claim Is filed under such artl-
cle no public official shall pay all of said moneys due said con-
tractor’but shall retain enough of said moneys to pay said claim.
Therefore, if the contractors comply with the requirements of the
statute as to furnishing satisfactory evidence and affidavits that
all just claims have been paid except that of the Tile Company,
the University should retain enough to pay that claim that IS,
the amount of the claim with a small sum In addition for contingen-
cies and pay to Wood & Scurlock, Contractors, the remainder.
It is further our opinion that where a portion of the re-
tainage fund or balance of the contract price withheld, Is charged
. . ,
Hon. J. W. Calhoun, page 8 (O-1268)
by statutory notice with the claim by a subcontractor, the general
contractors have a right to furnish a release bond under the pro-
visions of Article $t72b--1 Revised Civil statutes, 1925, as
amended, and be paid said claimed portion along vith the balance
of the retainage fund, provided the evidence is satisfactory that
there are.no other claimants to the retainage fund.
In connection with the foregoing, we further respect-
fully advise that this department Is unable to sanction or specl-
fically answer any one or all of the propositions Number 2, 3 and
4 outlined in the third paragraph on page 2 of your letter same
being questions controlled by facts directly bearing upon Che
proof to be submitted by the contractors under the contract and
statutes quoted herein, upon which we are unable to pass.
Trusting the above answers your request, we remain
Yours very truly
ATTORNEY
GENERAL
OF TEXAS
By /s/ Wm. J. R. King
Wm. J. R. Klng,~ Assistant
APPROVED AUG25, 1939
/s/ Gerald C. Mann
ATTORNEY GENERALOF TEXAS
APPROVED:;X’&NIg;A;zT”
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