74R9762 DLF-F By Smithee H.B. No. 2635 Substitute the following for H.B. No. 2635: By Smithee C.S.H.B. No. 2635 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to certain bonds executed by sureties. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Section 1, Chapter 87, Acts of the 56th 1-5 Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's Texas 1-6 Insurance Code), is amended by amending Subsection (a) and by 1-7 adding Subsections (c) and (d) to read as follows: 1-8 (a) Whenever any bond, undertaking, recognizance or other 1-9 obligation is, by law or the charter, ordinances, rules and 1-10 regulations of a municipality, board, body, organization, court, 1-11 judge or public officer, required or permitted to be made, given, 1-12 tendered or filed, and whenever the performance of any act, duty or 1-13 obligation, or the refraining from any act, is required or 1-14 permitted to be guaranteed, such bond, undertaking, obligation, 1-15 recognizance or guarantee may be executed by a surety company duly 1-16 authorized to do business in this state; and, except as provided by 1-17 Subsection (b) or (c) of this section, such execution by such 1-18 company of such bond, undertaking, obligation, recognizance or 1-19 guarantee shall be in all respects a full and complete compliance 1-20 with every law, charter, rule or regulation that such bond, 1-21 undertaking, obligation, recognizance or guarantee shall be 1-22 executed by one surety or by one or more sureties, or that such 1-23 sureties shall be residents, or householders, or freeholders, or 2-1 either, or both, or possess any other qualification and all courts, 2-2 judges, heads of departments, boards, bodies, municipalities, and 2-3 public officers of every character shall accept and treat such 2-4 bond, undertaking, obligation, recognizance or guarantee when so 2-5 executed by such company, as conforming to, and fully and 2-6 completely complying with, every requirement of every such law, 2-7 charter, ordinance, rule or regulation. 2-8 Provided, however, that any municipality may require in any 2-9 specifications for work or supplies, on which sealed bids are 2-10 required, that any corporate surety tender shall designate, in a 2-11 manner satisfactory to it, an agent resident in the county of such 2-12 municipality to whom any requisite notices may be delivered and on 2-13 whom service of process may be had in matters arising out of such 2-14 suretyship. 2-15 (c) A bond for an amount that exceeds $100,000 that is made, 2-16 given, tendered, or filed under Subchapter H, I, or J, Chapter 53, 2-17 Property Code, or Chapter 2253, Government Code, may be executed 2-18 only by a surety company that is authorized and admitted to write 2-19 surety bonds in this state and is the holder of a certificate of 2-20 authority from the United States secretary of the treasury to 2-21 qualify as a surety on obligations permitted or required under 2-22 federal law. 2-23 (d) Subsection (c) of this section does not apply if the 2-24 amount of the bond in excess of $100,000 is reinsured by an entity 2-25 that is authorized and admitted in this state as a surety or 3-1 reinsurer and that is the holder of a certificate of authority from 3-2 the United States secretary of the treasury to qualify on 3-3 obligations permitted or required under federal law. 3-4 SECTION 2. Sections 53.172, 53.202, and 53.237, Property 3-5 Code, are amended to read as follows: 3-6 Sec. 53.172. Bond Requirements. The bond must: 3-7 (1) describe the property on which the liens are 3-8 claimed; 3-9 (2) refer to each lien claimed in a manner sufficient 3-10 to identify it; 3-11 (3) be in an amount that is double the amount of the 3-12 liens referred to in the bond unless the total amount claimed in 3-13 the liens exceeds $40,000, in which case the bond must be in an 3-14 amount that is the greater of 1 1/2 times the amount of the liens 3-15 or the sum of $40,000 and the amount of the liens; 3-16 (4) be payable to the parties claiming the liens; 3-17 (5) be executed by: 3-18 (A) the party filing the bond as principal; and 3-19 (B) a corporate surety authorized and admitted 3-20 to do business under the law in this state and licensed by this 3-21 state to execute the bond as surety, subject to Section 1(c), 3-22 Chapter 87, Acts of the 56th Legislature, Regular Session, 1959 3-23 (Article 7.19-1, Vernon's Texas Insurance Code); and 3-24 (6) be conditioned substantially that the principal 3-25 and sureties will pay to the named obligees or to their assignees 4-1 the amount that the named obligees would have been entitled to 4-2 recover if their claims had been proved to be valid and enforceable 4-3 liens on the property. 4-4 Sec. 53.202. Bond Requirements. The bond must: 4-5 (1) be in a penal sum at least equal to the total of 4-6 the original contract amount; 4-7 (2) be in favor of the owner; 4-8 (3) have the written approval of the owner endorsed on 4-9 it; 4-10 (4) be executed by: 4-11 (A) the original contractor as principal; and 4-12 (B) a corporate surety authorized and admitted 4-13 to do business in this state and licensed by this state to execute 4-14 bonds as surety, subject to Section 1(c), Chapter 87, Acts of the 4-15 56th Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's 4-16 Texas Insurance Code); and 4-17 (5) be conditioned on prompt payment for all labor, 4-18 subcontracts, materials, specially fabricated materials, and normal 4-19 and usual extras not exceeding 15 percent of the contract price. 4-20 Sec. 53.237. Bond Requirements. The bond must be: 4-21 (1) in an amount double the amount of the claims 4-22 filed; 4-23 (2) payable to the claimants; 4-24 (3) executed by: 4-25 (A) the party filing the bond as principal; and 5-1 (B) a corporate surety authorized, admitted to 5-2 do business, and licensed by the law of this state to execute the 5-3 bond as surety, subject to Section 1(c), Chapter 87, Acts of the 5-4 56th Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's 5-5 Texas Insurance Code); and 5-6 (4) conditioned that: 5-7 (A) the principal and surety will pay to the 5-8 obligees named or to their assignees the amount of the claims or 5-9 the portions of the claims proved to be liens under this 5-10 subchapter; and 5-11 (B) the principal and surety will pay all court 5-12 costs adjudged against the principal in actions brought by a 5-13 claimant on the bond. 5-14 SECTION 3. Section 2253.001(4), Government Code, is amended 5-15 to read as follows: 5-16 (4) "Public work contract" means a contract for 5-17 constructing, altering, or repairing a public building or carrying 5-18 out or completing any public work. The term includes a contract 5-19 for constructing, altering, or repairing a public building or 5-20 carrying out or completing any public work in which an insurance 5-21 company is fulfilling its obligation under a contract of insurance 5-22 by arranging for the replacement of a loss rather than making a 5-23 cash payment directly to the governmental entity. The term does 5-24 not include a contract with a surety company complying with an 5-25 obligation under a bond. 6-1 SECTION 4. This Act takes effect September 1, 1995, and 6-2 applies only to a bond made, given, tendered, or filed on or after 6-3 that date. A bond made, given, tendered, or filed before the 6-4 effective date of this Act is governed by the law as it existed 6-5 immediately before the effective date of this Act, and that law is 6-6 continued in effect for that purpose. 6-7 SECTION 5. The importance of this legislation and the 6-8 crowded condition of the calendars in both houses create an 6-9 emergency and an imperative public necessity that the 6-10 constitutional rule requiring bills to be read on three several 6-11 days in each house be suspended, and this rule is hereby suspended.