By Smithee 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 adding 1-7 Subsection (c) 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 completely 2-6 complying with, every requirement of every such law, charter, 2-7 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 that is made, given, tendered, or filed under 2-16 Subchapter H, I, or J, Chapter 53, Property Code, or Chapter 2253, 2-17 Government Code, may be executed only by a surety company that is 2-18 the holder of a certificate of authority from the United States 2-19 Secretary of the treasury to qualify as a surety on obligations 2-20 permitted or required under federal law. 2-21 SECTION 2. Sections 53.172, 53.202, and 53.237, Property 2-22 Code, are amended to read as follows: 2-23 Sec. 53.172. BOND REQUIREMENTS. The bond must: 2-24 (1) describe the property on which the liens are 2-25 claimed; 3-1 (2) refer to each lien claimed in a manner sufficient 3-2 to identify it; 3-3 (3) be in an amount that is double the amount of the 3-4 liens referred to in the bond unless the total amount claimed in 3-5 the liens exceeds $40,000, in which case the bond must be in an 3-6 amount that is the greater of 1 1/2 times the amount of the liens 3-7 or the sum of $40,000 and the amount of the liens; 3-8 (4) be payable to the parties claiming the liens; 3-9 (5) be executed by: 3-10 (A) the party filing the bond as principal; and 3-11 (B) a corporate surety authorized and admitted 3-12 to do business under the law in this state and licensed by this 3-13 state to execute the bond as surety, subject to Section 1(c), 3-14 Chapter 87, Acts of the 56th Legislature, Regular Session, 1959 3-15 (Article 7.19-1, Vernon's Texas Insurance Code); and 3-16 (6) be conditioned substantially that the principal 3-17 and sureties will pay to the named obligees or to their assignees 3-18 the amount that the named obligees would have been entitled to 3-19 recover if their claims had been proved to be valid and enforceable 3-20 liens on the property. 3-21 Sec. 53.202. BOND REQUIREMENTS. The bond must: 3-22 (1) be in a penal sum at least equal to the total of 3-23 the original contract amount; 3-24 (2) be in favor of the owner; 3-25 (3) have the written approval of the owner endorsed on 4-1 it; 4-2 (4) be executed by: 4-3 (A) the original contractor as principal; and 4-4 (B) a corporate surety authorized and admitted 4-5 to do business in this state and licensed by this state to execute 4-6 bonds as surety, subject to Section 1(c), Chapter 87, Acts of the 4-7 56th Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's 4-8 Texas Insurance Code); and 4-9 (5) be conditioned on prompt payment for all labor, 4-10 subcontracts, materials, specially fabricated materials, and normal 4-11 and usual extras not exceeding 15 percent of the contract price. 4-12 Sec. 53.237. BOND REQUIREMENTS. The bond must be: 4-13 (1) in an amount double the amount of the claims 4-14 filed; 4-15 (2) payable to the claimants; 4-16 (3) executed by: 4-17 (A) the party filing the bond as principal; and 4-18 (B) a corporate surety authorized, admitted to 4-19 do business, and licensed by the law of this state to execute the 4-20 bond as surety, subject to Section 1(c), Chapter 87, Acts of the 4-21 56th Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's 4-22 Texas Insurance Code); and 4-23 (4) conditioned that: 4-24 (A) the principal and surety will pay to the 4-25 obligees named or to their assignees the amount of the claims or 5-1 the portions of the claims proved to be liens under this 5-2 subchapter; and 5-3 (B) the principal and surety will pay all court 5-4 costs adjudged against the principal in actions brought by a 5-5 claimant on the bond. 5-6 SECTION 3. Section 2253.001, Government Code, is amended by 5-7 amending Subsection (4) to read as follows: 5-8 (4) "Public work contract" means a contract for 5-9 constructing, altering, or repairing a public building or carrying 5-10 out or completing any public work. A public work contract 5-11 includes, but is not limited to, the constructing, altering, or 5-12 repairing a public building or carrying out or completing any 5-13 public work, whereby an insurance company is fulfilling its 5-14 obligation pursuant to a contract of insurance by arranging for the 5-15 replacement of a loss rather than making a cash payment directly to 5-16 the governmental entity. 5-17 SECTION 4. This Act takes effect September 1, 1995, and 5-18 applies only to a bond made, given, tendered, or filed on or after 5-19 that date. A bond made, given, tendered, or filed before the 5-20 effective date of this Act is governed by the law as it existed 5-21 immediately before the effective date of this Act, and that law is 5-22 continued in effect for that purpose. 5-23 SECTION 5. The importance of this legislation and the 5-24 crowded condition of the calendars in both houses create an 5-25 emergency and an imperative public necessity that the 6-1 constitutional rule requiring bills to be read on three several 6-2 days in each house be suspended, and this rule is hereby suspended.