By: Madla S.B. No. 1026 A BILL TO BE ENTITLED AN ACT 1-1 relating to certain bonds executed by sureties. 1-2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-3 SECTION 1. Section 1, Chapter 87, Acts of the 56th 1-4 Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's Texas 1-5 Insurance Code), is amended by amending Subsection (a) and by 1-6 adding Subsection (c) to read as follows: 1-7 (a) Whenever any bond, undertaking, recognizance or other 1-8 obligation is, by law or the charter, ordinances, rules and 1-9 regulations of a municipality, board, body, organization, court, 1-10 judge or public officer, required or permitted to be made, given, 1-11 tendered or filed, and whenever the performance of any act, duty or 1-12 obligation, or the refraining from any act, is required or 1-13 permitted to be guaranteed, such bond, undertaking, obligation, 1-14 recognizance or guarantee may be executed by a surety company duly 1-15 authorized to do business in this state; and, except as provided by 1-16 Subsection (b) or (c) of this section, such execution by such 1-17 company of such bond, undertaking, obligation, recognizance or 1-18 guarantee shall be in all respects a full and complete compliance 1-19 with every law, charter, rule or regulation that such bond, 1-20 undertaking, obligation, recognizance or guarantee shall be 1-21 executed by one surety or by one or more sureties, or that such 1-22 sureties shall be residents, or householders, or freeholders, or 1-23 either, or both, or possess any other qualification and all courts, 2-1 judges, heads of departments, boards, bodies, municipalities, and 2-2 public officers of every character shall accept and treat such 2-3 bond, undertaking, obligation, recognizance or guarantee when so 2-4 executed by such company, as conforming to, and fully and 2-5 completely complying with, every requirement of every such law, 2-6 charter, ordinance, rule or regulation. 2-7 Provided, however, that any municipality may require in any 2-8 specifications for work or supplies, on which sealed bids are 2-9 required, that any corporate surety tender shall designate, in a 2-10 manner satisfactory to it, an agent resident in the county of such 2-11 municipality to whom any requisite notices may be delivered and on 2-12 whom service of process may be had in matters arising out of such 2-13 suretyship. 2-14 (c) A bond that is made, given, tendered, or filed under 2-15 Subchapter H, I, or J, Chapter 53, Property Code, or Chapter 2253, 2-16 Government Code, may be executed only by a surety company that is 2-17 the holder of a certificate of authority from the United States 2-18 secretary of the treasury to qualify as a surety on obligations 2-19 permitted or required under federal law. 2-20 SECTION 2. Sections 53.172, 53.202, and 53.237, Property 2-21 Code, are amended to read as follows: 2-22 Sec. 53.172. Bond Requirements. The bond must: 2-23 (1) describe the property on which the liens are 2-24 claimed; 2-25 (2) refer to each lien claimed in a manner sufficient 3-1 to identify it; 3-2 (3) be in an amount that is double the amount of the 3-3 liens referred to in the bond unless the total amount claimed in 3-4 the liens exceeds $40,000, in which case the bond must be in an 3-5 amount that is the greater of 1 1/2 times the amount of the liens 3-6 or the sum of $40,000 and the amount of the liens; 3-7 (4) be payable to the parties claiming the liens; 3-8 (5) be executed by: 3-9 (A) the party filing the bond as principal; and 3-10 (B) a corporate surety authorized and admitted 3-11 to do business under the law in this state and licensed by this 3-12 state to execute the bond as surety, subject to Section 1(c), 3-13 Chapter 87, Acts of the 56th Legislature, Regular Session, 1959 3-14 (Article 7.19-1, Vernon's Texas Insurance Code); and 3-15 (6) be conditioned substantially that the principal 3-16 and sureties will pay to the named obligees or to their assignees 3-17 the amount that the named obligees would have been entitled to 3-18 recover if their claims had been proved to be valid and enforceable 3-19 liens on the property. 3-20 Sec. 53.202. Bond Requirements. The bond must: 3-21 (1) be in a penal sum at least equal to the total of 3-22 the original contract amount; 3-23 (2) be in favor of the owner; 3-24 (3) have the written approval of the owner endorsed on 3-25 it; 4-1 (4) be executed by: 4-2 (A) the original contractor as principal; and 4-3 (B) a corporate surety authorized and admitted 4-4 to do business in this state and licensed by this state to execute 4-5 bonds as surety, subject to Section 1(c), Chapter 87, Acts of the 4-6 56th Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's 4-7 Texas Insurance Code); and 4-8 (5) be conditioned on prompt payment for all labor, 4-9 subcontracts, materials, specially fabricated materials, and normal 4-10 and usual extras not exceeding 15 percent of the contract price. 4-11 Sec. 53.237. Bond Requirements. The bond must be: 4-12 (1) in an amount double the amount of the claims 4-13 filed; 4-14 (2) payable to the claimants; 4-15 (3) executed by: 4-16 (A) the party filing the bond as principal; and 4-17 (B) a corporate surety authorized, admitted to 4-18 do business, and licensed by the law of this state to execute the 4-19 bond as surety, subject to Section 1(c), Chapter 87, Acts of the 4-20 56th Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's 4-21 Texas Insurance Code); and 4-22 (4) conditioned that: 4-23 (A) the principal and surety will pay to the 4-24 obligees named or to their assignees the amount of the claims or 4-25 the portions of the claims proved to be liens under this 5-1 subchapter; and 5-2 (B) the principal and surety will pay all court 5-3 costs adjudged against the principal in actions brought by a 5-4 claimant on the bond. 5-5 SECTION 3. Subdivision (4), Section 2253.001, Government 5-6 Code, is amended to read as follows: 5-7 (4) "Public work contract" means a contract for 5-8 constructing, altering, or repairing a public building or carrying 5-9 out or completing any public work. A public work contract includes 5-10 but is not limited to constructing, altering, or repairing a public 5-11 building or carrying out or completing any public work, whereby an 5-12 insurance company is fulfilling its obligation pursuant to a 5-13 contract of insurance by arranging for the replacement of a loss 5-14 rather than making a cash payment directly to the governmental 5-15 entity. 5-16 SECTION 4. This Act takes effect September 1, 1995, and 5-17 applies only to a bond made, given, tendered, or filed on or after 5-18 that date. A bond made, given, tendered, or filed before the 5-19 effective date of this Act is governed by the law as it existed 5-20 immediately before the effective date of this Act, and that law is 5-21 continued in effect for that purpose. 5-22 SECTION 5. The importance of this legislation and the 5-23 crowded condition of the calendars in both houses create an 5-24 emergency and an imperative public necessity that the 5-25 constitutional rule requiring bills to be read on three several 6-1 days in each house be suspended, and this rule is hereby suspended.