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.