Untitled Texas Attorney General Opinion ( 1980 )

The Attorney General of Texas
December 15, 1980
MARK WHITE
Attorney General
Mr. Andy James, Administrator Opinion No. m-287
Texas Real Estate Commission
4920 N. Interregional Highway Re: Licensure of residential service
Austin, Texas 78751 www
Dear Mr. James:
National Warranty Corporation, whose home offices are located in
Indiana, markets a “Mobile/Modulsr Home Protection Plan.” Through signed
agreements with approved mobile home dealers, the corporation offers for a
fixed charge to extend for five years a manufacturer’s guarantee on mobile
home units. Coverage is made available to an initial purchaser of a unit or
his transferees. Service contracts warrant described units, includlng their
structure, plumbing, heating and electrical systems, and new appliances or
equipment to be free, under normal use, from manufacturing defects in
material or workmanship. Contracts take effect lpcn expiration of the
manufacturer’s warranty, at which time the corporation assumes respcnsi-
bility for repairing (r replacing any parts necessary to correct defects in
material or workmanship if a dealer is unable or unwilling to resolve the
problem.
You tave asked whether companies which market such a service
program in Texas must be licensed as a residential service company pursuant
to article 6573b, V.T.C.S., the Residential Service Company Act. Section 6
of the act provides, in pertinent part:
(a) No person shalL . . arrange to perform services
pursuant to residential service contracts unless such
person is a licensed service company or its authorized
representative.
of (b) No person shall. . . arrange or solicit the sale
. . . residential service contracts, unless (a). . and
(b) such residential service contracts are Issued by a
licensed service company.
A “service company” is defined in section 4(b) as “any person who issues and
performs, or arranges to perform, services pursuant to a residential service
contract,” and a “licensed service company” is a service company licensed by
the Texas Real Estate Commission. Section 4(c).
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Mr. Andy James - Page Two @M-287)
You assert that the service plan marketed by National Warranty Corporation
constitutes a “residential service contract” within section 4(a), which &fines such a
contract as:
any contract. . . whereby, for a fee, a person undertakes, for a
specified period of time, to maintain, repair, or replace all or
any part of the structural components, the appliances, or the
electrical, plumbing, heating, cooling, or air-conditione
systems of residential property.
The arporation maintains that it is exempted from licensure requirements by the
following proviso in section 4(a):
provided, however, the term &es not. . . include any service. . .
contract. . . sold . . or issued by any menufacturer or merchant
in which.. . the manufacturer or merchant undertakes. . . to
service. . . sny product or part thereof. . . manufactured or sold
by such manufacturer or merchant. . . .
The corporation also relies upon section 25(e), which states that the act &es not apply
to:
any service. . . amtract. . . which ptuvides for. . . the
maintenance, repair, service. . . of sny product or part
thereof. . . provided such service. . . contract. . . is sold,~
offered for sale, or issued by the manufacturer or merchant who
manufactured or sold such product or part.
National Warranty Corporation &es not contend that mobile homes covered by
its service plan are not “residential property” within article 6573b. Thus, we need not
decide whether the act would cover any mobile home, without regard to its intended
use, but will assume that mobile homes covered by the corporation’s service plan sre
residences and are therefore within the scope of the act. See Yates v. Mobile America
Sales Corporation, 582 S.W.2d 509 (Tex. Civ. App. - BeaGnt), writ rePd n.r.e., 591
S.W.2d 453 (Tex. 1979).
The corporation argues that because it &es not sell its service plans directly to
consumers, but markets them through approved dealers who pay for the coverage and
then provide it to their buyers, it is exempt from licensure requirements. However, in
our opinion, this argument overlooks the fact that an sgreement between the
corporation and an approved dealer is itself a “residential service contract” within
section 4(a) of the act: it is a contract whereby, for a fee, the corporation undertakes
to service the parts of residential property specified in that section. It is equally
clear, moreover, that the exemptions relied qcm by the corporation are inapplicable.
Sections 4(a) and 25(e) exclude from the act service contracts issued or sold by
manufacturers cr merchants of the products or parts covered by the contract.
However, although a dealer with whom the corporation contracts may later make the
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Mr. Andy James - Page Three (Mw-287)
advantages of the contract available to its customers or “resell” the contract to them,
the original contract is sold to the dealw by the corporation, which is neither a
manufacturer nor a merchant within article 6573b.
We therefore conclude that National Warranty Corporation is required to be
licensed as a residential service company pursuant to srticle 6573b, V.T.C.S., in order
to & tminess in Texas. We assume, of course, that the corporation is not already
licensed as an insurance company. V.T.C.S. art. 6573b, S2(a).
SUMMARY
National Warranty Corporation is required to be licensed as
a residential service company under article 6573b, V.T.C.S., in
order to do business in Texas.
MARK WHITE
Attorney General of Texas
JOHN W. FAINTER, JR.
First Assistant Attorney General
RICHARD E. GRAY III
Executive Assistant Attorney General
Prepared by Jon Bible
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Acting Chairman
Jon Bible
Rich Gilpin
Nancy Lynch
Bruce Yamgblood
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