Untitled Texas Attorney General Opinion

The Attorney General of Texas
JIM MAnOX Oct,cmber24, 1984
Attorney General
Supreme Gael Building Aonorable David Cain Opinion No. JM-215
P. 0. Box 1x49 Chairman
Austin. TX. 78711. 254 Committee on Transportation Re: Bond requirements for
51214752SOl Texas House of Representatives motor vehicle dealers under
Telex 910/974.13S7
P. 0. Box 2910 article 6686, V.T.C.S.
Telecopier 51214754298
Austin. Texas 78769
714 Jackson. Suite 7W Dear Representative Cain:
Dallas, TX. 75202-4SOS
2141742-99U
You have asked this office for its opinion on matters relating to
the bond requirement for motor vehicle dealers under article 6686.
4924 Alberta Ave., Suite 10 V.T.C.S. Specific.%:Lly, you ask first whether article 6686 or any
El Paso, TX. 799052793 other law implicitl.>~ requires that a particular kind of bond be filed
9151S33.w pursuant to articll! 6686. Second, you ask whether the Texas Depart-
ment of Highways ancl Public Transportation has the authority to limit
301 1exu. swe 700
the type of bond filed under the act.
rlouston. TX. 77002-3111
713/223ea9S Article 6686, section (a). describes the procedures to be
followed by applicants for an original dealer’s and manufacturer’s
general distinguirh,ing number or master dealer’s license plate.
808 Broadway, Suite 312
Lubbock. TX. 79401-3479
Subsection (a)(7), in particular. was rigniflcantly amended by the
909i747.5239 Sixty-eighth Legisl.c:ture in 1983. See Acta 1983, 68th Leg., ch. 941,
at 5174. The atnentlrtents. which marked a number of changes from prior
law. were analyzed by this office in an earlier opinion. See Attorney
4309 N. Tenth. Suite B
McAllen. TX. 7SSOl-1SP.S
General Opinion 13-136 (1984). Nonetheless, severalquestions
512/a&?-4547 concerning article 6686(a)(7) rerrmin, the most significant of which
are the subject of J’our inquiry.
200 Mel Plaza. Suite 400 The present controversy arises from the newly enacted bond
San Antonlo, TX. 7&?0%?797
512a2S.4191
requirement of art:lcIe 6686(a) (7). As a condition to the issuance of
a license under thti! act, subsection (a)(7) now requires each applicant
to
An Equal Opportunltyl
Altirmatlva Actlon EI@OYW procure culd file with the Department [of Bighways
and Public Transportation] a good and sufficient
bond in I:he amount of Twenty-five Thousand Dollars
($25.000:‘. (Emphasis added).
The bond is condit::oned oo (1) the applicant’s satisfactory payment of
all valid bank dralta drawn for the purchase of motor vehicles in
dealer-to-dealer trrhnsactions and (2) the applicant’s transfer of good
p. 965
Ronorable David Cain - Page ii (JM-215)
title to each motor vehi:le he or she sells. V.T.C.S. art.
6686(a) (7). The act does no1: specify the type of bond to be submitted
by applicaote. but merely tluLt it be “good and sufficient.” Thus, YOU
ask in connection with you,’ first question whether the bond required
under the act “may be either a cash bond, surety bond, or bank letter
of credit that indemnifies :ln the same manner as a surety bond.”
In answer to your first question. it is our opinion that neither
article 6686(a)(7) nor any other law acts to limit the type of bond
filed under the act. Our conclusion rests, in part, on the fact that
no particular meaning or 1in:ttation is inherent in the words “good and
sufficient bond.”
Rule 364 of the Texa:, Rules of Civil Procedure, for example,
requires persons seeking to suspend the execution of an adverse
judgment to file a “good and sufficient bond” approved by the court
clerk, prior to prosecuting an appeal or writ of error. The supreme
court, interpreting the prt:decessor to Rule 364, held that if one of
the sureties on the bond wa.8 financially able to pay the amount of the
bond in the event of default, and if the district clerk was willing to
accept the bond, then this Inside the bond “good and sufficient” for the
purposes of the rule. Ex I’arte Wrather, 161 S.W.2d 774, 775 (Tex.
1942). On the other hand, a bond which provides no security other
than the solvency of the principal obligor is not a “good and
sufficient bond” within thtz meaning of the rule. Elliot v. Lester,
126 S.W.Zd 756, 759 (Tex. CL’?. App. - Dallas 1939. no writ).
Article 4201, V.T.C.S. (repealed, see Probate Code 1346).
formerly authorized the su1.e of estate property. It required the
guardian of the estate to post a “good and sufficient bond” prior to
the sale. In a case coastc%ing this requirement, one court of civil
appeals concluded that theoc! words “relate to [the bond’s] terms and
conditions and the solvt!r.cy and sufficiency of its sureties.”
Jarnagin v. Garrett, 69 S.J.Zd 511, 514 (Tex. Civ. App. - Texarkana
1934, writ ref’d). The colrrt indicated that the duty of the officer
accepting the bond was not: merely to require the bond; rather, the
officer was to “formulat(? . . . an order requiring a bond of a
particular character,* one which satisfied the requirements of the law
under vhich it was filed. Id. Such bonds should be liberally
construed in order to effec,tuatehe purposes the bond is intended to
serve. Scroggs v. Morgan, LO7 S.W.2d 911 (Tex. Civ. App. - Beaumont
1937). rev’d on other grounds 130 S.W.Zd 283 (Tex. 1939). But see
Setttgast v. Barris Count]5759 S.W.2d 543, 547 (Tex. Civ. App. -
Galveston 1942. writ rl?:l’d) (bonds are strictly construed).
Accordingly, we believe that the discretion, if any, of the Department
of Highways and Public Tr~lsportation in accepting or refusing the
bond required by article 6686(a)(7) must be determined by reference to
the language of the act and the purpose it is intended to accomplish.
p. 966
”
Honorable David Cain - Page :I (Jn-215)
As we noted in AttorncG General Opinion JM-136 (1984). the bond
required by article 6686(a)(7) is intended to provide security to
consumers and auto dealers doing business with persons licensed under
the act. In this respect, Ihe purpose of subsection (a)(7) is similar
to thet of laws in other atates vhich require bonds from applicants
for motor vehicle dealer licenses.
5320.27(10) (West 1984); Iowa Code Ann.%$i%; :2;t %%I; %:
Transp. Code AM. 1glS-103, U-308 (1984-85); Mich. Camp. Laws Ann.
$257.248(7) (West 1984); 1I.C. Gen. Stat. 120-288(e) (1983); Okla.
Stat. tit. 47, 0583(E) (1981). In this state, bonds of this kind are
coavnon prerequisites to the issuance of operating permits or licenses
for other occupations. See, e.g.. V.T.C.S. arts. 911b. 513 (motor
carriers); 4413(29bb), S4bs,rivate investigators and private security
agencies); 5221f. 513 (mobiLa! home dealers and manufacturers); 8501-l.
68(b) (boxing and wrestling; promoters); 8700. 05 (auctioneers). Our
research indicates that under the ~majority of these statutes, only
surety bonds sponsored by corporations licensed to conduct business in
the state are acceptable. IJe are also informed that following this
lead, the Department of Highways and Public Transportation has engaged
in a similar practice under article 6686(a)(7).
The language of article 6686(a)(7) does not, in our opinion,
support the limitation imposed by the Department of Highways and
Public Transportation. Whereas the act stipulates only that bonds
submitted thereunder be “good and sufficient,” those previously cited
statutes for which only corporate surety bonds are accepted expressly
impose this requirement or provide for alternative forms of security.
‘allb, 113; 4413(29bb), 140; 522lf. 113;
fgp&b;l;Ti;$; ;;‘.‘“’ Set! also, Iowa Code Ann. 1322.4 (West 1984);
Md. Transp. Code Ann. 515-308 (1984); N.C. Gen. Stat. 520-288(e)
(1983). Furthermore, the rule urging the liberal construction of
statutory bonds, Scroggs v. Morgan, supra, compels the rejection of
any rule or policy stricter than the statutory schame, particularly if
it does not serve the public interest. Although a corporate surety
bond arguably may provide the best form of security for consumers and
dealers, it does not necc!ssarily follow that the other forms of
security described in your ::c!quest cannot equally accomplish the goals
of article 6686(a)(7). Moreover, because neither the courts nor the
legislature has seen fit to impart a particular meaning or limitation
on the words “good and sufficient bond,” this office is without
authority to approve au ‘:I action by an administrative body.
Accordingly, we answer both your first and second questions in the
negative.
Finally, we caution that our conclusions should not be read to
require the Department of Righways and Public Transportation to
abandon its discretion over l:he approval of bonds filed under the act.
It is clear that the legislature intended to impose on the department
the duty to determine the su:! ficiency of bonds submitted by applicants
p. 967
Eonorable David Cain - Page 4 (JM-215)
for dealer's licenses and ta88. This necessarily entails the exercise
of some discretion by the department in determining whether a
particular bond in fact provides the security intended. Given the
number of applications the department must process every year, it is
understandable that the de?.lrtment would adopt a practice which not
only indemnifies adequately but is also the most administratively
convenient. Cf. Bullock v. Rewlett-Packard Co., 628 S.W.2d 754 (Tex.
1982). HowevE until article 6686(a)(7) expressly authorizes such a
practice, the department say not place limits on the type of bond
acceptable under the act.
SUMMARY
Neither article 6686 nor other law implicitly
requires the bor,d filed pursuant to subsection
(a)(7) to be of a particular kind. The Texas
Department of Hi:~lways and Public Transportation
may not, therefore, limit the type of bond filed
under the act.
JIM MATTOX
Attorney General of Texas
TOMGREEN
First Assistant Attorney General
DAVID R. RICRARDS
Executive Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Rick Gilpin
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Rick Gilpin, Chairman
Colin Carl
Susan Garrison
Tony Guillory
Jim Moellinger
Nancy Sutton
p. 968