                      January 24; 1963

    :!onorableD. C. Greer       Opinion No. c-6
    State Highway Engineer
    ~cxas Highway Department    ie:    Construction of Article
    Austin,Texas                       6674m and related statutes
                                       as to the amount to be
                                       withheld on highway con-
                                       struction contracts under
    Dear Mr. Greer:                   -stated facts.
          Your recent letter&quests the.opinion of this office
    concerningthe referenced statutes, under the following situa-
    tion:                                      ..
               "On a project.whioh has been recently com-
          pleted, our contractor went bankrupt and defaulted.
          Hia surety took over and completed the job and, in
          addition', paid off such claims for materials and
          wages aswere deemed to have qualified under the
          payment bond provlded.for in Article 5160. .~This
          Department has notice'of 8ome $13,OOO.OC.worthof
          alleged claims which are still unpaid and conse-
          quently ha8 withheld thia amount from it8 ypayment
          to the .contractor."                            :
               "Since the job in .uestion was a small one
          and only totaled some $2O,OOO.OO. it has been
          suggested that the subject of Article 6674m belng~
          retainage it only requires that 5%. or $3,000.00, ..
          be withheld until It is shown tha'tall.bills have
          been paid. Would you please advise us whether we
          should withhold an amount equal to the alleged
          unpaid bllls.or whether'we can pay the contra,ctor
          all but 5.5 of the~contract price."
.         Article 6674m, Vernon's Civll Statutes, requires the
             retalnage from final payment of highway construction
    FOllowring
    Cstracts:

               "Said contracts“may provide for partial pay-
          ments to anamount not exceeding ninety-five per




                               -19;
:   -




             D. c. cireer,Page 2 (C- 6
        .HOll.                           )


               o&t (95%) of the value of the work done. Five
               per cent (5s) of the contract price shall be
               retained until the entire work has been comple-'
               ted and accepted, and final payment shall not
               be made until It 18 shown that all sums of.
               money due for any labor, materials, or equip-
               ment furnished for 'thepurpose 'ofsuch improve-'
               ments made under any such contract have been
               paip2
               Article 5160, Vernon's Civil Statutes, requires prime.
        contractorsentering into contract with public agencies of
        the State for public works involving an amount in excess of
        $200 to execute a performance bond and a payment bond.
        Section B of Article 5360 provides:
                     .%very claiinantwho'has furnished labor
              .'ormaterial in the prosecution of the .workpro-
               vided for in such,contract in which.a Payment
               Bond is furnnishedas required hereinabove,and
               who ha&not been paid in full therefor,,shall
               have the right, if his claim remains unpaid
               after the .explration.of sixty (60).daysafter
               the filing'of the claim as herein required, to
               sue the principal andthe surety..orsureties on,
               .the Payment Bond.'. . .";;,
                 Article !%?%a, Ve.rnon'sCd.&.1Statutes, authorizesone
        furnishingany material, apparatus; fixtures;,,machinery,   or
        labor to a contractor under .a prime contract  for,any public
        improvementnot exceeding $2000 to perfect a lien on the
        money,,bonds,   or warrants due or to become due .tothe con-
        tractor for'the improvement by giving pr.operand timely noticc
        of unpaid c,laimSto the public official responsib$e for pay-
        ment on the zontract. The procedure to perfect such a lien ir
        ,setforth in some ,detall. Article %72b, Vernon's Civil Stat-
        utes, states:
                    "Tha.tno publld official, when so notified
               in writing, shall pay all of said moneys, bonds
               ortiarrants, due.said contractor, but shall
               retain enough of said moneys, bonds or warrants
               to pay said claim, in case it is established-by'
               judgment in a court of proper jurisdiction."
               Under,the prior 'law,one furnishing labor or materials




                                     -2%
          C. Greer, Page 3 (c- 6
   !ion..D.                         )


   could proceed against the payment bond (Article 5160) or per-
   fect a lien on money due the contractor under the prime con-
   t:sact (Article5472a). Since the 1959 amendment, however,
   actionspursuant to Article 5160 are limited to contracts in
   c:xcessof $2000 and liens pursuant to Article g72a are liml-
   ted to contracts which do not exceed $2000. Acts 56th Leg..
   i?jg, oh. 93, Pa 155: See Cacanay Corporation v. Shepherd,    _
   336 S.W.2d 779 (Civ. App.'19bO.,error dism. w.0.j.).
          Conalderingthe 1959 amendment, the question presented
,- 1s whether the retalnage provision of Article !5472brelates
   exclusivelyto Article 972a liens and; as a consequence,18
   applicablesolely to prime contract8 not exceeding $2000.
   Articles$k72a and 5472b were each sections of the same act
   In their original enactment.     Acts.39t.hLeg. 1925,'ch. 17, p.44,
   SCCS. 1 and'2. As noted in Metropolitian Casualty Insurance
   company v. Cheaney, 55 S.W.2d 553 (1932) both articles were
   sectionsof the same,act but were codif&d separately by Ver-
   non's. The two articles are considered by the courts as.parts
   of the 8ame.law.and as providing a remedy In the nature of a
   lien or garnnishment, which i8.in addition to that 'ofArticle
   5160.. smith v..Texz~%'Co.,:53   S.W..2d774 (1932); .Massachusetts
   3. & .InS.Co. v. Farmer8 &.M. State Bank, 13g.!kX. 310 lb2
   r;.Y.2db57 (1942)' Fr nklin I3ros:v. Standard Mfg. Co.: 78 S.W.2d
   294 (Civ. App. l&j, kit dism )* U S.:v. 'PedenIron & Steel Co.,
   330 'S.W.2d635 (Clv,.'App.   1959;~&&    ref.,n.r.e.); Cacanay
   Corporationv. Shepherd, supra.         :
          Further, the 1959 amendment to Article.5472a Indicates
   that 'the~Legislature'~consldered
                                   the two articles.as parts of
   the same act and the first section was amended, ,as follows:
               (8       Sebtion 1, Chapter 17,'Acts of
          the Th&y%.nth    Legislature, 1925 (compiled
          as titicle 547@,  Chapter 2, Vernon's Civil
          Statutes) Is amended. . . ."
           In view .ofthe above, we are of the opinion that Article.
    9472b refers exclusively to unpaid claims for whlch'notice Is
    Clven in accordance with Article *72a, and that retainage of
   funds sufficientto cover such claims is required only.where
    th? prime contract does not exceed $2000..
                              *_
           Attorney General's Opinion No. o-6241 (1944).states:
                "Articles 5472a, 5472b-1,   and 6674m, are
          :.
         Hon. D. c. Greer, Page 4 (C- 6   )


                In pari materla and should be construed~together.
                ~dWd;$8t.t& Work v. Kennedy, Clv. App.. 57
                             These Articles, In general, pro-
                vidi additional security for the payment of
                claims against a contractor in favor of those
                who furnish any material, equipment or labor
                to any contractor for any public improvements
                In this State, by means of either (1) a lien
                against funds designated for the payment of
.               said contractor, or (2) a bond which the con-
                tractor makes In lieu of-said lien.'
                Attorney General's Opinion No. O-4453 (1942) states:
                     "In the case of Huddleston & Work v.
                Kennedy, 57 S.W.2d 258 the court held that
                'Article-2160and Article 6674m were inpari
                materia.           _.
               :&ulthvi Te$s $a~~~                  the statutes con- ’
                                          held.'tha,t
         cerning the fixing f   1     or material8 and labor furnished
         in‘the constructionof permane.ntImprovementsof the State
         should be liberally construed.
                Ai+icJe 6674m was .&nended'bythe LegislatureIn then
         same'sessldn'butlater in time than Articles.5160, and 5472a.
         Acts 56th Deg. 1959;ch. ,434, p.:138.
                 ~Theprio? constructionthat.these atatutes,arein par1
          .materia.andshould be~liberally conatrued,.togetherwith the
          fact that the amendmentsof Article 6674m was later in time
          than the amendment of Articles 5160 and %72a, compels the
        '~conclusionthat the Texas liighway.Department should retain
          five .percentof the contract price of al.1highway constructior
          contracts'untll,thework has been completed and accepted and
          that final payment should not be tendered until a showing is
          made that all money due for labor and material furnished for
          the purpose of the project has been paid.
                                 SUkARY
                     Article 5472b~requirespublic officials to
                retain funds due under prime contracts.forpublic
                improvementssufficient to xover unpaid claims
                for which notice is recelved.only in those situa-
                tlons where the amount of the prime contract does


    .

                                      -22-      .

          ‘
Hon. D. C. Greer, Page 5 (c- 6     )


       no.texceed $2000. Article 6674m requires the
       Texas Highway Department to retain five per-
       cent of the contract price of highway con-
       struction-contractsuntil a showing is made
       that all money due for labor and material
       furnished for the purposes of the project has
       been paid.
                                 Sincerely,

                                 WAGGONER CARR
                                 Attorney General of Texas

                                 By .JH&
                                    F. -R:.Booth
                                    Assistant Attorney General
                                                                 :
: FRB:ab
  APPROVED:
  OPINION COMMITTEE
  W. V. Geppert, Chairman

 BenHarrison      -
 Arthur Sandlin   ~'
 Tom Peterson
 Grady Chandler

 APPROVED FOR'TRE ATTORNBY GRNERM,
 BY: Stanton Stone




                             -23;
