            OFFICE OF THE ATTORNEY    GENERAL   OF TEXAS
                             AUSTIN




Honorable D. C. Greer
State El&way En&nesr
Texas Highway Depsrtment
Auetin, Texas
Dear Sir:



                                                  ju4gwnt   in caum
                                               n the 98th Dirtrlot
                                               ik County, Texau,
                                               4ePont deN&aoure &
                                               laintitie  .va. Brady
                                        J, Chairnan of the State
                                        CowmllrEtlon OS TsxfM, et
                                        ridante, and a relate4




                                            Tom Arohsr   an4

      improvement an4 a oontraat was awarded to him for
      thle work on May 27, 1932.    The oontraotor   began
      work on July 18, 1932 but after perf'orming one montha
      work on thle contract  he defaulted   an4 a receiver wae
                                                                     505



gon. D. C. Greer~, l’age 2


    appointed.     This receiver    proceeded with the rti-
    fill&ant   or this contract     but at the request      of
     the eurety company the reoelvsrship         was dissolved
    and the surety oompany took over the oonetruot~on
     Or the project on Deoembsr 31, 1932.           On or about.
    I;ay 4, 1933 t&e surety oompany defaulted          an4 aft6ir
    having been given notloe by the Stats Highway Duv
    partmcmt to oomplat@ this projeot         ati they tail&&
    to raaume work In looordanoe with the oontraot             the
    State took over the completion        of thla oontraot      on
    N&J 13, 1933.     To oomplete this oontraot        the State
    NoalVs4    bids and awarded a oontraot        to thr womaa)t-
    Henning Construotlon     Compsny for the remainingwork.
    OR June 29, 1033.     h’hlle the work as required        by
    thlr oontraot    was phpsioally    oomplotod on Ootober
    10, 1935 the oontraot has not as of thlr data, been
    oomplrted duo to the iaOt that the State wlthheld
    frosmbnfae due ths oontraotor         funds on aooount or
    labor and materials     olalma having been illed        with
    thr Department.
          “After   paylag   to the   Womack-Henning Construo-
    tion Company the amount due thti          far the oompletlon
    oi thin oontraot       tha State now ho148 a balanae        ai
    Ql,g+S.CS of the monies due the oontraotor              on ao-
    aount of this projeot.         Rsoently   &. I. DuPont Do
    Nemours and Company fllsd        a suit agalnet     the oon-
    traotor,    his surety oompany and the State Highway
    Department to establish        a llan against    the oontnc-
    torr funds tbat wo now hold.           on Novanber 3, 1943
    the Dirtrlct     Judge of the 9Sth Dirtriot       Court of
    Travla County’ entered a judgment against           the OOO-
    traotor    and the surety oonpany and the State Or
    Texas for the #1,835.44.         The requirement6      of tbir
    ju4gmant are that the Stats of Texas pay into the
    iiegiatery   of tha Court the funds of the oontraotor
    that it now holds to be distributed           to the various
    persona who have filed       and did establish      In thi8
    oourt their     claim ror labor $$.n4mataridls        in eon-
    neotion with the oon8truotion 0r thir projeot.
    #hen the State Highway ComQiOaiOn raOOivO4 Oikrt%on
    in oonneotion      with thir suit this iniOrlUEition was
pk.   D. C. Grew,      Face 3


      passed to your ofilcs       an4 your oifioe     made a
      oonstruotire   tendei     of the $1,835.46    funds OS
      the oontraotor    into    the Flegirtary   of tha Court.
            “In oonneotion  with the $1.835.45   fun48 that
      the State now holds,   It is our thought that this
      money is the property of the oontraotor     ati 10
      bring hel4 In the Trraaurp althor     to pay to him
      or to pay to olalmantr    In the event that the olaim
      la eatabllsho4   In a oourt of oompeteat   jurladiotlon,
      the Stats being maraly a ataka holdar of the8a runas,
            Vln quortion haa now been ralae4       as to *ether
      the aontraotora   run48 oan be wlthdiuwn rrom     the Stata
      Treasurer   duo to tha oonatltutlonal    provision tbat
      the Lsglalature   baa authority    to appropriate  funds
      not lon(;erthan two yeara.
             *The Leglalaturo   every two years reapproprlatoa
      all State highway funds not previously        expanded am
      roll as all new run46 oualug Into the Trearury an4
      it 18 our thought that all unexpm4ed funda ror oon-
      traotual    obligationa are   reappropriated   by the Legla-
      lature   eaoh two years for the payment o? tha State’s
      &~-stlonr       on woh oontraot    as well as otha    obllga-
            .
            WArtiola   5472    (b) requlraa   *that   no pub110
      offlolal,wha      80 notlfie4  ln wrIti!&, #hall pay all
      of%ati     monies  bond or warrants 80 said oontraotor,
      btit shall    ret&     enough of asi4 W&88,         bonds or
      warrants to pay oaid olalm, In 0866 it 18 latablirhe4
      by ju4gmant in a court or proper jur1a4iotlon----*.
      Under thlr statute        fund@ that were     4ua the oontraotor
      wern retained       on account of the filing       of labor and
      material    claims an4 tha Stata would bare bean in
      violation     of the statute6      had lt paid all tha monies
      to the oontraotor       upon phyaleal     omplrtlon     of the
      work oallod      ror by the v4ontraotor.      -The State only
      now is $0 a position         to lagally   di~poae or tha funda
      or +b ocntraotor,        a judgment having been rendered
      on November a, 1943 agalnrrt the aontraotor             In favor
      of the Olalmants.         It is %hWght that the state         la
 Hon. D. C. Graer’, Page   4




     n_ot at thia time barred from the oompletion        of
     Its oontraotual  obligation.
            WSaotlon 0 0s Article       VIII 0r the State
     Constitution    provider     that *no money shall be
     drawn from the Treasurer         but in purauanor of the
     ~peoIfie4    appropriation     made by law; nor shell
     any qqropriatlon         of money be 11~340for a longer
     terma than two year+----*.
          “We would llkr an opinion from your ortioe
     as to whether or not funds are available for the
     payment of the balanoe or the funds due under thl8          ’
    ‘OontMot  at this time.
          wArtiola 4SS7 provides that  *no olati   shall
    Abe pal4 from approprlatlona unleaa proa@nted to
    tha Comptroller  for paymakt withln two yemra 0s
    the SlsOal yeara for whloh auah approprlati,on     was
    m&e----    *,

           we   ~~14further    like to have an opinion from
     your offloe   as
                    to whather or not the Stats la barred
    from making payments on aooo*unt of a oontraat      wha%
    fund8 were held by the State on aooount Of the flllng
    of olal~ under Article       5478 (a) au4 (b) when payment
    00~14 not have been ~aa4e wdthln two year8 from the
    oloae of the fleaal    year from whloh auoh appropriation
    was made duo to the fact that the claim had not been
    released or a~ judgmalt entered      prior to this time.
            *For your Information  thora la attaehed  hereto
     a oopy of the judgmmt In Cause No. 68639 In the 98th
     Diatriot    Court oi Travla County,’ Texar in the suit
     styled    E. I. DeFont De Nemoure and Company et al. Vs.
     B&y      y. tintry, Chairman of the State Highway CODD-
     mlraion or Texas et al.*
           #e shall anawer both of your ques~tlona together   a8
the first  question la speolflo  an4 the asoond queetlon   la mere-
ly a general one dealing   with ths mame aubjeot matter.
HOI%.J-ii.Creel',PsigS5



           Ant% your lottar      Ik18 set out In detail   the pro-
vision8 of the Conrtltution      and the Aatute8,     we will not
burden your tint8 by relteratlng      the came herein.
           In the oa8e of Texae Colnpeny P. Sahriewer,         38 3. w.
(Ed) 161,  the Court hold that Art~ciee      5478a end 547Zb, Vermm'8
tinnotated Civil   iitatuter, gave nub-oontreator8,    es well a8 gea-
era1 elmtraCor8,       a 11~ oa money paid for public improve.aQnta.
That Court  III that oaoe further    held that the tit&to Elghway De-
portment in rlew of iirticle8     6078 to 6674,   and nrtiole8    66140,
66748, 66741 and 6694, hev8 8upervl8loa       over the expenditure
of hlghuay funds and that     the State Reaeurer     I8 merrly a
depooltory  of suoh fundr.

           It ha8 been held by the aourtr               of Tara that all state
hi&hwayr are under the oxolusl~o  ooatrol               and management of the
Ytnte Blghwey Department.
              The Court held     In the    0a8a ot Atkin      V. Texar Highway
Department,801 3. W. i%6, that the Legirlature  la deelerlng th5t
all funds malag into tb head8 of the tjtete Blghwap Coaslr8lon
derived    iron ro@8tratIoa      fee8 prerorlbed     for motor vehloler,
or froa    nap other 8ouroe.      shall bo deposited    with the State
Treasurer     to a 8pealal    aoaorurt de8igAated    as the "State Highway
Fund" aooount, and that 8srtlu I8 a valid approprfetlon,           though
not, bf oourse, 8peolfylng         the ammats to be realized;      8imilar
prorIslon8     for oontlngent     amount.8 having long been reOW!iiZsd     a8
valid approprlatioar.
              ktia~le   4357,   Vernon’8    j&notated     CIvIl   Statutes,   pro-
vider     a8 Sollow8:


              ** *'* No olalm     shallbe paid fioslOQprOprie-
          tlona  unle88  praaented to tke Oonptroller    for pay-
          mnt within two (8) yeer8 from the olO8e o? the
          ilace   year  far whIoh such epWoprIatIon8    were made,
          but any alala not presented    for payment within 8uoh
          period smy bs preeented    to the Legl8leture    a8 other
          al~ims tar which no appropriation8     ere lvall*ble.*
          * 5"


               In the ou8e of winder t&08. v. Sterling,             18 S. K. (Ed)
127,    the   Court, on page UO, in dealing with lien              olaiaentr r,im.i-
    IX=* 2. c.          Crder,   pug0 6




    zdto        these     ao pirtles      in the    aaae presented   ia your   inquiry,
           :-

                    CTho ~rorlslonfor wlthholdlng            Boney, war-
            rants,    lto.,    ror paymeat ,0r a olala 88 and wh8a
             redwad to judgznnt,          wlth laak of requirement         for
             Judfgant wlthla say given t&110, it i8 said, render8
             the statute      IndePlalte.      To this 18 added a ohrlrge
             of axbitrariLtO88      ia forOh$& th8 OOUtreOtOr t0 aWatt
             the plecIi.un of the oiaimat           In respeot to time of
             juegmnt.       ‘&a statuSe,      however, but Paw8 a oaa-
             tueacy      upoa time       eoourreaoe   in ad lpproprlato
             oa84 awneye, eta.,        become due and payable to the aoa-
             traator,    and for rhloh, OS noted, the part.ie8 to the
             aoatraot (by reference          and inputation)    stipalata.     88-
             aldee,   no Teasoa 18 lg p a p a for    y ep*eoluaIn6
                                                          nt           adjudi-
           .oatIon    oi the okaita or its Ir&vaJ.idStr oa 1o1e of th8
             eontra&tor,      It he becoa88 di88oti8fledwith pxvores-
             tlaatloa    of tha Olal0sa:~,*

            da    apia       on pago 189,     the    Court   Said;

                   *+ + * ?baia(l the SUbjOOtS of ii&LB and ttm                   *
            OOOdltIO~S for their           regI8tretloa     ana lnforoemeat
            is a tamillar       legI8latlre       p0wer.    We are glrea a0
            ratfaronoe to preoedentr           (and wa know 0r none) against
            lnclu8ion      0r pub110 moneys aad SOO~itieS or tE8
            legI8latln('8overeIga,            (a8 and whoa payable or de-
            liverable      to oontraotors,        eta.) within     the StAb3OOt
            mttor      of llens    deolsred     for   materialmen.    meohanIor.
            lto.     irncl when the Mea (in this ehuter-proriaed)                 -
            ottao&ea. t&a 0xODer8y to which it lttaohes                   la thr,
            pr~r~W       of the OOntreOtInR debt&r and WA or the
            state or muaialpal~ty.           tlm latter     being debtor 0Z that
            aebtor or baIlo8.         eta.     00rr0x00, there is a0 ooatempt
            of the letter       or spirit      of Section     2W. artiolo    3. OS
            the Constitution,         to whloh we a8eWDI oounsel Intsnded
            to refer.*




i
            In the ease oft Wepubllo Niatlonel Bunk an&'Trust Com-
WY    v. YasBaohuOetts   Bonding t fnsurenee   Company, 68 Ted. (8d)
d3, Honorable Judge Sibley of the Cirault       Court of kppeals,  in
&lIng    with the okso in which the surety oa the bond of th eon-
traaetor wna suing to recdl aoneys that had been paid out by the
oity on tha RTOPOSea a*slgrrpLsnt 0s the aontraotor    to a bank, be-
fore tba urriaavit about mentioned in proof 0s pay:wnt 0s all
@lab8 hed beed -a., said in plain la~gurrg8 at pago 447, with
nferenoo    to that rbet sItuotIoA,   a8 fOisOW88

               Wls     (the      sursty*a) equity            originates          in the
       agreement of the bltf and the contrmtor, relnrorcea
       by the aot 0s 1989 to the am8 errrot, thrt oertaln
       peroentages          0s   the    earsed     papwmts         uhall    be    remned
       for Y final payaent.ror the maurlty of th, olty and
      sumty,   and equity treating    this fund as a trprt will
      see to Its protectloadna      appllaatloq,raoalling it ii
      f3iSappliad.   This IS the hOart of tbs bill. Prairlo
      State fiatlonal Bank v. United States, l&d 0. S. Ic.27;
      Olader County v. Dotraft Fldallty      k Surety Co., 57 F.
      (Ed) 449; pirat rational     Baak v. lfdellty  & Deposit
               65 P.     (8a)       9b9$ Fideiit~          Lh DepOSitCO. Of Lbp
       $4      v.    Claiborne         Parrlrh     bohool     Board,       11    F.   (zd)
      404.”


               In tb8       0~86 Of Jsaith t.          TUB         ciW&~~y, 33 8. W. (3d 1 774,
8t   page 797, the Court               said:


               "Senate       3iil      94~, kOt8 39th        L8gISlaturO    (lU3S)
      c.    le6,     P. 456 (Y.A.C.S.            ( Arts.     6694a-6d74n)    was *a-
       aotoa       by the    amme LegiS&Gum                whloh    paarea krtieler
       547er       ana 5470b.
            *It provides       that the State shall retain   10% 0s
      the oontrpaet price tmtll the work htrr been aooepted,
      and it exm=eooly r0rbIas fIAal paywnt of tha retained
      SUm until  it   18 shows that      *all 8~8 of monel due for
      any labor,    materills,     or equIpmAt furnished   for the
      purpoue Of SuOh iroprOvtiUiOAt8 sado under any Such aoa-
      trvot have bOOA paid.* sad. 13 0s the ket (v.~.c.ii.,
      iat.  dd7apl) . It IS groper to ooaet~ue this xot 50 a
      ;‘art 0s the lo@iletlon      pravldlng for the lion In ques-
      tlOA, 88 it rehte8      tQ the BeiM SUbdebt BurttaT and %?+a
      &Weed at the 8811, !I8selon                   JI the Lsgf81ature.m
                                                                    511




nnd again   nt the    top of Pugh 777,     the Court    said:


      "It was the lnteiltion     of the hglslature
to  enable those lurnlehlng      L:bor, mterlal,      eto.
to a sub-oontraofor     for any‘~ubLlo    im2rove~nt
to receive   paymat    theretor   to the extent    0r any
unpcrld balance due raid cub-oontreotor        at  the
tlu@ notice   required    by 8tatute   18 given.


      Vie   6180         thht the ruin6 or the
                   oonolube
notloo wlth the   stuto Highway CoPsef88lon *a8 a
8triOt  0~3piianQe With the WOVl8iOn Or th8 8Ot,
which  r8qulre8 the 8.aa8to be riled with the Or-
rloiel,   whove duty it 1s to p&y the orlglnal             oon-
tractor.    Ihinder i&08.   v.  sterling,     ll0   Tex.   2bB,
12 6. ik. (2d) 127, 14 Y. W. (2d) 808; !detropolltan
La8ualty In8. Co. v. Chean8y, et al.,             (Tex.,Clv.
..&I.) 92 a. n. (2d) 801; iseet Chicago Perk Com*r8.
v. iiestern &mite Co., eoo Ill.           527, 66 I@. P. 37;
JaUu38 p. iidi,   ILlLO., ‘I..Jer8ey City, 62 N. J. Ea.
489, 60 n. 603.
      n. . *

       *all sonay deposlted to the oredlt Or the
highway rUnd IS by the teXYII8Of artiole  66740
made subject   to approgrlatlonror tba 8;reOiriO
purpoee 0r oaid iqrovetint or 8ald ay8tem or
8tat.e hi&way8 by the highw8y d8partmant.
       "It thua a?pamr thnt the Legislature             has
eatabllshed    a 4epart:snt     and clotbed     it with iull
and complete authority       to sake oontmat8         ror the
is2roverpnnt of ekte      hi5bwayS and created a epeoial
fund out of which the ObligntlOa8           *de by such de-
ptirt3xmt 8bU11 -be dlschiirged.       'i'he hlshway 000!3&8-
slon ie charged with the duty or laying thee8 obll-
gationr    from this epaoia]. fund.       shea oonalderatlon
is given to the sttrtutes      ve8tlng     control    over de-
sign&ted stiite highway* in the atate hi&my                ooml8-
alon, and uuthorlzlng       suoh body to oontmot         and ex-
pmd fun%u eet ag~!irt for that purpose.            it  beeowe
obvious that such dep0t:mnt          is the cne whoee duty
       it 13 to pay oontnctora tar work perrome                upon
       et&to highways.        It is true that the 8tnte tredm-er
       actually   pay8 outthe mcdy on depoelt          to the oredit
       of the highway department, a8 is generally            the oase
       ath    au obligations      izk&e by a 8tate de'partmnt       ror
       ana on behdr 0r the stite.           Ete does thi8,   however,
       E;S a mre dlsburrrlog      officer   and on VoUOhsr8 issued
       and agi.~roved by a majority       of the highway SoimIi8SlOlI.
       iie ha8 no di8OretiOn       in paying olelms 0r oontrtsotorr
       whenthey are properly approved by the highway Oo!uniS-
       slon.    CertAnly suoh dlsoretlon        wa8 intended    to be
       lodged with the official         Who80 duty it 18 to pay Orr
       and dl8oharge     suoh obli~ation8.       The Leglalrtture    might
       kve nmde ~rovlslon        for the 8paolal    highway iund~to
       be deposited    in 8oae prlviite     banking institution.
       Ii it bud done 8o, stio~h bank would actually           pay the
       vouchers   iseuad by the hi&way departaent, but under
       such CirOWZStiMiCe8 it Could in ru) proper 8eD88 b8 0011-
       sldered   the oiflolal     whose duty it un8 to pay ooa-
       traotor8   fur 8erViOe8 perromed         Under th8ir    oontract8."

              In the case of F. C. Crane v. Chue. C. Bellar,      195
6. iii‘. (id) 167, the Court held that      a materialman*  aotlon to
establish     a llen on money8 due or to beooze due to a pub110
eontroctor     under the statute   authoricing   such a llsn on the
riling  or notice .i8a specie8      0r "gsrnlrhnnnt;" Vernon*8
iuxmtated .itatUte8,     tirticle8 5150, 5372a, 547Eb, 6674~
           By reason or the toregoing authorltle8,    it is the
opinion of this aepartinent   that the Legiednture  hn8 put the
money ordered paid by the oourt in the judgwmt in the o&80 or
Ii. I. duPor,t deNemour8 k, Company, et al, v. Brcidy P. tintry,
Cholman of the ktute iii&may Comrslsslon,     et al, beyond their
rurttrer   pox-er to reapproprlatethe       8a:~.

            Th8 money retain66    by the Hlgharccy l;epartmnt   on the
original   cmtruet,   a8 uwae fsll   due and becnse impounded by
the filiug   of oOtiOe8 by lien Ck.3iiWlt8,     hje placed such fund8
upon which such lien8 attached      at the tii2.e 0r the riling   0r
such notloee, out of the hands ot the Legiskture           and the r;t,::e
of Texes, an& said ;noneythen 6eom5 the property of the aon-
truotlng   debtur or hi8 8ub-oontraotor    or lien o,laimant8 as the
F
                                                                                           513



     oourt may decree,     and wae no l.onP,ar property of the .Xate,
    t& Litat& belag raer6ly a dobtot or debtor abovr ballee           and
    8uoh money bocam ln law a trust fund held by the State of-
    fioia1.a Tar floe1     payment in acoordance with the judgwnt         of
    the court    in da     0aiU.   We are, theretore,   or the opinion
    tbt    gha dlsburziemsnt    oT euch fund8 at thla time in accordance
    with the judezent     of the oourt in such aaae would not be in
    eontraventlon    or drtlale    8, Section   5 or the Conatitutldn     at
    ‘PU~I, end, thereforr,       Article  4357, 8ugra, would not epply.
                     gusting      that        thl8   letter   an8vmr8   your   inquiries
    utlrfnctorily,             we be6    to     remain


                                                                Your8 very     truly
