                                 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
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    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




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