Can a Texas bail bondsman swap out the type of collateral backing their license?

Plain-English summary

El Paso County Attorney Jo Anne Bernal asked the Attorney General two related questions about how a county bail bond board handles the collateral a licensed bondsman posts. To get and keep a bail bond surety license in a county that has a board, a person must post at least $50,000 in security under Occupations Code section 1704.160, in one of two forms: a monetary deposit (a cashier's check, certificate of deposit, or cash) with the county treasurer, or real-property deeds executed in trust to the board. Neither the cash deposit alone nor the property value alone may be less than $50,000.

The first question was whether a bondsman could withdraw part of the security already posted and replace it with a different type of collateral, ending up with a mix of cash and property that together met the $50,000 minimum. The opinion said no. The statute uses the disjunctive "or," giving an applicant one avenue or the other, and it requires a license holder to maintain "the amount of security required by" section 1704.160 throughout licensure. The opinion read that to mean a bondsman must keep both the amount and the type of collateral shown on the application intact, so swapping one type for another is not allowed. The opinion treated its earlier opinion JM-875 (1988), which barred a Bexar County applicant from combining a $20,000 certificate of deposit with a $30,000 property deed, as still correct and equally applicable to a licensed bondsman, not just an applicant.

The second question dealt with two other statutes the county attorney pointed to. Section 1704.206 covers replacing depleted security: if a bondsman fails to pay a final bond-forfeiture judgment, the judgment is paid out of the posted security, and the bondsman must then deposit or execute additional security to comply with section 1704.160. The opinion concluded that this replacement, because it just restores the depleted portion of the original security, must be in the same form as the existing collateral. Section 1704.203, by contrast, lets a bondsman post additional security at any time to raise the limit on how many bonds he can write (a bond-to-security ratio). The opinion read section 1704.203, especially subsection (f)(2), which expressly contemplates holding two different collateral types at once, to allow that extra security to be in a different form from the original. So additional security above the minimum may differ in type; replacement of the minimum may not.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

Licensed bail bondsmen (as the opinion described it): The opinion concluded a bondsman could not withdraw part of the security backing the section 1704.160 minimum and replace it with a different type of collateral, and had to keep the original amount and form intact throughout licensure.

County bail bond boards (as the opinion described it): The opinion treated the form of the minimum security as fixed once posted, so a board could not authorize a swap to a different collateral type for that minimum, though it could accept differently-formed security added above the minimum under section 1704.203.

Bondsmen replacing depleted security (as the opinion described it): The opinion held that security posted under section 1704.206 to replace what a forfeiture judgment consumed must be in the same form as the existing collateral.

Common questions

Could a bondsman trade some cash security for a property deed and still be covered?
The opinion said no. The minimum $50,000 security under section 1704.160 had to stay in the single form originally posted, cash or property, for the life of the license.

What happens to the security if a bondsman loses a bond forfeiture?
The forfeiture judgment is paid from the posted security, and under section 1704.206 the bondsman must replace it. The opinion held that replacement had to be in the same form as the existing collateral.

Was there any situation where a different type of collateral was allowed?
Yes. Security a bondsman posts above the minimum to raise his bonding limits under section 1704.203 may be in a different form from the original, because that statute contemplates holding two collateral types at once.

Did an old opinion already answer part of this?
Yes. The opinion treated JM-875 (1988), which barred combining a $20,000 certificate of deposit with a $30,000 property deed to reach $50,000, as still correct and as applying to licensed bondsmen, not just applicants.

Background and statutory framework

Chapter 1704 of the Occupations Code governs bail bond sureties in counties that have a bail bond board. Section 1704.160 sets the minimum security: an applicant posts either a monetary deposit "in the amount stated on the application" or executes "each deed to the property listed on the application" in trust to the board, and neither the cash nor the property value may be less than $50,000. Section 1704.253(a) requires the board to suspend a license immediately if the holder fails to maintain the security amount.

Section 1704.206 ("Replacement of Security") applies when a forfeiture judgment is paid out of the posted security and requires the holder to deposit or execute additional security to comply with section 1704.160. Section 1704.203 ("Bail Bond Limit; Additional Security") ties the dollar amount of bonds a holder may write to a multiple of the security held, and subsection (d) lets a holder increase those limits "at any time" by posting additional security. The opinion relied on subsection 1704.203(f)(2), which caps bonds for a surety licensed two to four years at a figure combining "the value of property held as security under Section 1704.160(a)(1)(A)" and "property held in trust under Section 1704.160(a)(1)(B)," as showing the Legislature contemplated two collateral types at once. The opinion applied the plain-meaning approach from R.R. Comm'n of Texas v. Texas Citizens for a Safe Future & Clean Water and the presumption that every word in a statute has a purpose from In re Allen (quoting State v. K.E.W.).

Citations

Cases:

• R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 628 (Tex. 2011)
• In re Allen, 366 S.W.3d 696, 706 (Tex. 2012)
• State v. K.E.W., 315 S.W.3d 16, 21 (Tex. 2010)

Texas Attorney General opinions referenced:

• Tex. Att'y Gen. Op. No. JM-875 (1988)

Statutes:

• Tex. Occ. Code Ann. § 1704.160(a)(1)(A)-(B), (b), (d) (West 2012)
• Tex. Occ. Code Ann. § 1704.203(d), (f)(2) (West 2012)
• Tex. Occ. Code Ann. § 1704.206 (West 2012)
• Tex. Occ. Code Ann. § 1704.253(a)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0977
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2012/ga0977.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

November 20, 2012

The Honorable Jo Anne Bernal Opinion No. GA-0977
El Paso County Attorney
500 East San Antonio, Room 503 Re: Whether a county bail bond board may permit a
El Paso, Texas 79901 licensed bail bond holder to change part of the
collateral he or she posted as security (RQ-1067-GA)

Dear Ms. Bernal:

You request an opinion regarding the authority of a county bail bond board ("Board") to "accept a combination of cash and real property security from a licensed bondsman."[1] Specifically, you ask whether a Board can "authorize a licensed bail bondsman to withdraw a portion of his deposited or executed security and replace it with a different type of collateral if doing so results in a combination of security types to meet the minimum security requirement under [section] 1704.160 [of the Occupations Code.]" Request Letter at 1.

When a person in a county with a Board applies for a bail bond surety license and the application is conditionally approved, the applicant must "deposit with the county treasurer a cashier's check, certificate of deposit, or cash in the amount stated on the application under Section 1704.154(b)(2)(E); or ... execute in trust to the board each deed to the property listed on the application under Section 1704.154(b)(3)." See TEX. OCC. CODE ANN. § 1704.160(a)(1)(A)-(B) (West 2012) (emphasis added). Neither the monetary deposit nor the total value of property executed in trust may individually "be less than $50,000." Id. § 1704.160(b), (d). This office concluded in Attorney General Opinion JM-875 that the statutory predecessor[2] to section 1704.160 did not authorize the Bexar County Bail Bond Board to accept a certificate of deposit for $20,000 and a real property deed valued at $30,000 from an applicant to satisfy the $50,000 minimum security amount. See Tex. Att'y Gen. Op. No. JM-875 (1988) at 2-4. However, you tell us it is "unclear the extent to which ... JM-875 applies to a licensed bondsman, as opposed to an applicant." Request Letter at 2. As explained below, we conclude that JM-875 remains correct, and its analysis is equally applicable to a licensed bondsman.

In examining a statute, our goal is to give effect to the Legislature's intent as expressed in the statute's plain language. See R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 628 (Tex. 2011). Section 1704.160 uses the disjunctive word "or" in expressing the two avenues available for posting security. See TEX. OCC. CODE ANN. § 1704.160(a)(1)(A)-(B) (West 2012). An applicant may make a monetary deposit or he may execute real property deeds in trust to the Board. See id. The amount an applicant must post, in the case of a monetary deposit, is "the amount stated on the application," and in the case of real property deeds, is "each deed to the property listed on the application." Id. Regardless of the avenue an applicant chooses, the value of the posted security "may not be less than $50,000." Id. § 1704.160(b), (d). If the license holder fails to maintain the security amount posted, the Board must immediately suspend the license. Id. § 1704.253(a). Because the plain language of the statute places an obligation on a licensed bondsman to maintain "the amount of security required by [section 1704.160]," a licensed bondsman must keep intact the amount and type of collateral indicated on his or her application throughout the period of licensure. Id. § 1704.160(j). Any substitutes for the initial collateral type are precluded by the statute. Thus, in answer to your first question, a licensed bondsman may not withdraw a portion of the security deposited or executed under section 1704.160 and replace it with a different type of collateral.

Your second question is whether a Board may "authorize a bondsman to post additional security in a form different from that originally deposited or executed after the initial minimum security deposit required under [section] 1704.160 has been satisfied." Request Letter at 1. You point to two statutory provisions that, in your view, "do not restrict the type of security that a licensee may deposit or execute to add to or replace security to the same type of collateral as that originally deposited under [section] 1704.160." Id. at 2-3 (discussing sections 1704.203 and 1704.206); see also TEX. OCC. CODE ANN. §§ 1704.203 (West 2012) ("Bail Bond Limit; Additional Security"), 1704.206 ("Replacement of Security"). We discuss each provision in turn.

The first provision, section 1704.206, concerns the replacement of depleted security. See TEX. OCC. CODE ANN. § 1704.206 (West 2012). If a license holder fails to pay a final judgment on a forfeiture of a bail bond, the judgment is paid from the security deposited or executed under section 1704.160. See id. In such a case, a license holder "shall deposit or execute additional security in an amount sufficient to comply with [section 1704.160]." Id. (emphasis added). By requiring that the replacement security must comply with section 1704.160, the statute requires that the replacement security be of one type of collateral or the other in the amount indicated on the application, which amount may not be less than $50,000. See id. § 1704.160(a)-(b), (d). Thus, to the extent that the posting of replacement security under section 1704.206 merely replaces that portion of the initial security that has been depleted, the replacement security must be in the same form as the existing collateral.

The second provision you raise, section 1704.203, establishes bail bond limits for individual license holders for bonds they execute in a particular county. See id. § 1704.203. The extent of a license holder's authority to execute bonds depends upon the dollar value of outstanding bond obligations as compared with a multiple of the value of the property held as security or in trust for the license holder under section 1704.160. See id. This bond-to-security ratio sets the limit on the dollar amount of bonds that can be executed. Section 1704.203 provides that "[a] license holder, at any time, may increase the limits prescribed by this section by depositing or executing additional security." Id. § 1704.203(d). You argue that additional amounts deposited or executed for the purpose of increasing the bond-to-security ratio may be "in any form." Request Letter at 3. A deposit or execution of additional security under section 1704.203 does not contemplate the disturbance of the original security under section 1704.160, which remains intact in a single form of collateral. Because section 1704.203 does not otherwise limit the type of collateral that may be posted to increase the bonding limits, we see no reason why additional security could not be posted in a collateral form that is different from the one originally posted to meet the requirement of section 1704.160. We find support for this proposition in subsection 1704.203(f), which sets forth the various bond-to-security ratios on a sliding scale based on seniority. See TEX. OCC. CODE ANN. § 1704.203(f) (West 2012). Under that subsection, a surety licensed after September 1, 1999, who has been licensed between two and four years "may not execute ... bail bonds that in the aggregate exceed 10 times the value of property held as security under Section 1704.160(a)(1)(A) plus six times the value of property held in trust under Section 1704.160(a)(1)(B)." Id. § 1704.203(f)(2) (emphasis added). If the Legislature had contemplated that the total amount of security posted would be limited to a single collateral type, it would not have referred to the simultaneous holding of two different types of collateral in expressing the bond-to-security ratio. See In re Allen, 366 S.W.3d 696, 706 (Tex. 2012) (quoting State v. K.E.W., 315 S.W.3d 16, 21 (Tex. 2010)) ("every word or phrase in a statute is presumed to have been intentionally used with a meaning and a purpose").

Thus, in answer to your questions, to the extent that replacement security posted under section 1704.206 replaces a portion of the initial security that has been depleted, the replacement security must be in the same form as the existing collateral. By contrast, additional security posted under section 1704.203 beyond the amount initially posted may be in a form different from that originally deposited or executed.

SUMMARY

A licensed bondsman may not withdraw a portion of the security deposited or executed under section 1704.160 of the Occupations Code and replace it with a different type of collateral. To the extent that replacement security posted under section 1704.206 of the Occupations Code replaces a portion of the initial security that has been depleted, the replacement security must be in the same form as the existing collateral. Additional security posted under section 1704.203 of the Occupations Code beyond the amount initially posted may be in a form different from that originally deposited or executed.

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

JASON BOATRIGHT
Chairman, Opinion Committee

Becky P. Casares
Assistant Attorney General, Opinion Committee

[1] Letter from Honorable Jo Anne Bernal, El Paso Cnty. Att'y, to Honorable Greg Abbott, Tex. Att'y Gen. at 1 (June 4, 2012), http://www.texasattorneygeneral.gov/opin ("Request Letter").

[2] See Act of June 1, 1987, 70th Leg., R.S., ch. 921, § 2, 1987 Tex. Gen. Laws 3109, 3110.