Amwest Surety Insurance v. Graham

949 S.W.2d 724, 1997 WL 60991

Opinions

OPINION

DUNCAN, Justice.

The issue presented in this appeal is whether a surety is liable on a supersedeas bond when the judgment for which the bond was issued is reversed on appeal for a procedural reason rather than on the merits. The trial court refused to release the supersedeas bond and instead ordered the surety to apply the proceeds of the bond to the new judgment that was rendered on remand. We reverse the trial court’s order and render judgment in the surety’s favor.

Facts

On July 20, 1992, John Frank Graham, Cherie Canion Graham, Leonel M. Valadez, and Zapata Ready Mix (“Graham”) obtained a judgment against Employers Casualty Company in the amount of $1,024,074.80, together with postjudgment interest and costs (“the 1992 Judgment”). Employers appealed and superseded enforcement of the 1992 Judgment by posting a supersedeas bond. In this bond, Employers and its surety, Am-west Surety Insurance Company, acknowledged themselves bound to pay the 1992 Judgment, together with interest and costs, “[cjonditioned that [Employers] shall prosecute the appeal with effect” and “in case the judgment of the Supreme Court or the Court of Appeals shall be against Employers Casualty Company, Employers Casualty Company shall perform its judgment or decree, and pay all such damages as the Court may award against Employers Casualty Company, liability not to exceed $1,239,130.50 plus costs as provided by law and any additional interest as provided by law.”

On January 6, 1994, Employers was placed in receivership. On January 24, this court reversed the 1992 Judgment and remanded the case to the trial court. Employers Cas. Co. v. Graham, No. 04-92-00650-CV, slip op. at 5 (Tex.App. — San Antonio Jan. 26, 1994, writ denied) (not designated for publication) (attached as Appendix 1). The basis for this disposition was that, although “[t]he summary judgment order appearfed] to be final, as evidenced by the Mother Hubbard clause,” it “grant[ed] more relief than requested .... ” Id. On December 29, 1994, this court issued its mandate by which “the trial court’s judgment [was] REVERSED and [the case was] REMANDED to the trial court.”

On remand, Employers filed a motion requesting the trial court to release the super-sedeas bond. After initially granting the motion, the trial court signed an “amended final judgment” (“the 1995 Judgment”), which Employers did not appeal, and ordered Amwest to apply $1,024,074.80 of the proceeds of the supersedeas bond to satisfy the 1995 Judgment. Amwest appealed.

Discussion

Under its sole point of error, Amwest argues that it was released from its obligations under the supersedeas bond as a matter of law as a result of this court’s reversal of the 1992 Judgment; therefore, the trial court erred in ordering it to apply the proceeds of the bond to satisfy the 1995 Judgment. We agree.

A supersedeas bond is a contract by which a surety obligates itself to pay a final judgment rendered against its principal under the conditions stated in the bond. See Trent v. Rhomberg, 66 Tex. 249, 18 S.W. 510, 511-12 (1886). Supersedeas bonds are therefore construed as any other contract, and the cardinal rule of construction is to ascertain the intent of the parties. Harrison v. Barngrover, 118 S.W.2d 415, 418 (Tex.Civ.App. — Beaumont 1938, writ ref'd). Accordingly, “[t]he sureties are no further bound than they have contracted to be. They are given the simple justice of a literal interpretation of the language of their undertaking.” Trent, 18 S.W. at 512; see also Geters v. Eagle Ins. Co., 834 S.W.2d 49, 50 (Tex.1992); Howze v. Surety Corp. of America, 584 S.W.2d 263, 266 (Tex.1979) (liability of surety determined by language of bond).

Amwest’s specific undertaking was to provide a supersedeas bond that would suspend enforcement of the 1992 Judgment pending appeal. Therefore, in accordance with Rule 47, Tex.R.App. P., Amwest promised to pay the 1992 Judgment, together with interest and costs, “conditioned that [Employers] shall prosecute [the] appeal ... with effect” and “in case the judgment of the Supreme Court or Court of Appeals shall be against Employers Casualty Company, Employers Casualty Company shall perform its judgment or decree, and pay all such damages as the Court may award against Employers Casualty Company, liability not to exceed $1,239,130.50 plus costs as provided by law and any additional interest as provided by law.”

By conditioning the supersedeas bond as required by Rule 47, Amwest obligated itself to do two things: (1) to pay the 1992 Judgment if Employers did not prosecute the appeal “with effect” and (2) to pay any judgment that might be rendered against Employers by this court or the supreme court on appeal of the 1992 Judgment. See Lloyds Cas. Insurer v. McGee, 141 Tex. 384, 174 S.W.2d 314, 316 (1943). Since it is undisputed that Amwest did not breach its promise to pay a judgment rendered against Employers by this court or the supreme court, since none was rendered, we are concerned here only with whether Amwest is liable on the bond because Employers failed to prosecute the appeal “with effect.”

“As a general rule, when the appellant prosecutes his appeal with effect, the judgment is reversed, and the cause is remanded, with no sentence or decree to be performed by the appellant, or award of damages to be paid by him.” Harris v. Keoun, 135 S.W.2d 194, 195 (Tex.Civ.App.— Waco 1939, writ ref'd) (quoting Trent, 18 S.W. at 511). When this occurs, the surety on the bond issued to secure payment of the reversed judgment is released and discharged as a matter of law; it is not liable for a new judgment rendered on remand. See Blair v. Sanborn, 82 Tex. 686, 18 S.W. 159, 160 (1892) (surety on cost bond released as a matter of law when judgment against its principal reversed on appeal, and surety not liable for judgment on remand for costs against other parties to original appeal); see also Resolution Trust Corp. v. Chair King, Inc., 827 S.W.2d 546, 550 (Tex.App. — Houston [14th Dist.] 1992, no writ) (“case law clearly holds that, under the explicit language in a supersedeas bond, a surety is not liable where the judgment awarding damages is reversed on appeal”);¹ Wheeler v. Pavlic, 290 S.W.2d 754, 757 (Tex.Civ.App. — Beaumont 1956, writ ref'd n.r.e.) (when judgment reversed and rendered, judgment debtor entitled to have cash deposit in lieu of supersedeas bond released to it); Martinez v. Southwest Bitulithic Co., 119 S.W.2d 740, 742 (Tex.Civ.App. — San Antonio 1938) (appeal prosecuted with effect when judgment ordering foreclosure on homestead reversed and judgment for damages affirmed; accordingly, “there can be no judgment on the supersede-as bond”), rev’d on other grounds, 135 Tex. 347, 143 S.W.2d 116 (1940); accord Neeley v. Bankers Trust Co. of Texas, 848 F.2d 658, 660 (5th Cir.1988) (applying Texas law) (“The bond is limited to any decree of the court of appeals; it does not include an entirely new judgment of the district court.”); Aetna Cas. & Sur. Co. v. LaSalle Pump & Supply Co., 804 F.2d 315, 318 (5th Cir.1986) (applying analogous Louisiana law) (“Nothing in the bond indicates an intent to be bound for payment of an entirely new judgment, rendered after a new trial.”); Harp v. American Sur. Co. of New York, 50 Wash.2d 365, 311 P.2d 988 (1957) (reversal without more terminates surety’s liability).

On the other hand, an appeal is not prosecuted “with effect” when it is dismissed for want of jurisdiction, because a dismissal operates as an affirmance. McGee, 174 S.W.2d at 316; see also Trent, 18 S.W. at 512 (appeal not prosecuted with effect when dismissed for want of prosecution); Wooldridge v. Rawlings, 14 S.W. 667, 668 (1890) (appeal not prosecuted with effect when dismissed for unknown cause); cf. Ragsdale v. Progressive Voters League, 730 S.W.2d 176, 178 (Tex.App. — Dallas 1987, no writ) (surety on cost bond in first appeal, which was dismissed for want of jurisdiction, liable on original cost bond for costs in second appeal); see generally, e.g., International Ass’n of Machinists v. Federated Ass’n of Accessory Workers, 133 Tex. 624, 130 S.W.2d 282, 283 (1939) (dismissal of appeal leaves trial court’s judgment intact and operates as affirmance); 5 C.J.S., Appeal & Error § 1047 (1993) (while reversal constitutes prosecuting appeal “with effect,” failure to perfect appeal is breach of this condition).

In this case, it is beyond dispute that the 1992 Judgment was reversed.² But it is also clear that the reversal was not based upon the merits of Employers’ appeal. Amwest therefore argues that the dispositive fact is the reversal, while Graham argues that the reversal is immaterial because it was not on the merits. No Texas case addresses this hybrid situation.³ Indeed, we have found only one case in the United States that even comes close to doing so. See Conston v. New Amsterdam Cas. Co., 366 Pa. 219, 77 A.2d 603 (1951) (per curiam).

In the first appeal in Conston, the Supreme Court of Pennsylvania determined that Conston had converted personal property of the plaintiffs. Brooks v. Conston, 359 Pa. 141, 142, 58 A.2d 463, 463 (1948) (per curiam). Accordingly, the court remanded the case to the trial court to determine the amount of restitution owed. Id. On remand, Conston filed an account, to which the plaintiffs filed numerous exceptions. Id. The trial court ruled on some but not all of the exceptions, and both the plaintiffs and Conston appealed. Id. at 463-64. Pending the second appeal, Conston superseded enforcement of the judgment with a $151,784 bond, for whieh he deposited $80,000 as collateral. Conston, 77 A.2d at 603. The supreme court, however, found that “ ‘[a] lengthy and complicated audit of [Conston’s] account remains to be had after (these appeals are) decided’ ” and declined to render an advisory opinion. Brooks, 58 A.2d at 464. Instead, the court “[f]or the procedural reasons indicated, ... set aside the orders of the court, without prejudice,” and remanded the case to the trial court to “comply with [the supreme court’s] decree.” Id.

After the supreme court issued its opinion, Conston demanded that his surety release the collateral he had deposited to secure his supersedeas bond in the second appeal. Conston, 77 A.2d at 604. The surety refused, asserting that its liability “remained intact” because the supreme court had not passed upon “the propriety of the lower court’s decision.” Id. The trial court disagreed, ruling for Conston, and the supreme court affirmed. Id. “[T]he order directing [Conston] to pay having been set aside, plaintiffs no longer had a judgment against Conston. Hence, the condition in the bond that the appeal be prosecuted “with effect,’ was satisfied and Conston was entitled to the collateral deposited.” Id. The supreme court thus held that setting aside the judgment extinguished the surety’s liability — even though that disposition was not on the merits but for “procedural reasons.”

As Conston makes clear, the issue is not whether review is on the merits but whether the judgment is affirmed, either expressly or by virtue of a dismissal of the appeal, or reversed. This rule is a necessary corollary of the fact that the surety on a supersedeas bond does not promise to pay any judgment entered in a particular case; it bonds a “particular judgment.” Kulhanjian v. Moomjian, 105 So.2d 788, 785 (Fla.1958); cf. Howze, 584 S.W.2d at 265-66 (distinguishing between “particular judgment” bond and “general undertaking” bond). As demonstrated by Conston, when that particular judgment is reversed, vacated, or set aside on final appeal, whether on the merits or otherwise, the appeal is prosecuted “with effect,” and the surety is released.

We therefore hold that when the mandate issued reversing the 1992 Judgment, Employers prosecuted its appeal “with effect,” and Amwest was discharged from its obligations under the supersedeas bond as a matter of law.. To hold otherwise would violate the rule established by our own supreme court that “[t]he sureties are no further bound than they have contracted to be. They are given the simple justice of a literal interpretation of the language of their undertaking.” Trent, 18 S.W. at 512. Amwest simply cannot be held liable on the superse-deas bond issued to secure payment of the 1992 Judgment when that judgment was reversed on appeal. See Sanborn, 18 S.W. at 160 (surety on cost bond issued to secure payment of costs on appeal of original judgment not liable for costs on remand when original judgment reversed on appeal); accord Neeley, 848 F.2d at 660 (surety on supersedeas bond issued to secure payment of original judgment not liable for new judgment entered on remand when original judgment reversed on appeal).

Conclusion

By obtaining a reversal of the 1992 Judgment, Employers prosecuted its appeal “with effect.” Accordingly, as a matter of law and the undisputed facts, Amwest did not breach its obligations under the supersedeas bond, and it cannot be held liable thereon. The trial court’s order instructing Amwest to apply the proceeds of the supersedeas bond to satisfy the 1995 Judgment is therefore reversed and judgment is rendered in favor of Amwest, which is fully and finally released and discharged from its obligations under the supersedeas bond issued to secure payment of the 1992 Judgment (Bond No. 015000775). In addition, judgment is rendered in favor of Amwest and its surety in this appeal, Allstate Insurance Company, and they are fully and finally released and discharged from their obligations under the supersedeas bond issued to secure the trial court’s order (Bond No. 015000775). Finally, in accordance with Rule 89, Tex.R.App. P., costs are assessed against John Frank Graham, Cherie Canion Graham, Leonel M. Valadez, and Zapata Ready Mix.

Footnotes

1

. We recognize there is no opinion of the court in Chair King because each member of the panel filed a separate opinion. See Chair King, 827 S.W.2d at 552 (Sears, J., concurring), 554 (Robertson, J., dissenting). The issue upon which the panel members disagreed was whether the appellant’s cash deposit in lieu of a supersedeas bond was available to satisfy the judgment on remand "where the appellant [became] insolvent during the appeal, and the appellate court affirm[ed] its liability, with only the amount of damages and certain attorney’s fees to be determined on retri-al_’’ Id. at 551, 553 (Sears, J., concurring), 555 (Robertson, J., dissenting). The panel members agreed, however, on the issue involved here — the surety is not liable on a supersedeas bond issued to secure a judgment that is reversed on appeal. Id. at 550, 552-53 (Sears, J., concurring), 554 (Robertson, J., dissenting).

2

. Graham does argue that "[tjhis court did not reverse the award of damages for which the bond was indemnity" but only “the part of the judgment that purports to grant more than was asked, and remand it to the trial court for disposition of only those claims.” But this argument is untenable; neither this court’s opinion nor its mandate purports to effect a reversal of only part of the 1992 Judgment. See, e.g., Price v. Gulf Atlantic Life Ins. Co., 621 S.W.2d 185, 187 (Tex.Civ.App. — Texarkana 1981, writ ref'd n.r.e.) (“when an appellate court remands a case for further proceedings and the mandate is not limited by specific instructions, the effect is to remand the case to the lower court for a new trial on all issues of fact, and the case is reopened in its entirety”).

Graham also argues that this court actually dismissed Employers’ appeal for want of jurisdiction, as the majority opinion states in Amwest Sur. Ins. Co. v. Flores, No. 04-95-00568-CV, 1995 WL 624618 (Tex.App. — San Antonio Oct.25, 1995, orig. proceeding) (not designated for publication) (attached as Appendix 2). But this statement is simply incorrect, as clearly demonstrated by the court's opinion, which expressly recognized that the judgment was final and appealable and not subject to dismissal under Mafrige, and its mandate, which expressly reversed the 1992 Judgment and remanded the case to the trial court. Indeed, had the court not acquired jurisdiction over Employers’ appeal, it would have had no jurisdiction to reverse the judgment; it could have only dismissed Employers’ appeal. E.g., Dimerling v. Grodhaus, 152 Tex. 548, 261 S.W.2d 561 (1953) (per curiam).

3

. Amwest refers us to Edlund v. Bounds, 842 S.W.2d 719 (Tex.App. — Dallas 1992, writ denied), but that case is inapposite. In Edlund, the court of appeals affirmed the trial court's judgment insofar as it granted a recovery to Bounds on a promissory note signed by Edlund but reversed the judgment against Edlund on his conversion counterclaim. Id. at 732. As a result of its reversal of a part of the trial court's judgment, the court held that its resulting judgment was not final and released the surety on Edlund's super-sedeas bond. Id. Edlund thus does not involve the situation here — a judgment that was reversed in its entirety for a reason other than the merits of the appeal.

The case to which Graham refers us — Gilchrist v. Bandera Elec. Co-op., 924 S.W.2d 388 (Tex.App. — San Antonio, writ requested) — is likewise inapposite. Gilchrist simply represents another instance in which this court reversed a summary judgment that granted more relief than requested in the motion; it does not address the viability of a supersedeas bond following a reversal of the judgment the bond was issued to secure.