Amwest Sur. Ins. Co. v. Graham, 04-95-00725-CV

• Decision Date: 12 February 1997
• Docket Number: No. 04-95-00725-CV,04-95-00725-CV
• Citation: 949 S.W.2d 724
• Parties: AMWEST SURETY INSURANCE COMPANY, Appellant, v. John Frank GRAHAM, Cherie Canion Graham, Leonel M. Valadez, and Zapata Ready Mix, Appellees.
• Court: Texas Court of Appeals

Page 724

949 S.W.2d 724 AMWEST SURETY INSURANCE COMPANY, Appellant,
v.
John Frank GRAHAM, Cherie Canion Graham, Leonel M. Valadez,
and Zapata Ready Mix, Appellees. No. 04-95-00725-CV. Court of Appeals of Texas,
San Antonio. Feb. 12, 1997.
Rehearing Overruled July 1, 1997.

Page 725

Stephen K. Yungblut, Michelle I. Rieger, Wesly C. Maness, Ford & Nelson, P.C., Dallas, for Appellant.

H. Harman Camp, Selman & Camp, McAllen, Arturo A. Figueroa, Jr., County Attorney, Zapata, Susan Feller Heiligenthal, Bob Roberts, Law Offices of Bob Roberts, Austin, Arnulfo Gonzalez, Jr., Laredo, Christopher Fuller, Jane M. N. Webre, Scott, Douglass, Luton & McConnico, L.L.P., Austin, for Appellee.

Before LOPEZ, GREEN and DUNCAN, JJ.

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

Page 726

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 Employers appealed and superseded enforcement of the 1992 Judgment by posting a supersedeas bond.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, Amwest Surety Insurance Company, acknowledged themselves bound to pay the 1992 Judgment, together with interest and costs, "[c]onditioned 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 appear[ed] 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 supersedeas 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

Page 727

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 supersedeas 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...