Colonial American Cas. and Sur. v. Scherer

• Decision Date: 19 January 2007
• Docket Number: No. 03-06-00097-CV.,03-06-00097-CV.
• Citation: 214 S.W.3d 725
• Parties: COLONIAL AMERICAN CASUALTY AND SURETY COMPANY, Appellant, v. Nancy SCHERER, Successor Administrator of the Estate of Kimberly Lynn Lambert, Deceased, Appellee.
• Court: Texas Court of Appeals

214 S.W.3d 725

COLONIAL AMERICAN CASUALTY AND SURETY COMPANY, Appellant, v. Nancy SCHERER, Successor Administrator of the Estate of Kimberly Lynn Lambert, Deceased, Appellee.

No. 03-06-00097-CV.

Court of Appeals of Texas, Austin.

January 19, 2007.

Robert M. O'Boyle, Strasburger & Price, L.L.P., Austin, for appellant.

Kent J. Lisenby, The Lisenby Law Firm, P.C., Fort Worth, for appellee.

Before Chief Justice LAW, Justices PATTERSON and PURYEAR.

OPINION

JAN P. PATTERSON, Justice.

The question presented by this appeal is whether the surety on a bond securing the original administrator of an estate is liable for attorney's fees incurred by a successor administrator in a suit against the original administrator for neglect and mismanagement of the estate. Colonial Casualty and Surety Company as surety appeals from the award of attorney's fees by the probate court to appellee Nancy Scherer as the successor administrator of the estate of Kimberly Lynn Lambert. For the reasons that follow, we hold that attorney's fees are authorized but only to the extent of the penal amount of the bond. We reverse the trial court's judgment to the extent it awards attorney's fees against Colonial in excess of the penal amount of the bond, and we remand to the probate court for further proceedings.

BACKGROUND

In 1998, Dr. Robert Martin Lambert qualified and was appointed to serve as administrator of the estate of Kimberly Lynn Lambert. At that time, Lambert, as principal, and Colonial, as surety, executed a bond pursuant to section 194 of the Texas Probate Code in the penalty amount of $30,000 payable to the probate court to secure Lambert's duties as administrator. See Tex. Prob.Code Ann. § 194 (West 2003). The terms of the bond provide:

That we, Robert Martin Lambert as Principal, and Colonial American Casualty and Surety Company, as Surety, are held and firmly bound unto the Probate Judge of the County and his successors in office in the sum of thirty thousand and 00/100 ($30,000.00), conditioned that the above bound Principal has been appointed by the said Judge as administrator of the estate shall well and truly perform all the duties required by law under said appointment.

The instrument was executed by Lambert as principal and a representative of Colonial as surety, and was "examined and approved" by the probate court.¹

In 2001, in accordance with probate code sections 222(b)(2) and (3), the probate court removed Lambert as administrator and appointed Scherer, who qualified as successor administrator of the estate. Id. § 222(b)(2)-(3) (West 2003). Scherer filed suit in 2003 against Lambert for Lambert's failure to perform his duties as administrator and against Colonial on the bond. Specifically, Scherer alleged that Lambert breached numerous statutory and common law duties that he owed to the estate, including the following:

Spending principal of the decedent's estate without prior court approval;

Failing to account properly for the assets of the decedent's estate, the receipts of the decedent's estate and for his disbursements of the decedent's funds;

Failing to deposit the proceeds of the sale of personal property belonging to the estate into the registry of the court pursuant to court order;

Transferring property of the estate without prior court authority;

Failing to collect claims belonging to the estate;

Causing the court to appoint an attorney ad litem to investigate his management of the estate and the fees and costs allowed to the attorney ad litem are fees and costs for which he is liable; and

Following his removal as administrator, closing the estate's bank account without court authority and failing to deliver the funds to the successor administrator.

As to Colonial, Scherer alleged:

As surety on the bond filed by Robert Martin Lambert, Colonial American Casualty and Surety Company bound itself in the amount of $30,000.00, conditioned upon the proper performance of Robert Martin Lambert of his duties as Administrator of the Decedent's Estate. In the event that Plaintiff is successful in establishing that the Decedent's estate has been damaged by the wrongful conduct of the former Administrator, all as alleged above, Plaintiff seeks payment of such damages from the bond issued by Colonial American Casualty and Surety Company.

In her petition, Scherer did not allege any wrongdoing by Colonial; the cause of action asserted was based upon the conduct of the principal Lambert and the undertaking of the surety pursuant to the bond. Scherer also sought generally recovery of court costs and attorney's fees.

After Lambert filed a handwritten answer but failed to appear for depositions or hearings, the probate court granted summary judgment in favor of Scherer. The judgment awarded Scherer $46,815.33 in damages² against Lambert and $13,856.46 in attorney's fees recoverable from the defendants jointly and severally. Colonial appeals, challenging the award of attorney's fees generally and alternatively that the award improperly exceeded the face amount of the bond.

ANALYSIS

Colonial contends that the probate court erred by awarding attorney's fees because the bond did not allow for such an award, and alternatively that the court erred in awarding such fees in excess of the penalty amount of the bond. See id. § 194. Colonial urges that its bond was a statutory bond that obligated it for damages resulting from Lambert's failure to properly perform his duties as administrator, and that no basis exists for Scherer to recover attorney's fees. Scherer "concedes that the limited terms of the surety bond itself do not provide a basis for recovery of attorneys' fees from the principal" but asserts that she is entitled to reasonable attorney's fees "for a valid claim on an oral or written contract." See Tex. Civ. Prac. & Rem.Code Ann. § 38.001 (West 1997).

The availability of attorney's fees under a particular statute is a question of law we review de novo. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999); Johnson v. City of Fort Worth, 774 S.W.2d 653, 656 (Tex.1989). An award of attorney's fees is permissible if authorized by statute or by contract between the parties. See, e.g., Travelers Indem. Co. of Conn. v. Mayfield, 923 S.W.2d 590, 593 (Tex.1996); Dallas Cent. Appraisal Dist. v. Seven Inv. Co., 835 S.W.2d 75, 77 (Tex. 1992); First City Bank v. Guex, 677 S.W.2d 25, 30 (Tex.1984).

A fidelity or fiduciary bond is an instrument issued by a surety — either an individual or a corporation — that names an administrator or other fiduciary. Because these bonds are generally required for probate purposes, they are created pursuant to statutory provisions. See Tex. Prob.Code Ann. § 194; 31 AM.JUR.2D Executors and Administrators § 319 (1989). The purpose of a personal representative's bond is to protect the estate and its beneficiaries and any person who has an interest in the estate from potential costs and damages arising from an administrator's mismanagement. See, e.g., Lawyers Sur. Corp. v. Larson, 869 S.W.2d 649, 651 (Tex. App.-Austin 1994, writ denied) (op. on reh'g); Trinity Universal Ins. Co. v. Drake, 587 S.W.2d 458, 463 (Tex.Civ.App.-Dallas 1979), aff'd in part, rev'd in part on other grounds, 600 S.W.2d 768 (Tex.1980).

A bond is a personal obligation on the part of the administrator and his sureties guaranteeing that the administrator will perform the duties required of him by law under his appointment. See Tex. Prob.Code Ann. § 196 (West 2003). A bond is a contract between the principal and the surety, and the specific language of the bond must be interpreted in order to determine the extent of the surety's liability. New Amsterdam Cas. Co. v. Bettes, 407 S.W.2d 307, 315 (Tex.Civ.App.-Dallas 1966, writ ref'd n.r.e.). Because the relationship between principal and surety is governed by contract, the language of the bond is strictly construed. Id. When the language of the bond is clear and unambiguous, neither the parties nor the court may vary it; the surety cannot be held liable contrary to or beyond the condition of the bond. Id. at 314; AMERICAN BAR ASSOCIATION, TORT & INSURANCE PRACTICE SECTION, THE LAW OF SURETYSHIP 21-1 (Edward G. Gallagher ed., 1993).

The liability of the surety depends on the contract and the existence of facts showing liability on the part of the administrator. As this Court has long held, "The undertaking of the surety is to make good any breach of official duty of its principal, not because of anything the surety may have done or failed to do, but because the surety has so bound itself by its undertaking." Mills v. Baird, 147 S.W.2d 312, 316 (Tex.Civ.App.-Austin 1941, writ ref'd). The liability of the fiduciary bond surety is controlled by the language of the bond and any related statutory provision.

Section 194 of the probate code expressly governs bonds required by personal representatives of estates. Tex. Prob.Code Ann. § 194. The statute specifically provides that the bond "shall bear the written approval" of the probate court. Id. The penalty of the bond³ is fixed by the judge in an amount deemed sufficient to protect the estate and its creditors after the court hears evidence and determines the estimated value of the estate and its assets and debts. Id. § 194(1), (3)-(4). A representative may deposit cash in lieu of a bond or a bond may be reduced, as approved by the court, id. § 194(7)-(8), and a deposit in lieu of bond or to reduce the penal sum of the bond may be withdrawn or released only upon court order. Id. § 194(8)(c). Section 194 also specifies who may act as surety and prescribes qualifications of personal sureties. Id. § 194(10), (12).

The probate court was required to comply with section 194 when setting Lambert's bond, see Tijerina v. Mackie, No. 04-05-00213-CV, 2006 WL 397936, at *4, 2006 Tex.App. LEXIS 1389, at *14 (Tex.App.-San Antonio Feb. 22, 2006, no pet.), and we presume that it did as neither party asserts otherwise. As...