Firemen's Ins. Co. of Newark, New Jersey v. Pugh

• Decision Date: 11 October 1996
• Parties: FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY v. Jennie W. PUGH, conservator of the estate of Genevieve M. Sherman, an incapacitated person. 2950554.
• Court: Alabama Court of Civil Appeals

Page 281

686 So.2d 281

FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY v. Jennie W. PUGH, conservator of the estate of Genevieve M. Sherman, an incapacitated person.

2950554.

Court of Civil Appeals of Alabama.

Oct. 11, 1996.

Rehearing Denied Nov. 15, 1996.

Fred K. Granade and L. Brian Chunn of Stone, Granade & Crosby, P.C., Bay Minette, for Appellant.

Lionel C. Williams, Mobile, for Appellee.

RICHARD L. HOLMES, Retired Appellate Judge.

This case involves the enforcement of a suretyship contract.

Firemen's Insurance Company of Newark, New Jersey (surety), appeals from a final judgment entered by the Probate Court of Mobile County in the amount of $61,472.40. The following facts are undisputed: On July 27, 1992, the Probate Court of Mobile County appointed Jennie W. Pugh as the guardian and conservator over the estate of Genevieve M. Sherman, an incapacitated person (ward). Thereafter, Pugh filed a bond in the amount of $63,000, pursuant to Ala.Code 1975, § 26-2A-139, which requires a conservator "to furnish a bond payable to the judge of probate conditioned upon faithful discharge of all duties of the trust according to law, with sureties as it shall specify." The bond named Pugh as the principal and Firemen's as the surety. At all times relevant to the probate proceedings, Pugh employed, and was represented by, an attorney.

In September 1992 Pugh's attorney directed her to withdraw the ward's funds, which were on deposit at Central Bank, and to endorse them over to him for the purpose of reinvesting them with AmSouth Bank, which offered a higher rate of interest. Pugh complied with this request and transferred the monies to her attorney via a cashier's check, which was endorsed "for deposit only." Approximately two years later, the attorney died of a self-inflicted gunshot wound. Pugh, upon learning of the death, discovered that the monies were not on deposit at AmSouth Bank. In fact, the attorney converted the monies to his own use.

On November 8, 1994, Pugh filed a conservator's motion for accounting by surety, wherein she alleged that she suffered a loss of her ward's funds due to her attorney's misfeasance.

On July 12, 1995, the probate court entered an order, which stated in pertinent part:

"Upon due consideration of the testimony and evidence adduced and the arguments and briefs submitted by counsel, the Court FINDS that there existed an agent relationship by and between Jennie Pugh, as Conservator of the above-referenced estate, and ... her counsel. Accordingly, the Court is of the opinion and does FIND that the said Conservator by her actions and Firemen's Insurance Company of Newark, New Jersey, as the surety on her bond, are liable for any mismanagement of estate assets by said counsel."

(Emphasis in original.)

On December 27, 1995, the court entered a final judgment against the surety in the amount of $61,472.40.

The surety appeals.

The dispositive issue is whether the probate court erred in finding the surety on the bond liable for the wrongful acts committed by Pugh's attorney.

Initially, we would note that in a non-jury case, the trial judge, or the probate judge in this instance, is the finder of fact and that a presumption of correctness attaches to his findings and to the judgment based on those findings. Clardy v. Capital City Asphalt Co., 477 So.2d 350 (Ala.1985). The resulting judgment will not be disturbed on appeal unless it is manifestly unjust, palpably wrong, or without supporting evidence. Id. at 352.

On appeal the surety contends that its only obligation on the bond was for any deficiencies in the ward's estate caused by a negligent or wrongful act committed by Pugh, not by her attorney. Pugh's testimony reveals that she did not commit any wrongful acts or, otherwise, act negligently in regard to her position as conservator over the ward's estate. However, we would note that any determination by the probate judge in regard to Pugh's actions was a question of fact.

The evidence reveals that Pugh, after turning her ward's estate funds over to the attorney made several inquiries in regard to the status of her ward's estate. Pugh called her attorney on one occasion to inquire as to whether she would be receiving a bank book. On several other occasions Pugh called to inquire about the status of the annual accountings, the income tax returns, and the estate tax returns. Pugh testified that every time she contacted her attorney's office regarding these matters, the secretary assured her that everything was being taken care of. However, Pugh never received a bank pass book. It was also later discovered that the tax returns were never prepared.

The probate court could well have determined that Pugh's actions did not conform to that of a prudent person. For approximately two years, Pugh never demanded to see the actual income tax returns, estate tax returns, bank statements, or bank book because she believed that her attorney was taking care of all these matters. However, the very fact that the attorney was not authorized to sign checks on behalf of the ward's estate should have alerted Pugh that something was wrong.

Here, in deciding this appeal, we turn to a brief summary on the law of agency and suretyship. Our supreme court has stated that an attorney is a special agent for his client during the prosecution or defense of his client's case. Mitchum v. Hudgens, 533 So.2d 194 (Ala.1988). Furthermore, " '[a]n agent's apparent authority must be founded upon the conduct of the principal and not upon the conduct of the agent.' " Id. at 199 (quoting Daniel v. Scott, 455 So.2d 30,...