State of Tennessee v. George T. Wiebe, in re: Paul's Bonding Company, Inc. ( 2002 )

IN THE COURT OF CRIMINAL APPEALS OF TENNESSEE
AT NASHVILLE
February 12, 2002 Session
STATE OF TENNESSEE v. GEORGE T. WIEBE, IN RE: PAUL'S
BONDING COMPANY, INC.
Direct Appeal from the Criminal Court for Davidson County
No. 98-C-2034 Steve R. Dozier, Judge
No. M2001-00350-CCA-R3-CD - Filed July 16, 2002
Bonding company for absconded defendant appeals final forfeiture of bond and alleges that its
agents were without authority to issue an alleged illegal bond. Concluding that bonding company’s
employee had authority to act, we affirm the judgment of the trial court.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Criminal Court Affirmed
JOHN EVERETT WILLIAMS, J., delivered the opinion of the court, in which JOSEPH M. TIPTON and
ALAN E. GLENN, JJ., joined.
Joel H. Moseley, Sr., Nashville, Tennessee, for the appellant, George T. Wiebe, In Re: Paul’s
Bonding Co., Inc.
Paul G. Summers, Attorney General and Reporter; Christine M. Lapps, Assistant Attorney General;
Victor S. (Torry) Johnson, III, District Attorney General; and John C. Zimmerman, Assistant District
Attorney General, for the appellee, State of Tennessee.
OPINION
On January 28, 1999, the trial court issued a conditional forfeiture against defendant George
T. Wiebe and his surety, Paul’s Bonding Company, in the amount of $500,000.00. A scire facias
was issued and served on the surety, and a capias was issued for the arrest of defendant.
The surety filed an answer to the scire facias. A final forfeit hearing was held, and the trial
court subsequently ordered that the forfeiture become final. In doing so, the trial court lowered the
bond amount to $250,000.00.
The surety subsequently requested the court to alter or amend its order. However, the trial
court denied the request. The surety’s notice of appeal timely followed.
Facts
Defendant was arrested and charged with possession of marijuana. Bond was subsequently
set and posted in the amount of $500,000.00, and a Davidson County grand jury returned an
indictment for possession with intent to deliver seventy pounds of marijuana.
The surety presented to the court a death certificate, and the court ordered the matter abated
by death. Subsequently, a police investigation revealed that two agents of the surety, Peggy
Coleman and James Ferrell, along with Jose Herrera, a bondsman from Texas, entered into an
agreement whereby they would receive and divide $250,000.00 for defendant’s release. After
receiving their money, they posted $50,000.00 on the surety’s books to reflect the statutory premium.
Shortly thereafter, an undercover police sting operation involving another fake death
certificate on another client led to the arrest of Coleman, Ferrell, and Herrera. All three were
charged with money laundering and fabricating evidence. Coleman pled guilty to fabricating
evidence, and Ferrell pled guilty to money laundering. Herrera entered a plea of nolo contendere
to the charges of money laundering and conspiracy to commit money laundering and pled guilty to
fabricating evidence. The record, as well as the trial court’s findings, reflects that Coleman, Ferrell,
and Herrera entered pleas to similar charges in other courts as well. They were subsequently
sentenced in Davidson County Criminal Court. At that time, defendant was still at large and
believed to be residing in Mexico.
Upon learning that the death certificate for defendant was not authentic, the trial court set
aside the judgment and entered a capias for defendant and a conditional forfeiture of the appearance
bond. The court also entered a scire facias against the surety, ordering it to appear and show why
the forfeiture should not become final. The surety filed an answer and an amended answer alleging
that the bond should be remitted because the surety exercised due diligence in establishing
procedures by which the employees were to operate when undertaking bond obligations. The surety
contended that the employees failed to follow the company protocols and entered into a criminal
conspiracy defrauding the company and the criminal justice system.
Subsequent to a hearing conducted on the issue of whether the forfeiture should become final,
the court determined that the forfeiture should be reduced from $500,000.00 to $250,000.00. The
surety appeals the trial court’s decision and asks that it be relieved from the entire amount of the
debt.
Hearing on Final Forfeiture of Bond
Charles Wheeler testified that he was the owner of Wheeler Bonding Company, Inc. and was
employed by the surety’s law firm to assist in the location and apprehension of the forfeiting
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defendant. Wheeler stated that he located defendant and that defendant was residing in LaJunta,
Mexico. Wheeler stated, however, that he did not try to apprehend defendant because the United
States does not have an extradition treaty with Mexico. Wheeler stated that he had never seen
defendant nor talked with defendant. When asked if he knew whether or not anyone had seen
defendant after the surety had given the death certificate to the trial court on September 30, Wheeler
responded that as of July 30, he was notified that defendant was living in Mexico. He stated that he
had gained that information from defendant’s uncle, who owned a trucking business together with
defendant in Canada.
Wheeler testified that he spoke with no other witnesses who stated that defendant was living
in Mexico. He also stated that he did not have any documentation proving that defendant was in
Mexico. Wheeler said he had information that defendant was working at a business in New Mexico;
however, he did not physically locate defendant in New Mexico. A trip to El Paso, Texas, to visit
defendant’s family members also revealed that no one would tell Wheeler where defendant was
located.
Michael Wayne Campbell testified that he was president of Paul’s Bonding Company, the
surety. His grandfather, Paul Sullivan, helped Campbell start and fund the business several years
ago. He stated that during his grandfather’s illness in 1990, Coleman ran the business. He stated
that he only spoke with her four or five times during 1998, the year of execution on defendant’s
bond. The only documents he reviewed were total sum deposits furnished him by his accountant,
Morris Hickman. The company had no procedures whereby Coleman was required to notify
Campbell about a specific bond amount. Campbell said that he would not have known about his
employees’ illegal activities if there had been no police sting operation. He further stated that he
would have questioned Ferrell about expenses incurred on defendant’s bond if Campbell had actually
reviewed the expense reports. Since the discovery of the employees’ illegal actions, Campbell had
implemented various safeguarding procedures to prevent any such future conduct.
Campbell testified that he did not see anything that indicated Coleman was not discharging
her duties properly. Subsequently, Coleman became vice-president of the corporation. She was
general manager and ran the day-to-day affairs of the business. Campbell said that he never received
anything from his certified public accountant (CPA) indicating that he needed to conduct an audit
on the business, investigate Coleman’s activities, or be suspicious of anything Coleman had done.
He stated that in the fall of 1998 he heard rumors that Coleman was using fake death
certificates. He subsequently met with her to discuss the rumors. Coleman was instructed to go
meet with the surety’s attorneys. Campbell said that he is not exactly sure what happened after that.
In 1999, the surety was asked to participate in a sting against Herrera in connection with a
bond. The surety was given money by the local police department, and the surety wrote the checks
out of its own checking account. The purpose of the sting was to get Herrera to obtain a phony death
certificate on another client, Rais Castro. Campbell stated that only after the sting did he learn about
the bond on defendant in the instant case.
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Campbell said that prior to the hearing, the surety had no unpaid final forfeitures. On cross-
examination, Campbell testified that the checks from the corporation’s checking account had to be
signed by two people and that the three eligible people were himself; his mother, Wanda Campbell;
and Coleman. He stated that Coleman was never authorized to spend the corporation’s money on
her own signature alone.
Campbell later read in a newspaper that Coleman had been accused of participating in
criminal activities with Ferrell. He also read in the newspaper that, as a result of those activities, the
surety’s bonding company had been enjoined from signing any more bonds. These events had come
about because of Coleman’s dealings with fake death certificates.
Campbell stated that, at one point, Coleman came to him and stated they needed to increase
their bonding capacity. He stated that he always granted her requests to raise the company’s bonding
capacity. He further stated that he did not know of any instance where his father, James Campbell,
denied her request to raise the bonding capacity. However, Coleman had the ability to increase the
bonding capacity without Campbell knowing about it because she had access to other company funds
she could use to increase the bonding capacity. Coleman would accomplish this without Campbell’s
signature on the checks because over the years, Campbell began to trust Coleman more and would
allow her to sign both signatures on the checks. Campbell stated that the company did not have an
insurance policy to protect itself against mismanagement or fraud of any employees.
Campbell testified that before the police sting, the company was being operated by Coleman.
He stated that he had knowledge that any expenses incurred in writing a bond would be deducted
from the company’s portion and reimbursed to the employee before a deposit was made. Even
though he did not expressly give his permission to do that, he knew what was going on and knew
that was the way Coleman operated the business.
The deposition testimony of Campbell’s father, James Campbell, son-in-law to Paul Sullivan
and 49% shareholder in the company, revealed that Coleman was running the business after
Sullivan’s death. He stated that he never knew that the surety’s bonding capacity was exceeded or
that there was even a bond on defendant. He said that the company’s board usually met annually,
but he did not realize that Coleman was on the board. He said that he did not spend much time at
the business at all and that Coleman did not consult with him concerning forfeitures or other agents
of the company. Finally, he stated that he only knew Ferrell by sight and would not feel comfortable
talking to him about the business.
Morris Hickman testified that he was the CPA for the surety. He stated that he dealt with
Peggy Coleman and that she would generally give him the information upon which he could base
financial reports for the surety. He also stated that he never saw anything in the information that
suggested that an audit should be conducted.
Analysis
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Initially, we agree with the trial court’s statement that “a bail bond is essentially a contract
whereby a surety guarantees the appearance of a accused in court.” Tenn. Code Ann. § 40-11-114,
122(2) (1997); see State v. Clements, 925 S.W.2d 224, 226-27 (Tenn. 1996). In this case, the State
contends that the surety, through the acts of its agents, is bound by its contract to ensure defendant’s
appearance in court. The surety, however, contends that it is not bound because the execution of the
bond was illegal and therefore, unenforceable. On appeal, the surety raises two issues: (1) the surety
is not liable for the illegal acts of the rogue agents. More specifically, the trial court incorrectly
applied the standards of Tennessee Code Annotated section 48-18-301; and (2) the forfeiture should
be remitted pursuant to Tennessee Code Annotated section 40-11-204.
This Court recently addressed the issue of a trial court’s role in bond forfeitures, as well as
the substantive law governing forfeiture of bonds:
The forfeiture of bail is governed by statute. Tenn. Code Ann. §§ 40-11-201 through
-215. When the defendant fails to appear as required, the issuance of a scire facias
requires sureties to give reasons why a forfeiture of bail should not become final.
Tenn. Code Ann. § 40-11-202. Trial courts have the discretion to relieve bail
bondsmen or other sureties from the liability of bail and are authorized to hold
hearings to determine whether the forfeiture should be excused, lessened, or
absolutely remitted. Tenn. Code Ann. § 40-11-204. The discretion has been
described as broad and comprehensive, empowering trial courts to make
determinations “in accordance with [its] conception of justice and right.” Black v.
State, 154 Tenn. 88, 92, 290 S.W. 20, 21 (1927).
State v. Shredeh, 909 S.W.2d 833, 835 (Tenn. Crim. App. 1995). Accordingly, in reviewing a trial
court’s determinations, we apply an abuse-of-discretion standard. State v. Robinson, 2000 Tenn.
Crim. App. LEXIS 655, No. E1999-00950-CCA-R3-CD, 2000 WL 1211316, at *3 (Tenn. Crim.
App. at Knoxville, Aug. 28, 2000). Under an abuse-of-discretion standard, this Court grants the trial
court the benefit of its decision unless the trial court “applied an incorrect legal standard, or reached
a decision which is against logic or reasoning that caused an injustice to the party complaining.”
State v. Shuck, 953 S.W.2d 662, 669 (Tenn. 1997); see also State v. Shirley, 6 S.W.3d 243, 247
(Tenn. 1999). For the reasons set out below, we conclude that the trial court did not abuse its
discretion in ordering the final forfeiture of defendant’s bond. Accordingly, we affirm the judgment.
I. Surety’s Bond Writing Capacity and Agent’s Bond Writing Authority
The surety first contends that it is not bound by the acts of the “rogue agents.” The surety
asserts that the acts of the employees should not be attributed to the surety because the surety in fact
did not have the capacity to write the bond in the instant case. The surety asserts that the execution
of the bond exceeded the surety’s bond-writing capacity and was thus, an action that the surety itself
could not have undertaken. Ergo, because the surety could not have the power to execute the bond,
the agent could not have the authority to execute the bond. In arguing its claim, the surety attempts
to shift the blame to the Davidson County Criminal Court Clerk’s Office because the clerk’s office
allowed the surety’s employees to exceed the surety’s bonding capacity.
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In rebuffing the surety’s attempt to distribute the blame among the employees of the
Davidson County Criminal Court Clerk’s Office, we conclude that the trial court properly ruled that
the surety is bound by the acts of its agents and is liable on the bond.
First, we affirm the trial court’s finding that the surety had the authority and ability to execute
the bond at issue. The proof shows that upon executing defendant’s bond, the surety was over its
bonding capacity by $158,000.00. As reflected in the trial court’s opinion, the deposition of Elaine
Ragan, Division Chief of the Davidson County Criminal Court Clerk’s Office, indicated that
although it was unusual for the surety to be over capacity by $100,000.00, it was not unusual for
bonding companies to exceed their bonding capacity. Assistant District Attorney General John
Zimmerman stated in his deposition that it was common for bonding companies to exceed their
capacities. The surety’s employee in charge of compiling reports regarding the bonding capacity,
Sherry Donaghey, testified that executing bonds exceeding capacity occurred regularly. The record
further shows that at no time was there a court order prohibiting the surety from executing any bonds
due to overcapacity. Therefore, the surety never lost its authority to execute any bond. We conclude
that, contrary to the surety’s assertions, the execution of the bond was not per se illegal and that the
surety had the authority to execute the bond.
Second, we affirm the trial court’s finding that the actions of the agents were within the scope
of employment and that such actions bind the principle, in this case, the surety.
We initially note that the scope and extent of an agent’s authority are questions of fact that
must be determined from all of the facts and circumstances of the particular case. Southland
Express, Inc. v. Scrap Metal Buyers of Tampa, Inc., 895 S.W.2d 335, 340 (Tenn. Ct. App. 1994).
Whether an employee is acting within the scope of employment becomes a question of law, however,
when the facts are undisputed and cannot support conflicting conclusions. Tennessee Farmers Mut.
Ins. Co. v. American Mut. Liab. Ins. Co., 840 S.W.2d 933, 937 (Tenn. Ct. App. 1992). When
determining if an agent’s actions are within the scope of authority, we view the actions in light of
the Restatement (Second) of Agency. Id. at 937. The Restatement states as follows:
(1) Conduct of a servant is within the scope of employment if, but only if:
(a) it is of the kind he is employed to perform;
(b) it occurs substantially within the authorized time and space limits; [and]
(c) it is actuated, at least in part, by a purpose to serve the master; [...]
(2) Conduct of a servant is not within the scope of employment if it is different in
kind from that authorized, far beyond the authorized time and space limits, or too
little actuated by a purpose to serve the master.
RESTATEMENT (SECOND) of AGENCY § 228, p. 504 (1957). An agent’s authority to bind its principal
may be actual or apparent. Actual authority is the “power which a principal intentionally confers
upon the agent, or intentionally or by want of ordinary care allows the agent to believe himself to
possess.” 2A C.J.S. Agency § 147 (1972). It may be either expressed or implied. Id. Likewise,
apparent authority is the “authority which a principal holds his agent out as possessing or permits
him to exercise or to represent himself as possessing, under such circumstances as to stop the
principal from denying its existence.” Id. § 157.
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The proof in this case reveals that the surety’s company was run almost exclusively by its
agent, Coleman, because owners James Campbell, Mike Campbell, and Wanda Campbell had almost
no involvement in the business. Indeed, Coleman ran the day-to-day affairs of the business as she
wrote bonds and supervised other agents. Mike Campbell testified that he allowed Coleman to sign
his name on company checks and that Coleman had access to other company funds. Coleman
officially served as vice president of the company and was general manager of the business. Her
position allowed her to write and approve bonds for the company. We agree with the State that, in
her capacity as general manager and vice president of the surety’s bonding company, Coleman
approved defendant’s bond that was written by another agent, Ferrell. When applying the facts to
the principles espoused in the Restatement, it is clear that entering into bonding agreements was the
type of work Coleman was employed to perform; she entered into the bond while at work for the
surety; and she executed the bond, at least in part, to serve the surety’s business, this reflected in the
fact that she and Ferrell entered $50,000.00 onto the company’s books to reflect the statutory
premium. She was certainly granted express authority to execute bonds, write checks, and generally
run the daily affairs of the business. She also had apparent authority as she was held out as the
company’s general manager and vice president. The evidence is quite clear that Coleman acted
within the scope of her employment when executing the bond.
Having already determined that the surety itself had the ability and authority to execute the
bond, we conclude that the agents had such authority and therefore bound the surety to the bond
amount.
Finally, the surety contends that the trial court applied an incomplete standard in evaluating
the surety’s conduct as director of the corporation. The trial court made the following statement in
its final order:
Under Tenn. Code Ann. § 48-18-301(a) (1995), “A director shall discharge all duties
as a director . . . (1) In good faith; (2) With the care an ordinarily prudent person in
a like position would exercise under similar circumstances; and (3) In a manner the
director reasonably believes to be in the best interests of the corporation.” While
there is no indication that the directors of the surety were not acting in good faith, it
is certainly apparent from their “absentee management” that they were not acting
prudently or in the best interests of the corporation.
. . . [T]he directors, pursuant to their duty under Tenn. Code Ann. § 48-18-301(a)
(1995), should have reviewed the capacity reports made by Ms. Donaghey and
prevented any bonds written over the capacity of the company.
Subsection (b) of the statute states that a director, in discharging its duties, is “entitled to rely on
information, opinions, reports, or statements” prepared by another officer or employee the director
reasonably believes is “reliable and competent in the matters presented.” Tenn. Code Ann. § 48-18-
301(b)(1). The surety asserts that in ignoring subsection (b), the trial court “applied a ‘hindsight’
standard and not a front-end duty standard” to the directors’ conduct. Hence, the directors should
be able to reasonably rely on their employees and thus be excused from liability. The State,
however, responds by noting that the surety’s reliance on its employees is not an issue critical to the
current case. Rather, the issue is the enforceability of the bond. In its reply brief, the surety
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contends that it does not seek exoneration based on the statute’s application but, rather, that the trial
court should have referenced the statute in its entirety and not simply subsection (a). The record
reflects that the statute is only first mentioned in the trial court’s opinion.
We agree with the State that the issue central to this case is the enforceability of the bond and
not whether the surety could reasonably rely on its employees. Further, and contrary to the surety’s
assertion in its reply brief, it is apparent that the surety wishes to be exonerated from the bond
amount by seeking application of subsection (b) of the statute. Though the surety did not rely on the
statute in its answer or amended answer to the scire facias, the surety wishes to escape liability by
having this Court apply subsection (b). We choose not to do so and conclude that liability is based
on the agency principles discussed supra. Lastly, we conclude that the statute applies to causes of
action by a corporation against an officer or other fiduciary. We agree with the State’s assertion that
the statute does not provide a remedy in such a case as this where the issue is a third party’s ability
to enforce a legally executed bond. We affirm the trial court’s judgment.
III. Remission of Bond Amount
Finally, the surety contends that even if this Court concludes that the surety’s employees
were agents acting within the scope of authority when executing the bond and thus binding the
surety, fairness dictates that the surety be exonerated. We disagree and affirm the trial court’s
judgment.
In making its argument, the surety relies on this Court’s opinion in State v. Shredeh, 909
S.W.2d 833 (Tenn. Crim. App. 1995). In Shredeh, we determined that the trial court’s remission of
the bond by 40% was proper. In doing so, we concluded that the trial court acted well within its
discretion. Indeed, the trial court made specific factual findings upon which it based a thorough,
thoughtful opinion. Shredeh, 909 S.W.2d at 836. Therefore, we found no abuse of discretion and
noted that appellant failed to prove otherwise by a preponderance of the evidence. Id. This Court
noted that the trial court’s remission in the bond amount was, to some extent, due to the finding that
the surety “had exercised some diligence . . . before undertaking the risks” involved in issuing the
bond. By implication, the trial court also found that the surety had not exercised enough diligence
to warrant total relief from the bond amount. Id.The surety in the instant case contends that because such a remission was sanctioned by this
Court on appeal in Shredeh, the surety is deserving of “complete exoneration.” We disagree. First,
we again note that our function in a case such as this is to evaluate whether or not the trial court
abused its discretion. The trial court in this case observed witnesses and listened to extensive
testimony on the issues. It found that there was “no conclusive proof” that defendant was in Mexico
and, therefore, in a jurisdiction from which extradition was not possible. Further, the court found
that the “impossible” situation in which the surety claimed to be was due to the surety’s failure to
recognize the various “red flags” alerting it. As indicated by the trial court, defendant’s New Mexico
address on the bond application certainly should have been the subject of a “reasonable inquiry” by
the directors of the bonding company. Indeed, the surety’s failure to implement certain policies and
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procedures certainly contributed to the employees’ ability to write such a large bond on this out-of-
state defendant in the first place.
The record supports the trial court’s judgment, and, in our view, the court rendered a well-
reasoned opinion reflecting why the surety should be obligated to pay the forfeiture amount.
Moreover, we note that the trial court in the instant case already reduced the amount of the bond
from $500,000.00 to $250,000.00 in the interests of what is “just and right.” We conclude that the
trial court did not abuse its discretion in ordering the final forfeiture for this amount.
Finally, the surety alleges that because the extradition treaty between the United States and
Mexico is practically unenforceable, it is impossible to surrender defendant, and the surety should
therefore be exonerated. However, we agree with the State’s position that a “lack of an enforceable
extradition treaty between the United States and Mexico does not warrant relief” to the surety. This
holding is certainly in line with our holdings in Shredeh and In re: Paul’s Bonding Company, Inc.,
62 S.W.3d 187, 194-95 (Tenn. Crim. App. 2001) app. denied (Tenn. Sept. 17, 2001) perm. to appeal
denied (Tenn. Sept. 17, 2001). We therefore affirm the forfeiture of the bond.
CONCLUSION
Accordingly, we affirm the judgment of the trial court.
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JOHN EVERETT WILLIAMS, JUDGE
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