Donohue v. Highlands Underwriters Insurance

This is an appeal from two orders of the court approving compromises of claims by a conservator of a conservatorship estate, overruling the objections of a surety to the settlements and denying the surety’s claim of lien on the settlement proceeds. We reverse the orders of the trial court approving the settlements and affirm the orders denying the liens.

Factual Background

Clara Bell Jackson, as successor conservator of the estate of Gary S. Edwards, conservatee, filed two petitions for approval of compromises of the conservatorship estate’s claims against Hibernia Bank (Hibernia) and Great Western Savings (Great Western), a Federal Savings & Loan Association. (Collectively the “banks.”) Jackson succeeded Bilal H. Sabir as conservator. Sabir was appointed conservator of the estate in 1979. At that time the court ordered him to post a surety bond in the amount of $18,000. The surety, Highlands Underwriters Insurance Company (Highlands), posted the bond in December 1979.

In 1981, in accordance with the terms of a settlement of the conservatee’s personal injury lawsuit, Sabir received a lump sum payment in excess of $140,000. He deposited $100,000 with Great Western and…