
    LAWYERS SURETY CORPORATION, Appellant, v. The STATE of Texas, Appellee.
    No. 3-91-142-CV.
    Court of Appeals of Texas, Austin.
    March 4, 1992.
    G. Dennis Sullivan, Sullivan & Ave, Dallas, for appellant.
    Dan Morales, Atty. Gen., David Randell, Asst. Atty. Gen., Austin, for appellee.
    Before CARROLL, C.J., and ABOUSSIE and KIDD, JJ.
   CARROLL, Chief Justice.

Lawyers Surety Corporation (“LSC”) appeals from the trial court’s order granting the State’s motion for summary judgment in a tax bond case. The State of Texas was awarded almost $42,000.00 for gasoline and diesel fuel taxes, plus penalties, interest, and attorney’s fees. We will reverse the trial court’s judgment and remand for further proceedings.

BACKGROUND

LSC issued two bonds as surety to the State of Texas for the Joe G. Tarrant Oil Company. These bonds are for state gasoline and diesel fuel taxes as mandated by the Texas Tax Code. See Tex. Tax Code Ann. §§ 153.116, 153.218 (1982). The taxes remained unpaid so the State filed suit against LSC as surety for the bonds. After filing suit, the State moved for summary judgment. In response, LSC asserted the affirmative defense of the statute of limitations. We note that LSC did not move for summary judgment. The district court granted the State’s motion for summary judgment.

DISCUSSION

The parties agree that the suit was filed after the running of the three-year statute of limitation. See Tex. Tax Code Ann. § 111.202 (1982). However, they disagree as to a surety’s application of the statute against the State. In a summary judgment case, the court must decide whether a disputed material fact issue precludes summary judgment, with every reasonable inference and doubt resolved in the nonmovant’s favor. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-549 (Tex.1985). Since we find that the surety is able to successfully assert the statute of limitations defense against the State, a fact issue exists as to the State’s claim being barred by the statute of limitations. Therefore, we conclude that summary judgment is improper in this case.

It is well settled that the surety is bound by the obligation of the principal, and “such liability depends on the principal’s liability.” Wright Way Constr. Co. v. Harlingen Mall Co., 799 S.W.2d 415, 426 (Tex.App.1990, writ denied). Therefore, LSC’s liability will depend upon the taxpayer’s liability. If the State lost its right to assert its claim against the taxpayer after the lapse of three years from the final deficiency determination, then the surety’s liability was also barred by the running of the statute.

The Texas Supreme Court dealt with a similar case in Hatcher v. State, 125 Tex. 84, 81 S.W.2d 499 (Tex.1935). In that case, the State brought suit against the surety of the state treasurer for the treasurer’s failure to perform his duties properly. The court found that the action was not based on the bond itself because the bond was “simply a collateral security for performing the officer’s duty, and, when suit is barred for breach of his duty, action is also barred on the bond.” Id. 81 S.W.2d at 502 (quoting Phillips v. Hail, 118 S.W. 190, 191 (Tex.Civ.App.1909, no writ)). This type of fidelity bond bears a striking resemblance to tax bonds: both are statutorily mandated bonds which provide collateral security for breaches of statutorily defined duties.

We therefore conclude that the bonds are simply collateral security and incidental to the taxpayer’s statutory obligation. Although the bonds state that the surety will pay all taxes with penalties and interest, this statement lacks complete meaning without the statutory definitions and computations of taxes. Therefore, the bond does not properly “state the conditions of recovery” and is merely incidental to the taxpayer’s duty to the State.

In this case, to allow recovery on the bond itself would effectively repeal § 111.-202. If the State were able to initiate suit for taxes against the surety after the three-year limitation of § 111.202, the taxpayer would ultimately lose the statutory protection of this legislation because of the surety’s contractual right to recover on the bond itself. “[I]f the surety pays the debt which is at the time barred by limitation as against the principal, but is a valid obligation against the surety, such surety may recover against the principal.” Willis v. Chowning, 90 Tex. 617, 40 S.W. 395, 396 (1897). The three-year limitation granted by the legislature would be extended indefinitely since the State could delay for more than three years before filing suit for the taxes against the sureties of these required bonds. The sureties would then pursue the principal taxpayer, rendering the statute ineffective. The principal would, in effect, be forced to defend a suit for these taxes more than three years after the final deficiency determination, which clearly violates the legislature’s language in § 111.202. Also, the surety itself would have no way of determining when its liability on these bonds expires.

The tax bonds for gasoline and diesel fuel at issue are statutorily mandated. See Tex. Tax Code Ann. §§ 153.116, 153.-218 (1982). The statute of limitation raised in LSC’s affirmative defense is part of the same statutory scheme as the foregoing sections. See Tex. Tax Code Ann. § 111.-202 (1982). Texas courts have incorporated terms of a statute into the bond which the statute requires. See Sheldon Pollack Corp. v. Pioneer Concrete of Texas, 765 S.W.2d 843, 846 (Tex.App.1989, writ denied); Grimes v. Bosque County, 240 S.W.2d 511, 516 (Tex.Civ.App.1951, writ ref’d n.r.e.). Because the suretyship was created to comply with part of a statutory scheme, it therefore makes sense to apply the other parts of the scheme in a conflict over the bond. Thus, if the three-year statute of limitation is established, it should apply to the surety as well as the principal. LSC has provided summary judgment proof that the State’s suit was filed after the running of the statute; therefore, a material issue of fact does exist which precludes granting of the State’s motion for summary judgment.

We conclude that a fact issue remains as to whether the State’s suit for taxes was time barred. Accordingly, summary judgment is not appropriate here. Since this issue is dispositive of the case, we do not discuss appellant’s other points of error.

We therefore reverse the trial court’s judgment and remand for further proceedings.  