New Amsterdam Cas. Co. v. Bettes, 16709
| Decision Date | 03 June 1966 |
| Docket Number | No. 16709,16709 |
| Parties | NEW AMSTERDAM CASUALTY CO. et al., Appellants, v. T. J. BETTES et al., Appellees. . Dallas |
| Court | Texas Court of Appeals |
Brundidge, Fountain, Elliott & Churchill, Lloyd E. Elliott, and J. Willard Gragg, Dallas, for appellants.
Vinson, Elkins, Weems & Searls, John C. Snodgrass and John B. Holstead, Houston, Dean Carlton, Dallas, for appellees.
This is an appeal from a judgment for $1,178,770 in favor of T. J. Bettes Company against New Amsterdam Casualty Company. The recovery of T. J. Bettes Company was upon alleged obligation of four bonds executed by L. A. Peterson, Inc., as principal, and New Amsterdam Casualty Company as surety, said bonds being conditional upon the faithful performance by L. A. Peterson, Inc., of contracts for the construction of buildings located in Virginia and New York.
The factual background of the parties and subject matter involved in this litigation is so complex that the record will not yield to a simple statement.
L. A. Peterson, Inc. (hereinafter called Contractor or Peterson, Inc.) is a Texas corporation engaged in the construction business. All of the stock of this corporation was owned by L. A. Peterson with the exception of two shares, one owned by his wife and one by his brother. Its directors were R. C. Peterson, James R. Cash, B. W. Morris, Frank Zitzman and L. A. Peterson.
South Falls Corporation was incorporated under the laws of the State of Texas. James R. Cash, Billy W. Morris and L. A. Peterson each owned one-third of the stock of this corporation. Later, the stock of the company owned by L. A. Peterson was transferred to L. A. Peterson, Inc.
Disco Corporation was a wholly owned subsidiary of South Falls Corporation. Morris, Peterson and Cash were officers and directors of this corporation. Both corporations were engaged in acquiring land and constructing buildings thereon in various parts of the United States. The corporations will be referred to as South Falls and Disco, respectively, and collectively as South Falls-Disco.
Because of the interrelationship between Peterson, Inc. and South Falls-Disco, Peterson, Inc., was the contractor on the majority of the building projects constructed by South Falls-Disco in Iowa, Illinois, Ohio, Texas, Virginia and New York.
T. J. Bettes Company (hereinafter called Bettes) is a Texas corporation engaged in the mortgage banking business, one facet of which is the making of interim construction loans. Bettes was the interim construction lender on the building projects mentioned above in Ohio, Illinois, Iowa, Texas, Virginia and New York. On each of the projects Bettes required that Peterson, Inc. and an approved corporate surety execute dual obligee bonds, being identical with those bonds involved in the present litigation and which will be described in more detail hereinafter.
Peterson, Inc. engaged to build buildings for Disco in Norfolk, Newport News and Richmond, Virginia and in Plattsburgh, New York. On each of these jobs Bettes required that South Falls-Disco, L. A. Peterson, Inc. and L. A. Peterson, James R. Cash and B. W. Morris, individually, execute a loan agreement which spelled out in detail the conditions under which Bettes' loan was being made with reference to interim financing of the respective jobs. These loan agreements provided, Inter alia, that on each construction project South Falls-Disco should furnish Bettes as security the following instruments: (1) note and deed of trust; (2) collateral assignment of an unconditional contract to purchase the buildings previously executed by A. A. Rosen, a New York investor; and (3) collateral assignment of landlord's interest under a twenty-year lease previously executed by Maxam's Inc., a large discount department store chain. Also, Peterson, Inc. was required to furnish the owner, South Falls-Disco, and the lender, Bettes, dual obligee payment and performance bonds executed by an acceptance corporate surety.
On January 19, 1962 Disco, as owner, and L. A. Peterson, Inc., as contractor, executed three standard form agreements for the construction of 'Maxam's Department Stores' in Norfolk, Newport News and Richmond, Virginia for an agreed consideration of $861,802 each. The completion date in each contract was May 26, 1962. In each of the contracts Peterson, Inc. agreed to furnish all of the materials and to perform all of the work shown on the drawings and described in the specifications for each of the respective jobs and to do everything required to be done by the contract. Article 7 of the contract entitled 'Guaranty Bonds' provided:
On June 5, 1962 South Falls, as owner, and L. A. Peterson, Inc., as contractor executed a construction contract for the construction of 'Forest Hills Outlet Store, Plattsburgh, New York', such contract having the same general provisions as the Virginia contracts except that the amount was to be $750,000.
Subsequent to the execution of each of the construction contracts Peterson, Inc. as principal and New Amsterdam, as surety, executed two bonds, a payment bond and a performance bond, on each of the four construction projects in question.
The four performance bonds, which are of vital concern in this litigation, were all on standard A.I.A. forms and the one on the Norfolk, Virginia project is illustrative of all:
'KNOW ALL MEN BY THESE PRESENTS:
That L. A. Peterson, Inc., 7135 Empire Freeway, Dallas, Texas as Principal, hereinafter called Contractor, and NEW AMSTERDAM CASUALTY COMPANY, a corporation organized and existing under the laws of the State of New York, as Surety, hereinafter called Surety, are held and firmly bound unto Disco Corporation, 1066 W. Mockingbird Lane, Dallas, Texas and T. J. Bettes Co., Houston, Texas as Obligee, hereinafter called Owner, in the amount of Eight Hundred and sixty-one thousand, eight hundred two dollars and no/100 Dollars ($861,802.00), for the payment whereof Contractor and Surety bind themselves, their heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents.
'WHEREAS, Contractor has by written agreement dated January 19, 1962 entered into a contract with Owner for general construction of Maxam's Department Store, Norfolk, Virginia in accordance with Drawings and specifications prepared by Donald H. Speck, which contract is by reference made a part hereof and is hereinafter referred to as the Contract.
'NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION is such that, if Contractor shall promptly and faithfully perform said Contract, then this obligation shall be null and void; otherwise it shall remain in full force and effect.
'The Surety hereby waives notice of any alternation or extension of time made by the Owner.
'Whenever Contractor shall be, and declared by Owner to be in default under the Contract, the Owner having performed Owner's obligations thereunder, the Surety may promptly remedy the default, or shall promptly
(1) Complete the Contract in accordance with its terms and conditions, or
(2) Obtain a bid or bids for submission to Owner for completing the Contract in accordance with its terms and conditions, and upon determination by Owner and Surety of the lowest responsible bidder, arrange for a contract between such bidder and Owner and make available as work progresses (even though there should be a default or a succession of defaults under the contract or contracts of completion arranged under this paragraph) sufficient funds to pay the cost of completion less the balance of the contract price; but not exceeding, including other costs and damages for which the Surety may be liable hereunder, the amount set forth in the first paragraph hereof. The term 'balance of the contract price,' as used in this paragraph, shall mean the total amount payable by Owner to Contractor under the Contract and any amendments thereto, less the amount properly paid by Owner to Contractor.'
Each bond contained an endorsement which reads as follows:
The four labor and material payment bonds covering each of the four construction projects contained basically the same information as the four performance bonds.
ALLEGED DEFAULT IN CONTRACTS BY PETERSON, INC.
After the work on the Virginia construction contracts had been carried off almost to completion Peterson, Inc., was called upon to correct the defects and deficiencies claimed by the owners. The requested corrections were not made. Bettes claimed that in order to procure the acceptance of the Virginia buildings by the tenant, it was required to place in escrow the sum of.$80,570 for repairs and completion of the buildings. It was claimed that New Amsterdam...
To continue reading
Request your trial
-
Cates Construction, Inc. v. Talbot Partners
...Co. v. Southern Concrete Services, Inc. (5th Cir.1994) 17 F.3d 106, 111, following American Home Assurance Co; and New Amsterdam Cas. Co. v. Bettes (1966) 407 S.W.2d 307.) We believe that Amerson was correctly decided and should be followed. It is consistent with other California case law a......
-
Colonial American Cas. and Sur. v. Scherer
...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......
-
Great American Ins. Co. v. North Austin Mun. Utility Dist. No. 1
...amount of a bond, a surety's liability generally is limited to the penal sum of the bond. New Amsterdam Cas. Co. v. Bettes, 407 S.W.2d 307, 314-15 (Tex.Civ.App.--Dallas 1966, writ ref'd n.r.e.) (surety not liable for actual or special damages caused by default of principal in excess of face......
-
Augusta Court Co-Owners' Ass'n v. Levin, Roth & Kasner, CO-OWNERS
...Co. v. K & D and Associates, 589 S.W.2d 752, 758 (Tex.App.--Dallas 1979, writ ref'd n.r.e.); New Amsterdam Causalty Co. v. Bettes, 407 S.W.2d 307, 315 (Tex.App.--Dallas 1966, writ ref'd n.r.e.). Here, the rule of strict construction is inapplicable because the parties' obligations under the......