Trinity Universal Ins. Co. v. Ponsford Bros.

• Decision Date: 29 March 1967
• Docket Number: No. 5798,5798
• Citation: 414 S.W.2d 16
• Parties: TRINITY UNIVERSAL INSURANCE COMPANY, Appellant, v. PONSFORD BROTHERS, a Co-Partnership, Appellee. . El Paso
• Court: Texas Court of Appeals

Page 16

414 S.W.2d 16

TRINITY UNIVERSAL INSURANCE COMPANY, Appellant, v. PONSFORD BROTHERS, a Co-Partnership, Appellee.

No. 5798.

Court of Civil Appeals of Texas El Paso.

March 29, 1967.

Rehearing Denied April 19, 1967.

Kemp, Smith Brown, Goggin & White and William J. Derrick, El Paso, for appellant.

Scott, Hulse, Marshall & Feuille and George W. Finger, El Paso, for appellee.

OPINION

FRASER, Chief Justice.

On July 31, 1961, a corporation known as Dallas Building, Inc. (hereinafter described as 'Dallas') had been awarded the contract to construct what is known as the Sun Bowl Stadium in El Paso. Trinity Universal Insurance Company had executed both payment and performance bonds for Dallas in favor of El Paso County. In other words, Trinity was surety for both the performance, and payment for the construction, of the Sun Bowl Stadium. Dallas had entered into a number of subcontracts such as those calling for dirt work, electrical construction, etc. On April 5, 1962, El Paso County declared Dallas in default and called upon Trinity, as the surety, to perform under its surety bonds. It is obvious from the record that there was not much time allowed to contact prospective bidders to succeed Dallas as general contractor, as Mr. Bill Mounce, attorney for Trinity, not only solicited bids from other general contractors to complete the Sun Bowl Stadium, but distributed copies of the plans and specifications along with a schedule prepared by Mr . Mounce showing the balances left in said purchase orders of Dallas and subcontractors and materialmen as of March 31, 1962. Although the default was declared on April 5, 1962, Mr. Mounce, on behalf of defendant Trinity, advised Ponsford Brothers, a co-partnership, plaintiff in the trial court, that its bid must be in his office by April 20, 1962. Plaintiff (appellee) submitted its bid to Mr. Mounce on April 20th, and alleges that paragraph 5 was included because plaintiff, as a potential general contractor to take over from Dallas, did not have time in the short period existing from April 5th to April 20th to make an adequate survey, inventory, etc., to enable plaintiff to make a definite and thorough bid. So plaintiff alleges that it incorporated in its bid the following paragraph (designated as paragraph 5):

'We are to be protected by Trinity Universal Insurance Company for amounts in excess of the balance due on contract (dated March 31, 1962) because of renegotiations or replacement of existing subcontractors or material suppliers.'

Defendant Trinity accepted plaintiff's bid by letter dated April 25, and included in said letter a paragraph, also numbered 5, which reads as follows:

'You will attempt to negotiate similar contracts with all of Dallas Building, Inc.'s subcontractors and suppliers, Trinity will reimburse you for any amounts in excess of the balances shown on the schedule prepared by Dallas Building, Inc., dated as of March 31, 1962, resulting from such negotiations.'

It then appears that plaintiff was unable to negotiate or renegotiate new contracts with two of the original Dallas subcontractors, as shown on the aforesaid schedule of March 31, 1962, for the balance left in the existing contracts. As alleged in its brief, plaintiff reported to Trinity's attorney, Mr. Bill Mounce, both verbally and by letter, as follows:

'As agreed, we have left the negotiations with Hammer and Gunnels, electrical contractors, and Montgomery and Knight, earth mover, for your handling.'

(Montgomery & Knight are variously referred to in the briefs, issues and answers as 'Montgomery & Knight' and/or 'Montgomery and Knight'). As events moved on, it appears that the defendant was able to satisfy the electrical contractors, but it soon became evident that Mr. Mounce could not obtain a surety or performance bond for Montgomery & Knight, whose subcontract was that of dirt work. It seems agreed that there was left the sum of $46,680.00 in the original dirt subcontract as of March 31, 1962. Apparently because of the inability to obtain a surety for Montgomery & Knight, plaintiff alleges that attorney Mr. Mounce instructed plaintiff to obtain other bids for the balance of the dirt work. Plaintiff did so and reported to Mr. Mounce a preliminary or estimate bid from Hugh McMillan to the effect that it would cost at lease $108,000.00 to complete the dirt work. The record indicates that Mr. Mounce and Trinity felt that it would be better or cheaper to go ahead with Montgomery & Knight on the ground that even if they had an overrun, it wouldn't be as much as the estimate submitted by Hugh McMillan. Mr. Mounce therefore, on May 7, 1962, entered into or created a letter contract between his client, defendant Trinity, and Montgomery & Knight to go on with the dirt work. Two pertinent paragraphs of this letter contract follow:

'This will evidence in writing the agreement between Trinity Universal Insurance Company (Trinity) and Montgomery and Knight Co. relative to your completing the grading, excavating and other dirt work on the Sun Bowl Stadium.

'1. You will execute a subcontract with Ponsford Brothers, which sub-contract will be substantially the same as your original sub-contract with Dallas Building, Inc., dated August 16, 1961, except that the total consideration will be $60,651.98. You will commence work under such sub-contract Tuesday morning May 8, 1962, and complete same in a good and workmanlike manner in accordance with said sub-contract.'

Montgomery & Knight commenced work on Tuesday morning, May 8th. It is alleged that Mr. Mounce then instructed plaintiff to enter into its usual form of subcontract with Montgomery & Knight for the completion of the dirt work, with a copy of the Trinity-Montgomery & Knight letter dated May 7, 1962 attached thereto, of which the two paragraphs quoted above were a part. Mr. Mounce, representing Trinity, approved the form and wording of the subcontract between plaintiff and Montgomery & Knight before it was signed late in the afternoon of May 8th. It is pointed out that Montgomery & Knight had already begun work the day before, and it is alleged that plaintiff knew that it would probably cost at least $108,000.00 (the lowest estimate submitted) to complete the dirt work. As further evidence of the reason for the apparent desire of Trinity and Mr. Mounce to keep Montgomery & Knight on the job to complete the dirt work, the following except from a letter dated May 8th, written by Mr. Mounce to defendant Trinity, is included which, inter alia, states:

'If at this point Montgomery and Knight Co. walk off the job, then there is a possible loss to Trinity * * * You will recall that under Ponsford's contract with Trinity, Ponsford is to be reimbursed for all amounts in excess of $46,680.00 for the dirt work * * * If Montgomery and Knight Co. complete their contract, in my opinion, we will have saved approximately $75,000.00 on the dirt work alone.'

It is also alleged that plaintiff kept Mr. Bill Mounce fully advised on the progress and costs. When it became apparent that Montgomery & Knight were beginning to overrun the balance left in their subcontract, it was agreed that plaintiff would advance the actual expenses for Montgomery & Knight in completing the dirt work and leave the decision as to responsibility for the overrun to be decided when the job was completed, which was confirmed by letter from the defendant's attorney. It is then alleged by appellee-plaintiff that the actual overrun of Montgomery & Knight, without profit or overhead allowance, was $111,792.83, which amount had been advanced by plaintiff and the accounts thereof audited by defendant Trinity.

Suit was brought against the defendant-appellant by the plaintiff-appellee to recover the amount of said overrun, alleging that defendant was obligated to reimburse plaintiff for its losses or advancements to Montgomery & Knight on the dirt subcontract. In its brief appellee states that it, as plaintiff, was entitled to recover the amount of this overrun from defendant Trinity under several theories, as follows: First, that paragraphs 5 of the bid and acceptance provide that Trinity would be responsible for any overrun of an existing subcontractor shown on the March 31, 1962 schedule, and appellee urges that this paragraph is broad enought to substantiate such position, even if it negotiated a subcontract with an existing subcontractor without a subcontract performance bond. Appellee also maintains that Trinity attempts to interpret the said paragraphs 5 to mean that if appellee signed a subcontract with an existing subcontractor, then Trinity's responsibility would end. Appellee further maintains that if, on the other hand, the said paragraphs 5 are ambiguous or uncertain, or do not actually provide for the contingency that plaintiff might be unable to negotiate a subcontract with Montgomery & Knight (for the dirt work) in good faith, then, in any or either of such events, the intention of the parties in the bid and acceptance would control, and the actions of the parties at the time with their interpretation of paragraphs 5 should be given considerable weight. Secondly, if it appears that appellee did not negotiate a subcontract with Montgomery & Knight to complete the dirt work, then the May 7, 1962 contract (between Montgomery & Knight and Trinity) was actually the contract to complete the dirt work, with defendant Trinity instructing both Montgomery & Knight and appellee to enter into a subcontract in substantially the same form as that executed between Dallas and Montgomery & Knight, for the purpose of coordinating the dirt work with the other contractors and making payments to the dirt contractor as the work progressed. Also, appellee points out that it was obligated to complete the Sun Bowl Stadium, and it was agreed that plaintiff would advance the expenses of Montgomery & Knight in the overrun and leave the determination of liability for the overrun until completion of...