Court Opinion

ID: 9769244
Source: CourtListenerOpinion
Date Created: 2023-08-29 14:41:27.489949+00
Date Added: 2024-06-11T15:18:58.521540
License: Public Domain

DORSEY, Justice,
dissenting.
I respectfully dissent from that portion of the majority opinion that holds that there is a common law duty of good faith and fair dealing between a surety and a principal. I do not believe that a “special relationship” existed between these experienced, sophisticated business entities that requires a common law duty of good faith and fair dealing owed by Associated to Joint Venture. Even if there was some sort of special relationship, furthermore, I do not believe that the fact situation seen in this case is sufficiently common to announce a new rule of law creating a new duty in surety contracts.
A surety relationship, by its very nature, protects the surety to the potential detriment of the principal. See 72 C.J.S. Principal and Surety § 224 (1987) (“In general ... [a] surety acquires the right to be exonerated by the principal debtor.”) According to the majority, Joint Venture was forced to bargain from an unequal position because state statutes required that they obtain a bond on the construction project and because the bonding company they contracted with, Associated, also required a separate indemnity agreement protecting them in case Joint Venture defaulted and Associated was forced to pay on the bond.
I do not believe that this situation created unequal bargaining positions. The principal in this case was experienced with municipal construction projects and had undoubtedly entered into surety arrangements before. Associated was not the only bonding company that could issue the required construction bonds. Each of these companies was sophisticated, and they entered into the surety arrangement after arms-length bargaining.
As “principal” in this arrangement, Joint Venture was the party on whom the primary obligation rested. See 72 C.J.S. Principal and Surety § 4 (1987). It was Joint Venture’s responsibility to complete the construction in an acceptable manner, and to indemnify Associated if Associated was forced to pay on the construction bonds. Associated, as surety, guaranteed to the District that the District would not lose money on the project due to Joint Venture’s actions. And the District, not Associated, held the *604statutory authority to approve the form of the bonds. See Tex.Gov’t Code Ann. § 2253.021(e) (Vernon Pamph.1995). Each of these entities had crucial roles in the surety arrangement, and none was in a more powerful bargaining position when entering into the arrangement.
As noted by the Texas Supreme Court in Great Am. Ins. Co. v. North Austin Mun. Util. Dist. No. 1, 908 S.W.2d 415, 418 (Tex.1995), the three-way surety relationship is a different situation from a liability insurance contract, in which the insurer owes a duty of good faith and fair dealing to its insured. As the supreme court stated:
While a liability insurance contract involves only two parties, the insurer and the insured, suretyship involves a tripartite relationship between a surety, its principal, and the bond obligee, in which the obligation of the surety is intended to supplement an obligation of the principal owed to the bond obligee, (citations omitted).
In determining that no common law duty of good faith and fair dealing existed between a surety and a bond obligee, the supreme court noted that none of the factors which led them to find such a duty in the insurance context (unequal bargaining power, the nature of insurance contracts, and exclusive control over the claim evaluation process) existed in the construction surety context. Rather, the supreme court held that the parties had conducted arms-length negotiations and did not bargain from unequal positions. Furthermore, because sureties in Texas have the express statutory right to force the bond obligee to sue the principal before pursuing actions against the surety, the supreme court declined to impose a common law duty on the surety simply because it is in the position to delay payments on a bond. Id. at 419.
In English v. Fischer, 660 S.W.2d 521 (Tex.1988), the Texas Supreme Court determined that an implied duty of good faith and fair dealing does not exist in every contract. Since then, the duty of good faith and fair dealing has been established only sparingly in Texas, and the courts have rebuffed efforts to expand it. E.g., SmithKline Beecham Corp. v. Doe, 903 S.W.2d 347, 356 (Tex.1995) (no duty owed by drug testing laboratory to person tested as part of a pre-em-ployment drug screening); Transport Ins. Co. v. Faircloth, 898 S.W.2d 269, 279-80 (Tex.1995) (no duty between insurer and third-party claimant); Natividad v. Alexsis, Inc., 875 S.W.2d 695, 698 (Tex.1994) (no duty between an insurance agent and the insured absent a contract giving rise to a special relationship); Federal Express Corp. v. Dutschmann, 846 S.W.2d 282, 284 n. 1 (Tex.1993) (no implied covenant in context of employment relationship); Winters v. Houston Chronicle Pub. Co., 795 S.W.2d 723, 724 n. 2 (Tex.1990) (same); Crim Truck & Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d 591, 595 (Tex.1992) (no duty between franchisor and franchisee where a statutory scheme controlling the relationship is already in existence); FDIC v. Coleman 795 S.W.2d 706, 708-09 (Tex.1990) (no duty between mortgagor and mortgagee, creditor and guarantor, or creditor/FDIC acting as receiver and guarantor); Exxon Corp. v. Atlantic Richfield Co., 678 S.W.2d 944, 947 (Tex.1984) (no implied duty in an oil & gas contract to vary the terms of the contract).1
I would sustain Associated’s points of error fifteen and sixteen. Because there is no common law duty of good faith and fair dealing owed by Associated to Joint Venture, there can be no breach of that duty and no resulting tort damages. I would therefore sustain Associated’s point of error thirty-four in its entirety, and disallow the $700,000 *605awarded for mental suffering to the DiPonios and the Catallos.

. See also Wheeler v. Yettie Kersting Mem. Hosp., 866 S.W.2d 32, 52 (Tex.App.—Houston [1st Dist.] 1993, no writ) (no duty of good faith and fair dealing in context of a claim against a healthcare provider); Texstar N. Am., Inc. v. Ladd Petroleum Corp., 809 S.W.2d 672, 677-78 (Tex.App.—Corpus Christi 1991, writ denied) (no implied duty of good faith and fair dealing in oil & gas joint operating agreement); Herndon v. First Nat’l Bank of Tulia, 802 S.W.2d 396, 399 (Tex.App.—Amarillo 1991, writ denied) (no duly of good faith and fair dealing between bank and borrower); Adolph Coors Co. v. Rodriguez, 780 S.W.2d 477, 481 (Tex.App.—Corpus Christi 1989, writ denied) (no duly of good faith and fair dealing between a supplier and distributor); Cluck v. Frost Nat. Bank of San Antonio, 714 S.W.2d 408, 409-10 (Tex.App.—San Antonio 1986, writ ref'd n.r.e.) (no duty of good faith and fair dealing between bank and customer).