Scribbles December, 2011

Sauer Scribbles Presents:
It’s The Most
Wonderful Time of
the Year !
Volume XI , Issue Two
36th Issue
December, 2011
Table of Contents
1. Scribbles Driven Out of Norwood by a 2014 Crown Vic . . . . . . Page 1
2. December 23: The Morning . . . . . . . . . . . Page 5
3. Scribbles Christmas Jokes . . . . . Page 18
4. December 24: The Evening . . . . . . . . . . . Page 24
5. Claims Against Your Bid, Payment and Performance Bonds: Strategies to Help You Protect
Yourself When Times Get Tough . . . . . Page 29
“Apart from all of the other things I have to worry about now it
appears that liquor liability is one of them! And, forced from our
beloved Norwood office by a bunch of Feds? Now, I really need a
drink!
SCRIBBLES DRIVEN OUT OF
NORWOOD BY A 2014 CROWN VIC
Route One or on Sumner Street - with a
seriously increased regularity.
Not to be paranoid,
but, in recent months, our
Scribbles offices on Route
One seemed to have had a lot
of helicopters flying over
them, at least several times per
day. True, that we are not that
far from Norwood Airport and
certainly Norwood is fairly close to Boston
where, let’s face it, nearly anything goes. The
fact of the matter is that we have always, at the
Scribbles Tower, had several businesses of
different kinds, some of them more publicly
visible than others.
About one month ago, we seemed to
see an increase in State Police cars making Uturns at the intersection of Sumner Street and
Route One. The net effect of this was Police on steroids (and we all know that steroids
are not good for you, listen to your mother.)
Two weeks ago was the last straw.
Mid day on a Monday, three all black very
large cars pulled into our parking lot, two of
them parking in front and one parking in back.
With no wasted motion, each car seeming to
know in advance
what it was
supposed to do, as
if choreographed
by June Taylor or
the Rockettes. All
of the entrances
and all of the exits were covered. There were
at least two good-sized men in each car,
maybe more.
Scribbles, itself, other than being a
magazine is also a holding company operating
various subsidiary businesses. For example,
as explained in an earlier issue, our crew is
active in the return of property that falls off the
back of trucks. Somehow, more often than
not, when one of these vehicles develops
problems, one of our guys is very nearby. We
own a gentleman’s club, a deli, a bail bond
business and a variety of car dealerships.
Some other businesses which
we won’t discuss right now.
The Law Office part of the
operation is clueless as to all
of this. Not involved.
Bunch of squares and stuffed
shirts.
The Founder went downstairs to talk
with them. Only one man got out of his car.
At first glance, nothing spectacular: maybe
five feet ten inches, maybe one hundred
seventy-five pounds and about early forties.
Forgettable. But, on closer examination, very
solid. He clearly knows where his gym is
located. Black suit, white shirt, black tie,
black shoes and the suit was cut generously,
especially in the chest and houlders, which he
completely filled out. Very
dark wrap-around sunglasses.
He looked like an escapee from
one of the “Men in Black”
insect movies.
T h e
Founder and the man in black looked at each
other warily.
A couple of months ago, these flyovers
started getting even more frequent. It seemed
that there was at
least one per
hour. Then, the
local squad cars
seemed to be
going by our
offices - either on
“Can I help you, sir,” the Founder
-1-
asked gruffly.
“I wouldn’t know about that, sir,” the
man in black said, expressionless.
“No, sir,” the man in black said.
“We’re just out for a ride in our new cars. A
kind of test drive.” He
looked very closely at the
Founder. “We thought
that this might be an
interesting place to drive
to.”
“So, is this like one of the last
2011's?” the Founder
asked.
“No, sir, it is not,”
the man in black replied.
He took off his sunglasses
slowly and the Founder
saw two of the coldest
eyes he had ever seen. A
very slight smile.
“This is an early release
2014 Crown Vic.”
Test drive? Takes three cars to do a
test drive? Why are they blocking all of the
entrances and exits? Don’t they know they are
interrupting our several businesses? All of
these ideas and others flowing through the
Founder’s not inconsiderable brain.
“2014?” the Founder asked
incredulously. “For most car models, they
are just getting into the 2012 model year and
there are still lots and lots of new 2011's
being sold. And, they don’t make them any
more,” he added.
“Say, I am kind of a car buff,” the
Founder said. “I’ve got a collection of cars
and a bevy of bikes. I’m not sure that I
recognize your car.” The Founder moved up to
the lead car slowly, hands out to his sides, so
everyone could stay comfortable. “Kinda
looks like a Crown Vic and they stopped
making them in 2011,” the Founder said, “And
that car looks really brand new.”
The man in black gave another very
slight smile, an utterly humorless man for
whom smiles and other demonstrations of
humanity were doubtlessly seriously rationed.
“It is new, sir,” the man in black said,
the expression on his face unchanging: just on
the minimally polite side of otherwise very
grim. “And, it is a Crown Vic.”
“They make them for us, sir.” He
walked over to his car and stopped after he
had opened the driver’s door, looking back.
“You have a nice day, sir,” he said. Then, as
a group, all three of the cars slowly left the
parking lot, each person carefully eyeing the
Founder as they left.
The
Founder saw some sudden
flashes of light and
instinctively hit the deck.
When he got up, he realized
that they had been taking his
picture. A lot of pictures.
“But they stopped making them this
year,” the Founder protested. “Cops - I mean,
law enforcement - have been switching over to
Chargers and Ford Tauruses,” the Founder
said.
“And, Crown Vics haven’t been
available to the general public for several
years: they used to sell’em only to cab
companies, limousine companies and the
police. Ford has been phasing them out big
time for the last several years. Hell, they
don’t even make Town Cars anymore. Fleet
gas averages and green shit, stuff like that.”
Feds! Only Feds would have the juice
to have a special car built for them, the
-2-
Founder thought. Norwood being as built up
as it is, we are just too visible, he thought,
further.
For example, the town has absolutely
no coyotes. This is because of the fact that
the plentiful bear population eats them pretty
much as fast
as they show
up.
(As the
b e a r s
frequently
wander down
Main Street, it
i s
a
compulsory
course in first
grade to reach
‘marksman’
level with a
shotgun.) If any coyote is lucky enough to
avoid the bears, he won’t be able to avoid the
wolf population, which is substantial and
always very hungry. (It’s a well known fact
that coyotes and wolves have little regard for
each other.) The wolves tend to travel in
large packs and everyone tries to give them a
wide berth.
And, within a week, all of the
administrative operations as well as the Law
Office were hurriedly moved from Norwood in
the middle of the night with twelve large
moving vans. Norwood, an industrial giant,
whose downtown
was occupied by
gleaming two and
three
story
skyscrapers, one
after another after
another. Certainly,
a big, big city,
virtually indistinguishable from Boston, except
that it wasn’t Occupied.
And, all of Scribbles administrative
operations were transferred to the seemingly
sleepy town of East Walpole. East Walpole way, way out in the country, where cows
outnumber humans by at least one hundred to
one. A town so
rural that the
average lot size is
greater than sixteen
acres. A town so
quaint that from
many views, with
just a little
imagination, one
might think he was
back in the 1800's. A backwards town, in
many ways, with most of the roads not paved,
some sections of the town not even yet
electrified. No town water. No town sewer.
Indoor plumbing still seen, in some parts, as a
kind of a novelty, really not necessary. No
regular delivery of mail. If you weren’t born
here, they don’t want you. Not that one should
think that everything’s ‘bad’ in this town. The
town has a lot to commend it.
A lot of “Keep Out” and “No
Trespassing” signs outside of practically
every house and establishment. In the hilly
even more rural sections, one would
frequently see signs like “We Shoot
Revenuoors”.
Outside of one isolated rambling
farmhouse with a lot of cars parked out front,
the sign “Welcome Cousins.” A place where
there are a lot of very close
extended families.
Clannish. A town where
vicious dogs are
encouraged to run free. A
small town, to be sure, but
one which has its very own
maximum security prison, with several other
jails and prisons located nearby in
neighboring towns. All in all, a very
unfriendly town to outsiders. Just the way its
-3-
citizens, the vast majority of whom are
‘townies’, like it.
Jonathan Sauer
Sally Sauer
Sauer & Sauer
15 Adrienne Rd.
E. Walpole, MA 02032
Phone: 508-668-6020
Fax: 508-668-6021
jonsauer@verizon.net
sallysauer@verizon.net
With the heavy tree cover - more than
half of the town is heavily-forested - the
helicopters wouldn’t be able to see much.
And, no one would want to drive his brand new
2014 Crown Vic over
t h e v e r y b u m p y,
suspension-killing
roads, spilling coffee
and donut crumbs all
over their black suits.
And, much, much closer
to the new casino that
was going to be built in
Foxboro, a business or
Craft that the Founder had always been
interested in. What’s there not to like about a
business where people walk in and willingly
give you their money for nothing other than a
couple of free drinks and to oogle the
waitresses in their short dresses?
Some final notes. As the roads out
here are really terrible - probably impassable
during much of the winter - four wheel
vehicles are strongly recommended. Also,
when you get out of your cars and trucks,
move very, very slowly and keep your hands
open and visible at all times. Folding them
behind your head might be a very good idea.
For safety’s sake.
And, unless you are really good with
vicious dogs,
hungry wolves and
pretty big bears, a
little protection
might not be a bad
idea, capisce? If
your car can pull
the weight, a small
cannon is not a bad
idea.
For the Founder, a very quiet town. So
far out into the country
that his operations
would be far less
visible. He bought six
hundred acres, plenty
of room for expansion
and many of his
businesses were
booming. He moved
the law offices, too, so he could keep an eagle
eye on all of those lawyer-types, making sure
that they billed at least four thousand to five
thousand hours yearly. Making sure that they
don’t steal too many paper clips. One has to
run at least some of one’s businesses through
the IRS or they get grumpy and out of sorts.
A lot harder to deal with when they are in that
certain kind of mood.
************************************
So, if you are looking to find us, here
are our new digs:
-4-
The Founder had thought that the
freight elevator was a good idea in that, as
strange as it might seem, some people might
have an aversion to a two and one-half foot
seventy pound rodent such as Ratsputin.
Also, K’nyacker, newly arrived from some
place very distant in the night-time sky, was
also along and at
over nine feet tall what, with all that
plating and teeth,
maybe a little smell
- was not the easiest
thing to look at or,
for that matter, to
occasional issues are
smell. (Imagine that “These
making me irregular.”
a Survivor stayed on
the island for more than 39 days. Like for six
or seven thousand days with nary a bar of
Dial soap or any Right Guard within four
hundred nautical miles.)
December 23: THE MORNING
The Founder and some of the boys,
along
with
Ratsputin dressed
up as Uncle Sam in
a red, white and
b l u e
s u i t
reminiscent of the
Vancouver ‘Green
men”, entered the
hallowed halls of “My exploratory committee is
Dewey, Cheetum & looking for donations.”
Howe’s Boston office on the top floor of
Boston’s currently most expensive tower.
The Founder and his group were going
up the freight elevator, which they entered in
the bowels of the building near the parking
area. There are only so many places one can
leave a Town Car limousine which has been
stretched and then stretched once again. A
tractor trailer with a full box was a little bit
longer than the ‘Enterprise’ but not by much.
The limousine was given that name by Rocco,
as this group of individuals - a crew, really,
which is not at all to be confused with a gang often had to ‘boldly go’ to various places,
sometimes under difficult circumstances and
often at a high rate of speed, either being
chased or chasing. Since the Enterprise had
both a supercharger and a turbocharger, it was
capable of moving along right smartly. It had
actually beat the Bugatti in a little drag strip
action down Route One late one evening but
the Founder claimed that this only happened
because Rocco kept slipping the clutch. In his
defense, the Veyron does make 1001
horsepower and that is a lot to control.
Actually, the Veyron makes over three
thousand horsepower but two thousand of
which is only measured in heat. Maybe that is
why the thing has eleven separate radiators and
costs 1.6 very large until you start adding the
goodies.
For these reasons, all of them had on
costumes of one kind or another. Even
though a few of them had not seen the happy
end of third grade, the Harvard Club was
having a winter costume ball, “The Christmas
Eve Eve Ball” to benefit underprivileged
people, like those, for example, who only
could go to places like Boston University.
People who don’t live in places like Dover,
Needham, Sudbury, Weston, Westwood,
Newton or Brookline. Only graduates of ‘the
school’ - they never actually used the “H”
word as there was only one real school that
the proper people went to, so who needs to
define it? - and their guests could attend. A
couple of the boys thought that crashing it
would be a gas. K’nyacker wasn’t really sure
about this but, being very thirsty at the
moment, he was willing to do so if they had
an open bar and maybe a few hundred pounds
of hors d'oeuvres.
DCH had eight floors of the tower,
-5-
give or take. The higher a lawyer went up on
the depth chart, the higher the office one could
find him in. At this firm, nosebleeds caused
by rarified air were a good thing.
The
eightieth floor contained the offices of the
three most senior partners, Alexander Dewey
III, Scott Francis Cheetum and Sir Edgar
Howe. (Howe was a transplant from their
London office. He had been knighted for some
unknown reason at the end of a long and
drunken night.
A
maiden’s - the
Dutchess
of
somewherehonor
had been at stake but,
fran k l y, no one
remembered the exact
“No shit?”
details except that it
seemed that Schnopps heavily figured into the
evening’s activity.)
course for hours at end in go karts that looked
more like Indy cars. For example, no
Corvettes were allowed except for the Z06
and ZR1 models, as, frankly speaking, they
wouldn’t be able to keep up. In a separate
area, he kept his most favorite thirty
motorcycles, which rotated from a much
larger inventory frequently. Cheetum also
had an collection of antique plumbing
fixtures. Some would refer to them as
‘bidets’.
He was very concerned with
cleanliness in all of the right places. As is
widely known, ‘down there’ could be very
problematic, depending on the tides and other
monthly variations.
Howe’s office was a bit different. Tiny only nine thousand square feet - he had a
relatively modest desk that a fellow by the
name of Louis had until his
use of it was suddenly cut
short, made unnecessary by
an incredibly large blade
causing a spatial
interruption between his “I bet they could solve
neck and chest in something the old ‘clumped fur’
problem”
called the French
Revolution. (Actually, there have been at
least six French Revolutions as, for whatever
reason, the French could be revolting,
typically involving foreigners who couldn’t
speak French, non-domestic (to France) wines
and the fact that Au Bon Pain was selling
baguettes and other small rolls that a few
well-placed French politicians felt royalties
should be paid on, mistresses being as
expensive to keep as they are.)
Dewey, as the senior, senior partner had
the largest office, which was about ten
thousand square feet. He needed one that
large to service his two athletic passions:
candlepin bowling and golfing. He had three
lanes installed in his office and had a short two
hole pitch and putt course in the other corner of
the office.
Both were walled off with
silencing materials in the walls, lest someone
get the undeserved impression that someone
was being a wee bit extravagant.
Cheetum’s office was only ninety-five
hundred feet, something that pissed him off to
no end. Every year, usually on March 4th, he
went on an extended rant about the missing
five hundred feet. He kept insisting that he be
allowed to build a porch outside of his office.
The architect was leery of designing one, as he
already had a good back-log of malpractice
cases for that year, his deductible long since
lost, and he also had some concerns that, at this
height, the porch might actually be hit by an
airplane. Cheetum did have a go cart track
installed, in which he zoomed around a circular
Howe had a curling course on the west
side of the office. Curling, a 16th century
sport where hardy Scots would slide
odd-shaped rocks called 'loafies' on the frozen
lochs and marshes of Scotland. As the game
is played indoors on meticulously prepared ice
with polished 42-pound granite rocks, Howe
-6-
had had a small ice rink installed on one side of
his office. He got a pretty good deal in that it
was the same company that installed the ice
arena portion of the New Boston Garden. It
seems that someone had ordered too much ice
and there was little alternative other than to let
it melt, which might have made a mess of
Causeway Street and incurred for that company
some heavy fines, to pay, example, for the
hippies living up on top of the central artery.
Howe and Dewey had literally come to blows
when Dewey found
Howe rolling his
rocks down two of
his bowling alleys.
Needless to say, this
had caused scratches
and gouges down
the entire length of
both lanes, so much
so that the entire
guys are colorful, to say
lanes would have to “These
the least.”
be replaced. Howe
and Cheetum had also had disagreements over
Howe’s use of his go kart track for what Howe
called “Curling for athletes”, which was kind
of like playing polo from go karts, using
incredibly strong steel sticks and curling
stones, all while traveling at rather high rates
of speed.
that Happy Hour was going to make a reentry. Of course, this was made necessary to
avoid Bay Staters from going to Twin Rivers
and having one of Fred and Steve’s thirty
dollar steak dinners on their way to handing
their money over to the nice people running
the casinos. Connecticut, of course, has
Mohegan Sun and
Foxwoods and Bay
Staters frequent
these establishments
at an alarming
frequency to engage
in
what
is
euphemistically
referred to as “I am boring, by comparison.”
‘games of chance’.
With Massachusetts soon to authorize
the building of casinos, a whole lot of things
had to be re-examined. The approval of
casino gambling legislators determined to be
necessary because the Founding Fathers - had
they thought of it - would undoubtedly have
authorized the same as they would have
authorized, for example, abortion, had they
thought about it. It appears, when evaluating
current mores that the Founding Fathers had
failed to consider a whole raft of things. In
their defense, however, a couple of hundred
years ago no more excitement was necessary
than attempting to avoid any skirmishes with
the Indians from
wherever or the
French from
Canada and to
try to avoid bears
and
other
animal s who
would be quite
i nt erested in
“I can climb higher than bears.”
eating them.
And, since
Massachusetts, until one hundred and fifty
years ago, largely had an agricultural and mill
economy, by the time people got done
Howe, unfortunately, had a history of
frequent misadventures. He claimed that in a
former life time he had been in the British
Merchant Marine and had incurred the wrath of
an extremely strong case of scurvy, which had
followed him through subsequent lives.
Decades earlier than present day, his
treatments for scurvy, requiring stout spirits
with a very high alcohol content, wouldn’t
occur much before Happy Hour.
Happy Hour, however, had been
banned throughout the Commonwealth in
1984. But, with casino gambling rushing
through the General Court in 2011, it appears
-7-
working at the end of the day, the only thing
they had enough energy to do was to go to bed
to recharge, there to perform intricate dances in
order to keep warm.
safer place to put such signs was on the
emergency generators on the side facing the
wall.
After all, if Tom Brady could
enthusiastically encourage fans to get ‘lubed
up’, who was the Legislature to detract from
this message from someone who was
practically a god?
The General Court or Legislature
undoubtedly determined that it was their duty
to preserve near-constitutional rights and were
poised to authorize casino gambling. That this
might be the source of some tax revenue was
not an unpleasant by-product of casino
gambling but something that was only an afterthought and not an, uh, forethought. That the
tax coffers might swell with these revenues had
been completely unintended.
In any event, Howe was known to ‘tipple’ a
fair measure, eschewing the ‘drinking’
description as being uncouth and only one of
the many colonial behaviors which had caused
England to cut the colonies adrift. Truth be
told, according to Howe, the American
Revolution had only been fought to prevent
this forced separation, not to facilitate it.
‘Tipple’ was a wonderful English word, first
used in 1560, and from the Middle English, a
period during which English people talked
funny. The elegance of the word lent to the
concept of imbibing a certain elegance,
elevating it in stature. Out of his respect for
the English language, Howe did tipple a
good deal but never before lunch time. These
days, he was having lunch at any time after
seven thirty in the am, mostly to avoid the
crowds some time later.
Apparently, some college boy with a
bow tie had done a study and determined that
there was a direct relationship between the
level of drinking of spirits and the enthusiasm
to hand over your paycheck while engaged in
the gambling process. The more of one, the
more of the other. The less of one, the less of
another. So, to more
fully p rot ect Bay
Staters’
nearconstitutional right to
gamble, Happy Hours
had to come back, not
to facilitate gambling
(and the unfortunate
if you’re in a
resulting taxation) but so “Yeah,
bucket truck.”
that the gamblers could
enjoy their new found near-constitutional
freedom and be warm, fuzzy and comfortable if somewhat bleary-eyed - while doing so.
One more conscientious legislator had offered
an amendment that each casino parking garage
should have at least one ten inch by ten inch
sign warning that it wasn’t the best possible
idea for those driving home to be seriously
under the influence of alcohol.
This
amendment, controversial and causing great
debate, ultimately passed. However, since
signs could be distracting to drivers,
particularly at night, it was determined that a
The whole west corner of his office
was a pretty substantial bar, actually larger
than the actual bar at “Cheers” otherwise
known as ‘The Bull & Finch Pub’.
The three offices of DCH’s three
senior stalwarts all
sort of melded
together like the Blob
with Steve McQueen
from the fifties, at a
period of his life when
he had yet to realize
that only he and Paul “In my prime, I was a fine
specimen too.”
Newman were the
only really handsome men in Tinseltown.
This, before Paul Newman got interested in
making salads. As none of these three
-8-
partners actually practiced law any more - that
was what junior partners, associates and, in a
pinch, interns were supposed to do - they
usually had their offices open one to another.
a small reception desk made from exotic
woods inhabited by an even more exotic and
attractive woman,
bearing a striking
resemblance to Marilyn Monroe, although
prettier and more fulsome.
All three had been, strange as it may
s e e m ,
constitutional law
lawyers at one
point in time,
specializing in
“Of what?”
election law issues,
voters’ rights, that
sort of thing. They still consulted with many
candidates for state and federal office but tried
to avoid candidates who had had too many
relationships with those to whom they were not
married, especially if they lacked the facility to
lie about them convincingly. So, one standing
outside of the elevators on the eightieth floor
could see into all three offices if the doors were
open. As the distances involved in moving
around the offices were significant, and with
none of the three getting any younger, people
tended to go from one office to another in golf
carts, not to be confused with the go karts that
Cheetum tended to favor.
The Founder, Ratsputin, K’nyacker,
Rocco, Luigi and D-Wayne all walked out of
the elevator.
Ratsputin, as previously
reported, was dressed up to look like a kind of
rodent version of Uncle Sam with the actual
rodent features mostly hidden. Rocco and
Luigi were in matching twin sailor suits, blue
and white stripes, a sash around the middle,
the hat with the wide brim and patent leather
shoes, looking like something out of the Good
Ship Lollipop. Not at all costumes of their
own choice but suggested by the Founder, the
compliance with his opinions being a factor
pointing to a longer and more pleasant life.
D-Wayne was dressed entirely in black: black
jacket, black shirt, black belt, black shoes and
a black hat with a really wide brim, kind of
like a recent Republican candidate rumored to
be cut of the Johnson cloth. He was going to
the costume ball
as “Super Fly”,
which, even with
his
dark,
Southern Italian
coloring, was a
bit of a stretch.
The Founder was
dressed up also in
black but with a
white tie and
“Watch out, cat fight in progress!”
white shoes. He
was going to the ball as “the Don”, not at all
to be confused with “the Donald”, the former
looking like Marlon Brando without the
cotton in his cheeks and the latter looking
kind of like Sonic the Hedgehog on a bad hair
day. He was carrying a prop: a very mean,
menacing firearm that looked various much
like a fully automatic machine gun.
There was also a rather impressive
conference room next to the elevators on the
one side and, on the other, a janitor’s closet
and a men’s room. Often hearing from their
enlarged prostates at their age encouraged the
frequent use of the loo, as Howe referred to it,
fiercely proud of its and his English heritage.
(This unfortunate aspect of senior life was only
one of the many factors sparking Cheetum’s
interests in the plumbing fixtures.) The
janitor’s closet was quite large, what with all of
the brooms, mops, some girlie calendars from
previous years and various supplies used to
maintain this floor, including a floor waxer,
various paints and paint thinners and solvents.
Just in front of the elevators, there was
-9-
It probably looked so authentic because
it was a fully automatic machine gun. And,
quite loaded. K’nyacker’s costume was to
wear no costume at all, since he didn’t really
need one. Just as is, he gave a very effective
representation of a . . . monster. A very tall
pre-historic monster, making Tyranasaurus
Rex look like the Fool or Court Jester from the
King Richard’s Faire. Charitably speaking,
not from around these parts.
behave. This, of course, because California is
a community property state.
K’nyacker had one of his several noses
- beaks? - upturned into the conditioned air,
sniffing. “My, my, my. The aroma! I can tell
that there is something really good to drink
here,” he rumbled, in a voice that was
reminiscent of a subway train deep
underground screeching against the rails,
perhaps while making the turn under the
Boylston Street stop on the Green Line, the
line between Boylston Street and Park Street
being the very first subway in the United
States.
Now they are very common,
especially since they hit the five dollar
promotion using NFL has-beens.
When the receptionist saw this group
disembark, she involuntarily gasped. “Ah,
may I help you? She spilled a drink which
looked and smelled like something from
Howe’s office.
“Yeah, yeah, yeah,” the Founder said.
“I have a meeting scheduled with either
Dewey, Cheetum or Howe. I can’t remember
which one,” he said, scratching his head. “I’m
having myself a kinda senior moment here,” he
said with a boyish grin. “Say, why don’t you
just give me the cheapest of the three so that I
don’t have to leave here in a barrel?”
They walked into the conference
room.
There was a scraping noise,
K’nyacker’s heavily plated fourteen foot tail
dragging along the floor. Dewey was, as
usual, sartorially
magnificent.
Cheetum wore
something that
looked a bit like
a racing suit,
w h i c h
impression was
buttressed by the
helmet and
“Feline fecundity.”
driving gloves on
the table. He looked impatient: a pretty big
motor was idling some place nearby, sounding
a lot like a Dodge Viper. Howe had a kind of
fixed smile on his face, weaving a bit. This
was interesting in and of itself, as he was
sitting in one of those Harvard chairs, the ones
with the expensive wood for arm rests that try
to keep one upright and confined. At this
moment, not so successful.
She gave him the most intriguing of
smiles. “I am sure that I wouldn’t know
anything about things like that.” Leaning
conspiratorially towards the Founder - which
infinitely improved the view, reminding one of
the White Mountains of New Hampshire - she
whispered: “At their rates, I am not sure you
would even notice the difference.” No one but
she and the Founder noticed but there was an
exchange from her to him of a piece of adding
machine tape with a bunch of numbers written
on it, as many as there might be in, say, a
phone number. The Founder and the young
lady shared a special smile. For the Founder,
an ordinary day. If it were widely- known how
successful he was in this line of endeavor, it
wouldn’t at all be unusual to see guys like the
pre-marital Demon go to him looking for
advice. At this point, the best advice to him
would be that now that Shannon has that ring,
Dewey began. “I understand generally
what you want, Mr. . . ?”
-10-
“Names aren’t important to me,” the
Founder said, waving his arms dismissively.
“Even though I am trained as a lawyer, I
decided to improve myself by going into, uh,
other endeavors. What I want to know is if the
definition of ‘person’ as required for one to run
for President as contained in the Constitution
only necessarily means a human. Or, could it
be more broader interpreted than that?”
putt, a driving range and a whole mess of
lanes for bowling.” His visage saddened.
“Last time I drove up Route 9, a coupla’
weeks ago, they had knocked it down and
were putting in some other kind of building.”
He looked out of one of the huge windows,
gathering himself. “Friggin’ contractors,” he
said, mostly to himself.
“I know the establishment well,” said
Dewey.
“I’ve
bo w l e d t here
many times
myself, a couple
o f t im e s o n
Candlepins for
“Say what?”
Dollars.”
He
leaned towards
the Founder confidentially. “When I was a
kid, they had a soft serve place in front and
you could get the biggest cone for only
twenty-five cents. My dad would take me
there after little league games. For a kid, what
could be better than playing baseball,
spending time with your dad and having a big
ice cream cone just before you went to bed?”
Dewey looked at one of his wellmanicured fingers. “Before we get into that,
there is the little matter of my fee. For a
matter as unusual as this one is,” he said
gesturing at Ratsputin, “this firm will require a
retainer of five hundred thousand. . .”
Suddenly, there was a very mechanical
sound, like the safety being turned off on a
very sinister and menacing automatic machine
gun. Then, another noise, not dissimilar from
that of a round being chambered.
This caused Dewey to jump.
Recovering slightly - getting bad and scary
news on a daily basis was only one of the many
things making the legal profession so
rewarding and pleasant - Dewey smiled. “I
suppose we could discuss the fee at some later
point in time.” He looked at the Founder.
“So, you’re a lawyer, too?”
“Candlepins for Dollars? Get out of
here! No shit?” the Founder exclaimed.
“No shit. And the bowling? I even
won once on tv with Don Gillis and
everything! Back when I was younger and,
uh, a little more athletic.” Dewey looked out
the broad window behind the conference
table.
The Founder gave an impatient nod.
Dewey smiled more broadly. “You are
native to this state?”
Once again, an even more impatient
They were so high up and with such a
good view that they had an excellent view of
the mere more mortal towers far below them,
those that thought that they had an excellent
view of the waterfront. So, that was like an
excellent view twice removed. They were so
high up that, if they could, the clouds could
come to building management, looking for
navigational advice. “Maybe,” he said softly,
nod.
“Do you like to, uh, candlepin bowl?”
The Founder grinned, his broad face
crinkling. “Geez, when I was a kid, I was in a
league at this place on Route 9 in Natick,
Fairway Bowling, that used to have a pitch and
-11-
“Helen got too old or too tired to run it
anymore.”
Luigi punched Rocco back, grinning.
Each punch thrown so far, greatly in excess of
the punching power of that Russian automaton
in one of those Rocky movies: Rocky 13?
Dewey said: “Say, why don’t we go to
my office and roll a few strings?” The
Founder enthusiastically nodded and they left
the conference room.
“Say, up here we have both go karts
and lots of bikes,” said Cheetum. “What do
you say we go look at them?” The boys
nodded enthusiastically. “And, if either of
you is not feeling especially clean in those
secret places, we could make a little stop
along the way. I got a new one in last week,
said to have been last used by Marie
Antoinette.” Rocco and Luigi looked at each
other, confused.
Rocco and
Luigi, both car buffs,
were in earnest
conversation with
Cheetum, discussing
the advantages and
disadvantages of a
‘hemi’ engine and “You ought to read more.”
whether or not a
combustion chamber fired more cleanly and
efficiently when it was being a fed a mixture of
gasoline and air at the same time as compared
with having the gasoline ignited separately
after having been introduced by a fuel injector.
Soon, several screaming engines could
be heard speeding around the track at high
speed. The difference between men and
boys? Only, the price of their toys. And, it
should be remembered that men only have
four essential needs, two of which can only be
provided by females: food, clean clothes,
sports and sleep. There might have been
another thing at one point in time. Usually,
men got kind of hazy about this after they had
been married for
six months or
reached their early
thirties, whichever
came first. It is
said that for many
men who have
entered their midfifties, they have
forgotten about
this altogether.
“Please! Anything!”
Rocco looked up at the ceiling, smiling,
remembering. “Back in the sixties, you could
get horsepower real cheap. Today, every car
has air, power everything, ABS, traction
control, stereo, CD. Cost you twelve to fifteen
thousand dollars today to even get a shit box.
My first car? A 1971 Gremlin? She was about
eighteen hundred dollars without a back seat
and with nothing on it. In them days, you
could buy just pure horsepower on practically
any model.”
“I’m more like the Boss,” said Luigi. “I
like cars but bikes are better. A big Harley
with a Screaming Eagle engine? A Triumph
Rocket III? A Hayabusa?
Almost everyone had left. Ratsputin
was quietly pacing the reception area looking
at what appeared to be original artwork. A
Renoir?
Looked authentic. A Monet?
Looked real, especially the way the light
broke over the face of the cathedral, showing
sunlight in infinite varieties and shades, the
color of the stone in an incredibly large
Rocco punched his friend, goodnaturedly. “A Honda Rebel is more your
speed. One whole cylinder, 250 cc. 0 to 60 in
two or three days! For a rider like you, they’d
haveta put on training wheels.”
-12-
number of shades of pink and purple. That
guy with the one ear? Some of his work was
here, as well. This had all cost somebody
some very, very
serious green. As
in the tens of
millions.
Who
had incurred such
a cost?
Why,
fancy digs, art
work, three story
reception areas?
At the Wharton
School - not to be
could get one of those
confused with “I wonder if I bidets.”
Penn State - they
have a word for it: overhead. And, who pays
for the overhead? This also has a term of art,
six letters, beginning with the letter ‘c’ and
ending with the letter ‘t’ with a couple of more
vowels and a couple of more consonants in
between.
watching a tv program he doesn’t quite
understand. Like a child trying to shake water
out from an ear. “What’s an ‘arrulio’?”
“Well, that’s kind of hard to
understand,” K’nackyer responded.
“I
suppose that you are not familiar with the
planet Dork?” Howe sadly shook his head
side to side. “I don’t personally know any of
them, although it is said they have quite a
cluster of ex-pats on Massachusetts Avenue in
Cambridge.”
“Ok,” K’nyacker continued. “Picture
a very large feral hog, about six or seven
hundred pounds with nine legs and four sets
of teeth. You kind of cross that with a forty
foot alligator, three snakes, four large sea
slugs, a hairy anteater and two or three gross
of blood worms. Along with a very serious
case of serious attitude.”
“Worse than Nancy Grace after she
lost Dancing with the Stars?” Howe inquired.
Howe had brought out the whiskey, a
dusty bottle of Chivas Regal. He pointed at the
bottle ruefully. “This stuff? I give it to the
help. When I want something to drink I have
something from The Macallan Fine and Rare
Collection, 1926. $38,000 a bottle and harder
to find than an American Girl catalog at a
whorehouse.” He held the very dusty bottle up
triumphantly. For a moment, a small concern.
This was quickly relieved after looking at his
diamond-encrusted Rolex. It was, after all,
later than seven-thirty in the morning.
“Much worse,” K’nyacker responded.
“Almost as bad as Gloria Allred after five or
ten days of not being on tv.”
They both shuddered. Some things
are just too awful to contemplate.
“Close as I can put it in human terms,
that’s what an arrulio is,” K’nyacker said.
He nodded to himself, several of his chins,
mouths and jaws moving at right angles to one
another, various scales and wet substances
flying in every direction. He sighed. “They
sure are pretty, but they do truly stink.”
Meanwhile, K’nyacker had been to the
janitor’s closet and back and had dragged out
a ten gallon container of paint thinner. He took
a sip of the Chivas Regal - just to be polite but after making a face, something one would
rather not have seen, he spit it out. “This shit
tastes like arrulio piss,” he said.
Howe looked at the paint thinner. He
took a tentative sip and was able to keep it
down. “But, this stuff is pure awful! It’s
much too strong.” He picked up the bucket,
trying to read the ingredients. “I suppose
there must be some alcohol in here
Howe turned his head sideways at a
forty-five degree angle, like a dog does
-13-
somewhere but it’s really undrinkable.”
needs something.”
K’nyacker looked at Howe and grunted.
He took the bottle of Chivas Regal and poured
it into the paint thinner container. He picked
up the container and shook it, then putting a
foreleg or claw into it, whatever, and got a
taste of it. “Better, but still needs something,”
he said judiciously. He looked around and saw
that in the corner, there was a big, big open
bottle of Mountain Dew. It is a well known
fact that this is only drunk in the South. A
place where there are stills, music with more
than one banjo and rumored unusual
relationships among cousins.
Howe looked at the bar. There was an
ash tray with the remains of four or five
Cuban cigars that had been imported through
Canada, where they sold the things from
trucks just over the border. There was a jar
of peanuts that didn’t have a lid on it and
which looked as if it
had seen better and
fresher days. There
was a half-empty
bottle of hot sauce,
which boasted of
being made from
“Shocking ...”
Ghost chilis. A bottle
of bitters. There was a kind of plastic-covered
tightly wound small, tubular cotton product
that men don’t generally inquire into too
closely. There was a dirty bar rag. There
were some hot peppers and onions. There
were pieces of orange and lime slices and
cherries, all referred to cheerfully by
professional bartenders as ‘the junk’. And, a
half gallon of buttermilk, that looked as if it
had been sitting
out for awhile,
with little clumpy
white islands
floating in the
liquid, like back
in the day when
there were ice “I don’t think I’ll ever be thirsty
again!”
floes in the ocean
from which polar
bears could partake of the seals. Inexplicably,
there was a sheer pair of green panties,
slightly torn, under one of the chairs. After
going to the janitor’s closet, Howe carefully
swept an eighth acre of his office, picking up
all kinds of things. He went into his office
and brought out several plastic bags and
began emptying items into the pail, one at a
time. Some, very unusual items. On impulse,
Howe put everything in the paint thinner
bucket. He got one of those hand-mixer
Howe nodded. “No one can stand that
stuff. We pour that stuff liberally on the floor,
especially in the corners of the room. It’s a
well-known fact that a cockroach would rather
chew off its own carapace rather than get that
stuff on its legs. And, it keeps the rodent
population down because they just can’t stand
the smell or the taste.” Even thinking about it,
he grimaced.
A kind of high-pitched but menacing
growl arose from Ratsputin’s throat. He
looked like he was going to grab onto the
Britisher and maybe do a little gnawing. His
claws extended and retracted, not unlike a cat
purring, but in nowhere near such a happy way.
Howe saw this and was more than a
little afraid. A seventy pound rodent is a
seventy pound rodent. “Hey, sorry, man. No
offense intended! Present company excluded,
of course!”
K’nyacker poured the Mountain Dew
into the pail and a kind of industrial-sized
fizzing started. Smoke rose from the mixture
and portions of it seemed to catch on fire. It
looked like the smoking black parts of Hawaii
that they rode the Iron Man through. After
stirring it, he sampled. “Even better, but it still
-14-
things, the big tubular instrument that looked
kind of like a vibrator with a big disk on it, the
ones they used on the Food Channel when they
were trying to make soup from non-liquid
ingredients that would just as soon not be made
into soup.
K’nyacker looked up, burped and then
did something really terrible. He smiled. “A
gzkkksj is a really interesting animal. They
are only found on the Planet Gulp.” He
looked as if he was struggling to find the right
words. He gestured with a couple of his arm
things, just like that tall weatherman does on
tv, swooping his viewers up. “Picture a nutria
with the red eyes and
bad temperament from
s om e s wam p i n
Louisiana.
But,
instead of being small
and pretty - like they
are here - he was
really mean and scary “Gzkkksj! Yummm....”
looking, weighing a couple thousand pounds,
covered with dripping slime. Constantly
making this horrible thudding noise in their
throats, kind of like when those animals
trample each other at a running of the brides
before Filene’s went broke.”
The smoking abruptly ceased. The pail
became unearthly quiet. Then, the mixture
began emitting various colors, kind of like a
smaller version of the laser show at Jordan’s
Furniture in Avon. Also, there was a kind of
low-pitched hum. A constant kind of noise
like they have at the casinos to remind the
betters to bet some more before they waste the
rest of their money on foolish pursuits such as
rent, bills, food, booze or even hookers. And,
there was this very strong earthly smell. Like
that of mother earth with an emphasis on the
mother. Not really peaty. But, a very basic
smell that is hard to describe until after you
have smelled it, but after which you remember
and recognize it, almost like an old friend. A
yeasty smell, like that found in the making of
bread and the making of beer and as in some
other things. A kind of central smell.
Howe looked up at his new friend with
awe and reverence. “I don’t even like to think
about something you think is mean and
scary.”
K’nyacker put two or three of his
snouts over the big pot and inhaled. “Now,
this smells like four gzkkksj!” Howe leaned in
and took a big whiff. “It certainly smells
different.”
“The only thing I am afraid of,” said
the alien king, “is that we are going to run out
of this wonderful drink before we run out of
thirst.” K’nyacker gave Howe a friendly slap,
causing Howe to fly through the air twenty or
thirty feet or so, landing on his butt. He
brought over a half gallon jug of ‘the drink’
and poured some of it down Howe’s throat, as
if to revive him.
They each reached into the pot and
ladled out a few ounces into some coffee cups.
And then, they drank.
Smoke began coming out of Howe’s
nose and mouth at the density and rate as that
of a four alarm fire in a chemical plant. All of
his ear hairs - those that were not immediately
singed off - were ram rod straight, as if they
were heavily starched. Howe came to a sudden
realization. “Say, I don’t know what a gzkkksj
is,” he said, a bit unsteadily. “But this stuff
isn’t half bad.”
Howe looked up, woozy and crosseyed. “Thank you, my friend. Give me some
more.” They both started to drink in earnest.
Within minutes, Howe had an arm partially
around the alien king and K’nyacker had a
wing or a claw - or whatever - around Howe,
but carefully, gently.
-15-
K’nyacker
looked at his new
BMF. “You’re not a
bad guy, even for a
human. And, imagine!
A lawyer to boot?”
on Lane 2, as this was the only lane that Howe
had not done too much of his curling on.
Most of the boards were straight and true and
the varnish wasn’t half bad. The Founder
was winning by fifty points, which was
nothing out of the ordinary. A few minutes
in his presence and life always looked more
comfortable - and sure - by deferring. This
was something that simply occurred to folks,
although it occurred to folks more readily
when Rocco and Luigi were in the room. Not
so much with D-Wayne. Although a good
earner, by comparison, he was more sensitive.
Kind of like a poet or like an estimator.
“At some point, many
clients boot their lawyer.”
Howe shook his head sideways in an
exaggerated way, like a driver trying to pass a
field sobriety test thinking he only looked
serious to the cop rather than drunk. “Not any
more.” He looked confused for a moment and
then brightened. “I think I gave it up for Lent.”
He stood up and took a bow. “Thank you very
much, thank you very much,” kind of like what
Elvis did before the last few sorrowful years.
“I’m going to teach you about a certain genre
you probably don’t get in your neck of the
woods. Drinking songs. In particular, English
drinking songs. Here’s a little ditty about a
sailor - I like to think of as an English sailor by the name of Barnacle Bill. He began to
sing, somewhat off key but earnestly:
Speaking of D-Wayne, he was in the
reception area reading a construction
management course book from a class he was
attending at Wentworth Institute, one given by
a fellow paysan. In his eyes, it wasn’t enough
to just aspire to be a crew member, what
others might call a ‘gangster.’ He was going
to make his mother really unhappy: he was
thinking of becoming a contractor.
"Who's that knocking at my door?
Who's that knocking at my door?
Who's that knocking at my door?" said
the fair Young Maiden.”
Ratsputin was going through the
refrigerator in Howe’s office. It seems that
there was this really nice brie. He put some
on Ritz crackers and some other on Triscuits.
Munching away happily, he was humming to
himself a little ditty vaguely reminiscent of
“Hail to the Chief”.
At this point, they were swaying back
and forth together in harmony, like that certain
scene from “The Producers”. From the first
one, the good one. Not from the second one,
where they were only trying to rip off and
exploit the first one.
Some hours later,
a somewhat disheveled
group of people
reconvened in the
conference room.
K’nyacker was lying on
“Black Kitty! I’m
his plated back, feet in
impressed. Signs of
the air, immobile.
intelligent life!”
Howe was in a kind of
fetal ball but more so, like a cat curled up on
a favorite couch in a warm house on a cold
day.
And, Rocco and Luigi were chasing
Cheetum around the go-kart track, easily
catching up to him and passing, as neither one
of them had ever learned words such as
‘caution’ or ‘judgment’ or, especially ‘selfrestraint.’ There was the smell of hot oil and
burning tires. Good male smells.
The Founder was bowling with Dewey
-16-
Rocco was bent over them, carefully
studying the situation. “Do you think they are
dead?” he asked Luigi.
And, so they all went to the Ball and
had a very interesting time. A full squad of
the Boston police and sixteen state police
cruisers along with a platoon of the National
Guard and a SWAT team attended later in the
evening. And, it was a sure bet that none of
them had ever gone to Harvard.
Luigi shook his head in the negative.
“Nah. I think it is something much worse than
that.”
Of those who were upright, there was a
discussion about the fundamental problem.
Does the word ‘person’ in the description of
who could run for president in the Constitution
only mean a human person? Or, was it broad
enough to include, well, some non-human
persons. And, where there didn’t seem to be
the same limitation for vice-presidents, could
anybody or any thing run for vice president?
The primary season was in earnest and soon it
would be time to declare. All three lawyers
took copious notes, now interested in the
problem for their new close friends. They
promised to thoroughly
research this and get
back to the Founder
fairly quickly. Time
and money to be spent?
No problem. If they
looked hard enough, “To a contractor. Without
a doubt.”
they’d find somebody
to charge all those hours to.
Another story for another day.
Perhaps.
************************************
After awhile, they got up to leave.
Dewey and Cheetum had gone to Harvard, so
they had already planned on going to the Ball.
And, Howe had gone to Oxford, which was
close enough, probably even better. But, if he
were going anywhere tonight, it would
probably be to Mass General or maybe to the
morgue. K’nyacker seemed to be improving.
His tail was swishing back and forth but very,
very slowly, like an underachieving
metronome.
The Founder and his group did not see such
artificial restrictions as to where one went to
school as limiting.
-17-
said. "The man I'm describing is dressed all
in red. I'm here for the truth now, it's time to
come clean. Tell me what you've done, tell
me what you've seen."
SCRIBBLES CHRISTMAS JOKES
'Twas the Night After Christmas
'Twas the night
after Christmas
and all through
the trailer, the
beer had gone flat
and the pizza was
staler. The tube
socks hung
empty, no candies
or toys and I was
camped out on
my old
Lay-Z-Boy.
Well I started to lie then I thought what the
hell, it wouldn't have been the first time that
I've spent New Years in jail. I said, "Sheriff
it happened last night about ten, and I
thought that my wife had been drinking
again."
When she walked in from work she was as
white as a ghost. I thought maybe she had
seen one of them UFO's. But she said that a
bunch of deer had just flown over her head,
and stopped on the roof of our good
neighbour Red.
Christmas
Present: The kids they weren't talking to me
or my wife, the worst Christmas they said
they had had in their lives. My wife couldn't
argue and neither could I, so I watched TV
and my wife, she just cried.
Well I ran outside to look and the sight
made me shudder, a freezer full of venison
standing right on Red's gutter. Well my
hands were a shakin' as I grabbed my gun,
when outta Red's chimney this feller did run.
When out in the yard the dog started barkin',
I stood up and looked and I saw Sheriff
Larkin. He yelled, "Roy I am sworn to
uphold the laws and I got a complaint here
from a feller named Claus."
And slung on his back was this bag over
flowin'. I thought he stolen Red's stuff while
old Red was out bowling'. So I yelled, "Drop
fat boy, hands in the air!" But he went about
his business like he hadn't a care.
I said, "Claus, I don't know nobody named
Claus, and you ain't taking me in without
probable cause." Then the Sheriff he said,
"The man was shot at last night." I said,
"That might have been me, just what's he
look like."
So I popped a warning shot over his head.
Well he dropped that bag and he jumped in
that sled. And as he flew off I heard him
retort, "That's assault with intent Roy, I'll
see ya in court."
************************************
The Sheriff replied, "Well he's a jolly old
feller, with a big beer gut belly, that shakes
when he laughs like a bowl full of jelly. He
sports a long beard, and a nose like a cherry."
I said, "Sheriff that sounds like my wife's
sister Sherri."
"It's no time for jokes, Roy" the Sheriff he
-18-
Second-hand smoke from his pipe had his
workers quite frightened.
His fur trimmed red suit was called
"Unenlightened."
Politically Correct Santa
And to show you the strangeness of life's
ebbs and flows:
Rudolf was suing over unauthorized use of
his nose
And had gone on Geraldo, in front of the
nation,
Demanding millions in over-due
compensation.
'Twas the night before Christmas and Santa's
a wreck...
How to live in a world that's politically
correct?
So, half of the reindeer were gone; and his
wife,
Who suddenly said she'd enough of this life,
Joined a self-help group, packed, and left in
a whiz,
Demanding from now on her title was Ms.
His workers no longer would answer to
"Elves",
"Vertically Challenged" they were calling
themselves.
And labor conditions at the north pole
Were alleged by the union to stifle the soul.
And as for the gifts, why, he'd ne'er had a
notion
That making a choice could cause so much
commotion.
Four reindeer had vanished, without much
propriety,
Released to the wilds by the Humane
Society.
Nothing of leather, nothing of fur,
Which meant nothing for him. And nothing
for her.
And equal employment had made it quite
clear
That Santa had better not use just reindeer.
Nothing that might be construed to pollute.
Nothing to aim. Nothing to shoot.
Nothing that clamored or made lots of noise.
Nothing for just girls. Or just for the boys.
Nothing that claimed to be gender specific.
Nothing that's warlike or non-pacific.
No candy or sweets...they were bad for the
tooth.
Nothing that seemed to embellish a truth.
So Dancer and Donner, Comet and Cupid,
Were replaced with 4 pigs, and you know
that looked stupid!?
The runners had been removed from his
sleigh;
The ruts were termed dangerous by the
E.P.A.
And fairy tales, while not yet forbidden,
Were like Ken and Barbie, better off hidden.
And people had started to call for the cops
When they heard sled noises on their
roof-tops.
For they raised the hackles of those
psychological
Who claimed the only good gift was one
-19-
ecological.
when the man felt a drop hit his nose. "I
think it's raining," he said to his wife.
No baseball, no football...someone could get
hurt;
Besides, playing sports exposed kids to dirt.
"No, that felt more like snow to me," she
replied. "No, I'm sure it was just rain, he
said." Well, as these things go, they were
about to have a major argument about
whether it was raining or snowing. Just then
they saw a minor communist party official
walking toward them. "Let's not fight about
it," the man said, "let's ask Comrade
Rudolph whether it's officially raining or
snowing."
Dolls were said to be sexist, and should be
passe;
And Nintendo would rot your entire brain
away.
So Santa just stood there, disheveled,
perplexed;
He just could not figure out what to do next.
As the official approached, the man said,
"Tell us, Comrade Rudolph, is it officially
raining or snowing?"
He tried to be merry, tried to be gay,
But you've got to be careful with that word
today.
"It's raining, of course," he answered and
walked on. But the woman insisted: "I know
that felt like snow!" To which the man
quietly replied: "Rudolph the Red knows
rain, dear!"
His sack was quite empty, limp to the
ground;
Nothing fully acceptable was to be found.
Something special was needed, a gift that he
might
Give to all without angering the left or the
right.
*******************
SOME ASSEMBLY REQUIRED
'Twas the night before
Christmas when all
through the house
I searched for the tools
to hand to my spouse.
Instructions were
studied and we were
inspired,
In hopes we could manage "Some Assembly
Required."
The children were quiet (not asleep) in their
beds,
While Dad and I faced the evening with
dread:
A kitchen, two bikes, Barbie's town house to
boot!
And, thanks to Grandpa, a train with a toot!
A gift that would satisfy, with no indecision,
Each group of people, every religion;
Every ethnicity, every hue,
Everyone, everywhere...even you.
So here is that gift, it's price beyond worth...
"May you and your loved ones enjoy peace
on earth."
************************************
Rudolph the Red Nosed
Reindeer
A Russian couple was
walking down the street in St.
Petersburg the other night,
We opened the boxes, my heart skipped a
-20-
beat....
Let no parts be missing or parts incomplete!
Too late for last-minute returns or
replacement;
If we can't get it right, it goes in the
basement!
Tomorrow we'll cheer, let the holiday ring,
And not have to run to the store for a thing!
We did it! We did it! The toys are all set
For the perfect, most perfect, Christmas, I
bet!"
Then off to dreamland and sweet repose I
gratefully went,
Though I suppose there's something to say
for those self-deluded...
I'd forgotten that batteries are never
included!
When what to my worrying eyes should
appear,
But 50 sheets of directions, concise, but not
clear,
With each part numbered and every slot
named,
So if we failed, only we could be blamed.
************************************
The First Reindeer Seen in a Bar
More rapid than eagles the parts then fell out,
All over the carpet they were scattered about.
"Now bolt it! Now twist it! Attach it right
there!
Slide on the seats, and staple the stair!
Hammer the shelves, and nail to the stand."
"Honey," said hubby, "you just glued my
hand."
One evening, in a
busy lounge in the
deep south, a reindeer
walked in the door,
bellied up to the bar
and ordered a martini.
Without batting an
eye, the bartender
mixed and poured the
drink, set it in front of the reindeer, and
accepted the twenty-dollar bill from the
reindeer's hoof.
And then in a twinkling, I knew for a fact
That all the toy dealers had indeed made a
pact
To keep parents busy all Christmas Eve night
With "assembly required" till morning's first
light.
As he handed the reindeer some coins in
change, he said, "You know, I think you're
the first reindeer I've ever seen in here."
We spoke not a word, but kept bent at our
work,
Till our eyes, they went bleary; our fingers
all hurt.
The coffee went cold and the night, it wore
thin
Before we attached the last rod and last pin.
The reindeer looked hard at the hoofful of
change and said, "Hmmmpf. Let me tell you
something, buddy. At these prices, I'm the
last reindeer you'll see in here."
************************************
Christmas Downsizing
Then laying the tools away in the chest,
We fell into bed for a well-deserved rest.
But I said to my husband just before I passed
out,
"This will be the best Christmas, without any
doubt.
Today's global challenges require the North
Pole to continue to look for better, more
competitive steps. Effective immediately,
the following economy measures are to take
place in the "Twelve Days of Christmas"
-21-
subsidiary:
The seven swans-a-swimming is obviously a
number chosen in better times. Their
function is primarily decorative. Mechanical
swans are on order. The current swans will
be retrained to learn some new strokes and
therefore enhance their outplacement.
The partridge will be retained, but the pear
tree never turned out to be the cash crop
forecasted. It will be replaced by a plastic
hanging plant, providing considerable
savings in maintenance.
As you know, the
eight maids-a-milking
concept has been
under heavy scrutiny
by the EEOC. A
male/female balance
in the workforce is
being sought. The
more militant maids
consider this a
dead-end job with no upward mobility.
Automation of the process may permit the
maids to try a-mending, a-mentoring or
a-mulching.
The two turtle doves represent a redundancy
that is simply not cost effective. In addition,
their romance during working hours could
not be condoned. The positions are therefore
eliminated.
The three
French hens
will remain
intact. After all,
everyone loves
the French.
The four calling
birds were replaced by an automated voice
mail system, with a call waiting option. An
analysis is underway to determine who the
birds have been calling, how often and how
long they talked.
Nine ladies dancing has always been an odd
number. This function will be phased out as
these individuals grow older and can no
longer do the steps.
Ten Lords-a-leaping is overkill. The high
cost of Lords plus the expense of
international air travel prompted the
Compensation Committee to suggest
replacing this group with
ten out-of-work
congressmen. While
leaping ability may be
somewhat sacrificed, the
savings are significant
because we expect an
oversupply of unemployed congressmen this
year.
The five golden rings have been put on hold
by the Board of Directors. Maintaining a
portfolio based on one commodity could
have negative implications for institutional
investors. Diversification into other precious
metals as well as a mix of T-Bills and high
technology stocks appear to be in order.
The six geese-a-laying constitutes a luxury
which can no longer be afforded. It has long
been felt that the production rate of one egg
per goose per day is an example of the
decline in productivity. Three geese will be
let go, and an upgrading in the selection
procedure by personnel will assure
management that from now on every goose it
gets will be a good one.
Eleven pipers piping and twelve drummers
drumming is a simple case of the band
getting too big. A substitution with a string
quartet, a cut back on new music and no
uniforms will produce savings which will
-22-
drop right down to the bottom line.
"Because my friends will be jealous, I'll
have to read all these instructions before I
can do anything with this stuff, I'll
constantly need batteries, and my toys will
eventually get broken," answered the
pessimist twin.
We can expect a substantial reduction in
assorted people, fowl, animals and other
expenses. Though incomplete, studies
indicate that stretching deliveries over twelve
days is inefficient. If we can drop ship in one
day, service levels will be improved.
Passing the optimist twin's room, the father
found him dancing for joy in the pile of
manure. "What are you so happy about?" he
asked.
Regarding the lawsuit filed by the attorney's
association seeking expansion to include the
legal profession ("thirteen lawyers-a-suing"),
action is pending.
To which his optimist twin replied,
Lastly, it is not beyond consideration that
deeper cuts may be necessary in the future to
stay competitive. Should that happen, the
Board will request management to scrutinize
the Snow White Division to see if seven
dwarfs is the right number.
************************************
Optimist vs. Pessimist
"There's got to be a pony in here
somewhere!"
************************************
A family had twin
boys whose only
resemblance to each
other was their looks.
If one felt it was too
hot, the other thought
it was too cold. If one said the TV was too
loud, the other claimed the volume needed to
be turned up. Opposite in every way, one was
an eternal optimist, the other a doom and
gloom pessimist.
Just to see what would happen, on the twins'
birthday their father loaded the pessimist's
room with every imaginable toy and game.
The optimist's room he loaded with horse
manure.
That night the father passed by the
pessimist's room and found him sitting amid
his new gifts crying bitterly.
"Why are you crying?" the father asked.
-23-
He looked down at his plate and then looked
over at the salad, shaking his head. It was
really amazing what some people would put
in their mouths! That stuff mostly grew in
dirt! He looked up. “Besides all that, no one
can afford to fight a big war any more.”
December 24: THE EVENING
The key members of the Norwood
Crew - Rocco, Luigi, D-Wayne and the
Founder - were huddled around the table,
eating. Ratsputin was also was there but off to
the side, in a corner. There, but not quite there.
There were at least two dozen hot platters on
the table: various
steaks, chops, pastas,
manicotti, meat balls,
a little fish. One
small salad, that was
untouched.
There
was playing on the
tv, kind of as “Why do I live here? One
word. Leftovers.”
background noise,
one of those annual
Christmas offerings. This one, with cartoon
characters of little boys and little girls and this
dog. The volume was such that you could
barely hear it. Just something to make the
night seem a little friendlier for a bunch of men
who, truth be told, most of whom didn’t really
have any other place to go. For the Founder,
things had been tough with Guppy Moon Cow
in recent years. And, with the twins.
D-Wayne groaned. Was construction
management still looking so interesting?
Rocco looked down at the table,
scarred by people using it as a dart board or
for cutting up various . . . things. With some
very sharp knives. “Them hotshots from Wall
Street? They let them immigrants buy houses
with no money down. They own five or six of
them, no prayer ever of making all the
payments. They took advantage of all them
illegal cab drivers, and I mean this sincerely,
from the bottom of my heart,” he said,
gesturing. “Then, this bubble bursts, and
everyone is in the shit.”
Luigi was flexing his biceps, a pretty
impressive thing to see. “Them bastards! If
we had a coupla’ them here right now, I’d
rearrange their faces.”
“That’s pretty tough. Where’s your
Christmas spirit?” the Founder asked. Rocco
pointed over to a big bottle on a side table.
They both grinned. “At least you got good
taste!”
“I’m tellin’ you guys,” the Founder
said, “that I read it in the paper. The economy
is going so bad, that contractors are starting to
use barter to bid on jobs. Like, a guy puts a bid
on putting an addition to a house? Rather than
say he wants a hundred thousand bucks for it,
he says, ‘I’ll do that for you for fifty cows,
three chickens and a goat’. Says in this article
that this might bring back the construction
industry.”
“If they
let me run, I
know that I can
straighten all of
this out,” said
Ratsputin
quietly.
“I’m
smarter than any
five humans.”
He looked down at a newspaper,
pointing. “Says here, that if they don’t do stuff
like this, the construction industry might not
come back for another twenty, thirty years.
After all, it was World War II that ended the
last depression and the weapons are so deadly
that type of war could never be fought again.”
“At least the humans running for
President now .,. ”
The Founder looked up at him quickly,
an eyebrow arching. “But, for some humans,
-24-
like you guys,” Ratsputin quickly added, “ I
may only be smarter than only two or three of
youse.” The Founder nodded, satisfied, and
went back to his dinner.
She smiled and nodded and started to go back
to the kitchen. “Wait a minute, darlin’ ” the
Boss said. He reached into his pocket and
pulled out a mess of Franklins. He stuck them
under her apron. “It’s the holidays. Get
yourself somethin’, you know, just for you.”
She gave him a big smile and, standing on her
tiptoes, gave him a kiss on the cheek. If the
light was better, one might swear they saw the
Founder blush.
“Boss, I know you don’t want that I
should keep sayin’ this, but I tell you I’ve been
hearing these rumors,” Rocco said.
The Founder looked up. A lot of gravy
from the pasta dripping from his lips, almost
like water over a waterfall. He snorted. “Here
we go with the conspiracy stuff! I tell ya’, a
bunch of decades ago, the Warren Commission
would have surely loved you.”
Then, all of a sudden, the lights
dimmed a little and the tv volume increased.
One of those
little cartoon
k i d
s
approached a
microphone,
just as if he
were appearing
“Shh! This is the good part.”
in a Christmas
play:
Luigi stood up and walked towards the
Founder, something that you didn’t do too
often or get too close. “Really, Boss. I know
that Rocco is a lunkhead,” he said, barely
dodging a punch. “And he and I, we don’t
always travel in the same circles. But, I been
hearin’ this same stuff, too.”
“And it came to pass in those days that
a decree went out from Caesar
Augustus that all the world should be
registered. This census first too, place
while Quirinius was governing Syria.
So all went to be registered, everyone
to his own city.
The Founder
got up from his
dinner, only thirty
minutes into it. He
hated to interrupt his
supper, particularly
where he was still
practically starving “I make a point of never
and had hardly even interrupting my dinners.”
begun. “Yeah, yeah,
I know! That, there’s some other crew going
to come into our area any day now. Maybe,
any hour! That, they are gonna take us over.
That, they’re such high flyers, there’s nothin’
we could do about it, even if we wanted to.”
Joseph also went up from Galilee, out
of the city of Nazareth, into Judea, to
the city of David, which is called
Bethlehem, because he was of the
house and lineage of David, to be
registered with Mary, his betrothed
wife, who was with child. So it was,
that while they were there, the days
were completed for her to be
delivered. And she brought forth her
firstborn Son, and wrapped Him in
swaddling cloths, and laid Him in a
manger, because there was no room
for them in the inn.
He shook his head from side to side,
noticing that one of the pretty bar girls had
come in with maybe another dozen savory
dishes.
He nodded to her appreciatively,
sticking a hundred dollar bill underneath her
apron. “For the family,” he said looking at her.
-25-
Now there were in the same country
shepherds living out in the fields,
keeping watch over their flock by
night. And behold, an angel of the
Lord stood before them, and the glory
of the Lord shone around them, and
they were greatly afraid. Then the
angel said to them: ‘Do not be afraid,
for behold, I bring you great tidings of
great joy which will be to all people.
For there is born to you this day in the
city of David a Savior, who is Christ
the Lord. And this will be the sign to
you. You will find a Babe wrapped in
swaddling cloths, lying in a manger.
That would explain it.
And then, in the sky, suddenly, a loud
ringing noise rang out. Bells! Like the ones
those Clydesdale wore, dragging that heavy
wagon around in those commercials.
They all ran to the windows and saw a
great sleigh being pulled by numerous
reindeer, one of whom had an especially
bright nose. Just in front of a smiling moon,
like ET in that movie. And, they could hear
from a portly man in a red suit with a flowing
white beard:
“Merry
Christmas, Merry
Christmas!”
And suddenly there was with the angel
a multitude of the heavenly host
praising God and saying: ‘Glory to God
in the highest, and on earth peace,
goodwill toward men.”
They stared
up at this openmouthed. “That must be that crew you was
talking about,” the Founder said softly. For
some reason he was having this problem with
his eyes, making him blink furiously. He
looked down at the table, like he was thinking.
He quickly looked up, snapping a couple of
fingers on his right hand. A decision had been
made.
The lights in the club room had
suddenly gone completely out. Suddenly, there
were no sounds of dancing or music that could
be heard from the main room. It was
completely and utterly quiet.
“Hey, Rocco and Luigi. I gotta job for
you that you gotta do tonight.”
The Founder, not remembering quite
why or when, had taken his hat off in the last
few minutes and held it between his two large
powerful hands, his head bowed. Rocco,
Luigi and D-Wayne, former altar boys the lot
of them, also had their heads bowed. For some
reason one or two cheeks might have been a
little damp.
Luigi stared at the Boss incredulously:
“Boss, it’s Christmas Eve and you want that
Rocco and I should do a job?”
“Nah, nah, you don’t understand. Not
that kinda job, you bunch of dumb guineas.”
(Normally, Rocco and Luigi would not put up
with the G-word from anybody, particularly
from a non-Italian. But, after all, the Boss
was the boss.)
For this late in December, it had been a
humid day.
-26-
The Founder pulled out a check-book
and began writing. He wrote for awhile and
then put a great number of pieces of colored
paper in an envelope. “Youse guys gotta
make some deliveries tonight, that’s all. I’ve
got some checks to be delivered: Here’s one
for Project Bread. Here’s one for the Boston
Rescue Mission. Another one for St. Francis
House.
One for
Morgan Memorial.
One for the Home for
Little Wanderers. One
for the Greater
Boston Food Bank.
I gotta few of them
“Let’s not leave out White
for the Salvation
Kitty here!”
Army, too.
And,
some for a few other places.”
“I think the feds only allow you to
deduct half of them,” D-Wayne said. “They
figure you gotta do the rest on your own.”
“ N o t
a
problem,” the Founder
said, grinning. “You
s e e , I go t t hi s
accountant.”
They
laughed.
all
“All theses places, they’re kinda like
us, the Founder said. “It’s for the family.
Different families from us but families,
notwithstanding.”
D-Wayne looked up at the Founder. “
‘Notwithstanding’? That’s a pretty big
word!”
Luigi looked at the Founder with
respect. “Maybe one for the Italian Home for
Children?”
The Founder chuckled. “Yeah, I guess
it is.” He looked embarrassed. “You know, I
was a college boy for quite a few years.”
They groaned. “Nothing that I’m proud
about,” the Founder added quickly.
“Thanks for reminding me.” He wrote
out another one. “Especially for the Italian
Home for Children.”
Luigi smiled, happy.
He looked at all of them
meaningfully. “Word of this ever gets to the
Council, I’ll know who leaked it.” He looked
meaningfully at the
automatic machine gun.
In this light and from
this angle, it wasn’t
clear if the safety was
on or off. Aiming accurately was not a
problem for a fierce weapon such as this. Sort
of point it in the general direction of where
you want it to go. Usually, that was enough.
“Here’s a couple more for some
Veterans Shelters.” He pulled out a huge wad
of one hundred dollar bills from a pants pocket.
“You pass any churches on the way, stick some
of these in the poor box. And, you see any
bums out there on the streets and they ain’t
looking so hot, give them one or two of these
and try to steer them to an eating place. Away
from a drinking place.”
Luigi was counting. “Boss, most of
these checks are for one hundred grand. Must
be a coupla million dollars or so here!”
“Not to worry, Boss,” Rocco said. He
picked up a roll and started eating it. “When
I am done with this, my lips are sealed.” He
looked outside. It had been snowing lightly
for an hour or so but it was beginning to pick
“Chump change,” the Founder said
dismissively. “Tax-deductible.”
-27-
it up. The weather
man had said they
were really in for it
in a couple of hours.
It was going to be a
very
White
Christmas.
bless us, each and every one.
“Meant to be. A White Kitty
for a white Christmas.”
“That’s a lot of driving to do, Boss,”
Rocco said. “We don’t got a lot of time. Can
we take, you know, take . .?”
The Founder laughed and threw him the
keys to the Bugatti. “Take the Veyron. But,
keep it under one hundred, as the roads? They
aren’t so good.” He looked at Rocco, smiled
and ruffled his hair like an uncle might do to a
nephew. “Besides, we all know that you can’t
drive a stick for shit.” Everyone laughed,
especially Rocco.
Rocco turned to his gang, his friends.
“Before Luigi and I hit the road, I got
something I wanna say. And, I mean this from
the bottom of my heart,” he said, gesturing. He
looked down and seemed to struggle with his
words. The four men and a rodent stood
closely together. “God bless us, each and
every one,” Rocco blurted out. And the four
men and a rodent moved towards one another.
Had it been a bunch of broads, it might have
been described as a kind of hug.
It was suddenly midnight. And, in this
dark, depraved, indifferent and very cruel
world, on this particular day, somehow there
seemed some reason for hope, based on
something that happened a very long time ago.
Somewhere out there, on the other side of the
snow, a church could be heard softly playing
‘Silent Night’.
Christmas. A chance for a new
beginning. A chance for a new start. God
-28-
business, things will be coming at you from
any and all directions. You are not going to
be at your best. You will be exhausted,
overwhelmed, fearful, angry and extremely
disappointed.
A lot of the suggestions
contained in this article are not intuitive.
They would not simply occur to you as
events unfold. And, your not understanding
how the whole game is played – from
declaration of default until personal
discharge in bankruptcy - can cause you to
make a lot of mistakes. Mistakes that can
cost you and your loved ones a lot of money
at a time that you don’t have a lot of money.
For bonded principals with a lot at stake
for the individual owners, this is one of my
articles that you should truly read first. I am
going to be brutally honest in what I say to
you in this article, sharing information that
can only come from someone who has
represented a lot of sureties and is familiar
with their practices. You need to be brutally
earnest and attentive in your reading of this
article to get the maximum benefit from it.
CLAIMS AGAINST YOUR BID,
PAYMENT AND PERFORMANCE
BONDS:
STRATEGIES TO HELP YOU
PROTECT YOURSELF WHEN TIMES
GET TOUGH
by Attorney Jonathan P. Sauer
Introduction
Those familiar with our website
(www.sauerconstructionlaw.com) know that
there are several articles on it as to how
claimants can or should pursue various bond
claims of one kind or another. These are, if
you will, ‘offensive’ strategies in terms of
how to pursue claimants’ rights under
various bonds: the plaintiff’s perspective.
Plaintiffs will generally be material
suppliers or subcontractors on payment
bonds. And, defendants will often be
general contractors, a large number of which
I have represented over the years and do
represent today.
As I have spent most of my thirtyfive years as a construction lawyer
representing more than two dozen bonding
companies - fifteen years of which time,
this was essentially all that I did - I have a
good understanding of how all three
processes work: representing sureties and
representing clients claiming against
sureties or defending clients against claims
from sureties.
Some of the suggestions
contained herein (such as how to settle a
payment bond claim and the proactive use of
payment plans) might not win merit badges
or awards for being the best of all possible
business practices. Having said that, I am
simply pointing out strategies that I have
seen employed and which are available
when significant surety problems raise their
ugly head, as they often do/will. And, the
premise for employing these ideas is that
your company and you – as an individual
The purpose of this article will be
purely ‘defensive’ in orientation. Namely,
how do you protect yourself when claims
are made against your bonds? And, the
thrust of the article isn’t to explain how to
handle isolated and small bond claims for a
viable business. The purpose underlying
this article is to discuss how to prepare for
and handle business-threatening bond
claims: claims that are made against your
company which can or might put it out of
business and claims made against your
company when you are out of business.
The various sources of law
referenced will be from Massachusetts.
This is a long article. But, think of
the purpose behind it. If and when you are
in the process of potentially going out of
-29-
indemnitor – are in some measure of
trouble, possibly serious trouble.
While
one might be critical of some of these
approaches in a vacuum, when one’s
professional and, especially, personal and
family life hangs in the balance, that
individual is entitled to know what arrows
are in his quiver. I leave it to the archer to
decide on which arrow he will select.
(GIA).
This is analogous to a mortgage,
which you would sign to get a loan to buy a
house. I have found that many contractors,
when trouble arises, either are not aware of
the fact that they signed such an agreement
and/or do not have a copy of such
agreement. So, the first idea we have is to
make sure you have a copy of the GIA and
you read it through at least once. Most of
them are difficult to understand, as they are
written in legalese and surety legalese, at
that.
However difficult, these are
extremely serious documents with distinctly
serious potential ramifications.
Some of what is discussed below is
applicable to general estate planning for
anyone: not just limited to those who
execute general indemnity agreements to
secure bonds.
Incidentally, while most suretyship
arrangements do depend on there being a
written GIA, there is case law to the effect
that the surety is entitled to indemnity even
in the absence of a written agreement.
In the construction business, most
contractors are only concerned with
‘contract’ bonds, which, for these purposes,
will be bid, payment and performance
bonds.
(One of the forms of lien bond
could also be considered a contract bond the so-called section 12 bond, which is
given by the general contractor at the outset
of a private project to prevent mechanic’s
liens. By my experience, these are fairly
rare these days.)
In the case of
New England
Merchants Nat. Bank v. Latshaw, 12
Mass.App.Ct. 150, 152, 421 N.E.2d 1264 (
Mass.App., 1981), the Appeals Court stated:
“By the pledge of his stock, Latshaw
stood surety for Gemico. As a surety
he was entitled, even without an
express agreement, to indemnity
when he was injured by payment in
discharge of Gemico's liability.
Ricker v. Ricker, 248 Mass. 549,
551, 143 N.E. 539 (1924). Wolverine
Ins. Co. v. Tower Iron Works, Inc.,
370 F.2d 700, 703-704 (1st Cir.
1966). Williston, Contracts s 1274,
at 866-868 (3d ed. 1967). See Eliot
Sav. Bank v. Aetna Cas. & Sur. Co.,
310 Mass. 355, 357-358, 38 N.E.2d
59 (1941).”
As this is a complex subject, I
suspect there will be a second article on this
subject later on. Let’s look at the basics
now.
1.
Understanding The General
Indemnity Agreement.
The first thing I will say about the
general indemnity agreement is that you
should do some serious work as to asset
protection before you sign it.
This is
discussed later in this article under section
2.B.
The basic idea behind the GIA is one
of the distinguishing factors between
insurance and surety. Generally speaking,
when an insurance claim is made against
Typically, most principal-surety
relationships commence with a contractor’s
signing a general indemnity agreement
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you, you do not have to pay the insurance
company back for either its expense
p aym en ts (paym ent s t o l awyers ,
accountants, outside adjusters) or for its loss
payments (what amounts actually get paid to
the claimant.) That makes sense! After
all, what is insurance for? The purpose of
insurance is simply to transfer the risk and
exposure from yourself to a financial
institution, which agrees to accept the
transfer in exchange for the payment of a
premium.
10% or more of the corporation’s stock have
to sign.
What if when the agreement was
signed, a husband and wife were married
and when the principal went into claim, the
individuals are no longer married? This has
no effect on the obligation of the signing exspouse as to the surety. (It may be that the
ex-spouse may have rights for indemnity
over against the former spouse; but, there is
no effect as to the surety.) What about if
the principal files bankruptcy and gets a
discharge? Does this excuse the obligations
of the individual indemnitors? The simple
answer is ‘no’, unless the personal
indemnitors file bankruptcy at the same time
as the company.
If the personal
indemnitors do not also file bankruptcy, the
discharge of the principal does not remove
this obligation on the part of the individual
indemnitors.
Suretyship, however, is not
insurance.
While there are a variety of
differences between the two (e.g. surety
premiums, generally, are not actuarilydetermined unlike insurance premiums), for
present purposes, the key thing to keep in
mind is that if the surety loses any money on
your account - expense payments, loss
payments or both - you have to reimburse
the surety and pay them back every penny,
including interest and the counsel fees
employed to get a judgment against you as
to your indemnity obligation.
An indemnity agreement is a
contract.
The following are some
Massachusetts cases discussing the
enforceability of contracts:
When does this apply? What about
when you are completely right as to the
underlying surety claim?
This doesn’t
matter; you have to pay them back. What
about if you are partially or completely
wrong? You have to pay them back. If the
claims department opens a file and begins
generating loss and expense payments, you
have to pay them back.
And, a very
important incidence of this is that not only
does your company - the principal - have to
pay the surety back.
The personal
guarantors (or indemnitors) have to also pay
the insurance company back. Typically, a
surety will look for the owners to sign
personally on the indemnity agreement,
including spouses (even when they are not
involved in the business.) Some sureties
have formulas: for example, those owning
Parties competent to contract may
not accept provisions of bargain they favor
and reject those they wish to avoid. Rogers
v. Okin, 478 F.Supp. 1342 (D.Mass. 1979).
Agreements voluntarily made between
competent persons should not be lightly set
aside on ground of hardship. Crimmins &
Peirce Co. v. Kidder Peabody Acceptance
Corp., 185 N.E. 383, 282 Mass. 367, 88
A.L.R. 1122 (Mass. 1933). When language
in a contract is unambiguous, enforcement
of such contract will not be denied because
of hardship to one of the parties.
J.F. White Contracting Co. v. Massachusetts
Bay Transp. Authority, 666 N.E.2d 518, 40
Mass.App.Ct. 937, review denied
670
N.E.2d 966, 423 Mass. 1106 (Mass.App.Ct.
1996).
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Privately held and uncommunicated intent
of any party to agreement is not controlling
on other parties; mutually manifested intent
controls. Jacobs v. Pierce, 208 B.R. 261
(D.Mass. 1997)
Under Massachusetts law, individual who
signs document is charged with knowledge
of what it says. Kravetz v. U.S. Trust Co.,
941 F.Supp. 1295 (D.Mass. 1996) A party
to a contract is legally bound by its terms,
whether or not he read them. Abbasciano v.
Home Lines Agency, Inc., 144 F.Supp. 235
(D.C.Mass. 1956 ) Generally, in absence of
fraud, one signing a written agreement is
bound by its terms whether he reads and
understands it or not or whether he can read
or not. Spritz v. Lishner, 243 N.E.2d 163,
355 Mass. 162 (Mass. 1969)
Under
Massachusetts law, contract is to be
construed so as to give reasonable effect to
each of its provisions. Bank One Texas,
N.A. v. A.J. Warehouse, Inc., 968 F.2d 94
(C.A.1 Mass. 1992)
Under Massachusetts law, whenever
possible the provisions of a contract are to
be construed with reference to one another
as to make entire contract a rational business
instrument which will effectuate apparent
intention of parties. Kagan v. Industrial
Washing Mach. Corp., 182 F.2d 139 (C.A.1
Mass. 1950)
and voluntarily incur. In a business failure
situation, this would largely be obligations
to the bank (as to lines of credit and loans)
and obligations to bonding companies (as to
losses and expenses incurred with regard to
your bonds that have gone into claim.)
Please keep in mind that the surety
does not have to have your permission to
incur an expense or to pay a claim. The
indemnity agreements typically give them
complete discretion to incur expenses and
pay claims, even against the principal’s
vociferous objection. Some of the more
aggressive GIA forms give the surety the
right to sign the principal’s name to
settlement agreements, even where the
principal doesn’t want to settle.
Some
GIAs even make provision for the surety to
sign your name to a ‘confession of
judgment’ in a court action, acknowledging
your responsibility for an indemnity debt.
This would, in effect, establish your
indemnity obligation without a trial and,
possibly, without your even knowing about
it. Scared yet?
You have to understand that bonds
are underwritten on what is known as a
‘zero percent loss expectation’. This means
that since the surety has at least theoretical
indemnity for all of its losses, sureties have
this rather arcane, possibly amusing, idea
that they shouldn’t lose anything as the
result of having underwritten contract
bonds, notwithstanding that the Bible has at
least six anti-surety statements in it!
I
know this as one afternoon, an insurance
agent – possibly half in the bag – called me
and read them to me! Here are a couple:
Personal liability for corporate debts
is an exception to the rule as – generally
speaking -under basic principles of
Massachusetts corporate law, the owners of
interests in corporations and limited liability
companies are not generally liable for the
contractual debts of that entity absent fraud.
After all, that is why you do business as a
corporation or as a limited liability
company: to separate your business
exposures and risks from your personal
assets.
Please keep in mind that this
general principle of law has no application
to contractual obligations you personally
“Do not be one of those who shakes
hands in a pledge, one of those who is surety
for debts; If you have nothing with which to
pay, Why should he take away your bed
from under you?” (Proverbs 22:26, 27)
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Proverbs 11:15 “He who is a surety
for a stranger will suffer, But one who hates
being surety is secure.”
you do to litigate from now until . . . forever.
They can far better afford lawyers and other
consultants than you can.
If the surety
incurs loss and expense payments on your
company’s account and then sues its
indemnitors, more likely than not, it will
win. Assuming any different would not be
sensible.
In any litigation between a surety and
indemnitors, in the vast majority of
circumstances, the surety will win the case.
So, if a surety expects to lose
absolutely nothing in exchange for its
receipt of premiums, what is the value to the
principal of being bonded?
One well-known New England
underwriter, when confronted with this
question, said with all sincerity: “A surety
earns its premiums by prequalifying its
principals for jobs”. My response to this is
that this is nice work, if you can get it!
If that is the likely result, what, then,
can be done to protect yourself as to
possible claims by your surety against you?
And, assuming there is a claim, what can be
done to minimize the loss and expense
payments the surety might incur, which you
might have to reimburse?
Friends, there are a number of things
to keep in mind when thinking of possible
litigation between your company (or
yourself, as a personal indemnitor) and the
surety. Because of the terms of the GIA,
the deck is distinctly and utterly stacked
against you, because these agreements are,
by design, heavy-handed in favor of the
surety.
And, looking at this issue
objectively, why shouldn’t they be? After
all, you are entering into a credit
relationship with the surety and no one is
forcing you to accept any particular
company’s indemnity requirements or
bonds.
2. Set up your personal financial
situation as early as possible,
preferably before you incur the
surety obligation.
A. This is especially important as
most construction companies will
ultimately fail.
Folks, if you are in the construction
business - particularly as a general
contractor - if you do any significant level of
business, it is very likely you are going to be
sued by some creditor or claimant. After all,
on a general contractor’s statutory payment
bond, you are contractually obligated to pay
your first tier subcontractors debts to their
material suppliers and subcontractors, even
when you fully and completely paid your
subcontractors. While I have three or four
calls a year in which a contractor tells me he
has never had any court cases in thirty years
of being in business, I find this to be
incredibly unusual and not typical at all as to
what I see.
Think about your relationship with
your bank with regard to your car loan or
with regard to your mortgage.
The
paperwork that you sign to get either makes
it almost certain that if you fail to make a
car payment, they will take your car away
from you.
And, if you fail to make a
mortgage payment, they will foreclose on
your mortgage and throw you out into the
street. As they say: life is hard and then
you die.
Additionally, a surety has a
significantly stronger economic ability than
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Therefore, it behooves you to
establish the personal security of your
family as early as possible and, when talking
about surety bonds, before you enter the
principal-surety relationship. Really, this
should be done before you commence
performing construction activities as a
company. Since it is human nature to look
away from the things that truly scare us, I
have got to get your undivided attention.
considerable size, in the millions.
How
many subcontractors can survive that?
You might contract a job that is
unbuildable because of architectural and
engineering errors.
One very good
company I know of was put out of business
by a difficult architect who devised a
‘phasing’ system for the renovation of a
school that was completely unworkable.
One good contractor I am aware of made the
mistake of signing five jobs more or less at
the same time with an extremely tough
general contractor it was not familiar with,
losing money - and getting jammed - on
each such job other than the first. (This is
something to be very aware of. The first
job may look good but, for whatever
reasons, it may turn out to be the only good
job. This might be by design, in some
instances.)
We start with an unhappy premise.
Having represented hundreds of contractors
over the years - and having observed what is
going on with other companies - I operate
on the working premise that all contractors
will eventually fail. Don’t be offended.
You do buy life insurance because you
know at some point in time you are going to
wake up on the wrong side of the dirt.
Human life is limited. Why should the life
of your company be any different?
You may incur a serious obligation
that isn’t covered by insurance. One of my
clients closed its business when the principal
got seriously injured in a skiing accident and
was no longer able to serve as the general
outside superintendent.
Your life may
change. You might get very sick. You may
get divorced.
You might suffer from
depression. You might develop substance
abuse. As you hit middle age, you might
start riding motorcycles, having a girl friend,
wearing too much gold jewelry or jump out
of airplanes! As hard to believe as it might
seem, at some point, you might simply get
tired of what you do, even if it is only
dealing with all of the BS which surrounds
your work.
I am aware of several
companies which failed due to cocaine use
by a principal. Similarly, I am aware of
companies who went out of business
because the principal had a serious gambling
problem.
I know of any number of
companies where the company went out of
business by embezzlement and employee
A very successful steel fabricator I
know of was put out of business by a
sustained period of cheaper Canadian steel.
That was nothing of its own doing. Your
market may change or even disappear. (Do
you often see advertised public housing jobs
on the water in New England seeking a
dryvit re-do?)
You may blow a bid.
(Everyone blows bids.) You may book a job
with a very expensive differing site
condition or change that the owner and
architect will not recognize or can not afford
or both. Your contracting party may lose
the ability to pay you (or, possibly, never
had the ability to pay you.) You may
seriously screw up one of your jobs. Your
contracting party on any given job might
suddenly file bankruptcy, leaving you in the
lurch.
Several of the twenty largest
unsecured trade creditors in the Modern
Continental bankruptcy had debts of
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theft of an employee. (This can particularly
happen in a very small office where there is
one person who seems to handle everything
and who has too much access to the
checking account with too much time alone
in the office.) I know of any number of
businesses where one day a key employee
(project manager or estimator) simply
suddenly quits (usually with no notice),
taking with him/her the Rolodex and a
variety of bids you were hoping to get, who
then start immediately competing against
you by working for a competitor or having
started his or her own company.
(You
might want to take a look at my website at
an article entitled “Employment Agreements
for Key Employees” and make sure you
have some understanding of the concept of a
‘covenant not to compete’).
Many
companies enjoy close relationships with
major customers because of their
relationship with one or two key individuals
at that company, who then move on with the
business being lost. Some family businesses
often suffer when the founders are replaced
by later generations who simply don’t have
the founders’ drive or talent. I represented
one general contractor for year where the
kids all drove BMW’s. How does one
develop the requisite toughness to be in
business when one starts his life thinking
that a car necessarily means a BMW? My
first car was a Gremlin and it didn’t even
have a back seat!
depression - largely related to immigrant cab
drivers owning five or six houses they have
no equity in and which they absolutely can
not afford, each with a gargantuan
mortgage. Dear reader, ten years ago, did
you ever even contemplate that the entire
financial system in this country might
almost completely self-destruct, as it nearly
did a few years ago?
Certainly, there is
less work for contractors under these
circumstances. For the work there is, the
profit margins have eroded faster than a
chronic candy eater’s gums. I would be
surprised if there were many readers whose
only personal 401k, IRA and SEP situations
survived fully intact during this period.
Retirement? That’s something you do when
you die.
For a great many of us as the year 2011
winds down, ‘retirement’ is essentially only
a word in the dictionary.
Who knows? The Wicked Witch of
the West might simply drop her house on
you!
That would be a Toto bummer! (Sorry . . . I
couldn’t resist.)
Now, as Bobby McFerrin says in his
song, ‘don’t worry, be happy’!
We all
know that we are not likely to escape this
life alive. Only two figures in the Bible
went to heaven without first dying: Enoch
and Elijah.
But, we can all take some
comfort from the fact that all of us live
under the same circumstances, some of
which are difficult. We have to relax, do the
best we can to enjoy our lives, protect our
families and, hopefully, make some
meaningful contribution to the world.
Along the way, hopefully, we will have
some fun. Whether a corporation or limited
liability company you formed survives or
doesn’t survive is, in the final analysis,
relatively unimportant. After all, most of
say “I do” with the best of intentions and
You know how they say that some
company is too big to fail?
Modern
Continental, at one time, was one of the
largest general contractors in the United
States.
There were claims made in its
bankruptcy which totaled close to one
billion dollars.
Then again, as has happened in the
last several years, the country goes into a
deep unexpected recession - some say
-35-
then find out somewhere down the road that
at least half of these marriages won’t work
out, causing all kinds of emotional and
financial pain.
already do things like this today.
Companies doing horizontal construction
frequently form other companies to own
substantial amounts of their equipment,
which then lease their services back to the
original company.
This is very smart
because of the fact that the second company
doesn’t have any construction contracts that
could cause it to fail due to business
problems. So, in your corporate life, you are
already thinking of ways to separate those
activities which cause you risk (the
performance of construction contracts) from
the pricey assets you don’t want to lose (the
assets of the second company.)
And, a business failure doesn’t begin
to compare in importance with an
unexpected phone call from the police, late
at night, to the effect that . . . . there has
been an accident.
Now, after having read these past
several paragraphs,
that we are all
thoroughly miserable, what is it that we
should do?
I believe someone once referred to
this as not having all of your eggs in the
same basket. Brown eggs might be local
eggs and local eggs are fresh. Still, like any
other egg, they still have that disturbing
tendency to break.
B.
Good estate planning and
insolvency planning will work best when
it is done earlier and before the wolf is at
the door.
So, having accepted the fact,
however reluctantly, that our present success
might prove to be illusory, what do we do?
We use that wonderful brain God blessed us
with. We plan.
Being business owners, one of the things we
plan for is to understand which of our
personal assets we might get to keep if our
company (or we) had to go through an
insolvency procedure such as bankruptcy.
Understanding the various bankruptcy
exemptions (as to property a debtor can
keep) should hopefully cause us to better
structure the ownership of our assets to meet
the requirements of these exemptions.
The key is to protect your personal
and family interests and assets from such
adverse effects you might suffer as caused
by your business activities. Earlier action
and planning is almost always better than
later.
This is because of laws such as those
laws pertaining to ‘fraudulent conveyances’.
For example, note the following statute:
M.G.L.A. 109A § 6. Fraudulent
transfer or obligation where
creditor's claim arose before transfer
or obligation
Under the law, a corporation is seen
as an ‘artificial person’. In other words,
despite how much your company might
mean to you emotionally, the corporation is
not you: it’s something different and apart.
When difficulties occur, remember you can
always form another company. It’s part of
the culture of construction that no one ever
really goes out of business. And, some of us
“(a) A transfer made or obligation
incurred by a debtor is fraudulent as
to a creditor whose claim arose
before the transfer was made or
the obligation was incurred if the
debtor made the transfer or incurred
the obligation without receiving a
-36-
reasonably equivalent value in
exchange for the transfer or
obligation and the debtor was
insolvent at that time or the debtor
became insolvent as a result of the
transfer or obligation.
longer be good law as to homesteads.
However, it’s a good case to illustrate and
explain the different situations of debtors
depending on when their debt situation was
created in relation to the activity they
attempted to protect against that debt. This
is the case of Gruet v. F.D. I. C, 879 F.
Supp. 153, 155-156
(District of
Massachusetts, 1995) in which the Court
said:
(b) A transfer made by a debtor is
fraudulent as to a creditor whose
claim arose before the transfer was
made if the transfer was made to an
insider for an antecedent debt, the
debtor was insolvent at that time, and
the insider had reasonable cause to
believe that the debtor was
insolvent.” (Emphasis added)
“In contrast to liability for damages
resulting from a personal injury tort or
violation of law, the liability of a
guarantor to a loan is contractual. In re
Goodman Indus., Inc., 21 B.R. 512, 519
(Bankr.D.Mass.1982). It is true that not
all contractual obligations are considered
“debts” under Massachusetts law. H.G.
Kilbourne Co. v. Standard Stamp Affixer
Co., 216 Mass. 118, 119, 103 N.E. 469
(1913) (“The word ‘debt’ has never been
made to include the simple possibility of
being found responsible in damages for
the breach of an executory contract,
where neither the fact of liability nor the
amount can be held affirmatively to exist
until a judgment shall have been
recovered.”) (em phas is added).
Nonetheless, the obligation of a
guarantor on a loan, even a revolving line
of credit such as the one issued by the
Bank to Kahn in this case, is
distinguishable from that of a party to an
executory contract, where neither the fact
of liability nor the actual amount of
damages exists until a judgment has been
rendered. Id. at 121, 103 N.E. 469. See
also Garsson v. American Diesel Engine
Corp., 310 Mass. 618, 621, 39 N.E.2d
566 (1942) ( “debt” includes agreements
for payment which require some
calculation to determine exact amount,
Keep in mind that homesteads may
not work in terms of discharging already
established debts.
Note the following
statute:
M.G.L.A. 188 § 3. Acquisition and
creation of estate of homestead; exemptions
“. . . . (b) An estate of homestead
shall be exempt from the laws of
conveyance, descent, devise,
attachment, seizure, execution on
judgment, levy and sale for payment
of debts or legacies except as
follows:
(1) for a sale for federal, state and
local taxes, assessments, claims and liens;
(2) for a lien on the home recorded
prior to the creation of the estate of
homestead;”
(Emphasis added)
Here is a case illustrative of the
principle that protections you create are
more effective when they are created before
a potential debt situation has arisen. This
case deals with an earlier version of the
homestead statute and this case may no
-37-
provided debtor has made distinct and
binding promise to pay).
to be very aggressive in pursuing their
indemnity obligations. They might go into
court and attempt to get an ex parte (you
don’t get notice of this)
real estate
attachment against your house. Whether
such an attachment is issued with or without
notice to you, at such point in time that an
attachment has been created, a homestead
declared after the attachment issues will
probably be no good as to that attachment.
Plaintiff's contract with the bank was
not executory, nor was it contingent upon
a finding of damages. Plaintiff executed
an Unlimited Guaranty of the Loan,
obligating her to pay Kahn's
“indebtedness, obligations, liabilities
and undertakings ... upon default,” in
return for the Bank's extension of
credit to Kahn. Defendant's Exhibit A,
“Unlimited Guaranty.” One who
guarantees a loan is bound, and her
obligations are coextensive with that of
the principal. Merchant's National Bank
v. Stone, 296 Mass 243, 251, 5 N.E.2d
430 (1936). Further, the fact that the
amount of the loan may be uncertain
does not relieve the guarantor of her
liability under the contract. H.F. Rieser's
Sons, Inc. v. Parker, 126 F.Supp. 1, 5
(D.Mass.1954) (citing Bishop v. Eaton,
161 Mass. 496, 37 N.E. 665 (1894)) (a
guaranty can be for an indefinite
amount). Plaintiff's obligation to the
Bank was thus a “debt contracted”
under the meaning of the statute, and
she became liable for the full amount
of Kahn's indebtedness to the Bank
when she executed her guaranty in
February 1987. Since her debt to the
Bank was contracted before she filed
her Declaration of Homestead in April
1990, it must follow that her
homestead interest is not exempt from
attachment and sale under ch. 188 §
1(2).” (Emphasis added)
When this article was written in late
2011, the filing fee for a declaration of
homestead was only $35.00. As they say in
Manhattan: such a bargain!
For that
$35.00, you get up to $500,000 debt
protection for your house. Quite a good deal
for any of us, provided that we don’t screw
it up!
There is one overriding principle,
particularly for very small contractors and
new contractors. And, that is, don’t ever
conduct business as a ‘d/b/a’.
Why
would/should you put your house at risk for
business problems you might have (and
everyone has some problems)? I had a
Russian contractor who did home
improvement work who told me repeatedly
over a period of time that he would ‘get to
it’ (form a corporation) when he had the
money. He said that he felt comfortable
doing what he did and how he did it because
he only worked for other Russians living in
Massachusetts. Before he could get to it,
however, the sky fell in and fell in
significantly. And, please keep in mind that
b u s i n e s s f a i l u r e s a r e freque n t l y
accompanied by damage to your family,
divorce being one of the most common
consequences. It is not uncommon for ill
health to result from business reverses, as
well.
These two examples - fraudulent
conveyances and homesteads - simply
illustrate the principle that the time to take
steps to protect your assets is before the
trouble comes. After the trouble comes,
many of these steps will be ineffective or
less than fully effective. Some sureties tend
Forming a corporation or a limited
liability company is not that complicated
-38-
and not particularly expensive.
The
Massachusetts Secretary of State’s Office at
“http://www.sec.state.ma.us/” has on-line
forms and procedures for on-line filing of
domestic profit corporations, nonprofit
corporations, domestic limited partnerships
and domestic limited liability companies.
This is not to say that legal advice as to the
appropriate business form might not be
desirable or necessary.
And, particularly,
some advice from a very good accountant
might also be useful in deciding what form
of business makes sense for you from a tax
standpoint.
Still, I am aware of one
contractor I have seen over the years who
has had a number of business failures - he
had this unusual idea about paying material
suppliers and subcontractors: he didn’t who would actually fill out the various
forms himself in his own handwriting,
creating his own corporations.
In a more ordinary situation, this is
the advice I typically give. First of all,
without particulars, summarize your assets
and liabilities on a piece of paper. “I have
this much trade debt, owe this much for
taxes, owe this much on my vehicles and
have exposures in this amount for this and
that.” Then, list your assets in terms of
cash, receivables and equipment. Again, it
is not necessary to have a lot of details as to
specifics: just be accurate,
generally,
concerning the amounts of assets and
liabilities. Then, either look at the internet
for the geographical area you live in or go to
the yellow pages (how twentieth century!)
and look at who has the largest ads under
lawyers who do business planning,
insolvency and bankruptcy. Many of these
will say that there will be no charge for an
initial consultation, although this may not
apply to you where you are not actually
considering insolvency at that time. So,
having checked the qualifications of the
practitioner or firm by such resources
available to you – including their websites make appointments with two or three of
them and listen to what they have to say.
In the law business, the greatest deal of
clarity as to what will happen in any given
situation is on the first day of the problem or
on the day after the problem has been
concluded.
The middle of a problem is
something characterized by an expression
attributed to the Prussian military analyst
Carl von Clausewitz as ‘the fog of war’.
Folks, there is at least one thing I can
tell you about “John Smith d/b/a Smith
Roofing”. He’s a complete idiot! For any
of you who may have been insulted by
reading this: good! Now, go out and do
something about it while you have the
chance for it to do you some good! If you
don’t – especially after having read this
article – then you have, unfortunately,
proved my point.
How do you get good legal advice in
the area of what your rights would be in
insolvency?
Certainly, in the main, not
from your usual ‘business’ lawyer. Law,
like medicine, is very specialized and a jack
of all trades is truly a master of none. If we
are talking about protecting millions of
dollars, then talk with your construction
attorney about finding someone who is wellsuited to serve your interests at this level
(and at a price that is commensurate!)
Why go to an insolvency guy when
you aren’t insolvent and you are not
planning on being insolvent?
The short
answer to this is that you need to discuss
your situation with someone who is very
familiar about what assets you can protect
should you need to seek bankruptcy
protection someday.
Knowing this, this
should help you with your planning so that
you will be able to preserve and protect the
-39-
maximum amount of those assets capable
of being protected in insolvency. For there
are some creditors, such as your surety, that
will require some prior preparation for.
kinds of things you can still do to keep as
many of your assets as possible from your
creditors, such as the surety, as early in the
problem as you can. And, if your company
is truly failing, I hope that you were able to
avoid the all-too-typical and understandable
knee-jerk reaction within the last year or
two of your business’s life of having
pumped into it all of the money you
personally have, taking mortgages out on
your home, cashing in on your retirement
accounts, etc. If these don’t work, when the
inevitable happens, you might be left with
nothing. You will certainly need money to
live and you will definitely need money to
be in a position to maneuver.
And, as is stated elsewhere in this
article, if you ever litigate your indemnity
obligations with the surety, based on the
terms of the general indemnity agreement
coupled with court cases describing the
interpretation and enforcement of
contractual obligations, you are most likely
to lose.
Indemnitors lose an
overwhelmingly high percentage of the
time. This is because this is the way the
system is set up.
The only really good
defense to an indemnity action is to not
having signed the general indemnity
agreement in the first place! Sometimes, it
may only be that the threat of an actual
insolvency procedure is what will get you an
acceptable settlement on your indemnity
obligation with the surety. And, you can’t
make such a realistic threat if you haven’t
set up your estate plan in such a way that
will protect the maximum amount of your
assets and if you don’t know, in advance,
which of your (remaining) assets will
survive a bankruptcy.
Here are twelve ideas to consider as
strategies for dealing with your surety.
(Some other ideas and strategies are
included in the discussion of specific kinds
of bond claims, infra.)
A. If it is clear that someone is
very likely to file a claim against your
bond, try to make your letter to the surety
the first in the file.
There will be times when it is fairly
clear that someone will be making a claim
on your bid bond or on your payment bond
or on your performance bond. Frequently,
the claimant may not really understand how
to do this. A common mistake is to send a
claim letter to the insurance agent who
signed the bond. That agent usually will
have nothing to do with claims handling: he
is in ‘sales’ (underwriting) and what the
claimant needs is ‘service’ (the claims
department).
Often, the claimant will
simply send the claim letter “to the
insurance company”, not to either the claims
department or to any specific individual.
Many of these letters get disregarded or just
plain lost, as the mail room clerk doesn’t
know to whom such a letter should be
3. You are ‘in claim’ with the surety.
What do you do when claims are
made against your bonds?
For this section of the article, we are
assuming that claims are being made against
one of your bonds and the surety is
contacting you. What can you or should
you do?
Well, first of all, let’s hope that you
were able to do some estate planning, along
the lines discussed above in section 2. B. If
not, consult with an insolvency attorney if
the situation is really egregious to see what
-40-
routed. Or, the claimant might write a letter
to the claims department and/or to a specific
individual but fail to actually make a claim.
Letters to the claim department informing
them of a debt owed - but not making an
actual claim against the bond - or letters
asking the bonding company for help in
getting the principal to pay a debt don’t
generally actually trigger the condition of
the bond, which is that someone actually
makes a claim against the surety bond.
national claims offices. They don’t know
anything about you or your company.
Frankly, you are just a file to them. But,
whether consciously or not, they will
compare your behavior against the aggregate
lowest common denominator of typical
principal behavior they experience in claims
situations. A surety is much more likely to
refer the matter to counsel when you are: (a)
playing hard to get; (b) are unavailable: ( c )
are acting not interested; or, (d) are not
providing the bonding company with
information and documentation. Also, it is
only human nature to infer from this type of
behavior that you are not responding
because there isn’t anything you can say in
your defense. Your job is to try to delay –
or prevent – the bonding company’s writing
of checks. And, particularly with payment
bond claims when there are a number of
them, once the first check is written to a
claimant, it is likely that others will follow.
So, for a variety of reasons, although
you know or suspect that a claim letter will
be coming, it may not be coming - or reach
anyone - for awhile. So, what action do you
take?
My experience is that particularly
where you have some defense to the claim it
is better for you to write the surety and tell
them about the problem and give them your
side to it first. Giving them particulars and
documentation can be useful. This way, it
doesn’t appear that you are hiding from the
claim. And, this way, you get to attempt to
frame the problem with your spin and theory
rather than the claimant’s doing this by
having the first letter. Where, as a matter of
law, a surety’s defenses include all of the
principal’s defenses, the surety will be
interested in knowing that: (a) you have a
position; (b) that it looks defensible. Since
having the surety trust the principal is one of
the most important things for both the
principal and the surety in a claims situation,
notice of problems first from the principal to
the surety is usually a good idea.
Also, pay attention to the following.
Construction cases are tried in court based
more on the written record than on anything
else. What that means for you is that letters
are better than phone calls and emails are
better than phone calls, as there is no
reliable record of what is said during a
phone call and they may not be admissible
into evidence for various evidentiary
reasons.
C. Be as honest as you can be and
document your positions.
These are good ways of earning the
surety’s trust and confidence. Remember
that the claims representative doesn’t know
you and doesn’t know the obligee (the entity
to whom the bond runs, the bond’s
beneficiary) or the claimants. Surety claims
are, to some extent, a ‘he said, she said’ type
situation, where each side has a
diametrically-opposed opinion about any
B. Always answer surety requests
for information as to specific jobs and
claimants.
Don’t fail to return phone calls and
answer every letter from the surety. Most
claims representatives work in regional or
-41-
given situation.
To the extent you can
provide the surety with useful information
and documentation, this helps establish and
maintain their trust for a period of time.
When I have my plaintiff’s hat on, I
encourage payment bond claimants to get
‘third party verification’ letters from those
not involved with the dispute (i.e. the clerk
of the works, the project engineer, the
project architect, the owner) to verify that
the subcontractor has done its work. The
same approach can also apply in a defensive
situation.
Letters from third parties
supporting your contentions may be useful
in the handling of a claim against you.
E. Some sureties will not fully
pursue indemnitors who have really
worked hard to save money for the
surety.
This is more of a surety-culture thing
rather than a legal thing. But, I have seen it
happen before. To be sure, this is not
something that is done easily or often. I
have seen this in situations where an
individual has attended numerous meetings,
participated in lots of phone calls, testified
in a lot of cases, has worked hard in the
settlement of payment bond claims and
performance bond claims and, generally,
has made significant efforts to assist surety
counsel or the bond claims representative in
the defense of claims. This happens when
an individual has made real efforts to save
the surety money, usually over a period of
years.
In some of these situations, the
relationship between the indemnitor and the
surety claims representative or the
relationship between the indemnitor and the
surety’s attorney approaches something that
looks a lot like friendship. They spend a lot
of time together. They have common
interests in protecting the surety’s interests
against claimants.
How likely are you to
sue your friends when things go wrong?
After all, you (the principal and the surety)
are - as to claimants - more or less on the
same side, at least in the beginning, and you
are both dealing with common opponents.
Even when the indemnitor is not completely
excused from the indemnity obligation, it
may be that you can negotiate a deal for
only being responsible for a percentage of
the loss. Another possibility: if there are
four personal indemnitors, try to negotiate a
situation where you are only liable for 25%
of the loss. I had one surety situation where
a well-known quality surety said through an
experienced attorney bond claims
representative early in a performance bond
At the same time, be careful as to
what you admit to in writing.
Prior
statements of a party to a future legal action
are generally admissible in evidence as
either an ‘admission’ or as a ‘declaration
against interest’.
Ill-advised statements
might haunt you. They can particularly
haunt you in a bid bond claim situation:
more on that later.
Remember this
statement from Chapter 10 of George
Orwell’s Animal Farm: “All animals are
equal but some animals are more equal than
others.” Honesty is almost always the best
policy . . . . except when it isn’t.
D. Be ready fairly early in the
claims process to offer a repayment plan
once it is clear that there will likely be a
loss payment(s).
Sureties tend to defer filing legal
actions against indemnitors as long as they
have some evidence that their indemnitors
are not attempting to walk away from their
indemnity obligations. Since you, as either
a corporate or a personal indemnitor, will
have to reimburse the surety for potentially
all of its legal costs, trying to minimize
those costs - or deferring them for as long as
possible - seems a desirable goal.
-42-
claim that when the time arrived where the
surety and the principal would have to settle
up as to the losses - when the matter was
over - the surety claims representative
would put fifty thousand dollars to the
principal’s account to the good.
device - such as an assignment for benefit of
creditors - in the future, but not presently.
Holding the surety at bay by having a
repayment plan in effect can be a good
strategy to avoid incurring costs of litigation
in the interim while you prepare your
situation for an ultimate resolution.
Why would one do this? The surety
needs the principal’s cooperation in order to
defend its interests and to save money and a
better relationship with the principal helps it
in doing so.
Try to arrange for having to pay for
only a percentage of the loss. And, as to a
proposed repayment plan, offer a very low
percentage rate of interest over an extended
period of time.
Think long repayment
periods. From the surety perspective, they
are less interested in getting repaid in a
shorter time than they are in having the
principal (or individual indemnitors) make
some offer to pay the loss back at some time.
If you really intend on paying them back,
give yourself a really long period of time to
make the payments, more than you think
you will need. After all, other life events
might occur which will diminish your ability
to repay at a certain level.
Here’s another similar idea. I have
seen countless times where material
suppliers and even subcontractors will
accept a ‘payment plan’ in lieu of a more
aggressive collection attitude, including
mechanic’s liens and the pursuit of payment
bonds.
More times than I can count,
material suppliers and subcontractors have
lost lien and payment bond rights because
they were under a ‘payment plan’. So, as a
way of potentially minimizing mechanics
liens, payment bond claims and litigations
against you, the effective and especially
proactive (rather than merely defensive) use
of payment plans has its uses. Having gone
to the rodeo for more than thirty-five years,
I can’t recall a single time out of hundreds
where someone actually got all of his money
from the payment plan and on time. Where
there are lien and bond rights, I always
suggest to my clients to pursue these also.
Effective mechanics liens and payment bond
claims will convert unsecured trade debt
into secured trade debt – much better for the
claimant and much worse for you. Quite
often, the material supplier or subcontractor
does not pursue the lien or the bond claim
because he is afraid of it, is timid, is
concerned about legal costs or simply wants
to attempt to maintain the relationship with
the debtor for future business opportunities.
Why did I say ‘if you really intend
on paying them back’?
In some
circumstances, your making an offer might
be primarily a tactical move. You might be
planning, for example, on filing bankruptcy
or some other insolvency proceeding or
I would say that for the plans I have
seen, if they proposed twelve monthly
payments over the course of a year, it would
be a lot to get four or five payments during
that time, at least two or three of them late.
I’ve had a number of circumstances where
In these situations, it doesn’t hurt to
ask for a deal. The answer might be ‘no’.
But, if you never ask, the answer will
definitely be ‘no’.
And, even when the
answer is ‘no’ today, the answer might be
different down the road.
F. The surety most likely will not
expect you to repay the entire debt.
-43-
no payments were received. I have had a
lot of situations where with a certain amount
of legal pressure, this number might have
gone to seven or eight, with maybe only the
first one being on time.
bond claim, generally speaking, is not
affected by the bankruptcy of the principal.
And, in many situations, a mechanic’s lien
may survive a bankruptcy.
G. Sureties sometimes will pay
for your time as a consultant or as an
employee of your company.
If a business were planning for a
dissolution or insolvency proceeding in the
next six to nine months, having as many
payment plans as possible for your trade
debt in place might minimize litigation and
minimize mechanics’ liens and payment
bond claims against your interests. Some
businesses’ failures seem to be hastened by
having to defend against numerous
litigations because of the legal costs
involved and because of possible injunctions
that can issue. In a reach and apply situation
or in a trustee process situation (bank
account attachment), having numerous
litigations might hasten your company’s
demise, even if it is ultimately inevitable in
any event, by stripping your available cash
from you.
This could be in a financing situation
(discussed elsewhere) or in other claims
situations in terms of assisting in the
handling of claims or in working on
performance problems in the completion of
your work. I am aware of a situation where
a mid-sized general contractor went into
bankruptcy and its principal, who had had
previous business failures, was paid at least
one hundred dollars per hour to assist the
surety in working on claims. (This was
twenty years ago so the one hundred dollars
would be at least two hundred dollars
today.)
When I used to do this work more
regularly, when a contractor was being
financed, the owner would typically receive
some kind of paycheck on a periodic basis if
he or she was doing any actual work.
Particularly in a financing situation,
sometimes it seemed as if the only work the
owner was doing was to try to get the surety
to pay as many of its bills unrelated to the
bond claim as possible.
For material s uppliers and
subcontractors who say “this isn’t good for
us, why suggest it?”, most of the time, you
are right: it isn’t good for you! When you
boil it all down, why would you give up a
potentially secured claim – by a mechanic’s
lien or a payment bond claim – and
substitute for it an unsecured payment plan,
which will not only not likely fully work (if
at all), but which will exhaust whatever time
periods you have to file a mechanic’s lien or
a payment bond claim? This doesn’t make
any sense to me conceptually and,
especially, based on my experience with
payment plans representing creditors, which
hasn’t been good.
After all, this being a
free country – more or less, reasonable
minds might differ! – no one actually forces
anyone else to take a payment plan, right?
An unsecured payment plan is ordinarily
dischargeable in bankruptcy. A payment
H. If the surety does not record
the GIA as a ‘financing statement’ or
‘security agreement’ under the Uniform
Commercial Code, its rights against you
in bankruptcy might only be as an
unsecured creditor, which means such
claims might be discharged.
This could mean that in a liquidation
(a chapter 7) you might be able to discharge
your individual indemnity obligation to the
-44-
surety.
I have found that threats don’t
necessarily always work in some legal
situations. In fact, I would say that they
usually don’t work all that often, except in
usual circumstances, frequently involving
people not well-versed in legal proceedings.
However, this is an area where they
sometimes do work. And, I have found that
the threat of something is often more
valuable than the actual taking of the action
you threaten.
than the unlikely possibility that you might
actually recover multiple damages against
the surety under a statute such as
Massachusetts’ C. 93A, bad faith allegations
have incidences which are distasteful to the
surety.
Usually, allegations of extra
contractual liability mean that the cases
might have separate supervision: one level
for the actual bond claim and another level
for the allegations of extra contractual
liability.
Some sureties will have two
separate claims representatives in these
situations: one for the bond claim and the
second for the bad faith claim.
These
claims can make some claims
representatives and supervisors nervous. I
know this from my representation of more
than two dozen bonding companies and a
number of insurance companies with regard
to insurance claims. Certainly, it can be
easily understood that if any particular
claims representative has too many
allegations of bad faith, this is not a factor
featuring prominently in future promotion
possibilities! I do know of one case where
the principal owed a surety one or two
million dollars for losses rightly incurred on
the performance bond and for which the
surety had sued the principal for indemnity.
However, at the end of the bad faith case by
the principal against the surety, the surety
somehow ended up paying the principal a
million dollars or so as a settlement, not
judgment as the result of the bad faith
claims, with the indemnity claim being
dropped.
Example. Your statement to the
surety that ‘you (the surety) should take
30% reimbursement over five years rather
than forcing a liquidation of my company
into bankruptcy, which will net you nothing’
might resonate with some bond claims
representatives and their supervisors. They
want to minimize their own legal expenses
and costs. There is a word for surety bond
claims representatives and supervisors who
run up heavy legal and consultants’ bills:
unemployed.
I represented one surety
many years ago where one of the bond
claims representatives seemed to simply pay
every single claim. And, for a while, she
was much admired for having such low
expense payments even though she clearly
overpaid on some claims and probably paid
on some claims not entitled to be paid at all.
I.
Alleging bad faith against the
surety.
A bad faith claim against a surety is
what is known from the surety perspective
as a possible “extra contractual liability.”
What this simply means is that this is
claimed liability that is not covered by the
bond, as a surety’s claimed bad faith is not
part of the condition of the bond. And, it is
the first great surety sin to pay for
something that is not covered by the bond or
which exceeds the limits of the bond. Other
These types of situations are not for
the sensitive or for those who are faint of
heart or squeamish. This typically is blood
sport. And, please keep in mind that the
possibility of this being successful is quite
small, if any particular matter were to
actually go to trial.
-45-
Here’s a Massachusetts case
discussing the results of an indemnitor’s
claiming bad faith against the surety in an
indemnity action:
who can afford to litigate more than you can
- is a very bad idea and counter-productive.
J. Protect your performance and
payment bonds.
“Want of good faith involves more
than bad judgment, negligence or
insufficient zeal. It carries an
implication of a dishonest purpose,
conscious doing of wrong, or breach
of duty through motive of selfinterest or ill will.”
Hartford
Accident and Indemnity Company v.
Millis Roofing and Sheet Metal, Inc.
11 Mass. App. Ct. 998,999-1000,
418 N.E.2d 645 (1981)
There is a joke in the surety industry.
Someone from the bonding company says to
either the principal or to the claimant or to
the obligee: “I’m from the bonding company
and I’m here to help you.” Not so! One
definition of a surety bond is an “unsecured
extension of credit”. I ask you: if you don’t
pay on your mortgage, do you expect the
bank to be interested in your problems as to
why you can’t pay? Of course not! A
surety claim situation is not dissimilar from
a problem in paying back a loan, as both
situations deal with extensions of credit and
are (or can be) financial transactions.
It is very hard for an indemnitor to
prove a ‘conscious doing of wrong, or a
breach of duty through motive of selfinterest or ill will’. After all, how does it
work to a surety’s
self-interest to make a payment to a
claimant?
Many principals don’t understand
the GIA and its implications and their
obligations to repay the surety. They don’t
understand that, more likely than not, the
surety will win the vast majority of its
indemnity cases against corporate and
personal indemnitors.
Also, there are
provisions in the public bid laws where you
will be asked during prequalification
proceedings if a surety company ever
sustained a loss on your account. And,
during the course of your company’s
‘bonding life’, you will find that your agent
will shop your account at different times to
different sureties for a whole host of
different reasons. You need a bigger single
bond limit or a larger total program. You
want a lower premium rate, wanting to go
from substandard market rates to standard
market rates . You are interested in getting
a surety that doesn’t require personal
indemnity, which was a big sales pitch for
some sureties maybe twenty years ago and
during times of intense competition for a
principal’s premium dollar. Your financials
At the same time, these things
sometimes, if infrequently, do work. If
nothing else, the possible allegation of bad
faith is something that might give you a
small level of leverage against the surety,
which usually has overwhelming superiority
and chance of success in surety-indemnitor
litigation matters.
Such allegations,
particularly if there is even a slight basis for
them, might support a reduction in your
indemnity debt, which is a positive value.
However, if there is no basis for such a
claim – i.e. the surety first heard about your
payment bond claim when you sued the
surety – alleging bad faith against the surety
might be a very bad strategy. I have found
over thirty-five years of practice that
annoying or angering an opponent for no
good reason – especially one who is
infinitely better-heeled than you are and
-46-
might get either significantly better or, more
usually, significantly worse.
discussion. Finding ways to save the surety
money on claims against your company
make you more valuable, more of an asset to
the surety and someone the surety has less
reason to sue because it needs you.
It is a typical question from the
potential new surety in this situation: has
any surety incurred a loss on any of your
bonds? It is for these reasons that, as well
as for a number of other additional reasons,
if you are viable, having the surety pay a
claim for you - even if you almost
immediately repay it - is unthinkable. One
of the reasons that makes it unthinkable is
that if your company goes seriously into
claim, it is quite possible, even likely, that
you will have difficulty getting your next
bid and contract bonds from that surety.
For a company doing public work, this
could put you out of business and quickly.
L. Offer defending the surety
under a ‘tender of defense’.
When the surety gets sued on a
payment or performance bond, it will have
to hire an attorney.
Massachusetts law
requires that all corporations who use the
court system have to be represented by
attorneys. Since your company will also
likely be sued at the same time as the surety
is sued, you will also have to hire an
attorney.
Ultimately, it will be your
responsibility to pay both of these bills
because of the typical wording of the GIA.
Protecting your bonds is something
you should keep in mind at all times. In
saying this, I am not advocating for the
surety industry.
Rather, I am only
concerned with your acceptability to public
owners as to your ‘responsibility’ as a
bidder (a public bid requirement) and
whether or not your account would be
acceptable to a new surety if you feel the
need to change sureties or, for a variety of
reasons, have to change sureties.
Since the principal and the surety
have similar interests much of the time, the
surety industry often will allow the principal
to defend it with your attorney (provided
your attorney can demonstrate some
experience and sophi s tication in
construction and surety matters). That way,
you will only have one attorney to pay:
your own. And, as a practical matter, to
some extent you can control the amount and
kind of information the surety learns about
the case (and when) if your lawyer is
representing the surety’s interests.
K. Smaller losses.
I have had dealings with at least one
surety active in the New England market
which took the position that a loss under one
hundred thousand dollars was a small loss.
From the circumstances of that matter, I
made the inference that this particular surety
was less likely to be aggressive in pursuing
indemnity and that such pursuit was not
likely to be sooner rather than later. Mind
you, this is not a guarantee. Still, keeping
the loss as small as possible may help you
once the indemnity subject comes up for
So, if a suit comes, if the surety
doesn’t suggest it, you might consider
requesting the surety to allow you to defend
it under a ‘tender of defense’. They are
more likely to do this in situations where
you can demonstrate a real dispute: in other
words, there is some real issue as to whether
the party suing the bond is entitled to
recover or there is some real issue as to the
amount claimed. Also, a surety is much
more likely to do this in a payment bond
-47-
situation than in a performance bond
situation.
This is because performance
bond suits are generally more complicated,
they involve greater sums of money and
they have a greater potential for generating
bad faith claims from the claimants against
sureties, something sureties try to minimize.
four F shall be accompanied by a bid
deposit in the form of a bid bond, or
cash, or a certified check on, or a
treasurer's or cashier's check issued
by, a responsible bank or trust
company, payable to the
commonwealth or public agency in
the name of which the contract for
the work is to be executed. A bid
bond shall be (a) in a form
satisfactory to the awarding
authority, (b) with a surety company
qualified to do business in the
commonwealth and satisfactory to
the awarding authority and (c)
conditioned upon the faithful
performance by the principal of the
agreements contained in the bid. The
amount of such bid deposit shall be
five per cent of the value of the bid.
4. Claims against your bid bond.
If it is Massachusetts public work,
your bid bond is set at five percent of your
bid, generally. Therefore, your bid bond’s
condition is to cover the bid spread between
you and the next low guy up to the amount
of your bid bond if you won’t sign the
contract or can’t produce contract payment
and performance bonds. In other words, if
the spread is less than five percent of your
bid, that is what your surety is liable for. If
the spread is more than five percent of your
bid, the surety is liable for just the five
percent. And, of course, you will typically
have the obligation to pay the surety back,
the same as with any other kind of bond
claim.
(3) All bid deposits of general
bidders, except those of the three
lowest responsible and eligible
general bidders, shall be returned
within five days, Saturdays, Sundays
and legal holidays excluded, after the
opening of the general bids. The bid
deposits of the three lowest
responsible and eligible general
bidders shall be returned upon the
execution and delivery of the general
contract or, if no award is made,
upon the expiration of the time
prescribed in section forty-four A for
making an award; except that, if any
general bidder who fails to perform
his agreement to execute a contract
and furnish a performance bond and
also a labor and materials or
payment bond as stated in his bid in
accordance with section forty-four E,
his bid deposit shall become and be
the property of the commonwealth or
the public agency to which it is
payable, as liquidated damages;
An important thing to understand is
when the obligation of a bid bond is
triggered.
By my experience, bid bonds are
usually required more for public work than
anywhere else. There is Massachusetts law
about under what circumstances you are
entitled to a return of your bid security on a
public project:
MGL, C. 149, s.44B. Plans and
specifications; bid deposits
(2) Every bid submitted for a
contract subject to section forty-four
A and every sub-bid submitted in
connection with such a contract for a
subtrade pursuant to section forty-48-
provided that the amount of the bid
deposit which becomes the property
of the commonwealth or the public
agency shall not, in any event,
exceed the difference between his
bid price and the bid price of the
next lowest responsible and eligible
bidder; and provided further that,
in case of death, disability, bona
fide clerical or mechanical error of
a substantial nature, or other
similar unforeseen circumstances
affecting the general bidder, his
bid deposit shall be returned to
him. (Emphasis added)
bid in accordance with section fortyfour F(2), the bid deposit of such
sub-bidder shall become and be the
property of the commonwealth or the
governmental unit thereof to which it
is payable, as liquidated damages,
provided that, the amount of the bid
deposit which becomes the property
of the commonwealth or the
governmental unit thereof shall not,
in any event, exceed the difference
between his sub-bid price and the
sub-bid price of the next lowest
responsible and eligible sub-bidder;
and provided further that, in case
of death, disability, bona fide
clerical or mechanical error of a
substantial nature, or other
unforeseen circumstances affecting
any such sub-bidder, his bid
deposit shall be returned to him.”
(Emphasis added)
As to subbidders, same statute:
(4) All bids deposits of subbidders, except (a) those of the subbidders named in the general bids
of the three lowest responsible and
eligible general
bidders and (b) those of the three
lowest responsible and eligible subbidders for each sub-trade, shall be
returned within five days, Saturdays,
Sundays and legal holidays
excluded, after the opening of the
general bids. The bid deposits of
sub-bidders not returned pursuant to
the provisions of the preceding
sentence shall be returned within five
days, Saturdays, Sundays, and legal
holidays excluded, after the
execution of the general contract;
except that, if a selected sub-bidder
fails to perform his agreement to
execute a sub- contract with the
general bidder selected as the general
contractor, contingent upon the
execution of the general contract,
and, if requested to do so in the
general bid by such general bidder,
to furnish a performance and
payment bond as stated in his sub-
What does this mean? It generally
means that if you make a substantive
error in bidding
your job - you are super low because you
didn’t take off all of the drawings or missed
some specifications - you are not able to
have your bid bond released. However, if
you make some kind of error in failing to
transfer correctly information from
subsidiary estimating documents to the bid
form, including making mathematical errors,
then, under those circumstances, you are
entitled to a return of your bid security. So,
if you make an honest error, you’re liable
and there is no relief.
However, if you
make a careless error, you might not be
liable.
My experience has been that when
bidders are apprised of these two
alternatives with regard to bid errors,
usually, they advise me that the error
actually was an error of transcription or a
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clerical or mathematical error rather than a
substantive error.
Legislature did not enact a general
‘unilateral mistake’ provision, but
rather responded to a specific
mischief. The ‘main object to be
accomplished’ was to relieve
contractors of the financial hardship
resulting from the inevitable errors
which occur during the hurried, last
minute calculations and compilations
required by competitive bidding.”
(Emphasis added)
Therefore, your initial statements to
the architect and owner as to your wanting
to withdraw your bid have to be made with
an understanding of the two circumstances:
one which leads to liability; the other which
leads away from liability. Once you tell
them you neglected to bid all of the contract
documents, particularly if this is in writing,
there is little that can be done to help you.
In all of the bid bond claims I have
been involved with over the years, those
bidders stating that their mistakes were
clerical, mathematical or mechanical have
been successful every single time in
withdrawing their bids without penalty with
one exception. In that one case, I believe
that the surety or its attorney might have
been intimidated, for some reason, by either
the obligee or by the obligee’s attorney.
Alternatively, the surety simply didn’t
understand the difference between excusable
mistakes and inexcusable mistakes. When
it was clear that the surety was going to pay
the claim irrespective of the principal’s
position – or, for that matter, by our
contention, irrespective of the law - we
were able to settle the matter for the
principal with some savings even though in
that particular case, probably nothing should
have been paid.
Here’s the leading case on this
subject:
As stated by the Supreme Judicial
Court in the case of Lincoln-Sudbury
Regional School District v. Brandt-Jordan
Corp. of New Bedford et al., 356 Mass. 114,
117-118, 248 N.E.2d 477 (1969):
“ It is the ‘general and familiar rule’
that a statute is interpreted
‘according to the intent of the
Legislature ascertained from all the
words construed by the ordinary and
approved usage of the language,
considered in connection with the
cause of its enactment, the mischief
or imperfection to be remedied and
the main object to be accomplished,
to the end that the purpose of its
framers may be effectuated.’ Hanlon
v. Rollins, 286 Mass. 444, 447, 190
N.E. 606, 608. See also G.L. c. 4, s
6. We are of opinion that in s 44B
the Legislature intended the term
‘clerical or mechanical error’ to be
limited to errors of copying,
transference or transcription,
including mistakes of arithmetical
computation, which occur during the
final stages of bid preparation. This
is the ‘ordinary and approved usage’
of the term. In addition, the
Some owners will require bidders to
supply evidence of their claims of
mechanical, mathematical and clerical error,
which might be a production of the
underlying papers and your explaining
specifically what information did not get
transferred to the bid form.
In some
instances, the bidder seeking to avoid the
bid may have to sign an affidavit – a sworn
statement – as to the facts of that particular
bid with regard to the claimed error. My
sense is that the requirement for affidavits
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comes more from architects than it does
from owners.
a sufficient amount of evidence to have their
claim accepted by the finder of fact, only
subject to the extent the defendant(s) can
rebut this evidence.
A couple of other things to
remember. Again, if possible, don’t let the
bonding company make any payments, for
the reasons stated above and elsewhere. At
the same time, more knowledgeable
principals will figure out what is more: the
payment that would be due under a bid bond
claim as compared with how much money
the contractor would stand to lose if it
actually performed the job. Performing the
job at a loss greater than the amount of what
might have to be paid under the bid bond
will not usually make a lot of sense, unless it
is a good customer or someone you want to
do some work for in the future.
Now, what do you say as the
defending party? If you don’t have much to
say in terms of your defense, more often
than not, you will lose. You have to keep in
mind paragraph four of the statutory
subcontract for filed subbidders which says
that notice of claims by the general
contractor against the subcontractor for
labor and materials the general contractor
has supplied to the subcontractor’s account
has to be provided to the subcontractor
within ten days of the next month after the
claim originates. My experience has been
that a lot of generals don’t comply with that
provision or comply with it only after it is
woefully late. They may not be aware of
the provision. Or, they know if they give
such notice, the relationship with the
subcontractor (and possibly its performance
on the job) might suffer. Or, they don’t
‘discover’ the claim until they enter into a
dispute situation, often much later.
5. Claims against your payment
bond.
Here’s the one of the most important
things I can tell you about this subject. If
you owe the money, chances are excellent
that the claimant will win. I once had a
general, who owed the sub, say something to
me like: “maybe they won’t win their case”.
Are there dumb judges? Yes. Are
there less than competent arbitrators?
Absolutely. Do juries sometimes fail to
understand the evidence? This happens all
the time.
Still, in looking at any given
claim situation, if the evidence is that the
plaintiff performed its contract and didn’t
get paid, it is going to win more often than
not in the absence of any significant
evidence to the contrary. So, in looking at
the legal system, it would be a mistake to
assume that it is a mere crap shoot either for
the plaintiff or for the defendant. Usually,
it is not. Contract claims, particularly
simple ones, are rather cut and dried.
The following describes a bare bones
approach to a plaintiff’s claim on a
materialman’s claim or a subcontractor
claim against a payment bond.
They
produce into evidence the contract between
the parties. They produce into evidence the
invoices. They produce into evidence what
they were paid as compared with what they
billed. They may testify that they did not
have any backcharges or requested deduct
change orders. (This is not a good factor for
general contractors defending against such
claims.)
They may testify that they
substantially completed their work required
for the job. Assuming all of these answers
are as anticipated, they have proved a prima
facie case, which means they have produced
I know of one well-known general
contractor who seemed to force many of its
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subcontractors to go to trial on their claims.
The thinking was: “maybe they can’t afford
to go all of the way. Maybe they won’t last
the several years it takes to get to trial.”
Sometimes, this strategy was successful,
even spectacularly for a six figure savings in
one case I was aware of. When it wasn’t
successful – i.e. the subcontractor had
sufficient staying power - I found that the
general contractor would simply pay the
claim on the courthouse steps along with the
interest that was due and move on to
something else. Whether it is significant or
not, this general contractor is no longer in
business. It is no secret that generals that
operate in this manner will have many filed
subbidders restrict against them as to their
future filed subbids on public building
projects. Apparently, this prospect doesn’t
worry some companies. What is moral,
what is right and what is legal are all
separate things an awful lot of the time, for
better or for worse.
- has been found to be successful in some
cases:
This is how it goes.
(First
Approach) You (the debtor) go to the
claimant/creditor and give them your tale of
woe. You tell them how this job or these
circumstances have ruined your life or have
destroyed your company. You tell them
how much money you lost on this job and
how unreasonable the owner or architect is.
You tell them that you will likely be either
closing your doors or filing bankruptcy
fairly soon (or both) and that the claimant
will have to litigate years with the surety
because, let’s face it, sureties hardly ever
pay anyone. But, because you (the creditor)
and I (the debtor) go back a bunch of years,
if you work with me and accept 50% (fill in
the blank as to what you will try for) of your
claim, I’ll push it hard with the surety to get
you your money pretty quickly, even where
somehow I am going to have to pay them
back some day. Otherwise, you are on your
own and you are committed to years of
litigation with the surety and all those legal
costs.
Needless litigation is a drain on your
time and money resources. The lawyer will
have to be paid. The claimant will be
entitled to interest on a judgment at the rate
of (at least) 12% simple interest per year
(and superior court cases don’t usually go to
trial with construction disputes for at least
three years.)
Statutory payment bond
claims on the general contractor’s payment
bond for public work in Massachusetts
include the award of the plaintiff’s
attorney’s fees when the plaintiff is
successful. This can get expensive!
A variant of this (Second Approach)
is most of the foregoing but saying that you
will be paying the claim out of your own
funds and that you can’t afford much. Both
situations may involve trading on the
relationship when it saw better days. In
fact, this type of approach seems more
successful in dealing with long-standing
accounts. It is not uncommon for some
tears to be shed in the process. Sometimes,
it can be quite maudlin. It is also more
successful when there is any possibility of
future business with the debtor. I can think
of one particular general contractor which
has a long-standing reputation of being a
poor payer.
I have sued this general
contractor many times and sometimes
multiple times for the same subcontractors
So, one strategy is to get the claim
paid on some basis as quickly as possible,
and even if the surety will be the party
paying.
There are a couple of ways of
doing this. If your company owes a trade
debt in a payment bond claim situation, the
following formula – which I didn’t originate
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but may not want to know any of the details!
on successive jobs. “He has the work and
his jobs are bonded” is a common response
to my question of ‘Why?’
Our material suppliers and
subcontractors who have just read this may
be horror-struck that this new method is
being suggested to general contractors.
Why are you giving comfort to the enemy?
The variant (Second Approach)
might work more in some situations with a
more sophisticated creditor, including
creditors who have been to the rodeo before,
because the creditor might say: ‘Why
should the surety be given a discount? If I
go against the bond, at some point I am
going to get one hundred cents on the dollar.
Anyways, sureties almost always lose in
court.’ However, even with the variant, if
you can obtain a release of your company
and of the surety as consideration for the
payment, which you usually would get
before the check is released, usually the
creditor will accept the surety’s check when
it is tendered even when the creditor was
told that it was going to be your check. In
the final analysis, money is money and
money is the life blood of every business.
After all, who is going to turn away a check
that the creditor is holding in his/her hands?
Here’s my response.
When the
Patriots play the Jets, who is the enemy?
From a Patriots’ fan’s perspective, the
response is “the Jets, of course, and sexy
Rexy.” But, from the Jets’ perspective, the
Patriots are the enemy. They can’t both be
the enemy, can they? It depends, of course,
on who is looking at the situation.
It
depends on the perspective as to where one
is at. And, subcontractors themselves often
have payment and performance and bid
bonds that will need protecting and this
same method (and other ideas suggested in
this article) can be (and are) used by them.
Whose fault is it when material suppliers
and subcontractors fail (or refuse) to file
mechanics liens or payment bond claims for
whatever reasons?
Either strategy works more often
than you might think, particularly with
material suppliers and small contractors who
are either gun shy at hiring lawyers to
pursue their claims (material suppliers) or
who really need the money now (small
subcontractors). Once the possibility of a
payment bond claim or of a mechanics lien
is lost due to passage of time, this method
seems to work better.
What if this won’t work? Three
other ideas. First, try to settle the claim
with the trade creditor itself before he/she/it
goes to a lawyer. It is more likely to be both
cheaper and more successful.
Secondly,
even if there is a lawyer involved, try to
settle the matter before a suit is filed. Since
the statute providing for interest on contract
claims discusses interest as being figured
from the date of the commencement of the
suit, it is more likely that at least interest
will have to be paid to settle a claim once a
case is filed. Thirdly, if neither of these
works, and you have the ability to pay a
settlement, try to effect a settlement on
whatever basis that you can, recognizing
that the definition of a good settlement is
where the claimant doesn’t feel it got paid
If a surety were to do this, more
likely than not, a court would consider this
to be either an unfair and deceptive trade
practice or an unfair insurance claims
settlement practice or both. There could be
some sanctions for the surety, including the
award of multiple damages. However, since
the principal is doing this - not the surety - a
surety will likely be interested in the results
-53-
enough and where the payer feels that it paid
too much. Other than saving your own time
(answering interrogatories, going to
depositions), you will save your own legal
expenses. And, my experience has been that
sureties more often than not lose on
payment bond claims, especially where they
are relatively clean and the general
contractor has a poor file (no backcharges,
late notice of general contractor claims, etc.)
More likely than not, the surety will settle
the claim before trial and it will not
ordinarily be able to settle the claim paying
the same amount that you would pay. It
will almost always cost the surety more.
And, of course, these increased costs will be
passed on to you, the indemnitor.
practitioners and who are good at it, who are
generally cheaper and less stressful.
Through a controlled series of meetings,
which are generally in conference rooms
located outside of court facilities, the
parties try to work out a solution to their
problem. The mediator does not per se
‘decide’ the case.
There is no written
decision rendered. No one either ‘wins’ or
‘loses’. And, by statute, whatever happens
in mediation is specifically exempted and
kept out of any subsequent trial. This is to
keep the mediation process confidential and
to encourage the parties to deal with each
other earnestly, not concerned about how
whatever is said can be used later in
subsequent litigation.
What normally
happens is that the mediator will require
each party to prepare before the meeting a
mediation memorandum explaining the case
and its position to submit before the hearing,
exchanging copies with the other side.
Then, the parties get together in a room,
typically the conference room of the
mediator.
Each side may make an
‘opening’, explaining its claim or defense,
which is usually done by your attorney.
Then, the parties are separated for the rest of
the day in separate rooms. The mediator
goes from one room to the other. What each
party tells the mediator is privileged in that
the mediator can not reveal this information
to the other side without that party’s
permission. The mediator points out to each
side the strengths of the other side’s position
and the weaknesses in your side’s position.
While all cases do not settle ‘in the middle’
a number of them will. At such time as
there is a settlement, both sides will get
together and the attorneys will prepare right
there a hand-written memorandum of what
the deal is and will sign it. Part of what
makes this work is that spending four to six
hours in a conference room is very tiring.
People get more reasonable as they get
bored and tired. If the mediation does not
And, a final idea. If you can take
the matter to mediation, many cases settle
with this procedure. It’s a quick process and
relatively inexpensive and there is some
expectation that the settlement will often be
somewhere in the middle between what the
demand is (from the subcontractor) and
what the offer is (from the general
contractor).
What is a mediation? Mediation is a
more-or-less non-adversarial process
whereby the parties go in front of a nonjudicial neutral (meaning, not a judge or
arbitrator) for anywhere from between three
and four hours - on the low end - to one day
or more on the high end. (Typically, a two
day hearing would be only with cases
making progress by the end of the first
day.)
Each side pays for one-half of the
mediator’s compensation, which varies from
about two hundred to four hundred dollars
per hour. Various organizations, such as
the American Arbitration Association, offer
mediation services. Many practitioners use
a group of about five to ten very
experienced construction attorneys who are
well-known to most construction
-54-
work, this ordinarily has no effect
whatsoever with any existing court case.
Traditionally, mediations tend to take place
fairly late in the court process: around the
time that the pretrial memorandum is due.
Many disputes clauses currently actually
require them much earlier in the process,
even before arbitration or litigation is filed.
in this article that there are at least six
specific admonitions against suretyship in
the Old Testament? Maybe the one has
something to do with the other! After all,
when one doesn’t comply with the
admonitions of the Great Architect, then
what can one expect?! (We all know how
difficult it can be dealing with architects!)
Here’s a wrinkle. I had dealings
with one principal who actually ‘set up’ the
surety, my client, to get the surety to pay
his bills under the payment bond.
Specifically, that principal would send to the
surety notarized, sworn letters admitting
with some particularity what it owed the
claimant with a copy of that letter being sent
to the claimant. Since the surety’s defenses
to a bond claim are the same as a principal’s
defenses – other than ‘personal’ defenses to
the surety, such as complying with a bond
statute of limitations – at such point in time
that the principal admitted to the surety that
it had no defenses, the surety would usually
have little choice but to pay such claims and
quickly.
6. Claims against your performance
bond.
These are the most serious and
potentially most expensive claims. These
are the claims that are most likely to
interfere with your principal-surety
relationship and are the most likely to affect
future bonds from this surety.
Many of the ideas and strategies
outlined above will work with performance
bond claims. Here are some ten additional
ideas and strategies that might be useful:
A. Try to conclude the claim as
quickly as you can.
Why would one do something such
as this?
I suppose, charitably or
optimistically speaking, that one might
argue that the principal’s promise to the
claimant of speeding payment for the taking
of a lesser amount of money might have
been tied into a promise of providing this
kind of assistance.
For this particular
principal, however, who had a history of
going in and out of business for thirty years
or more – faithfully filing bankruptcy as
often as the Bankruptcy Code would allow
(and sometimes more frequently) – this
probably was that principal’s way of
keeping the claimant warm, friendly and
interested in supplying labor and materials
to the principal once he formed his next,
new business at the expense of his current
surety.
Did I remember to say elsewhere
The longer these things go on, the
more likely they are to be more expensive
and more damaging to your future
bondability. Remember the suggestion to
protect your bond? This especially applies
to your performance bond.
B. The key issue in a performance
bond claim is: did the principal default on
its contract.
A surety bond is not insurance and it
is surprising how many claimants - and their
attorneys - don’t understand this.
A
performance bond claim, if successful, will
always be predicated upon some kind of
contract breach on the part of the principal.
Here is a non-exhaustive list of things that
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might constitute a contract breach: (a)
failure to meet the schedule; (b) doing
defective or non-conforming work; ( c )
failing to pay prevailing wages (on a public
job) or to supply the insurances the contract
requires; (d) filing bankruptcy or some other
form of insolvency; (e) failure to show up at
the job day after day until the job is done
(provided that there is work for you to do);
(f) failure to pay lower tier suppliers and
subcontractors; (g) causing delay to the
contracting party and to other parties
w o r k i n g on-s i t e, s uch as ot h e r
subcontractors.
claim, as sureties don’t like to
interfere/intervene in a situation where there
is litigation between the principal and the
obligee (the party to whom the bond runs,
the beneficiary).
D. Be creative.
Human beings are messy and their
problems also tend to be messy.
Court
judgments are usually black and white:
someone is completely right and the other
party is perfectly wrong. However, as we
all know, it’s a rare situation where there is
only fault on one side in any kind of dispute
situation as to the sufficiency of
performance.
So, the first issue to focus on when
trying to defend a performance bond claim
is to determine whether or not there has
been a material (significant) contract breach.
If there have been unexcused things such as
indicated in the last paragraph, there is a
good chance that a court would find a
breach of contract on your part and such a
breach of contract triggers the condition of
the performance bond.
A principal’s
strategy on a performance bond claim will
often include a dispute of a claimed breach,
if such is defensible. Obviously, the more
documentation and witnesses you have to
support such a contention the better.
I was recently involved with a
situation with a small site contractor, who
had installed a concrete block/poured
concrete wall, separating a public parking
lot from a small office building which was
in the process of being built. Shortly after
the wall was constructed, a portion of it
began to fail. Without going into a lot of
details, the owner had done things that were
wrong, the architect had done things that
were wrong and the contractor had done
things that were wrong. Also, the specialty
subcontractor which actually constructed the
wall had done so knowing that the soil
conditions behind the wall were insufficient
to provide lateral support and were not in
compliance with its own submittals.
C. Sue first.
Sometimes a good strategy is to sue
first. You know your contracting party general contractor or owner - is in the
process of terminating your contract. You
co ul d consider, in
approp ri ate
circumstances, filing a suit, such as a suit
contending that the other party has breached
the contract. Or, you might file an action
for declaratory judgment asking a court to
declare the rights and obligations of the
parties with regard to the contract at issue.
Existing litigation tends to give the surety a
more defensible position as to the obligee’s
The owner was decent, the
contractor was honorable and the architect,
while reluctant, wanted to protect other and
future jobs for this owner, a municipality.
The specialty subcontractor had never had
such a failure and was anxious to remove
this potential black mark from its record.
After some meetings and a lot of back and
forth, a methodology was established
whereby all three parties (owner, architect,
-56-
contractor) would each contribute
approximately one-third of the cost of the
rebuild of only that portion of the wall that
truly needed to be re-built. The specialty
subcontractor made some concessions on the
cost of further materials that were required
and provided its best crew to do the work.
necessary letters and respond to the other
side’s important letters.
To the extent
these things are not done, putting forth your
position in any litigation (or with the
bonding company) will be more difficult.
Put quite simply, construction litigations –
other than pure collections and indemnity
actions – are tried based on the written
record, pictures and videos. Trials occur
years after the events happened and, half the
time, some of the initial witnesses are either
not available or are hostile (as they are exemployees.)
Looking at it from another
angle, since an exchange of documents
(document production) is fairly routine in
the pre-trial preparation period of most
litigations, the fact that you don’t have very
much of a written record might actually
encourage your opposing party to go deeper
into the litigation.
For a dozen good
reasons, good super reports from the job-site
are exceptionally helpful and necessary. I
don’t know how many times I have had
business owners tell me that they can’t get
the supers to do this. You pay them, don’t
you? And, particularly today, there are a lot
of unemployed supers who would jump at
the chance to work for you. For someone
in authority to remind their employees that
there is someone just waiting to take their
job – this seems to have effectively worked
for the Patriots over the years – might
stimulate those daily report-writing juices!
Such reminders to be diplomatic, of course!
Once construction started, the job
was substantially completed in three or four
weeks and was finally completed in under
three months. No lawsuits. Bondability for
the general contractor was re-established.
A lot of money and headaches and the
unpleasantness of three to five years of
litigation were avoided.
The contractor had his arguments
why this wasn’t his fault. Still, he was fairly
small and he didn’t have the resources to
litigate with a municipality for three to five
years. Moreover, where his target market
involved performing a lot of public work, an
absence of further bondability would have
put him out of business, pure and simple,
and irrespective of whether a finder of fact
ultimately found him responsible for the
problem or not. After the work was fixed,
there were several very favorable articles
written by the local paper praising everyone.
Does this happen a lot? Maybe not
to this extent. But, keep in mind that what a
performance bond claim is is essentially just
a problem. The good Lord gave you a brain:
use it creatively to eliminate (or minimize)
the problem and protect your future bonding
(and bonding company).
F. Be aware of what the surety’s
options are.
What can or does a surety do with a
performance bond claim? Well, it can do
nothing: there is a dispute as to which it
can’t determine who is right and rather than
interfere with its principal’s position, it will
abide some kind of court decision. This is
why “sue first” is listed as an option
elsewhere in this paper. Suretyship operates
E. Document your positions and
respond to all important letters.
Not all of these ideas can be put into
practice once the claim has erupted. Still, it
is always good practice to keep good daily
reports, take a lot of pictures and write the
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by some very arcane rules, depending
significantly, on some United States
Supreme Court decisions that are almost one
hundred years old.
There used to be a
maxim applicable to sureties that a surety
should not be a volunteer.
While that expression had some validity
many years ago, some sureties seem to
follow this, as it is part of the ‘old rules’.
anxious to undertake performance in
situations where the cost is close to the
penal sum of the performance bond. Also,
since most sureties are not really set up to be
in a position to finish a job quickly, some
obligees will simply have another
subcontractor finish the defaulting
subcontractor’s work, the terms of the bond
be damned. At such point as the job is
done, the surety might write that check,
assuming there is no significant issue on
default.
Sometimes, the performance bond
surety will tender to the obligee another
contractor to complete the principal’s job.
If it is utterly impossible for some reason for
you to complete your own work, helping the
surety to find another contractor who can get
the job done without a great increase in
price might be a desirable strategy for the
surety, possibly for you. The surety will
seek such a contractor three ways: (a) it will
allow some of its existing principals
(customers) to give it prices, which builds
up a lot of good will with its other
principals; (b) it will contact the other
bidders to this job, who already have some
familiarity with the job because they figured
or bid it; ( c ) it will take bids from a group
of more or less local contractors having the
reputation and perceived ability to get the
job done.
One idea to be aware of is that often
the surety will complete a job under a
‘takeover’ agreement with the obligee and
use its principal - you - to complete the job
as its completion contractor. Quite often,
obligees don’t like this, as they are sick of
you. Others take the position that they will
go along with this as long as they only have
to deal with the surety. My sense is they
accept this a good amount of the time in
appropriate circumstances.
G. If it is clear you will be unable
to finish the job, bring the surety in
yourself.
You might be running out of money.
You are running out of time. You have tax
liens or attachments that are affecting your
cash flow. You recognize that you are no
longer a viable business. Your suppliers
and subcontractors won’t work for you
because you owe them money. Your crew is
insufficient to perform the amount of work
in question. Key employees are departing,
like rats from a sinking ship.
If the problem can be solved by
writing a check, sometimes the surety will
do this. From a principal’s standpoint, the
surety does this with payment bond claims
at an alarming rate. This might happen in a
situation where there is a clear principal
default and the estimated cost of correcting
the problem (or completing the project)
either exceeds the penal sum (the amount)
of the performance bond or might exceed the
penal sum of the performance bond. As
there is some law to the effect that a surety
undertaking performance might actually
waive the limitation of its liability to just the
penal sum of the bond, sureties are not
In such situations, indemnitors are
sometimes well-served by advising the
surety of this state of affairs sooner, rather
than later. Time is money in construction.
Getting the job done properly as quickly as
can be done is usually what will cause the
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least amount of damages (and loss
payments).
And, a surety with good
counsel can often negotiate away things like
possible liquidated damages or delay costs
or other obligee claimed costs and possible
consequential damages if the surety
commits to complete.
Principals often want the surety to
help pay for construction when they are in
trouble. They want the surety to lend it
some money to continue the job and its
business.
The technical term for this is
‘financing the principal’. Sureties hate to
do this. They will often claim that they
don’t do this. However, when there is no
other reasonable economical alternative,
they will do this.
It is common for subcontractors and
general contractors to have other companies
engaged in the same trade as buddies. Part
and parcel of ‘taking a voluntary default’
with the surety might be your figuring out
the cheapest and best way to get the job
done as quickly and as cheaply as possible
and then present that method to the surety at
or about the same time that you tell them
you can’t finish. Since the surety is not a
construction company – it is much closer to
being a bank or other financial institution –
it ordinarily will not have any idea how to
finish your work and a well thought out plan
might be well received. Remember that I
said elsewhere that sureties sometimes give
breaks to an indemnitor that significantly
helps it? This is one of those things that
might ultimately work towards that
direction.
Example. Many years ago, a surety I
represented had bonded a dozen or so
projects whereby its principal would
perform a complete evaluation of all
residential, commercial and industrial
properties in a town for the purposes of
assisting taxation. The principal didn’t have
the ability (money) to complete these
projects and they were only half done when
they ran out of gas. It is important to note
that such evaluations depend heavily on
what is proprietary software. So, if the
surety brought someone else in, it would
essentially have to pay the cost of
performing each job in its entirety, which
would cost boatloads of money and
contribute to boatloads of delay (and
significant possible consequential damages).
When an ostrich puts it head in the
sand, this doesn’t change the ultimate result
or protect it. It only means that when the
ostrich is hit by a car or run over by a truck
it won’t see it.
Pretending the situation
isn’t there isn’t going to prevent bad things
from happening.
The more time that is
available to get the job done may mean that
the surety has more options as to how to get
the job done and more options might mean
that it will spend less money. As an
indemnitor, this is what you want, also.
In these circumstances, this surety
did ‘finance’ the principal. It provided the
principal funds to function each week, the
distribution of which was overseen by an
accountant and by an attorney. Ultimately,
this approach was successful.
So, if you are in trouble, don’t
automatically assume that the bonding
company will give you money to finish the
work. Usually, and in the great majority of
cases, it won’t. Be aware, however, that
bonding companies will do this when this is
the only feasible opportunity for finishing
the work as quickly and cheaply as possible.
A tip. If you really are thinking of
H. Sureties do finance, but only in
very limited circumstances.
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requesting financing, prepare a realistic
schedule of what monies you will need and
when with as much back-up as possible
before you make that request.
much higher than they would be for the
same work as performed by your
subcontractors, bid in a competitive and
non-emergency situation.
The bidders
would say that if they have to provide
warranties for work that has already been
done, they have to include contingencies for
things they can’t fully protect themselves
for, such as wiring and piping behind walls
and what is in (or not in) conduits already
set in concrete. This is true. But, equally
true is the fact that most completion
contractors who work for sureties are
looking for cake and ice cream. It’s party
time when the surety is paying the bill, a
fact the surety is well aware of and a
situation it attempts to mitigate whenever
possible.
I. ‘Back door’ financing.
Sureties hate to do financing through
the front door: giving money to its principal
to finance its operations, which is charged to
its performance bond.
Under some circumstances, however,
there is another alternative, one that is more
palatable to the surety. This is ‘back door’
financing.
What this means is that the
principal will complete the job using its
existing subcontractors, who will then get
paid under the payment bond. This is less
objectionable to the surety than actually
providing money to the principal for a
variety of reasons. Also, as a practical
matter, the surety may not have anything to
say about this.
The principal may have
figured out that this is how he is going to get
the job done and by the time the surety
realizes this, there is a fait accompli. The
job is done:
the subcontractors and
suppliers want to get paid. Many times, the
surety will be aware that this is what is
happening and will not object to it. After
all, as we all know, most general contractors
don’t perform much of the actual
construction work themselves. Most of the
work is subcontracted. The subcontractors
already on the job have the benefit of the
learning curve: they know where the bodies
are buried, they understand what work has
been done (or not done) and are more or less
attuned to the schedule. Also, since they are
performing in accordance with subcontracts
for which the pricing was determined before
a default, this is usually a lot cheaper than
procuring new subcontractors. When a
bonding company hires contractors to finish
a principal’s work, usually the prices are
J. Complete bonded work first.
If things are really bad, make sure
that the bonded obligations are completed
before the unbonded obligations are
completed. And, make sure that the trade
debt for the bonded obligations gets paid
before the trade debt for the unbonded
obligations gets paid.
And, ahead of
everything – including trade debt - make
sure that all of the withholding taxes are
paid.
If you are performing construction
work as a corporation or limited liability
company, usually there is no way for your
company’s creditors to get to you
personally, absent allegations of fraud.
This isn’t the case with bonded work, as
you, as an individual, have agreed to
personally reimburse the surety for your
company’s losses by a contractual
obligation you voluntarily assumed during
rosier times. And, taxes always have to get
paid, as tax obligations are not generally
dischargeable in bankruptcy and can
accumulate horrific interest and penalties.
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Moreover, individual officers and
individuals in your organization might
become personally liable for them under
various provisions of law. The whole thrust
of this paper has been to protect the
individual owners and officers.
The
corporation, when many of these things are
happening or have happened, is like the
Titanic sinking in the sea. Or, it may have
already sunk.
fulfill you? We work to support ourselves
and our families. Period.
In writing these articles, am I
marketing? Of course, I am marketing! I
can always use additional quality material
suppliers, subcontractors and general
contractors as clients. I would welcome the
opportunity to serve you. Why not give us
a chance?
Think about these things before
trouble arrives and then make intelligent
plans accordingly.
Louis Pasteur said:
“Chance favors only the prepared mind.”
Having read a number of positive thinking
books, I have seen the following several
times in different forms: “It seems that the
harder I work and the better prepared I am,
the more lucky I am.” In negotiating with
the surety, a good experienced attorney in
many circumstances will pay for
himself/herself in terms of helping you get a
better deal and/or to achieve a better result.
CONCLUSION.
This is one of my longest articles. It
is a complex subject and while I hope that I
have at least more than scratched the
surface, there are more ideas to be
considered and explored. I can certainly
see a “Part II” article on this subject at some
point in the future.
If you have any
questions or comments on this subject
matter, I would be pleased to receive them
and I might possibly address some of them
having general interest ‘next time.’
Most of all, if sad events like these
overtake you in the future, remember that
the bonding company is not there to help
you. Capisce?
Why would someone take more than
thirty hours out of a very busy schedule to
write this article and to help you for
nothing? It is in my nature to write and
teach and, frankly, to nurture.
I have
gratitude to my industry which has
supported me for more than thirty-five
years. Construction law is all that we do at
Sauer & Sauer, a husband and wife business.
My website has more content of
information that people can actually use as
compared with every other lawyer website I
have seen. The more of these articles you
read and understand, the better your
business life is likely to be. More likely
than not, you’ll make (and/or keep) more of
the money you have earned. Isn’t that why
you go to work every day? Is hanging that
next sheet of sheetrock all that exciting?
How will installing one hundred more toilets
************************************
This article is not intended to be specific
legal advice and should not be taken as
such. Rather, it is intended for general
educational purposes only. Questions of
your rights and obligations when dealing
with sureties are best addressed to legal
professionals of your own choosing.
(Copyright claimed, Jonathan Sauer,
November, 2011)
Attorney Jonathan P. Sauer
Sauer & Sauer
15 Adrienne Rd.
East Walpole, MA 02032
Phone: 508-668-6020
-61-
Fax: 508-668-6021
jonsauer@verizon.net
(Please note that this is a new address and
that these are new phone and fax numbers)
Visit our web site for nearly forty articles
and forms on timely construction law and
business
law
subjects:
www.sauerconstructionlaw.com
“Knowledge is money in
your pocket!”
Norwood 5K
Sally and Jon Sauer
Second Place Winners
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Sauer & Sauer
15 Adrienne Rd.
E. Walpole, MA 02032
Phone: 508-668-6020
Fax: 508-668-6021
www.sauerconstructionlaw.com; jonsauer@verizon.net;sallysauer@verizon.net
C
Concentrated practice for 35 years (Jon) and 7 years (Sally) in construction law issues
including: bid problems; the competitive bid statutes; surety bonds; mechanics’ liens; the
drafting and negotiation of contracts; contractor business and surety issues; and,
litigation as to claimed construction contract breaches in all Massachusetts forums.
Sally also has extensive experience as a surety bond claims representative, working for
four sureties over a period of ten years.
C
Honors graduate of both Northeastern University and Suffolk Law School (Jon) and
DePaul University and Massachusetts School of Law (Sally).
C
Contributors as to mechanics’ liens and payment bond law for seven states for the annual
NACM publication Manual of Credit and Commercial Laws.
C
It’s the holiday season! However you celebrate it, we’d like to say to you and yours:
Happy Holidays and Best Wishes for the New Year and Good Health to all! We
certainly hope the economy gets better. But, as we always say in the world of Scribbles:
“It’s all about the family.” Isn’t it?
C
Geez, we moved out of Norwood in the middle of the night with about fifteen minutes
notice. The Founder, once he has an idea, is like a horse with a bit in its mouth. (Maybe
I should rephrase that.) We’re still trying to get used to East Walpole. For some reason,
although not a ‘townie’, the Founder is fitting right in famously. And, the new office is
less than three miles from our former office in Norwood.
“2012 will be the year of big doings. We are waiting for an advisory
opinion from Dewey, Cheetem & Howe as to rectifying a certain
omission made by the writers of the Constitution. We hope to be having
a kick-off rally soon. Wine and cheese will be served! Those of you
seeking cabinet appointments and other appointments in my new
Administration should be getting your resumes and donations together.
Cash, gold or personal checks, please! (I might consider a wheel of aged cheddar.)”
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