Place beans in a large saucepan; cover with water 3 inches above beans. Cover and bring to a boil; reduce heat and simmer 2 hours or until beans are tender. Set aside.
Saute onion and green pepper in butter in a large skillet until tender; add flour, stirring until well blended. Cook 1 minute, stirring constantly. Gradually add tomatoes and water; cook over medium heat, stirring constantly, until thickened and bubbly. Add sugar and salt; pour over beans, and mix well. Cook an additional 20 minutes, stirring frequently.