Abilene Nat. Bank v. Fina Supply, Inc.
| Citation | 706 S.W.2d 737 |
| Decision Date | 27 February 1986 |
| Docket Number | No. 11-85-112-CV,11-85-112-CV |
| Parties | ABILENE NATIONAL BANK n/k/a MBank Abilene, N.A., Appellant, v. FINA SUPPLY, INC., Appellee. |
| Court | Texas Court of Appeals |
W. Mike Baggett & Tonya Johannsen, Winstead, McGuire, Sechrest & Minick, Dallas, Pete Baker, Glandon, Erwin, Scarborough, Baker, Choate & Arnot, Abilene, for appellant.
Donald E. Godwin & J. Richard Tubb, Maxwell, Godwin & Carlton, Dallas, Roy B. Longacre, Wagstaff, Harrell, Alvis, Stubbeman, Seamster & Longacre, Abilene, for appellee.
This suit concerns a letter of credit. Abilene National Bank, now known as MBank Abilene, N.A., filed suit seeking a declaratory judgment that it was not liable to fund Letter of Credit No. 1342 in favor of Fina Supply, Inc. because the presentment documents submitted with Fina's draw request did not comply with the terms and conditions of the letter of credit. Subsequently, after Abilene National Bank failed to honor its draft, Fina filed suit against Abilene National Bank for breach of contract; and alternatively, to reform the terms of the letter of credit and collect on the letter as reformed; and also alternatively, to recover damages on the theory of common-law fraud. The two suits were consolidated for trial. Following the jury's verdict, Fina's Fina and Brio Petroleum, Inc. entered into an exchange agreement whereby each would ship crude oil to locations designated by the other, with the mutual intent of exchanging like amounts. Fina required a letter of credit securing payment for any imbalances in Brio's favor. Representatives of Fina and Brio discussed with Kathy Kiser, a vice-president of Abilene National Bank, the need for Brio to secure a letter of credit to support the transactions between Fina and Brio. Based on the discussion, an irrevocable letter of credit dated September 28, 1981, in the amount of $4.5 million was issued by the Bank.
motion for judgment authorizing recovery on the theory of common-law fraud was granted, and judgment was entered against Abilene National Bank for $4.5 million as actual damages, $6.5 million as exemplary damages, plus pre-judgment and post-judgment interest, costs of suit, and attorney's fees. Abilene National Bank appeals. We reverse and render.
The instrument provided that the funds were available to Fina by its sight draft when:
[A]ccompanied by this original document and:
1. Copy of your commercial invoice covering approximately 124,000 barrels of Giddings type crude oil at a price of $36.25 per barrel, delivered during October, 1981.
2. Copy of Pipeline Statement or Pipeline Receipt evidencing delivery of approximately 124,000 barrels of Giddings type crude oil to Brio Petroleum, Inc. via Exxon Pipeline, Raccoon Bend Station.
3. Signed statement by an authorized representative of Fina Supply, Inc. certifying that the amount drawn hereunder represents balances due from Brio Petroleum, Inc.
Special Instructions:
Partial Drawing Prohibited
Draft may not be presented prior to November 23, 1981
Drafts must be drawn and negotiated not later than November 30, 1981. The letter of credit was amended by instrument dated November 30, 1981, as follows:
a) No. 1 under accompaniments shall include deliveries during November and December, 1981.
b) No. 2 under accompaniments shall include deliveries via Hope Station and/or Rosanky.
c) Under Special Instructions: Drafts may not be presented prior to 1 (one) day after agreed payment date.
d) Expiration is extended to January 31, 1982.
Subsequently, the letter of credit was amended three more times. On January 15, 1982, it was amended solely as follows: The third amendment extended the expiration date to March 31, 1982, with no other change. Finally, the fourth amendment to the letter of credit dated March 29, 1982, provided only:
On May 24, 1982, Scott McEwen, manager of crude oil acquisition with Fina, tendered a draft and supporting documentation under the letter of credit to the Abilene National Bank. McEwen testified that Kiser received the documents and informed him that they would be reviewed, that she would personally contact him if there were any problems with the documents, and that Fina would be paid within three days if there were no problems. After examination of the documents by the attorney for Abilene National Bank, Fina was informed that the draw documents did not strictly comply with the terms and conditions of the letter of credit, as amended. Payment was refused, and the instant cause resulted. Fina insists that this Court is presented with a common-law fraud case. Abilene National Bank argues that this is a letter of credit case.
The allegations, facts, and prayer for relief contained in Fina's pleadings required Fina to make an election of remedies between reformation and a suit for fraud. The Texas Supreme Court in Custom Leasing, Inc. v. Texas Bank & Trust Company of Dallas, 491 S.W.2d 869, 871 (Tex.1973) declared:
An election of remedies is the act of choosing between two or more inconsistent but coexistent modes of procedure and relief allowed by law on the same state of facts.
Reformation and rescission, both equitable remedies, are considered to be alternative to, and inconsistent with, a party's damage claim for fraud which arises out of the same state of facts. See 14 DORSANEO, TEXAS LITIGATION GUIDE sec. 336.07 (1985); see also Uvalde Const. Co. v. Joiner, 132 Tex. 593, 126 S.W.2d 22, 24 (1939); Dixon v. Brooks, 604 S.W.2d 330, 334-35 (Tex.Civ.App.--Houston [14th Dist.] 1980, writ ref'd n.r.e.); Reynolds Brothers, Incorporated v. Dodson, 380 S.W.2d 678, 681-82 (Tex.Civ.App.--Corpus Christi 1964, no writ); Blum v. Elkins, 369 S.W.2d 810, 812 (Tex.Civ.App.--Waco 1963, no writ). As an analogy to an action for reformation, it is a well established principle that a party cannot, on the same state of facts, have both rescission and damages for fraud; rather, an election must be made. See Uvalde Const. Co. v. Joiner, supra; Dixon v. Brooks, supra. The reasoning which underlies the election of remedies doctrine in a rescission setting is that rescission, based on fraud, seeks to cancel the contract and recover damages; whereas an action for fraud, although alleging damages, affirms the contract. Likewise, when a party pleads, as was done in the instant case, for reformation based on fraud and also seeks damages based on fraud, two inconsistent and alternative remedies are present. Reformation asks the court to correct a written instrument which, due to mutual mistake or unilateral mistake accompanied by inequitable conduct or fraud, does not represent the true intent of the parties. See, e.g., First National Bank of Andrews v. Jones, 635 S.W.2d 950, 952-53 (Tex.App.--Eastland 1982, writ ref'd n.r.e.); Stegall v. Fulwiler, 423 S.W.2d 182, 186 (Tex.Civ.App.--Amarillo 1967, no writ); Meador v. Ivy, 390 S.W.2d 391, 392 (Tex.Civ.App.--San Antonio 1965, no writ). When, however, an action for damages based on fraud is sought, the party seeks merely to recover the damages occasioned by the fraud.
Although a party may plead, present evidence, and obtain special issues on two or more inconsistent remedies arising from the same state of facts, prosecution of suit to final judgment and obtaining relief under one of the pleaded theories constitutes an election of remedies. See, e.g., Bocanegra v. Aetna Life Insurance Company, 605 S.W.2d 848, 853 (Tex.1980); Redding v. Ferguson, 501 S.W.2d 717, 720 (Tex.Civ.App.--Fort Worth 1973, writ ref'd n.r.e.); Harris v. Christianson-Keithley Company, 303 S.W.2d 422, 428 (Tex.Civ.App.--Galveston 1957, writ ref'd n.r.e.). As stated by the court in Harris:
Plaintiff, having been allowed one of the two inconsistent prayers for relief, is, it seems to us, in the position of having induced the very action which the court took and is not in position to complain on the general principle, as announced by the Supreme Court of Iowa in Dow v. McVey, 174 Iowa 553, 156 N.W. 706, 707: "If two inconsistent prayers for relief be made, the court can properly grant but one, and, if it grants one, the plaintiffs can make no valid complaint because it denied the other."
Fina's prosecution of this suit to judgment based on fraud resulted in the election of fraud as the remedy under which Fina obtained redress for the alleged wrongdoing of Abilene National Bank.
The basis for Fina's cause of action for fraud was that Abilene National Bank misrepresented Fina's rights of coverage under Letter of Credit No. 1342 for exchange imbalances through April 1982. Fina argues that Abilene National Bank had loaned a substantial sum of money to Brio and that this loan would have been in jeopardy if Fina ceased delivering crude oil to Do you find from a preponderance of the evidence that prior to March 26, 1982 (the date of the Fourth Amendment to Letter of Credit No. 1342) Abilene National Bank knowingly or recklessly made false representations and/or statements of material facts to Fina regarding Letter of Credit No. 1342 and its amendments with the intention of inducing Fina to exchange crude oil with Brio in reliance on the false representations and/or statements and that Fina suffered damages as a direct result of its reliance on the representations and/or statements by Abilene National Bank?
the Brio refinery. The recovery based on the alleged fraud was founded on the jury's "we do" answer to the special issue which inquired:
Abilene National Bank, by Point of Error No. 15, contends that the alleged misrepresentations cannot qualify as "material misrepresentations" sufficient to support a fraud judgment....
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Fina Supply, Inc. v. Abilene Nat. Bank
...Brio through April 1982. Abilene National Bank appealed, and the court of appeals reversed and rendered judgment that Fina take nothing. 706 S.W.2d 737. We affirm the judgment of the court of Fina Supply and Brio Petroleum are in the business of acquiring oil for their affiliated refineries......
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Soto v. International Medical Group, Inc., No. 14-05-00956-CV (Tex. App. 4/3/2007)
...with IMG's assertion of accord and satisfaction, and payment. In support of her argument, she cites Abilene Nat'l Bank v. Fina Supply, Inc., 706 S.W.2d 737 (Tex. App.-Eastland 1986), affirmed in part, disapproved in part, Fina Supply, Inc. v. Abilene Nat'l Bank, 726 S.W.2d 537 (Tex. 1987). ......