Adams v. Petrade Intern., Inc.

• Decision Date: 17 March 1988
• Docket Number: No. 01-86-00526-CV,01-86-00526-CV
• Citation: 754 S.W.2d 696
• Parties: 7 UCC Rep.Serv.2d 369 John Rella ADAMS, et al., Appellants, v. PETRADE INTERNATIONAL, INC., et al., Appellees. (1st Dist.)
• Court: Texas Court of Appeals

Page 696

754 S.W.2d 696

7 UCC Rep.Serv.2d 369

John Rella ADAMS, et al., Appellants, v. PETRADE INTERNATIONAL, INC., et al., Appellees.

No. 01-86-00526-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

March 17, 1988.

Rehearing Denied July 7, 1988.

Raymond E. White, Akin, Gump, Strauss, Hauer & Feld, Van E. McFarland, McFarland & Tondre, Houston, for appellants.

Larry R. Veselka, Vinson & Elkins, Albert Vacek, James L. Reed, Looper, Reed, Weing & McGraw, Houston, Jerome P. Owens, Woodville, Sim T. Lake, Fulbright & Jaworski, Houston, for appellees.

Before EVANS, C.J., and LEVY and HOYT, JJ.

EVANS, Chief Justice.

John R. Adams, d/b/a Adams Oil Company, and Cloyce K. Box appeal from a money judgment in favor of Petrade International, Inc. and Gulf States Oil and Refining Company, based on the jury's findings that Box and Adams agreed to purchase certain gasoline from Petrade and Gulf States and that the parties were also bound by the terms of a settlement agreement.

In May 1979, gasoline and No. 2 grade fuel oil were bringing in the highest price in history. In early June 1979, Box, Adams, and Petrade, a trading company, began discussions about a purchase of gasoline and No. 2 oil from Petrade. The jury found that Box and Petrade's representatives agreed that Petrade would sell 100,000 barrels of regular gasoline and 100,000 barrels of No. 2 fuel oil, which, at Box's request, were to be shown as having been purchased in Adams' name. Adams verbally confirmed this purchase, and later agreed to purchase an additional 100,000 barrels of regular gasoline from Petrade. After Petrade confirmed that it could purchase the gasoline and oil from its supplier, Gulf States, Petrade sent "confirmation" documents to Adams, the legal effect of which is a substantial issue in the case.

After initially agreeing to delivery of the oil on Colonial Pipeline at Pasadena, Texas, Adams asked that the oil be scheduled instead on the Texas Eastern Pipeline, which could route the oil to where Adams had a potential customer. But because the Texas Eastern Pipeline could handle delivery of only 25,000 barrels of the oil in June, the delivery of the remaining oil was delayed. This delay was confirmed by the parties' writings in June 1979.

In mid-June 1979, prices of gasoline and No. 2 oil suffered a severe decline. On July 2, Petrade's representatives met with Adams and Box to discuss their arrangement. At that meeting, Adams executed a written agreement acknowledging his agreement to purchase the No. 2 oil, but he verbally informed Petrade that he needed more time to pay for it. Box and Adams denied any agreement to buy the gasoline.

After further negotiations, Box and Petrade's representative orally agreed to a settlement concerning the No. 2 oil purchase agreement. Under this settlement, Box's company, OKC Corporation, was to buy 100,000 barrels of No. 2 oil from Petrade for later delivery, at a price in excess of the then-prevailing market price; in return, Petrade was to release Box from liability. Adams, on the other hand, was to pay Petrade the sum of $1.3 million dollars, and Petrade would release Adams from liability. Also, Box and Adams would not be required to take delivery of or pay for oil from Petrade under the June 1979 agreement.

A written settlement agreement, stating that Adams would pay $1.3 million for a release of any liability on the No. 2 oil contract, was prepared and sent by Adams' lawyer to Petrade. There was evidence that this writing accurately reflected the terms of the agreed settlement. On July 16, Petrade received a revised settlement agreement from Adams requiring that Petrade OKC Corporation later purchased 100,000 barrels of No. 2 oil from Petrade at a price in excess of the prevailing market price (as provided by the settlement agreement), but Adams never paid Petrade the $1.3 million that was specified in the settlement agreement as the consideration for a release of his liability. Neither did Petrade expressly release Box or Adams of liability under the No. 2 oil purchase agreement. No oil or gasoline was ever delivered to Box and Adams, and this litigation resulted.

also release Adams from his alleged obligation under the outstanding gasoline agreements. Petrade refused to do so. As a result, neither Box nor Adams paid Petrade for any of the gasoline or for the No. 2 oil. Petrade's supplier, Gulf States, then demanded adequate assurance of performance on the gasoline that Petrade had agreed to buy in order to fulfill Adams' contract, and it refused to deliver either the gasoline or the prepaid No. 2 oil without security of $10 million.

The cause was tried to a jury, which found: that Box and Adams were partners, and that Adams was Box's authorized agent in negotiating the agreements to buy gasoline and oil, and also in making the oil settlement agreement; that Adams had orally agreed to purchase the gasoline and oil from Petrade; that Adams had anticipatorily repudiated his agreement to purchase 200,000 barrels of regular gasoline and breached his agreement to purchase 100,000 barrels of No. 2 oil; that the market price per gallon of gasoline, both at the time of the repudiation and at the time of tender, was $.96 per gallon and that the market price at the time and place of tender of the No. 2 oil was $.91 per gallon; that Petrade tendered to Adams all of the gasoline and No. 2 oil he had agreed to purchase; and that Box was liable as guarantor of Adams' obligation under the gasoline agreements. The jury favorably answered a series of issues relating to the enforceability of the gasoline agreements under the theory of promissory estoppel, and also found that Petrade was a merchant for purposes of an exception to the statute of frauds section of the Texas Business and Commerce Code.

The jury further found that Box and Adams had entered into the settlement agreement with Petrade regarding the No. 2 oil transaction; that the terms of such agreement were that Box or OKC would purchase 100,000 barrels of No. 2 oil from Petrade at $.80 per gallon, and that Adams would pay Petrade $1.3 million in settlement of the claims against him. The jury refused to find that there had been a failure of consideration by Petrade with respect to any of the agreements, or an impossibility of such performance, or that the parties intended that payment for the gasoline and oil would be made only upon receipt of supporting documents.

After motions for judgment and for judgment notwithstanding the verdict, the trial court awarded Petrade and Gulf Coast $2,898,000 as damages against Box and Adams, jointly and severally, on the gasoline contracts. This figure apparently represents the difference between the contract and the market price of the gasoline. Judgment was also entered against Adams alone for $1.3 million, the amount that Adams had agreed to pay under the settlement agreement. The court also awarded prejudgment interest and attorney's fees, and entered a take-nothing judgment as against Box's Company, OKC.

Box and Adams together assert 149 points of error, grouped into parts for purpose of argument.

We first address the appellants' contention that Petrade's recovery under the alleged gasoline purchase contracts was barred by the statute of frauds. The Texas statute of frauds provides:

(a) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a (b) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of Subsection (a) against such party unless written notice of objection to its contents is given within ten days after it is received.

term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

....

Tex.Bus. & Com.Code Ann. sec. 2.201 (Tex. UCC) (Vernon 1968).

Box and Adams contend, in essence, that the two alleged gasoline contracts: (1) are unenforceable as a matter of law under Texas UCC section 2.201(a), and (2) do not satisfy the merchant's exception to the requirements of 2.201(a), because "no writing in confirmation" was timely sent. Sec. 2.201(b). The appellants also contend that the court erred in submitting to the jury numerous special issues relating to elements of the statute of frauds issues; but these contentions are not argued, so they are waived. Appellants also assert that there was no evidence or insufficient evidence to support the jury's findings relating to these issues.

Section 2.201 of the Texas U.C.C. requires a signed writing sufficient to indicate that a contract for sale has been made. Tex.Bus. & Com.Code Ann. sec. 2.201(a). The appellees concede that no such writing signed by the appellants exists, but contend that the circumstances of this case fall within the "merchant's exception" to the statute of frauds.

The "merchant's exception" provides, insofar as applicable here, that between merchants, a writing in confirmation of the contract will satisfy the requirements of section 2.201(a) if (1) it is received within a reasonable time, (2) it is sufficient against the sender, and (3) the party receiving it has reason to know its contents. Tex.Bus. & Com.Code Ann. sec. 2.201(b). Such a confirmation satisfies section 2.201(a) unless written notice of objection is given within 10 days after the confirmation is received. Id.

Whether the circumstances of a particular case fall within an exception to the statute of frauds is generally a question of fact. Vehle v. Brenner...