American Petrofina, Inc. v. PPG Industries, Inc.

• Decision Date: 01 November 1984
• Docket Number: Nos. 2-83-133-C,2-83-152-CV,s. 2-83-133-C
• Citation: 679 S.W.2d 740,40 U.C.C.Rep. 816
• Parties: 40 UCC Rep.Serv. 816 AMERICAN PETROFINA, INC., American Petrofina Company of Texas, and American Petrofina Marketing, Inc., Appellants, v. PPG INDUSTRIES, INC., and Ayres Oil Co., Inc., Appellees.
• Court: Texas Court of Appeals

Page 740

679 S.W.2d 740

40 UCC Rep.Serv. 816

AMERICAN PETROFINA, INC., American Petrofina Company of Texas, and American Petrofina Marketing, Inc., Appellants, v. PPG INDUSTRIES, INC., and Ayres Oil Co., Inc., Appellees.

Nos. 2-83-133-CV, 2-83-152-CV.

Court of Appeals of Texas,

Fort Worth.

Nov. 1, 1984.

Maxwell, Godwin & Carlton and Donald E. Godwin, Dallas, for appellants.

Banner, McIntosh & Dobbs and Jack Benner, Wichita Falls, for appellee PPG Industries, Inc.

Fillmore & Associates and H. Dustin Fillmore, Fort Worth, for appellee Ayres Oil Co., Inc.

Before FENDER, C.J., and HUGHES and JOE SPURLOCK, II, JJ.

OPINION

FENDER, Chief Justice.

In this case PPG Industries, Inc. (PPG) brought suit jointly and severally against American Petrofina, Inc., American Petrofina Company of Texas, and American Petrofina Marketing, Inc. (Fina) and Ayres Oil Co. Inc. and Jack Ayres, individually (Ayres), whereupon Ayres sued Fina. After consolidation of the two suits Ayres cross-claimed against Fina, asserting essentially the same causes of action as asserted against Fina in its original petition.

In alternative counts, PPG pled (1) conversion, (2) violations of the Deceptive Trade Practices Act, (3) breach of contract, (4) Fraud, (5) breach of bailment, and (6) unjust enrichment. Ayres asserted its cross-claim against Fina for (1) indemnification for breach of contract, (2) violations of the Deceptive Trade Practices Act and indemnification for violations of the Deceptive Trade Practices Act asserted against it by PPG, (3) tortious interference with contract (4) conversion, and (5) indemnification for PPG's cause of action alleging conversion. Fina asserted as affirmative defenses, (1) abandonment of contractual rights by PPG and Ayres, (2) the doctrine of laches and stale demands, and (3) the agreement between Ayres and itself was unconscionable on the part of Ayres.

After the jury trial the suits were severed and separate judgments were entered. PPG's judgment against Fina and Ayres jointly and severally was for $3,240,000 in actual damages and prejudgment interest in the amount of $308,375.40; against Fina only for $6,480,000 in trebled damages and $150,900 attorneys fees. Ayres' judgment against Fina was for full indemnity for all amounts required to be paid by it in PPG's judgment, $126,471.00 in actual damages and $12,000,000 exemplary damages. Upon Fina's appeal from both judgments, the causes were again consolidated and are together before us.

The case arises out of a dispute among the parties regarding their respective rights and obligations under two contracts. The first contract was executed by PPG and Ayres. The second was executed by Ayres and Fina. These contracts will be referred to as "PPG-Ayres" and "Ayres- Fina" respectively. The background against which the contracts should be viewed is as follows.

PPG produces glass at its Wichita Falls plant in furnaces which utilize natural gas as the primary source of fuel. Those furnaces are equipped to use diesel oil in emergencies and they consume 50,000 gallons per day of such use. The Fina companies are producers of diesel oil and other related products and they maintain one of their pipeline terminals and storage facilities at Wichita Falls. Ayres is a "jobber" which sells Fina's petroleum products in the Wichita Falls area.

During the extremely cold winter, in February, 1977, PPG perceived danger to its continuing supply of natural gas fuel because it was experiencing curtailments of such fuel. To meet such danger, PPG took steps to provide itself with a sufficient quantity of diesel oil to enable it to continue operating with the alternate fuel in the event its use became necessary. PPG contacted Ayres, which in turn contacted Fina regarding the possibility of the purchase of large quantities of diesel oil. The results of negotiations thereafter were the two contracts which form the basis of the litigation.

The PPG-Ayres contract was executed on August 28, 1977, and is entitled Diesel Fuel Supply And Storage Agreement. It describes PPG as "buyer" and Ayres as "seller" and is for an initial term of five years. It provides that on the effective date (August 1) Ayres shall "sell to and store" for PPG's account 3,000,000 gallons of diesel fuel oil at $0.36 per gallon and that PPG pay a storage charge of $2,000 per month "for the entire term hereof for the three million gallons of storage space provided." Provision is made for replenishment of the oil used by PPG at the "branded jobber price" then prevailing. The maximum daily delivery rate was set at 60,000 gallons.

On September 1, 1977, Ayres and Fina consummated their "Fuel Purchase Agreement." It provided for the sale of an "initial quantity" of 3,000,000 gallons of diesel fuel to Ayres at $0.35 per gallon with payment in full for the initial quantity upon execution of the agreement. The oil was to be "made available" to Ayres at a rate not in excess of 60,000 gallons per day. Fina further agreed to sell and Ayres agreed to buy "additional quantities" of oil at the then prevailing branded jobber price in accordance with a schedule designed generally to maintain a three million gallon inventory by each November first during the five year term. The concluding paragraph of the agreement states:

"6. After termination of this agreement, any product which has been purchased by Buyer hereunder shall be delivered by Seller to Buyer in the manner and at the rate set forth herein."

PPG paid Ayres $1,080,000 and Ayres paid Fina $1,039,500, representing a purchase price of 35 cents per gallon, less one percent cash discount.

Subsequent to the execution of the contracts, the eventuality against which PPG sought to protect itself failed to materialize. A series of mild winters and increased natural gas supply combined to avert curtailment of the natural gas at PPG's plant, and accordingly PPG found no need for the stand-by fuel it purchased from Ayres nor did Ayres have reason to call for delivery of the diesel oil it had purchased from Fina. The contracts lay dormant until August of 1981, except for the routine monthly report of Ayres in verification of PPG's inventory and an occasional sampling and quality testing of its inventory by PPG. At that time, PPG decided to reduce its inventory by 1,400,000 gallons and to sell off that amount for the best price available, and so informed Ayres. Being assured by Ayres that the oil would be available, PPG made arrangements to sell 1,400,000 gallons to Pride Oil Co. for $0.92 per gallon. Fina's initial reaction to this plan was to begin to make bookkeeping arrangements for delivery as requested by Ayres. Soon thereafter, Fina took the position that the 1977 agreements were not enforceable due to the four-year inactivity and refused delivery but offered to return the purchase price plus interest. Fina's offer was refused and litigation ensued. Fina brings forty-one points of error in its appeal from the two judgments. For purposes of clarity, the points of error will be discussed as they relate to the two judgments entered below.

I. JUDGMENT IN FAVOR OF PPG

The judgment entered against Fina and in favor of PPG was on PPG's deceptive trade practices cause of action. Fina raises ten points of error regarding the question of whether the trial court erred in finding that PPG had a cause of action under the DTPA. Fina avers in its eighth point of error that PPG is not a consumer and that if PPG does qualify as a consumer, it did not comply with the notice requirements of the DTPA.

Two requirements must be satisfied for a person or corporation to qualify as a consumer under the DTPA. The person or corporation must have sought or acquired goods or services by purchase or lease and the goods or services purchased or leased must form the basis of the complaint. Privity is not a consideration in deciding consumer status. Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 541 (Tex.1981).

The trial court found that PPG was the owner of the three million gallons of diesel fuel oil at all times after Fina accepted payment therefor on September 21, 1977. Fina's reasoning under its non-consumer argument is that due to this finding by the court, the goods did not form the basis of the complaint when Fina refused delivery of the fuel in 1981. We disagree. Fina overlooks the allegations of misrepresentations at the inception of the purchase in 1977. Under the test set forth by the Supreme Court, PPG does qualify as a consumer. It sought three million gallons of diesel fuel by purchase and those goods form the basis of its complaint. See Cameron v. Terrell & Garrett, Inc., supra, at 541.

Fina's alternate contention is that if PPG does qualify as a consumer, it did not comply with the notice requirements of the DTPA. Fina states in its brief that PPG's notice to Fina that it intended to file a DTPA action was received on June 16, 1982. PPG's original petition was filed June 15, 1982. The 1979 amendments to the DTPA made 30 days written notice a prerequisite to the filing of suit. 1979 TEX.GEN.LAWS, ch. 603, sec. 17.50A at 1330. Fina argues that since PPG failed to comply with this prerequisite, it should be precluded from recovering treble damages. See Blumenthal v. Ameritex Computer Corp., 646 S.W.2d 283 (Tex.App.--Dallas 1983, no writ). Before deciding whether the notice was proper, we must decide which amendments to the DTPA govern this suit.

The 1979 amendatory act contains a provision which states:

This Act shall be applied prospectively only. Nothing in this Act affects either procedurally or substantively a cause of action that arose either in whole or in part prior to the effective date of this Act.

1979 TEX.GEN.LAWS, ch. 603, sec. 17.56A, sec. 9 at 1332. The trial court found that PPG's cause of action arose at least in part before the 1979 amendments became effective. We agree. The negotiations for the purchase of this three million gallons of fuel took place in ...