BarclaysAmerican/Business Credit, Inc. v. E & E Enterprises, Inc.

• Decision Date: 29 August 1985
• Docket Number: No. 05-84-00529-CV,05-84-00529-CV
• Citation: 697 S.W.2d 694
• Parties: 42 UCC Rep.Serv. 706 BARCLAYSAMERICAN/BUSINESS CREDIT, INC., Appellant, v. E & E ENTERPRISES, INC., Appellee.
• Court: Texas Court of Appeals

Page 694

697 S.W.2d 694

42 UCC Rep.Serv. 706

BARCLAYSAMERICAN/BUSINESS CREDIT, INC., Appellant, v.E & E ENTERPRISES, INC., Appellee.

No. 05-84-00529-CV.

Court of Appeals of Texas Dallas.

Aug. 29, 1985.

H. Campbell Zachry, Dallas, for appellant.

W.A. Pritchard, Dallas, for appellee.

Before SPARLING, VANCE and MALONEY, JJ.

MALONEY, Justice.

This is an appeal by BarclaysAmerican/Business Credit, Inc.("Barclays") from a take-nothing judgment in favor of E & E Enterprises, Inc.("E & E").Barclays brings five points of error contending (1) that the trial court erred in concluding that a contract was created between Wrape Forest Industries, Inc. d/b/a Industrial Wood Products ("Wrape") and E & E by the promise of Wrape to provide 60 days notice of ceasing operations; (2) that the trial court erred in concluding against the great weight of the evidence that E & E could assert defenses based upon facts arising prior to knowledge of the assignment from Wrape to Barclays; (3) that the trial court erred in concluding that E & E could assert a defense of anticipatory repudiation with respect to failure to deliver a shipment of products in August, 1982; (4) that the trial court erred in concluding that E & E could assert affirmative defenses against Barclays based upon E & E's dealings with Wrape; and (5) that the trial court erred in failing to find for Barclays and, thus, in failing to award stipulated attorney's fees to Barclays.For the following reasons, we affirm the judgment of the trial court.

Much of the evidence in this case was stipulated.In addition, testimony was taken at a trial before the court.The court then made findings of fact and conclusions of law.The evidence reflects that in 1980 Barclays, then doing business as Aetna Business Credit, Inc., and Wrape executed a General Loan and Security Agreement ("Agreement") whereby Wrape granted Barclays a security interest in certain property, including its accounts receivable.The security interest was perfected by the filing of financing statements.Barclays advanced Wrape funds in accordance with the terms of the Agreement.In January of 1982, Wrape filed for protection from its creditors under Chapter 11 of the Federal Bankruptcy Act.

E & E and Wrape had been doing business together for several years.The normal course of their business dealings was for E & E to contact a representative of Wrape, Inc. and place an order for wood products, which Wrape produced, for use in production of wooden cabinets by E & E.The orders varied in size.Wrape would confirm its acceptance of the order by sending E & E a written acknowledgment.The shipment of wood products was delivered to E & E approximately six weeks after an order was placed, and it was accompanied by an invoice reflecting the price to which Wrape and E & E had agreed.E & E normally paid Wrape between ten and sixty days after delivery of the shipment.Wrape delivered a shipment to E & E on June 9, 1982("S-1") and another on June 28, 1982("S-2").The prices agreed upon by Wrape for each of these orders totaled $76,105.08.The parties stipulated that the president of Wrape agreed with the president of E & E that Wrape would give E & E sixty days advance notice of Wrape's ceasing of operations.

On June 30, 1982, the bankruptcy court ordered all of the collateral that Wrape had pledged to Barclays, including its accounts receivable, transferred to Barclays.The amounts owed by E & E for S-1 and S-2 were included in the accounts receivable transferred to Barclays.

Wrape also acknowledged an order to deliver a shipment to E & E on July 16, 1982, which delivery date was moved up to July 12, 1982, upon agreement between Wrape and E & E ("S-3") and an order to deliver a shipment to E & E in the first week of August, 1982("S-4").

On July 16, 1982, the president of Wrape, William Wrape, orally notified E & E that it had closed its plant and would not deliver the materials described in the acknowledgements for S-3 and S-4.Wrape told E & E that the only way to receive the deliveries for S-3 and S-4 was to talk to Mike Wills, the vice-president of Barclays.

On or about July 23, 1982, Wills sent E & E a letter notifying it that Barclays had been assigned the accounts receivable of Wrape.This letter was received by E & E on July 28, 1982.

Barclays brought this action to recover the amounts claimed for S-1 and S-2.E & E answered that it was damaged as a result of Wrape's breach of its contracts with it for the delivery of S-3 and S-4 and was thus entitled to offset the amount of its damage against Barclays's claims.

Barclays and E & E have stipulated that E & E did not pay Barclays the $76,105.08 owed for S-1 and S-2.They have further stipulated that Wrape was advised prior to May 1, 1982, that if Wrape terminated its accepted contracts with E & E without advance notice, E & E's production of cabinets would be interrupted and it would take at least six weeks to secure similar materials from another supplier; that E &amp E had no knowledge before July 16, 1982, of Wrape's intention to cease production; that E & E did not have adequate inventory necessary to manufacture cabinets scheduled for production from July 16, 1982, until it could secure another supplier; that E & E could not secure materials from another supplier until August 18, 1982; and that, during that period, E & E produced 6,347 fewer cabinets than it would have except for Wrape's failure to deliver S-3 and S-4.Further, the parties stipulated that, due to Wrape's failure to give E & E reasonable advance notice of its inability to deliver the wood products, E & E had to refuse further orders for its cabinets until it could secure such materials from another supplier.Finally, the parties stipulated that E & E suffered the following damages: a loss of net profits of $126,940.00 as a direct and proximate result of the aforementioned loss of production and sales; $6,900.00 in expenses incurred to minimize E & E's damages which involved the cutting, reshaping, and culling of materials on hand; $11,500.00 for the cost of overtime labor in attempting to minimize damages; and $22,500.00 due to the cost of waste materials arising out of the cutting and reshaping of materials on hand during this stated period.Based on these stipulated facts, the court found that E & E had proved a valid offset in the amount of $167,840.00.

The primary issue in this appeal is whether the offset found by the trial court was proper.In its first point of error, Barclays contends that the court erred in concluding that a contract was created by an alleged promise of the president of Wrape to provide 60 days' notice of ceasing operations.Barclays argues that there is insufficient evidence of a contract between the parties requiring 60 days' notice of Wrape's ceasing operations because there was no consideration to support the alleged promise and, further, there was no requirements contract.In its Memorandum Decision, which was adopted by the trial court as findings of fact and conclusions of law, the court found that E & E's claim arose out of a promise by Wrape to give the 60 day notice, an order for S-3 and S-4 placed by E & E in reliance on Wrape's promise, and a breach by Wrape of their agreement by notifying E & E on July 16, 1982, that the plant was closing that same day.Thus, the court found that the consideration for the 60 day notice was E & E's agreement to purchase S-3 and S-4.However, Barclays argues that E & E did not show that the course of dealing between Wrape and E & E was altered in any way in response to the promise of 60 days' notice and thus no valid consideration was given.Further, Barclays urges that there was no requirements contract between Wrape and E & E.This argument is addressed to the court's finding that E & E had no supplier other than Wrape for certain wood products.

We need not decide whether the evidence supports the court's findings as to the 60 day notice and the supporting consideration, or whether a requirements contract existed, because the judgment of the trial court was sufficiently supported by the findings of fact that E & E placed the orders for S-3 and S-4 and Wrape confirmed its acceptance of the orders by the written acknowledgments for S-3 and S-4.On July 16, 1982, Wrape notified E & E that it would not deliver S-3 and S-4.The court concluded that Wrape breached the contract to deliver S-3 and S-4.We find that the evidence supports these findings and conclusions.

Under TEX.BUS. & COM.CODE ANN. § 2.204(a)(Vernon 1968), ¹ a contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such contract.Under section 2.206(a)(2), an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance by a prompt promise to ship.Although there is no Texas case law directly on point, other jurisdictions which have adopted this section from the Uniform Commercial Code have interpreted it to include a situation like the one at hand.In American Bronze Corp. v. Streamway Products, 8 Ohio App.3d 223, 456 N.E.2d 1295, 1300(1982), the court held that generally the submission of a purchase order is viewed as an offer which may then be accepted or rejected by the seller.See alsoLockwood Corp. v. Black, 501 F.Supp. 261, 264(N.D.Tex.1980),aff'd, 669 F.2d 324(5th Cir.1982).In Roto-Lith, Ltd. v. F.P. Bartlett & Co., 297 F.2d 497, 499(1st Cir.1962), the court stated that under section 2.206 of the Uniform Commercial Code in Massachusetts the mailing of an acknowledgment of an order constitutes an acceptance which completes the contract.The Massachusetts provision is identical to section 2.206 of the Texas code.In this case, the parties stipulated that acknowledgments confirmed acceptance of orders.Thus, the acceptances were given at some time prior to the acknowledgments...