Beijing Metals & Minerals Import/Export Corp. v. American Business Center, Inc.

• Decision Date: 15 June 1993
• Docket Number: No. 92-2171,92-2171
• Citation: 993 F.2d 1178
• Parties: BEIJING METALS & MINERALS IMPORT/EXPORT CORPORATION, Plaintiff-Appellee, v. AMERICAN BUSINESS CENTER, INC., et al., Defendants, American Business Center, Inc., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1178

993 F.2d 1178

BEIJING METALS & MINERALS IMPORT/EXPORT CORPORATION Plaintiff-Appellee, v. AMERICAN BUSINESS CENTER, INC., et al., Defendants American Business Center, Inc., Defendant-Appellant.

No. 92-2171.

United States Court of Appeals, Fifth Circuit.

June 15, 1993.

Henri-Ann Nortman, Nortman & Turet, Houston, TX, for defendant-appellant.

Tim Headley, Steven Stricklin, Baker & Botts, Houston, TX, for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before WIENER, BARKSDALE, and DEMOSS, Circuit Judges.

BARKSDALE, Circuit Judge:

This appeal turns on the effect to be given two alleged oral agreements made contemporaneously with execution of a written payment agreement. American Business Center, Inc. (ABC), challenges a summary judgment granted Beijing Metals & Minerals Import/Export Corporation (MMB) on its severed claim to enforce the payment agreement, contending, inter alia, that the district court misapplied the parol evidence rule and, on issues such as fraudulent inducement, overlooked genuine issues of material fact. We REVERSE and REMAND on the issue of fraudulent inducement and those pertaining to the quality and quantity of goods; as to all others, we AFFIRM.

I.

In 1988, MMB and ABC entered into a business relationship "in order to cooperatively develop the fitness [weight lifting] equipment market in the U.S. and Canada". ¹ ABC agreed to furnish MMB with "marketing information, customer names, product samples, and design prints for the research and development of products that [MMB] may be capable of manufacturing". MMB, in turn, agreed to "engage in production only" and to "not sell the products designed and ordered by [ABC] to companies other than [ABC]".

MMB also agreed that goods would be manufactured in accordance with detailed specifications, and be of the highest quality. But, according to ABC, from the very beginning, almost every shipment contained substantial amounts of defective and non-conforming goods; it notified MMB to that effect; it was assured that substitute goods would be sent; and it was instructed to retain the defective goods for later disposition.

For the shipments from MMB to ABC, the agreement originally required "documents against payment", obligating ABC to pay by letters of credit or upon presentation of bills of lading, prior to release of the goods from customs. Accordingly, ABC paid for all shipments prior to receipt. In 1988, the parties changed the payment terms to "document against acceptance", allowing ABC 90 days to pay (D/A 90). Of the shipments received on D/A 90 terms, ABC paid only approximately two invoices, and subsequently refused to pay for approximately 27 shipments totalling more than $1.2 million. ²

In July 1989, MMB notified ABC that if it did not respond with a payment plan, MMB would not ship scheduled merchandise. Accordingly, that August, Mike Lian, president of ABC, travelled to Beijing, China, to meet with MMB. ³ After several days of negotiations, Lian signed an agreement, in which he acknowledged that ABC owed MMB $1,225,997.78, ⁴ of which $768,529.23 was overdue as of August 15, 1989. The agreement established a payment schedule, obligating ABC to pay the amounts owed MMB in specified installments. Before he left Beijing, Lian made the first agreed payment ($197,503.43) by check, post-dated to August 30.

ABC maintains that the payment schedule was only part of the total agreement; that MMB orally agreed to two other items: it would ship goods to compensate for non-conforming and defective goods and shortages and would begin making new shipments to ABC on D/A 90 terms, beginning September 10, 1989. Lian maintains that MMB representatives admitted that ABC had a substantial claim for defective and non-conforming goods, but that because the invoices had been entered into the accounting and banking system, "the only way they could make up the problems to ABC was by shipping future goods on more favorable terms until the offsets were taken care of ". According to Lian, MMB representatives stated that the signed payment agreement was necessary only to appease the bank and the controller, which would allow MMB to continue shipments to ABC on agreed-upon terms; that MMB representatives told him that the oral agreements, i.e. replacement of goods and future shipments on D/A 90 terms, could not be reduced to writing for "political reasons"--that "some people could go to jail over this situation"; and that he "would not have signed the Agreement had he known that MMB did not have the intention or the ability to perform their part of the bargain". Lian estimated that the total amount of defective goods and shortages was $500,000.

On September 1, MMB sent a letter to Lian by fax, which stated, in part, that straight D/A 90 terms would not be permitted and arguably indicated that this issue had been part of the total agreement. ⁵ Lian replied twice. His first was that he could not operate on a letter of credit basis. ⁶ His second, in late September, referenced the alleged oral agreement for D/A 90 terms and arguably also referenced the alleged oral agreement to provide replacement goods. ⁷

Because ABC, in early September 1989, stopped payment on the check issued in Beijing, and informed MMB that it would not honor the payment schedule, MMB filed suit against ABC (and others not parties to this appeal) to recover payment on the agreement. The substantive claim, styled as on a "sworn account", was later described by MMB as an "account stated". The defendants answered, asserting various defenses to payment, including (1) fraudulent inducement of both the payment agreement and the check issued in Beijing; (2) duress; (3) breach of agreement and breach of contract; (4) breach of express and implied warranties; and (5) offset. ABC also counterclaimed against MMB (and others not parties to this appeal) on several of the grounds asserted as defenses and for a Deceptive Trade Practices Act (DTPA) violation.

In January 1991, the district court stayed the action as to all parties except MMB and ABC until the basic account claims were adjudicated. MMB moved for summary judgment. In January 1992, after a hearing, the district court granted the motion, and subsequently ruled that "[t]he cause of action based on the sworn account is severed from the main action" and that the "only issue remaining and not previously stayed, is the defendants' counterclaim for breach of the oral agreement for future business". A final judgment for approximately $1.7 million was entered for MMB.

II.

ABC contends that the summary judgment is precluded by genuine issues of material fact relating to its defenses and counterclaims. It goes without saying that we review a summary judgment de novo, e.g., Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 82, 121 L.Ed.2d 46 (1992); and it is appropriate if the summary judgment record "show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law". Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Affidavits must set forth facts "as would be admissible in evidence". Fed.R.Civ.P. 56(e). Therefore, "conclusory assertions cannot be used in an affidavit on summary judgement". Salas v. Carpenter, 980 F.2d 299, 305 (5th Cir.1992). Finally, we draw all inferences favorable to the non-movant. Reid v. State Farm Mut. Auto Ins. Co., 784 F.2d 577, 578 (5th Cir.1986).

A.

MMB sued to recover the amount stated in the payment agreement, asserting that it represents a binding contract in which MMB agreed to extend payment terms, and ABC agreed to pay its outstanding obligations. For summary judgment, MMB characterized the agreement as an "account stated", which is "an agreement between parties who have had previous transactions of a monetary character that all the items of the account representing such transactions, and the balance struck, are correct, together with a promise, express or implied, for the payment of such balance". Eastern Dev. & Invest. Corp. v. City of San Antonio, 557 S.W.2d 823, 824-25 (Tex.Civ.App.-San Antonio 1977, writ ref'd n.r.e.). An account stated establishes a prima facie case for obligation "without other proof of price, value, quantity, or specific items". Id. at 826.

ABC contested the account stated characterization, contending that the written agreement reflects only one portion of their three-part agreement to resolve all disputes regarding payment and the quantity and quality of the goods: part one (written)--ABC to adhere to a payment schedule; part two (oral)--MMB to ship replacement goods to make up for non-conforming goods and shortages; and part three (oral)--MMB to resume shipment of goods on D/A 90 terms as of September 10, 1989.

The district court held that the parol evidence rule prevented the two oral agreements being a defense to ABC's obligations under the written payment agreement. It concluded that the written agreement is an unambiguous "account restatement", and that nothing in its four corners, or in the surrounding circumstances, indicates the existence of collateral contingent agreements. The court focused on the fact that the payment agreement did not refer to supply, and contained meaningful consideration (extended payment time); that, at the time of the summary judgment hearing (three years later), ABC was unable to quantify with specificity MMB's obligation to ship replacement goods; that MMB's letter denying D/A 90 terms did not refer to the payment agreement; and that Lian's subsequent letters did not characterize ABC's obligation under the payment agreement as contingent. ⁸

Under Texas law, ⁹ it is well settled that the parol evidence rule generally bars enforcement of prior or contemporaneous agreements introduced to vary, add to, or contradict terms...