Flameout Design v Penzoil

• Decision Date: 27 May 1999
• Citation: 994 S.W.2d 830
• Parties: <!--994 S.W.2d 830 (Tex.App.-Houston 1999) FLAMEOUT DESIGN & FABRICATION, INC., Appellant v. PENNZOIL CASPIAN CORPORATION, PENNZOIL COMPANY, and PENNZOIL EXPLORATION AND PRODUCTION COMPANY, Appellees NO. 01-98-00543-CV In The Court of Appeals For The First District of Texas
• Court: Texas Court of Appeals

Page 830

994 S.W.2d 830 (Tex.App.-Houston[1st Dist.] 1999)

FLAMEOUT DESIGN & FABRICATION, INC., Appellant v PENNZOIL CASPIAN CORPORATION, PENNZOIL COMPANY, and PENNZOIL EXPLORATION AND PRODUCTION COMPANY, Appellees

NO. 01-98-00543-CV

In The Court of Appeals For The First District of Texas

May 27, 1999

On Appeal from the 61st District Court Harris County, Texas, Trial Court Cause No. 95-02192

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Panel consists of Justices Cohen, Hedges, and Nuchia

O P I N I O N

SAM NUCHIA, Justice.

This is an appeal of a summary judgment in favor of defendants in a lawsuit alleging breach of contract, anticipatory repudiation, economic duress/business coercion, fraud, negligent misrepresentation, and violation of the Texas Deceptive Trade Practices Act. We affirm.

BACKGROUND

In 1992, Pennzoil Caspian Corporation ("PCC") became involved with the State Oil Company of the Azerbaijan Republic ("SOCAR") in a major Gas Utilization Project in the Caspian Sea. PCC was to provide and install turbine-driven compressors and related process equipment and pipeline for the project and was to operate and maintain the compressors and related equipment for a period of time after installation.

PCC contracted with VECO Corporation to construct the compressor station and to provide engineering and procurement logistics for the project. VECO searched for a parts supplier and, after discussions with several potential suppliers, recommended to PCC that plaintiff, Flameout Design & Fabrication, Inc. ("Flameout"), become the parts supplier. VECO represented to PCC that Flameout was offering to supply original equipment manufacturer ("OEM") parts for the commissioned start up and for replacement parts.

An internal memo on PCC letterhead dated August 18, 1993 briefly summarized proposals by different equipment suppliers. This memo stated:

Flameout has presented a quotation of $937,832.24 and has promised delivery of commissioning items within 4 weeks with tools and balance of items 3 months except the spare impellars at 4 months. Flameout is offering original manufacturer parts. . . .

Our recommendation is to proceed with Flameout.

On September 10, 1993, Allan Hardison, VECO employee and Procurement and Logistics Manager for the project, issued a letter of intent to Flameout on PCC letterhead. This letter confirmed PCC's intention:

to purchase from your company turbine commissioning spare parts per the lists which are being developed by Mr. John Blackwelder and which have been reviewed by you. Acquisition of these parts is predicated upon finalizing these lists and appropriate unit prices for items presented to your company, and in accordance with the agreements reached at the meeting held in our offices on September 7, 1993. Payment terms for these parts must also be mutually agreed.

A document entitled "Parts Listing," dated January 20, 1994, contains lists of parts, quantities, and prices. The quantities are in columns headed "Comm." and "3 Year." This list, which the parties call the Baku list, is not signed, and there is no indication on the document to show who created it.

On February 22, 1994, in a letter to Paula Jacobs of PCC, Michael Moore, President and CEO of Flameout, wrote, "Flameout certifies that all the material supplies (sic) is NEW OEM equipment. No surplus, refurbished or auctioned materials will be supplied."

On April 28, 1994, PCC employee K.B. Whitley wrote Flameout and Transoceanic Shipping Company, "Gentlemen: Attached is the procedure for receiving spare parts at Transoceanic. This procedure should be implemented immediately." Attached to the letter is a two-page document entitled "Receiving Procedure." It begins, "For purchase orders 010763 02, 010768 01, and future purchase orders for the three year commissioning parts, as per list compiled by Flameout Design and Fabrication, and Pennzoil Caspian Corporation and Letter of Intent dated September 11 (sic), 1993, (see attached). After consultation with Transoceanic, the following basic receiving procedure will be followed." Procedures for shipping and receiving and some special procedures for certain equipment are then stated in the document.

During the time Flameout was involved in this project, PCC issued between 1.1 and 1.6 million dollars in written, signed purchase orders to Flameout, according to Moore's estimate. In addition, PCC gave some verbal purchase orders between mid-summer and December 1993. These verbal orders were filled by Flameout, and PCC paid for the equipment ordered.

On July 29, 1994, PCC wrote a letter to Flameout confirming that PCC wished Flameout to continue to expedite the delivery of the remaining items on purchase orders 010763 and 010768.

On October 25, 1994, Flameout wrote PCC informing it that Flameout would not quote or take any new orders from Pennzoil. On October 28, 1994, Flameout wrote PCC, stating in some detail its reasons for refusing to accept new orders from PCC. Flameout complained of PCC's unwillingness to abide by "the Agreement" between Flameout and PCC, Flameout's "unworkable" attempts to accommodate PCC's "changed positions," and PCC's purchase of certain parts from suppliers other than Flameout.

In January 1995, Flameout sued PCC alleging causes of action for breach of contract, anticipatory repudiation, violation of the Texas Deceptive Trade Practices Act, fraud, negligent misrepresentation, and the defense of estoppel to deny the enforceability of the agreement. Flameout later amended its petition to add Pennzoil Company and Pennzoil Exploration and Production Company as defendants (collectively referred to herein as "PCC"). It also added a cause of action for "economic duress/business coercion."

PCC filed a motion for summary judgment under rule 166a(i) of the Texas Rules of Civil Procedure, asserting that there was no evidence to support at least one element of each of Flameout's causes of action. PCC's motion was granted by the trial court.

STANDARD OF REVIEW

Under rule 166a(i), a party may move for summary judgment if there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial. TEX. R. CIV. P. 166a(i). Thus, a no-evidence summary judgment is similar to a directed verdict. Jackson v. Fiesta Mart, Inc., 979 S.W.2d 68, 70 (Tex. App.-Austin 1998, no pet.); see also Hittner & Liberato, Summary Judgments in Texas, 34 Hous. L. Rev. 1303, 1356 (1998). A party may move for a no-evidence summary judgment after there has been adequate time for discovery. TEX. R. CIV. P. 166a(i). The motion may not be general, but must state the elements on which there is no evidence. Id. The trial court must grant the motion unless the nonmovant produces more than a scintilla of evidence raising a genuine issue of material fact on the challenged elements. See TEX. R. CIV. P. 166a(i) and cmt. to 1997 change. Thus, the party with the burden of proof at trial has the burden of proof in the summary

judgment proceeding.

The general requirements of summary judgment practice continue to be governed by the existing rules. Id. Therefore, in reviewing a summary judgment, we must indulge every reasonable inference in favor of the nonmovant and resolve any doubts in its favor. Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995).

DISCUSSION

The Statute of Frauds

In its first issue presented, Flameout contends the trial court erred in granting the summary judgment on its breach of contract claims because Flameout presented written documents that satisfy the statute of frauds. Flameout argues that it had a three-year agreement with PCC to supply the parts on the Baku list.

The UCC Statute of Frauds provides:

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.

TEX. BUS. & COM. CODE ANN. 2.201(a) (Vernon 1994).

The general statute of frauds provides that an agreement that is not to be performed within one year is not enforceable unless the agreement is in writing and signed by the person to be charged with the agreement. TEX. BUS. & COM. CODE ANN. 26.01 (Vernon 1987).

It is uncontested that the alleged agreement in this case is for the sale of goods for a price of more than $500 and is not to be performed within one year. Therefore, both the UCC and general statute of frauds apply.

Flameout asserts that the essential elements of its three-year agreement with PCC are contained in three written documents: (1) the September 10, 1993 letter of intent; (2) the January 20, 1994 Baku list; and (3) the April 28, 1994 letter from PCC attaching new shipping and receiving procedures.¹ Flameout argues that these three documents, when read together, are sufficient because they identify the parties to the agreement, the subject matter of the agreement, quantity and price of the goods, and they specify a duration.² Flameout also argues that these documents satisfy the signature requirement under the UCC.

A plain reading of these three documents shows they do not constitute a contract for the sale of goods. The letter of intent is nothing more than an expression by PCC of its intention to do business with Flameout under agreements that were reached at an earlier meeting. This letter is not any evidence of an enforceable agreement between Flameout and PCC.

The Baku list is an extensive list of parts and equipment required for the project.³ There is nothing on the list to indicate that it is a purchase order, nor is there anything on the list to indicate that the items listed are to be ordered from Flameout, if at all. In addition, the list is not signed. Flameout's contention that...