Houston Chronicle Pub. Co. v. McNair Trucklease, Inc.

• Decision Date: 30 January 1975
• Docket Number: No. 16414,16414
• Citation: 519 S.W.2d 924
• Parties: HOUSTON CHRONICLE PUBLISHING COMPANY, Appellant, v. McNAIR TRUCKLEASE, INC., et al., Appellees. (1st Dist.)
• Court: Texas Court of Appeals

Page 924

519 S.W.2d 924

HOUSTON CHRONICLE PUBLISHING COMPANY, Appellant, v. McNAIR TRUCKLEASE, INC., et al., Appellees.

No. 16414.

Court of Civil Appeals of Texas,

Houston (1st Dist.).

Jan. 30, 1975.

Rehearing Denied March 6, 1975.

Liddell, Sapp, Zivley & Brown, W. Robert, Brown, Charles H. Waters, Jr., Houston, for appellant.

Fulbright & Crooker, M. W. Parse, Jr., Barry N. Beck, Houston, for appellees.

PEDEN, Justice.

McNair Trucklease, Inc., and its wholly-owned subsidiary, Greater Houston Cartage Company, sued the Houston Chronicle for breach of a contract. The case was tried to the court without a jury, and McNair recovered a judgment in the amount of $231,756.98 plus prejudgment interest in the sum of $14,922.89.

In October, 1965, the Chronicle and McNair (at that time known as Prudential Leasing Corporation) entered into a five year contract for McNair to haul the Chronicle's newspapers to distribution points inside the City of Houston. Performance commenced on January 1, 1966. With the full knowledge and consent of the Chronicle, Prudential created Greater Houston Cartage Company, a whollyowned subsidiary, to perform the contract, under which Greater Houston provided both trucks and drivers. The trial judge found that the contract was amended at least three times, with respect to rate of compensation and liquidated damages, by letter agreements.

On November 1, 1968, Greater Houston and the Chronicle executed a contract for Greater Houston to haul the Chronicle's papers to points within the State of Texas but outside of Houston. New trucks were to be purchased to fulfill this 'state contract,' and in the negotiations between Greater Houston-McNair and the Chronicle it was contemplated that a new fleet of diesel trucks would be obtained for the city contract. During the latter part of 1969 and early 1970 negotiations were begun between the Chronicle and Mr. Robt. C. McNair to extend the term of the city contract that was to expire at the end of 1970. These negotiations culminated in a letter agreement dated April 10, 1970 signed by Mr. McNair for Greater Houston and by Mr. Everett E. Bouldin for the Chronicle. Mr. McNair's letter read as follows:

'I am writing you to confirm our agreement relative to the equipment and services which we have contracted to provide you and the compensation which you have agreed to pay us for these services.

'Our new contract will be dated January 1, 1970 and will expire December 31, 1974. We agree to furnish 18 trucks and 10 drivers, 7 days per week; 4 extra trucks and drivers per week to be used Wednesday, Saturday, and Sunday or at the Chronicle's discretion; 12 trucks and 12 drivers, 3 1/2 hours per day for preshipments on Wednesday morning, truck shuttle on Friday nights for a total consideration of $22,360.38 per month.

'For extra trucks over and above the contract, the rate for 1 truck and 1 man will be $7.50 per hour, the rate for one truck and 2 drivers will be $10.00 per hour. Extra drivers will be $2.50 per hour. Extra trucks will be $5.00 per hour. The monthly rate for an additional truck and driver will be $1320.00 per month. The monthly rate for an additional truck and driver on a permanent basis will be $1200.00 per month.

'We also agree that should we fail to provide 18 drivers and 18 trucks for any day that $35.50 per man and truck per day will be deducted from our compensation. I do not wish to have this item incorporated in the contract, as it possibly could jeopardize our financing arrangements on our new equipment. I would be agreeable to covering this in a separate letter if this meets with your approval.

'I have not reviewed our existing contract to see if any other changes should be made; however, I have no particular suggestion in mind and would assume that Willis Witt will draw a new contract that will be basically the same as our present contract with the exception of the change in services and our compensation.

'If this letter represents your understanding of our agreement, please sign at the understated place and return 2 copies, retaining 2 for your file.'

While no new formal contract was subsequently entered into, the parties performed under the letter agreement of April 10, 1970. The Chronicle paid for services according to the rates set forth in the letter, and a rate increase was requested by McNair and approved by the Chronicle.

Greater Houston assigned its contract rights to McNair Trucklease, Inc.

On May 25, 1971, Greater Houston's drivers went on strike. Mr. Robert McNair, president of Greater Houston, told the Chronicle that McNair could supply substitute drivers, but the Chronicle told him not to furnish trucks or drivers until further notice. An agreement was reached on or about June 7, 1971 between McNair and the Chronicle whereby McNair would provide 19 trucks without drivers under the city contract for the balance of the term of the contract at a cost of $444.50 per vehicle per month plus 11cents per mile. Trucks were furnished under this arrangement until August 1, 1971, when the Chronicle informed McNair that its trucks were no longer to be used in the distribution of the Chronicle in Houston.

McNair sued the Chronicle for breach of contract and obtained a judgment. Both parties have appealed.

Appeal by the Houston Chronicle

The Chronicle's first point of error complains that the trial court's conclusion of law determining the existence and nature of the contract is erroneous as a matter of law. The point of error refers to the trial court's first, ninth and thirteenth conclusions of law, which were:

1.

'As of August 1, 1971, the City Contract consisted of the original agreement (Plf. Ex. 2) as modified or amended by (a) the agreement dated April 10, 1970 (Plf. Ex. 12), (b) the oral agreement adding a truck and driver made in October, 1970, (c) the agreement increasing the rates effective January 1, 1971 and (d) by the oral modification or amendment made on or about June 7, 1971, eliminating drivers and providing for the furnishing of vehicles alone at the initial rate of $444.50 per month per vehicle plus 11cents per mile.

9.

'Since (a) Greater Houston was at all times a wholly-owned subsidiary of McNair formed with the knowledge and acquiescence of the Chronicle for the purpose of performing the City Contract, (b) the Chronicle knew that both Prudential-McNair and Greater Houston would be engaged in performing the same, (c) McNair remained obligated on the City Contract after the assignment to Greater Houston, and (d) the City Contract as theretofore or thereafter amended was assigned as security to McNair on or about June 16, 1970, either McNair or Greater Houston or both may enforce the same as amended.

13.

'The letter agreement dated April 10, 1970 (Plf. Ex. 12) is an enforceable agreement without the execution of a more formal contract.'

The Chronicle argues that the letter agreement of April 10 shows that the parties contemplated the execution of a formal contract and did not regard the letter as a contract. The test is whether the parties intended to be bound by the letter agreement. The existence or lack thereof of this intention is a question of fact, not of law. Scott v. Ingle Bros. Pacific, Inc., 489 S.W.2d 554 (Tex.1972); Simmons & Simmons Construction Co. v. Rea,155 Tex. 353, 286 S.W.2d 415 (1956).

'We are familiar with a rule where the parties agree that a contract entered into by them orally shall be embodied in a formal writing and signed by them before a binding agreement is consummated that there is no binding contract until that has been done, but if they intend their agreement shall be effective from the time when it is made, it will be given effect from that time though they agree or intend that a formal writing embodying its provisions shall subsequently be prepared and signed.' Vick v. McPherson, 360 S.W.2d 866, 868 (Tex.Civ.App.1962, writ ref. n.r.e.).

The parties negotiated the terms of the original 1965 contract, and formally executed it. Included within this agreement was that Greater Houston would be an independent contractor, the extent of insurance coverage required to be carried by Greater Houston, the assignability of the proposed contract, and whether or not Greater Houston would be excused for non-performance due to a strike. The final paragraph of the letter agreement of April 10 indicates that except for the terms changed by the letter, the parties expected the remaining provisions of the contract would remain the same. Mr. McNair testified, concerning the negotiations leading to the signing of the letter, that those items not covered in the letter would remain the same as the original contract executed in 1965.

Subsequent to the execution of the April 10 agreement the Chronicle used the trucks and drivers provided by Greater Houston at the rate of compensation set forth in the agreement. Also, in October, 1970, a truck and driver were permanently added to the contract at the cost specified in the April 10 agreement. Both parties continued to operate as they had under the 1965 agreement except for the change in compensation set out in the letter.

One of the terms included in the letter agreement was that the contract would run for a new five year period of January 1, 1970, to December 31, 1974.

The trial court made the following unchallenged findings of fact:

12) 'In executing plaintiff's exhibit 12 (letter dated April 10, 1970), the parties thereto intended to amend the City contract by extending the term of same to and including December 31, 1974, by increasing the rate of compensation to be paid from and after January 1, 1970, and by changing to some extent the services to be performed.

15) 'At least by June 17, 1970 and from and after that date, the parties intended to be bound by the terms of the letter agreement dated April 10, 1970, and intended the same to be effective without the execution of a more formal contract. All material elements had been agreed to and...