Valero Markeing & Supply v Kalama Int'l

• Decision Date: 03 May 2001
• Citation: 51 S.W.3d 345
• Parties: <!--51 S.W.3d 345 (Tex.App.-Houston 2001) VALERO MARKETING & SUPPLY COMPANY, Appellant v. KALAMA INTERNATIONAL, LIMITED LIABILITY COMPANY, Appellee NO. 01-00-00143-CV Court of Appeals of Texas, Houston (1st Dist.)
• Court: Texas Court of Appeals

Page 345

51 S.W.3d 345 (Tex.App.-Houston [1st Dist.] 2001)

VALERO MARKETING & SUPPLY COMPANY, Appellant v KALAMA INTERNATIONAL, LIMITED LIABILITY COMPANY, Appellee

NO. 01-00-00143-CV

Court of Appeals of Texas, Houston (1st Dist.)

May 3, 2001

Rehearing Overruled June 1, 2001.

On Appeal from the 129th District Court Harris County, Texas Trial Court Cause No. 97-49288

[Copyrighted Material Omitted] Panel consists of Justices Cohen, Jennings, and Duggan.^*

OPINION

Terry Jennings, Justice

This is an appeal from a summary judgment disposing of a breach of contract complaint, rendered in favor of appellee, Kalama International, LLC. ("Kalama"). Appellant, Valero Marketing and Supply Company ("Valero"), complains the trial court erred in (1) granting Kalama's summary judgment motion and denying Valero's summary judgment motion; (2) considering "usage of trade" evidence and ignoring the existence of a fact issue on "usage of trade"; and (3) not finding Kalama was required under the Uniform Commercial Code to notify Valero of the requirement that a methanol dedicated or methanol clean barge was necessary to take delivery of methanol. We affirm.

Background Facts

Justice Oliver Wendell Holmes warned, "In most contracts men take the risk of events over which they have imperfect or no control." Ferry v. Ramsey, 277 U.S. 88, 95, 48 S. Ct. 443, 444, (1928). The undisputed facts of this case illustrate this admonition.

After negotiating a price, a third-party broker brought together Valero, a refiner and marketer of petroleum products, and Kalama, a marketer of various chemicals. Valero and Kalama subsequently entered into a contract, drafted by Valero, dated June 16, 1997, wherein Kalama agreed to sell Valero 20,000 barrels of methanol ASTM D 11552-89¹ at $.59 per gallon. The contract specified Valero would take delivery of the methanol between June 23, 1997 and June 30, 1997 "via Valero's barge, at Plaquemine, LA."

The designated point of delivery and loader of the methanol was Georgia Gulf Corporation, a third-party chemical company located in Plaquemine, Louisiana.² The parties also jointly hired a third-party inspection company, SGS Consulting and Inspection, Inc. ("SGS"), to inspect the barge upon its arrival at the port; Valero and Kalama split the costs of the inspection. Thus, SGS was a contract inspector working for both Valero and Kalama.

Valero hired the Genie Cenac, a third-party barge, to take delivery of the methanol. On June 18, 1997, Valero sent a nomination to Kalama detailing the volume of product and designating the Genie Cenac as the barge to receive delivery. The nomination also listed the prior cargo of the Genie Cenac as unleaded gasoline. Kalama received the nomination; no objection was made.

On June 30, 1997, before the Genie Cenac docked at Georgia Gulf, SGS inspected the barge and rejected it for "cleanliness to carry: Methanol"; this was the last date on which delivery could occur under the terms of the contract. The Genie Cenac had been cleaned prior to docking, but despite that cleaning, gasoline vapors and puddles remained on the barge from its prior cargo of unleaded gasoline. Georgia Gulf refused to load the barge because it could only load the methanol onto a methanol dedicated or methanol clean vessel.³

After this rejection, Kalama agreed to extend the time allowed for delivery until July 2, 1997, and Valero agreed to pay for the cleaning of the Genie Cenac.⁴ Valero subsequently took the Genie Cenac to be cleaned again and have it "stripped and blown dry." On July 1, 1997, the Genie Cenac again attempted to load at Georgia Gulf, but SGS rejected the barge a second time, noting the same problems that existed on the first inspection.

On July 2, 1997, Kalama sent a letter to Valero terminating the contract because Valero "had failed to produce a suitable barge to load the methanol within the contractual deadline." When Kalama terminated the contract, Valero was forced to cover at a higher price. Valero sent a letter to Kalama demanding to be paid damages in the amount of $82,135.52.⁵

Although Kalama was not aware before this incident that Geogia Gulf did not have a permit to recover gasoline vapors, Kalama was aware Georgia Gulf required barges accepting delivery of methanol to be methanol dedicated or methanol clean.

Danny Oliver, a Valero employee who drafted the agreement in question, testified that he did not know Georgia Gulf required methanol clean or methanol dedicated barges. However, Cathy Cazes, a Georgia Gulf employee, testified that Georgia Gulf had previously loaded methanol onto Valero barges "more than once or twice" and that Valero would have used a methanol dedicated or methanol clean barge because Georgia Gulf has always required methanol dedicated or methanol clean barges.⁶ Valero claimed in its summary judgment motion and in its appellate brief that the president of Georgia Gulf, Frank Vendt, testified Valero "had no prior dealings with Georgia Gulf"; however, this is not what Vendt said. The record shows Vendt either could not remember or did not personally know of Valero or any prior dealings between Valero and Kalama.⁷ Thus, his testimony does not contradict Cazes' testimony.

Peggy Pane, a Valero supply coordinator, testified that Valero had previously used methanol dedicated or clean barges and that two Valero refineries preferred methanol to be transported in methanol dedicated or clean barges. She sometimes called these refineries to see whether they would accept a barge with another previous cargo. Pane also explained that the inspection company represents both the buyer and the seller, who split the cost of the inspection, and that the inspection company inspects the barge to see whether any puddles are in the barge and whether it is in good shape for loading.

Procedural Background

Valero filed suit against Kalama seeking damages for breach of contract. Kalama answered with a general denial, and further pleaded several alternative defenses, including: (1) Valero caused the incident and damages as a result of its own negligence, actions, omissions, and failure to act; (2) Valero failed to provide a suitable container to transport the methanol; (3) Valero's failure to provide a suitable container to transport the methanol was a breach of the contract, excusing further performance by Kalama; (4) the actions of third parties rendered performance impossible; (5) the contract was modified; and (6) the incident and damages were caused solely by the acts and conduct of parties over whom Kalama had no control.

Kalama moved for summary judgment claiming there was no evidence Valero tendered performance because Valero failed to provide a suitable barge to receive the methanol and, thereby, breached the contract. Kalama contended proof of Valero's breach was demonstrated by: (1) the custom and usage of trade in the methanol business; (2) Valero's actual or constructive knowledge that a methanol dedicated or a properly cleaned barge was necessary to load Methanol ASTM D1152-89; (3) two failed barge inspections; and (4) Valero's failure to meet the product quality specifications in its nominations.

Valero replied by filing its own motion for summary judgment. Valero asserted the trial court could determine as a matter of law Kalama breached the contract because Kalama did not deliver the methanol as required under the contract and failed to notify Valero of "special requirements necessary to take delivery" pursuant to section 2.503(a) of the Texas Business and Commerce Code. Tex. Bus. & Comm. Code Ann. § 2.503(a) (Vernon 1994). Valero asserted that "[d]ue to [Kalama and Georgia Gulf's] prior dealings, Kalama was aware that Geogia Gulf had special requirements for barges." Valero claimed it tendered performance when the Genie Cenac arrived at Georgia Gulf's facility, but Kalama "did not deliver the product as required by the contract." Moreover, Valero maintained that it "had no prior dealings with Georgia Gulf." Valero blamed Kalama for the failure of delivery, asserting that Kalama was obligated to inform Valero of the necessity of a methanol dedicated or methanol clean barge and that "[a] buyer cannot be expected to furnish facilities with special requirements if it does not know what the special requirements are."

The trial court rendered summary judgment for Kalama.⁸

Summary Judgment Standard of Review

The purpose of the summary judgment rule is to provide a method of summarily terminating a case when it clearly appears that only a question of law is involved and there is no genuine issue of fact. Gaines v. Hamman, 163 Tex. 618, 626, 358 S.W.2d 557, 563 (1962). The basic standards for reviewing a motion for summary judgment are well established. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). The Supreme Court of Texas has mandated the following standards:

1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.

3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.

Id. When a defendant is the movant, as in the present case, we must be alert to additional rules controlling summary judgment practice. The question on appeal, as well as in the trial court, is not whether the summary judgment proof raises fact issues with reference to the essential elements of the plaintiff's cause of action, but, rather, whether the summary judgment proof establishes as a matter of law there is no genuine issue of fact as to one or more of the essential elements of the plaintiff's cause of action. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex. 1970).

When a party moves for summary judgment under Texas Rule of Civil...