Fernando Garza and Mohammed S. Hellail D/B/A Petroleum & Industrial Supply Co. v. Dealers Electrical Supply

• Court: Court of Appeals of Texas
• Decided: June 1, 2004
• Docket: 14-02-01127-CV
• Status: Published

Opinion

Reversed and Rendered and Memorandum Opinion filed June 1, 2004

Reversed and Rendered and Memorandum Opinion filed June 1, 2004.

In The

Fourteenth Court of Appeals

_______________

NO. 14-02-01127-CV

FERNANDO GARZA AND MOHAMMED S. HELLAIL

D/B/A PETROLEUM & INDUSTRIAL SUPPLY CO., Appellants

V.

DEALERS ELECTRICAL SUPPLY, Appellee

_________________________________________________________________

On Appeal from the County Civil Court at Law Number 1

Harris County, Texas

Trial Court Cause No. 745,630

_________________________________________________________________

M E M O R A N D U M   O P I N I O N

In this contract dispute, Fernando Garza and Mohammed Hellail d/b/a Petroleum & Industrial Supply Co. (APISC@) appeal a judgment in favor of Dealers Electrical Supply (ADealers@) on the grounds that: (1) there is legally insufficient evidence of PISC=s breach and Dealers=s damages; (2) Dealers=s demand for payment was excessive; and, alternatively, (3) PISC was harmed by the trial court=s failure to file findings of fact and conclusions of law.  We reverse and render a take-nothing judgment.

In 1998, PISC ordered a transformer from Dealers, but cancelled the order before the transformer was delivered and made no payment of the purchase price.  Dealers filed this suit, and, following a bench trial, was awarded the contract price for the transformer and attorney=s fees.  PISC=s first issue, contending that there is no evidence of any correct measure of damages, is dispositive of the appeal.

In conducting a legal sufficiency review, we view the evidence in a light that tends to support the disputed finding and disregard any evidence and inferences to the contrary.  Wal-Mart Stores, Inc v. Canchola, 121 S.W.3d 735, 739 (Tex. 2003).  If more than a scintilla of evidence supports the challenged finding, the no-evidence challenge must fail.  Id.

The purpose of damages, including the remedies provided under the Texas Business and Commerce Code, is to place the injured party in as good a position as it would enjoy if the other party had fully performed under the contract.^[1]  Thus, the universal rule for measuring damages for the breach of a contract is just compensation for the loss or damage actually sustained, neither less nor more.  Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1991).  Moreover, to recover, a party must affirmatively prove each element of the applicable damages,^[2] and a fact finder has discretion to award damages only within the range of evidence presented at trial.  Gulf States Utilities Co. v. Low, 79 S.W.3d 561, 566 (Tex. 2002).

The measure of damages to a seller for a buyer=s repudiation is: (a) the difference between the market price of the goods and the unpaid contract price (together with incidental damages but less expenses saved); or, if that measure of damages is inadequate, (b) the profit that the seller would have made from full performance by the buyer (together with allowable incidental damages).  Tex. Bus. & Com. Code Ann. ' 2.708 (Vernon 1994).^[3]  Conversely, a seller may recover the contract price (and any incidental damages), i.e., without reduction by the market price, where: (1) the buyer has failed to pay for goods it has accepted; or (2) goods have been identified to the contract and the seller is either unable, after reasonable effort, to resell them at a reasonable price or the circumstances reasonably indicate that such an effort would be unavailing.  Id. ' 2.709.^[4]

In this case, as its damages for PISC=s repudiation of the agreement, Dealers claimed that it paid the manufacturer either the contract price for the transformer or a cancellation fee in that amount.  However, there is no evidence that: (1) PISC ever received or accepted the transformer; (2) Dealers (or anyone else) made any effort to resell it; or (3) a reasonable effort to do so would have been unavailing.  In addition, the record contains no evidence of any market price for the transformer that differed from the contract price (or that this measure of damages would be inadequate), so as to support a damage finding under section 2.708.  Nor did Dealers have any personal knowledge or offer any documentary evidence that it actually made any payment to the manufacturer for the transformer.^[5]  Similarly, there is no evidence that Dealers or PISC ever expressly agreed, or otherwise became legally obligated, to pay a 100% cancellation fee in the transaction.^[6]

Dealers also contends that it was entitled to recover the cancellation fee as an incidental damage under subsection 2.708(b) because A[T]here is no dispute that the cancellation fee charged by the manufacturer in this case is a reasonable and customary business charge.@  On the contrary, as the foregoing discussion illustrates, there could hardly be greater dispute in this case as to the reasonableness of a 100% cancellation fee.  More importantly, however, as also noted above, there is no evidence in this case that the damage measure in subsection 2.708(a) is inadequate, so as to make subsection 2.708(b) applicable, or the incidental damage recovery provided therein.  Nor has Dealers cited any authority that incidental damages can be recovered under subsection 2.708(b) where, as here, there is also no evidence to establish any amount of lost profit.  Under these circumstances, the evidence is legally insufficient to show what, if any, damage Dealers suffered from PISC=s repudiation of the agreement.

Because Dealers failed to establish any damage resulting from the transaction, it was not entitled to an award of statutory attorney=s fees.^[7]  Similarly, Dealers was entitled to recover attorney=s fees under the parties= written agreement only if it was Anecessary . . . to institute legal proceedings against [PISC] to enforce the terms [of the agreement] or to recover any indebtedness or damages . . . .@  Because Dealers failed to establish that it was entitled to enforce any terms of the agreement or to recover any damages, it was thus also not entitled to recover any contractual attorney=s fees.  Accordingly, we reverse the trial court=s judgment and render a take-nothing judgment in favor of PISC.

/s/        Richard H. Edelman

Justice

Judgment rendered and Memorandum Opinion filed June 1, 2004.

Panel consists of Justices Fowler, Edelman, and Seymore.

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^[1]           See Tex. Bus. & Com. Code Ann. ' 1.305(a) (Vernon Supp. 2004); Lakewood Pipe of Tex., Inc. v. Conveying Techniques, Inc., 814 S.W.2d 553, 555 (Tex. App.CHouston [1st Dist.] 1991, no writ).

^[2]           See, e.g., Cook Composites, Inc. v. Westlake Styrene Corp., 15 S.W.3d 124, 138 (Tex. App.CHouston [14th Dist.] 2000, pet dism=d).

^[3]           See e.g. Lakewood Pipe of Tex., Inc., 814 S.W.2d at 555-56 (profit plus incidental damages, as set forth in section 2.708(b) of the Texas Business and Commerce Code, is the applicable measure of damages when a seller sues on buyer=s breach of contract to purchase specialized piece of equipment that has no market value).

^[4]           Thus, an action for the price is generally limited to cases in which the buyer has accepted the goods, the goods have been destroyed after risk of loss passed to the buyer, or resale of the goods is otherwise shown to be impracticable.  See Tex. Bus. & Com. Code Ann. ' 2.709 cmt. 2 (Vernon 1994).

^[5]           Instead, it relied on testimony that Athey normally pay their bills@ and that it had found nothing in its file to indicate whether it failed or refused to pay the invoice from the manufacturer, which is insufficient to support an inference of payment.

^[6]           A party has no right to have a contract term enforced that violates the rule limiting compensation to the damages actually sustained.  Phillips, 820 S.W.2d at 788.  Thus, even if a liquidated damage term in the form of a 100% cancellation fee had been expressly agreed to (such as under paragraph 7 or 8 of the agreement, neither of which so stated), it would have required proof that the actual damage amount was difficult to ascertain and that the liquidated damage amount was a reasonable forecast of just compensation, neither of which was shown in this case.

^[7]           See Tex. Civ. Prac. & Rem. Code Ann. ' 38.001 (Vernon 1997) (allowing recovery of attorney=s fees in addition to the amount of a Avalid claim@); Green Int=l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997) (holding that a party that fails to recover damages may not recover attorney=s fees under section 38.001).