Graybar Electric Co. v. Lem & Associates, L.L.C.

252 S.W.3d 536, 2008 WL 599314
CourtCourt of Appeals of Texas
DecidedMay 22, 2008
Docket14-06-00714-CV
StatusPublished
Cited by12 cases

This text of 252 S.W.3d 536 (Graybar Electric Co. v. Lem & Associates, L.L.C.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Graybar Electric Co. v. Lem & Associates, L.L.C., 252 S.W.3d 536, 2008 WL 599314 (Tex. Ct. App. 2008).

Opinions

MAJORITY OPINION1

KEM THOMPSON FROST, Justice.

A company contracted to sell a power generation system, including a manufacturer’s warranty, to a second company for sale to a third company to be used in a United States Army project in the Iraqi desert. The seller sued the first buyer for amounts allegedly owed under the sales contract, and the first buyer counterclaimed. The trial court rendered judgment that (1) the seller recover $3.35 million plus prejudgment and postjudgment interest and attorney’s fees, and (2) the first buyer recover $100,000 plus prejudgment and postjudgment interest on its counterclaim. We conclude the trial evidence is legally and factually sufficient to support the trial court’s denial of a credit or affirmative award based on the seller’s failure to provide the manufacturer’s warranty. We conclude the trial evidence is legally and factually insufficient to support the trial court’s conclusion that a change order between the seller and the first buyer is void based on failure of consideration, [539]*539fraudulent inducement, or duress. Based on the change order, the evidence conclusively proves the first buyer is entitled to credits that substantially reduce the judgment in favor of the seller. Because the seller’s recovery is being significantly reduced on appeal, we reverse the judgment in favor of the seller and remand to the trial court with instructions to render judgment in favor of the seller for the lower amount as well as the attorney’s fees and interest hereafter found by the trial court following further proceedings. Because the trial court erroneously failed to award any attorney’s fees to the first buyer based on its unchallenged recovery on its contract counterclaim, we reverse and remand with instructions for the trial court to determine the reasonable attorney’s fees for this counterclaim.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 2003, as part of its work for the United States Army in Iraq, Kellogg Brown & Root Services, Inc. (hereinafter “Kellogg”) contracted with appellant Gray-bar Electric Co., Inc. (“Graybar”) for the purchase of a Pratt & Whitney FT8 Twin Pack System Turbine package (hereinafter “Twin Pack”), along with related goods and services, to be deployed as a power generation system in the Iraqi desert. Graybar contracted with appellee LEM & Associates, L.L.C. (hereinafter “LEM”) for the purchase of a Twin Pack. LEM is a supplier of electric-generating equipment, owned by Lee Mathieu. LEM, in turn, had a contract to purchase a Twin Pack from Ron Bigham d/b/a Green Power Energy (hereinafter “Bigham”). Bigham had a contract to buy a Twin Pack from Allegheny Energy for $8 million.

Under its contract with Kellogg, Gray-bar was required to arrange for Pratt & Whitney to provide a warranty covering the Twin Pack and lasting until one year from the synchronization of the Twin Pack or 18 months from delivery, whichever came first (hereinafter “Warranty”). Under its contract with Graybar, LEM was required to provide such a warranty. Under hurried and somewhat chaotic circumstances, LEM sold the Twin Pack to Gray-bar but did not provide the Warranty. Graybar received the Twin Pack and started loading and shipping it out of the country on August 7, 2003. One week later, Pratt & Whitney notified Graybar that, due to the drastically different operating environment in the Iraqi desert, Pratt & Whitney was not willing to simply consent to the assignment of the existing warranty from Allegheny. Within two weeks, Pratt & Whitney gave Graybar a proposal for a warranty covering the Twin Pack, which would cost $703,000. Despite the proposal, no party ever purchased a warranty from Pratt & Whitney that would cover the Twin Pack in Iraq. Graybar, however, did contract with Pratt & Whitney to provide various services, including technical services and oversight at a cost of $998,100, that Graybar claims were required to make the Twin Pack warrantable.

While there had been disagreement between Graybar and LEM as to what was being purchased under the contract and at what price, on or about September 3, 2003, Graybar and LEM signed a letter agreement containing a change order (hereinafter “Change Order”), which stated that the original contract price was $12,102,000 and that deductions should be made from this price for the following:

(1) a $2 million payment that Graybar made directly to Allegheny to obtain release of the Twin Pack,
(2) a black start generator,
(3) costs to convert the Twin Pack from 60 Hz to 50 Hz, and
(4) the cost of gas compression skids.

After making these deductions from the contract price under the Change Order [540]*540and after subtracting the $6,150,000 that Graybar already has paid LEM, the amount outstanding would be $2,671,456.

Before the Twin Pack was commissioned and started up, the United States Army suspended the project.

LEM filed this suit against Graybar. Graybar counterclaimed against LEM and filed third-party claims that are not relevant to this appeal. After a bench trial, the trial court rendered judgment in favor of LEM and against Graybar in the amount of $3.35 million plus prejudgment interest, postjudgment interest, attorney’s fees and costs. The trial court also rendered judgment in favor of Graybar in the amount of $100,000 on its counterclaim for “commission costs” plus prejudgment interest, postjudgment interest, and costs.2

The trial court issued findings of fact and conclusions of law, stating, among other things, the following:

• On July 29, 2003, LEM sent Graybar a pro forma invoice for a Twin Pack with an invoice price of $11.5 million.
• Subsequently, LEM represented that the Twin Pack would have an extended Pratt & Whitney warranty against certain defects for a period of 18 months from sale or one year from commissioning, whichever occurred first.
• On or about August 7, 2003, Graybar accepted LEM’s pro forma invoice dated July 30, 2003, requiring a 50% initial payment with Graybar’s purchase order, 40% before shipment, and 10% at commissioning.3 This invoice was amended by a pro forma invoice dated August 5, 2003.
• LEM agreed to convert the Twin Pack from 60 Hz to 50 Hz; however, LEM’s failure to make this conversion was excused by Graybar’s act of moving the equipment out of the country without giving LEM the required amount of time to accomplish the conversion.4
• LEM’s failure to provide the Pratt & Whitney warranty and failure to accomplish the conversion are excused by Graybar’s obtaining the consent of LEM to pay Allegheny directly, concealing the fact that Graybar would be obtaining a bill of sale directly from Allegheny for the purpose of evading its payment obligations to LEM. Graybar did not pay LEM the amounts it owed to. Though LEM offered to pay up to $1 million for a Pratt & Whitney warranty, Graybar did not accept this offer.
• Even if LEM’s performance had not been excused, the court found that Graybar only suffered a loss in the amount of $100,000, which the trial court found was the commercially reasonable cost of performing the conversion from 60 Hz to 50 Hz in the United States.

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252 S.W.3d 536, 2008 WL 599314, Counsel Stack Legal Research, https://law.counselstack.com/opinion/graybar-electric-co-v-lem-associates-llc-texapp-2008.