Hartis v. Century Furniture Industries, Inc.

230 S.W.3d 723, 63 U.C.C. Rep. Serv. 2d (West) 282, 2007 Tex. App. LEXIS 4997, 2007 WL 1840026
CourtCourt of Appeals of Texas
DecidedJune 28, 2007
Docket14-05-01099-CV
StatusPublished
Cited by10 cases

This text of 230 S.W.3d 723 (Hartis v. Century Furniture Industries, Inc.) 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
Hartis v. Century Furniture Industries, Inc., 230 S.W.3d 723, 63 U.C.C. Rep. Serv. 2d (West) 282, 2007 Tex. App. LEXIS 4997, 2007 WL 1840026 (Tex. Ct. App. 2007).

Opinion

OPINION

EVA M. GUZMAN, Justice.

Appellant Eugene Morris Hartis, Jr. sold furniture on consignment for appellee, Century Furniture Industries, Inc. After Hartis repeatedly failed to remit payment to Century, the parties agreed that Century would pick up its consigned furniture and also furniture manufactured by third parties from Hartis’s Houston warehouses and credit the value of the furniture to Hartis’s outstanding indebtedness. After retrieving and reselling the furniture, Century brought suit on a sworn account, alleging that, after applying the credit to Hartis’s account, an outstanding balance remained. As an affirmative defense and counterclaim, Hartis alleged that the transfer was performed subject to a new *726 contract under which Century agreed to pay the full price stated by Hartis for each item. The main dispute on appeal involves Hartis’s contention that Century agreed to purchase each item of third-party furniture for the price stated by Hartis in a written document detailing his Houston inventory. After a trial to the bench, the trial court ruled in favor of Century. We affirm the trial court’s judgment.

I.Factual and Pjrocedural Background

April 2002-February 2003

Appellant Eugene Hartis, Jr. was a manufacturer’s representative for Century Furniture Industries, Inc. (“Century”). His company, Century Showrooms (“Showroom”) maintained an open account with Century. Century consigned furniture to Showroom, and Showroom paid Century for the furniture after it was sold. 1

Century’s controller, Brandon Hucks, inventoried Showroom’s three warehouses in April 2002 and discovered that, although Century had consigned furniture with a wholesale value of $454,930.89 to Showroom, Showroom had only $229,724.25 in consigned furniture in its possession. Hartis admitted that he had sold the missing furniture and had not remitted any of the proceeds to Century. 2

In an effort to address the missing payments, Hartis executed a “Key Points of Agreement” (“Key Agreement”) with Century on April 29, 2002. Under this Agreement, Hartis assumed personal responsibility for Showroom’s debt (the “Note”) and agreed to execute required forms perfecting Century’s lien on “the existing inventory and inventory acquired in the future” as collateral securing the Note. He also agreed that, effective January 1, 2003, he would devote 85% of Showroom’s net usable space to Century products. Century agreed to reduce the debt arising from the missing furniture from $225,206.64 to $150,000, and the parties established a payment plan. Hartis agreed to pay Century $50,000 of this debt on May 15, 2002 and to pay the remainder in four quarterly installments of $25,000 each, beginning on August 1, 2002. Hartis made the first two payments totaling $75,000, but failed to make payments due on November 1, 2002 and February 1, 2003.

By February 2003, Hartis had reported additional sales of Century’s consigned furniture with a wholesale value of $135,173.25. 3 After deducting these reported sales from Hartis’s April 2002 inventory, Century expected that in February 2003, Hartis possessed Century furniture with a wholesale value of $94,551.00. Hartis also incurred additional debts to Century during this time. As a result of sales on other accounts and sales of floor samples, Hartis’s total debt to Century in February 2003, including payments due under the Key Agreement, totaled $256,432.03.

February 12, 2003-March 17, 2003

Hucks testified that Hartis offered to pay his outstanding debt by turning over merchandise listed in three inventory spreadsheets that Hartis emailed to Hucks on February 12, 2003. One spreadsheet listed merchandise stored in Dallas and identified with the Durango Trading Company (the “Durango Inventory File”); another listed imported goods stored in a warehouse in High Point (the “High Point Inventory File”). 4 The third spreadsheet *727 was identified as “Century 2003 Reconciliation, Item Listing, February 12, 2003” (the “Houston Inventory File”). The Houston Inventory File contains six columns with the headings, “Item,” “Description,” “Quantity on Hand,” “Cost,” “Ext Cost,” and “Preferred Vendor.” On the last page of this spreadsheet, the sum of the entries in the column marked “Ext Cost” is fisted as $386,503.54.

On February 17, 2003, Hartis emailed Century two files labeled “CSR Inventory Reconcifiation021803” and “Durango In-ventory021803.” The body of the email contains no text, but the stated subject is “Updated Inventory.”

On February 18, 2003, Hucks wrote to Hartis as follows:

Gene, I haven’t had an opportunity to review the detail of your files below, but the CSR file seems high. When I took you’re [sic] Dec. Inventory less January Sales, I came up with 296,529.20. (excluding Durango and High Point). That seemed reasonable based on the January sales figures that we discussed (approximately $150K to $160K with little to no margin). Your file below states 366,887.09. Any ideas?

On February 20, 2003, Hartis responded:

I was trying to get a picture of the Century inventory and left the subtotal in the figures. I think that the Century inventory was added in twice. I am forwarding a corrected copy that subtotals the Century inventory and then backs out the Century goods.... Also attached is a listing of the Century items cleared in Jan./Feb. The merchandise at Ampac in High Point does not belong to [Showroom]_ There is also additional merchandise at Ampac from the Chinese company that came in with the goods designated for me. We do not own any of it, however.

Sometime between February 20 and March 17, 2003, Century picked up five truckloads of consigned and third-party furniture from Hartis’s warehouses.

Transfer of Consigned Furniture

The parties do not dispute their mutual understanding that some of the transferred furniture was held on consignment, or that, after retrieving the consigned furniture, Century removed it from the fist of consigned items held in trust, effectively giving Hartis a “dollar-for-dollar” credit for these items. The initial wholesale cost of these goods, and thus the credit applied to Hartis’s debt upon their return, totals $64,784.75. 5 With the exception of items that were simply misidentified on the party’s lists — and Hartis testified at trial that these constitute an insignificant amount— the shortfall is the result of missing inventory. When asked at trial if he sold an additional $30,000 of consigned Century furniture and again failed to pay Century, Hartis responded, “Possibly.”

Transfer of Third-Party Furniture

The remainder of the furniture transferred to Century consisted of furniture manufactured by third parties. The third-party furniture was not in its original packaging and had previously been displayed; Hartis was unsure of its age. Century sold this furniture to its sister company, Boulevard, for an amount Century identified as market value.

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230 S.W.3d 723, 63 U.C.C. Rep. Serv. 2d (West) 282, 2007 Tex. App. LEXIS 4997, 2007 WL 1840026, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hartis-v-century-furniture-industries-inc-texapp-2007.