Sanders Oil & Gas, Ltd. v. Big Lake Kay Constr., Inc.

554 S.W.3d 79
CourtCourt of Appeals of Texas
DecidedFebruary 28, 2018
DocketNo. 08–13–00156–CV
StatusPublished
Cited by6 cases

This text of 554 S.W.3d 79 (Sanders Oil & Gas, Ltd. v. Big Lake Kay Constr., 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
Sanders Oil & Gas, Ltd. v. Big Lake Kay Constr., Inc., 554 S.W.3d 79 (Tex. Ct. App. 2018).

Opinion

YVONNE T. RODRIGUEZ, Justice

Appellant, Sanders Oil & Gas, Ltd., ("Sanders Oil") appeals the trial court's ruling of a claim for services by Appellee, Big Lake Kay Construction, Inc., ("Big Lake") against them. At the conclusion of a bench trial, the trial court entered a judgment against Sanders Oil for $25,614.61 and awarded attorney fees of $7,200.00. In three issues Sanders Oil asserts: (1) Big Lake failed to satisfy a condition precedent to a contract; (2) the award of $25,614.61 was legally and factually insufficient; and (3) a spoliation presumption should have been applied. We affirm.

BACKGROUND

Big Lake provided oil-field services to Sanders Oil. Joey Hernandez (Hernandez) owns Big Lake and Gail Lynn Sanders ("Sanders") owns Sanders Oil. Big Lake and Sanders Oil orally agreed Big Lake would provide oil-field services to Sanders Oil and, in return, Sanders Oil would pay for the services rendered after receiving the appropriate invoices. Big Lake generated invoices totaling approximately $80,000 for the entirety of the work performed for Sanders Oil. Big Lake's lawsuit pertains to a portion of those invoices that were unpaid.

Big Lake sued Sanders, alleging a breach of oral contract, based on Sanders Oil's failure to pay Big Lake $39,355.88 for goods and services. In response, Sanders Oil asserted a variety of affirmative defenses-among them-alleging Big Lake did not own the breach of contract claim because Big Lake had sold the claim to Security Business Capital, LLC ("SBC").

SBC is a factoring company.1 During a financially difficult period, Big Lake sold their Sanders Oil invoices (i.e. factored) to SBC. On October 2, 2009, SBC sent Sanders Oil a Notice of Assignment signed by both Justin Keith Ryan, a then-manager of SBC, and Kenneth Stahl, Sanders Oil's then-comptroller. Under the agreement, Sanders Oil was to pay SBC, not Big Lake, for the outstanding invoices. After Sanders Oil ceased paying, Big Lake sued on the outstanding balance.

Joey Hernandez

During the bench trial, Hernandez, the owner of Big Lake, described how their invoices were generated. First, a Big Lake employee (or supervisor) would perform the work and at the end of the work day, the employee would return to the office and enter their field notes. The invoices would issue once the field notes were entered, which Hernandez subsequently reviewed. Hernandez confirmed that as a result of Big Lake's process, each invoice *86corresponded to a particular day and it was not possible to produce an invoice without the corresponding field notes. Indeed, he explained, without the relevant field notes, Big Lake would be unable to produce an invoice number. At trial, Sanders Oil's counsel, thoroughly cross-examined Hernandez regarding Big Lake's invoices and their diligence in adhering to their invoice process.

Hernandez testified, Big Lake began performing services for Sanders Oil after he had spoken to a contractor by the name of "Wayne" and Joe Johnson, a Sanders Oil representative. After the initial project, Big Lake continued to provide Sanders Oil with additional services: first, by allowing Sanders Oil to utilize Big Lake's employees and equipment, and later, by purchasing supplies and materials to service Sanders Oil. Big Lake built multiple "tanks" for Sanders Oil. Big Lake continued to work for Sanders Oil until they ceased paying on their outstanding invoices. Hernandez contacted Sanders about the outstanding invoices. Sanders explained that Sanders Oil was facing some financial pressure, but assured Hernandez he would receive payment in full. As a result, Big Lake recommenced performance of their services to Sanders Oil.

Big Lake soon found itself facing financial difficulties and Hernandez engaged SBC's factoring assistance: he sold the Sanders Oil invoices to SBC. In factoring these invoices, Big Lake lost an increasing percentage of each invoice over time while the invoices remained unpaid. Big Lake sold approximately sixty-nine invoices to SBC, with an approximate value of $37,000. Hernandez then informed Sanders he had factored those invoices and Sanders Oil needed to pay SBC direct. Hernandez kept in contact with SBC manager Justin Keith Ryan to check the status of Sanders Oil's payments until they ceased payment. Due to Sanders Oil's non-payment, Hernandez repurchased the outstanding invoices from SBC by borrowing from a bank and utilizing his own personal funds.

Hernandez testified that Big Lake initially factored (i.e. sold) $29,394.73 of the Sanders Oil invoices. After factoring a second set of Sanders Oil invoices, the outstanding total increased to $34,497.65. Hernandez also used Big Lake's cash on hand to repurchase the Sanders Oil invoices from SBC and Big Lake was, subsequently, sued for non-payment to another company. As a result, Hernandez testified Big Lake incurred approximately $2,000 to $2,400 in attorney's fees as a result of that lawsuit. Hernandez stated from the time Sanders Oil ceased payment up until trial, the amount owed varied. Nevertheless, Hernandez averred the total amount of the invoices, paid and unpaid, came from three or four "tanks" Big Lake had built for Sanders Oil. Hernandez testified to the amount Sanders Oil owed Big Lake, before and after factoring the invoices, and, in addition, the amounts owed before and after this suit commenced. Some of the outstanding invoices lacked the accompanying field notes, Hernandez explained, because Big Lake's office had moved. Previously, Hernandez operated Big Lake from his home, however, they were lost when he moved Big Lake to a new office location. Nevertheless, Hernandez produced the invoices he was able to locate and produced all of the relevant invoices in question.

At trial, Hernandez reviewed and confirmed the letter SBC sent Sanders Oil. The letter stated, in relevant part:

[Big Lake] has assigned their present and future accounts receivables to [SBC].
...
All payments should be made payable and mailed to [SBC] at [SBC's address].
*87...
This Notice of Assignment shall remain in effect until you receive written authorization from [SBC].

The letter was signed by Ryan, for SBC, and by Kenneth Stahl, for Sanders Oil.

Joe Johnson

Joe Johnson works in the oil industry and was employed by Sanders Oil to supervise companies, including Big Lake, that were working on Sanders Oil's wells. He explained that after having built four or five wells, he employed Big Lake for Sanders Oil's to continue work on the wells, which required various types of skills and equipment. In addition to the well-related work, according to Johnson, Big Lake are also responsible for performing non-well-related work. Johnson supervised Big Lake and kept Sanders Oil appraised of Big Lake's work and progress.

Johnson confirmed Hernandez's testimony regarding how the invoices were generated, but added that he reviewed the field notes for each of the invoices. Each invoice has to be the product of a corresponding set of field notes: it was his job to make sure they "match[ed] up." Johnson testified he did not approve an invoice without reviewing the corresponding field notes. Johnson averred each of the disputed invoices involved necessary work that had been completed by Big Lake.

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554 S.W.3d 79, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sanders-oil-gas-ltd-v-big-lake-kay-constr-inc-texapp-2018.