Smart Dealers Parts, L.C. v. Marks Transport, Inc. D/B/A Champion Toyota F/K/A Jay Marks Toyota

• Court: Court of Appeals of Texas
• Decided: October 5, 2006
• Docket: 14-05-00810-CV
• Status: Published

Opinion

Affirmed and Memorandum Opinion filed October 5, 2006

Affirmed and Memorandum Opinion filed October 5, 2006.

In The

Fourteenth Court of Appeals

_______________

NO. 14-05-00810-CV

SMART DEALER PARTS, L.C., Appellant

V.

MARKS TRANSPORT, INC., D/B/A CHAMPION TOYOTA F/K/A JAY MARKS TOYOTA, Appellee

On Appeal from the 125^TH District Court

Harris County, Texas

Trial Court Cause No. 02-41600

M E M O R A N D U M   O P I N I O N

In this appeal, Smart Dealer Parts, L.C. (SDP) appeals a judgment in favor of Marks Transport, Inc., d/b/a Champion Toyota f/k/a Jay Marks Toyota (Marks) on the ground that the evidence is factually insufficient to support the jury=s finding that SDP was the first party to breach the contract.  We affirm.

Factual and Procedural Background

Marks is a large Toyota dealership, which purchases and sells automobile parts on a daily basis.  Because of its unique parts requirements and its status as a Toyota franchise, Marks purchases the majority of its parts from Gulf States Toyota, the distributor for Toyota Motor Company in the Houston area.  As the distributor, Gulf States could immediately deliver parts to Marks.  Marks and other Toyota dealerships purchase a small portion of their automobile parts from Agray market@ dealers.  Most gray market dealers purchase parts at a discount overseas and resell those parts in the United States.  Because of the nature of the gray market business, the inventory of gray market dealers does not equal that of Gulf States Toyota.  In 1998, Marks was purchasing most of its gray market parts from Trans World Services.  In addition to purchasing parts from gray market dealers, Marks and other Toyota dealerships would obtain large quantities of parts from Gulf States Toyota and resell those parts at a discount to gray market dealers. 

In 1994, Abdullah Hassan Ali formed SDP for the purpose of selling auto parts on the gray market.  Dwayne Holliman worked as a salesperson for SDP.  Ali testified that when Holliman began work at SDP, he signed an agreement not to compete with SDP for a certain period of time following his termination.  SDP, however, failed to produce a copy of the agreement at trial.  Holliman was terminated from SDP and began working in the parts department at Marks.  In 1998, Ali became concerned that Holliman was taking clients from SDP and threatened to file a lawsuit against Marks.  At the time of the threatened lawsuit, Marks did not do business with SDP on a regular basis, nor did SDP purchase parts from Marks.  At that time, SDP purchased bulk parts orders from Fred Haas Toyota, a competitor of Marks.

In an effort to settle the disagreement, the parties entered into the contract at issue in this case.  In early discussions about settlement, Ali requested that Marks guarantee $120,000 in parts orders every month.  Because Marks was unable to make such a guarantee, it rejected any monetary guarantee of parts orders.  On December 17, 1998, SDP and Marks agreed to the following:

$                   Beginning January 1, 1999 and subject to the terms and conditions of the agreement, Marks agreed to offer SDP first opportunity to fill all daily, weekly, and monthly stock orders, industrial orders, and export orders to the extent SDP could timely fill the orders.

$                   SDP agreed to deliver all parts on or before the close of business on the next business day following the order.  If the parts were not timely delivered, Marks reserved the right to cancel the order.

$                   SDP agreed to use its best efforts to purchase parts from Marks.

$                   Payment terms were net thirty days.

Both parties testified they considered the agreement to be favorable to them.  SDP would benefit by diverting parts orders from its competitor, Trans World Services, and Marks would benefit by diverting parts orders from its competitor, Fred Haas Toyota.

Beginning January 1, 1999, Thomas Sowell, the parts manager for Marks, sent his daily parts orders to SDP by fax or email.  Sowell requested that SDP inform Marks by 3:30 p.m. the day of the order whether SDP could fill any of the parts orders.  Accordingly, Marks had time to order parts from Gulf States by 4:00 p.m. if SDP was unable to fill any portion of the order.  Sowell testified that whatever parts SDP reported it had in stock, Marks would order.  Sowell remembers that he continued to send daily stock orders to SDP through the end of 1999 and possibly into 2000.  Neither party kept a record of these daily orders.  The only records produced at trial were invoices produced by SDP.  Sowell testified that in January 1999, the first month of the contract, SDP was not able to fill all Marks=s parts orders.  SDP frequently shipped incorrect or damaged parts.  Further, SDP often did not fill the entire quantity ordered by Marks. 

Randy Martin was employed by SDP from 1994 through 2001.  When the agreement was initiated with Marks, it was his responsibility to administer it for SDP.  Based on his conversations with Ali, Martin understood that Marks would give SDP right of first refusal on all its parts orders in exchange for SDP=s promise to use its best efforts to purchase parts from Marks.  Shortly after the agreement was signed, Martin testified SDP had a large parts order it needed to fill.  Ali instructed Martin to purchase the parts from Fred Haas Toyota, not Marks.  When Martin discussed with Ali whether SDP should purchase the parts from Marks under the 1998 agreement, Ali told Martin he preferred to purchase parts from Fred Haas because Haas did not require Ali to pay for the parts in a timely manner.  Under Ali=s instruction, Martin sent the parts orders to Fred Haas first, then sent the remainder to Marks.  Ali instructed Martin not to send parts orders to Marks first.  Martin testified that after the agreement was signed, Marks complied with the agreement by sending SDP its parts orders on a daily basis.  Martin testified that the relationship between the parties deteriorated because SDP did not have many parts in stock that were needed by Marks.  Martin further testified that Sowell had valid complaints about order shortages and damaged parts.  He agreed that SDP sent inaccurate shipments.

Sometime after the first year of the agreement, Marks became frustrated with SDP=s performance and began diverting its parts orders to other gray market dealers.  SDP filed this lawsuit alleging Marks had breached the agreement.  Marks filed a counterclaim against SDP alleging it had breached the contract before Marks stopped sending all its orders to SDP.  The jury found that both parties breached the contract, that SDP breached the contract first, and that neither party suffered damages as a result of the breach.

Factual Sufficiency of the Evidence

In a single issue, SDP contends the finding by the jury that SDP breached the contract first is not supported by factually sufficient evidence or is so against the great weight and preponderance of the evidence as to be manifestly unjust.  In reviewing SDP=s factual-sufficiency challenge, we examine the entire record, considering both the evidence in favor of, and contrary to, the challenged finding.  Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986).  After considering and weighing all the evidence, we set aside the fact finding only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust.  Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986).  The trier of fact is the sole judge of the credibility of the witnesses and the weight to be given to their testimony.  GTE Mobilnet of S. Tex. v. Pascouet, 61 S.W.3d 599, 615B16 (Tex. App.CHouston [14th Dist.] 2001, pet. denied).  We may not substitute our own judgment for that of the trier of fact, even if we would reach a different answer on the evidence.  Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998).

The jury found that both parties breached the contract, but that SDP breached the contract first.  The contract required Marks to give SDP the first opportunity to fill any parts orders and to pay for those parts within thirty days.  SDP does not dispute that Marks timely paid its bills.  SDP, however, contends that Marks did not give SDP first opportunity to fill its parts orders.  In exchange for the first opportunity to fill Marks=s parts orders, SDP agreed to (1) deliver the parts on or before the close of business the next day after the parts were ordered, (2) use its best efforts to purchase parts from Marks, and (3) pay Marks for purchased parts within thirty days of delivery. 

Having reviewed the entire record, we find factually sufficient evidence to support the jury=s finding that SDP first breached the contract.  Thomas Sowell testified that Marks sent daily orders to SDP, giving it first opportunity to fill the orders, for at least one year following the signing of the contract.  SDP contends the evidence shows that Marks breached the contract on January 4, 1999, the first business day of the contract term because the first invoice for parts ordered by Marks is dated January 5, 1999.  Sowell testified that the invoice was sent for parts ordered on January 4, 1999, the first business day of the contract term.  Therefore, the date of the first invoice does not support SDP=s contention that Marks breached the contract first.  Sowell further testified that he continued to send parts orders to SDP, but became frustrated with SDP=s inability to fill parts orders accurately and with undamaged parts.  Sowell also became frustrated with SDP=s failure to purchase parts from Marks.  It was not until after at least a year of receiving inaccurate parts orders and damaged parts and not receiving parts purchases from SDP that Sowell began to divert parts orders to other gray market dealers.  Robert Martin, a former SDP employee, testified that he does not remember Marks depriving SDP of orders until after SDP failed to perform under the contract.

Martin testified that during the first several months of the contract, SDP failed to deliver all the parts that were ordered by Marks by the end of the next business day.  Martin further testified that SDP intentionally diverted a large parts order that could have been purchased from Marks to Fred Haas Toyota because payment terms were more favorable at Fred Haas.  SDP presented evidence that it expected to receive orders of parts totaling $120,000 per month from Marks, and because it did not receive such high orders, Marks must not have been giving SDP first opportunity to fill those orders.  The evidence at trial reveals that Marks never agreed to provide $120,000 per month in parts orders to SDP.  In fact, there was testimony that no dealership could produce that level of parts orders with a gray market dealer.

SDP further contends that an invoice from Star Toyota proves that Marks was not giving SDP first opportunity to fill orders in January and February of 1999.  At trial, SDP produced an invoice of a purchase of approximately $800,000 in parts from its Saudi Arabian supplier, Star Toyota.  Kurt Carlson, an employee of SDP, argued that the invoice proved that SDP had sufficient inventory in January and February, 1999 to fill Marks=s parts orders.  Therefore, SDP contends there is no merit to Marks=s claim that SDP was unable to fill its parts orders.  During cross-examination of Carlson, Marks contested the authenticity of the invoice from Star Toyota, pointing out discrepancies between that invoice and other invoices from the same company.  Further, neither party produced the actual parts orders sent by Marks to SDP because those records were not retained by the parties.  Because there is no evidence of the actual parts ordered, the Star Toyota invoice does not, by itself, prove that Marks did not give SDP first opportunity to fill its orders.  Further, as the trier of fact, the jury was entitled to judge the credibility of the evidence and to determine the weight given to certain evidence.  GTE Mobilnet, 61 S.W.3d at 615B16.  Having reviewed all of the evidence, both that in favor of, and against, the jury=s finding, we find factually sufficient evidence to support the jury=s finding that SDP first breached the contract.  We further find the evidence in support of the jury=s finding is not so against the great weight and preponderance of the evidence as to be manifestly unjust.  Appellant=s sole issue is overruled.

Accordingly, the judgment of the trial court is affirmed.

/s/        Charles W. Seymore

Justice

Judgment rendered and Memorandum Opinion filed October 5, 2006.

Panel consists of Justices Hudson, Fowler, and Seymore.