Kwikcolor Sand v. Fairmount Minerals Ltd. , 2011 Ohio 6646 ( 2011 )

[Cite as Kwikcolor Sand v. Fairmount Minerals Ltd., 2011-Ohio-6646.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 96717
KWIKCOLOR SAND
PLAINTIFF-APPELLANT
vs.
FAIRMOUNT MINERALS LTD., ET AL.
DEFENDANTS-APPELLEES
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-711688
BEFORE: S. Gallagher, J., Kilbane, A.J., and Blackmon, J.
RELEASED AND JOURNALIZED: December 22, 2011
ATTORNEY FOR APPELLANT
2
Arlene Sokolowski-Craft
Craft Law Offices
7425 Royalton Road
North Royalton, OH 44133
ATTORNEYS FOR APPELLEES
Colleen Conley
Mark I. Wallach
Calfee, Halter & Griswold LLP
800 Superior Avenue
1400 Keybank Center
Cleveland, OH 44114-2688
SEAN C. GALLAGHER, J.:
{¶ 1} Plaintiff-appellant Kwikcolor Sand (“KCS”) appeals the decision of the trial
court granting summary judgment in favor of defendants-appellees Fairmount Minerals,
Ltd., Best Sand Corporation, and Mineral Visions, Inc. (collectively “appellees”). For
the following reasons, we affirm.
{¶ 2} KCS asserted four, self-styled claims against appellees in its amended
complaint: action on an account, breach of contract, unjust enrichment, and punitive
damages. KCS attached 94 invoices to that complaint. In January 2004, KCS
contracted with appellees to supply colored quartz for prices set forth in “Schedule A”
3
attached to the Material Purchase and Distribution Agreement (“MPDA”). The MPDA
was a requirement contract where KCS would provide appellees with the necessary
amounts of colored quartz upon appellees’ request. The shipments were triggered by
appellees issuing a purchase order to KCS. Per the terms of the MPDA, the contract
self-renewed yearly unless either party submitted a notice of termination 90 days prior to
the expiration of the contract. The MPDA also contained a clause that prohibited
modifications unless the modifications were contained in a signed writing, the so-called
no-oral-modification clause.
{¶ 3} Appellees orally renegotiated prices with KCS sometime in 2005 due to
overall pricing concerns. Appellees presented evidence through the affidavits of
Christopher Calhoun and Maureen Lynn, appellees’ employees, that appellees and KCS
based pricing decisions on a price list dated June 27, 2005, provided by KCS. No signed
writing memorialized this agreement. In consideration of the 2005 reduced pricing
structure, appellees offered KCS a discount on the raw sand it purchased from appellees.
KCS purchased raw sand from appellees, added the colored quartz to the raw sand, and
then resold the mixture to appellees.
{¶ 4} After June 2005, and through October 2006, KCS issued 73 invoices
reflecting the prices contained in the 2005 price list. Appellees paid and KCS accepted
the amounts owed as reflected on the invoices. On September 25 to 27, 2009, KCS
reissued invoices for these 73 transactions based on the prices contained in the Schedule
4
A price list. 1 For the sake of simplicity, we will adopt appellees’ nomenclature
regarding those invoices and refer to the 73 invoices as the “reissued invoices.” These
73 invoices mirrored the original invoices, with the exception that KCS inserted “-A”
following the original invoice number, reflected the payment made on the original
invoice, and charged according to the Schedule A pricing. These invoices also included
the following statement: “Invoice price reflects ‘Schedule A’ of [MPDA], which was
composed by Best Sand. Invoice balance [is] due according to ‘Schedule A,’ which has
not been paid in accordance with the legal terms of the contract.” Appellees
continuously disputed owing the amount due on the reissued invoices.
{¶ 5} Sometime around October 2006, the relationship between KCS and the
appellees began to sour. According to KCS, at this time appellees and KCS were
negotiating some form of a merger between the companies, demonstrated by the dated
email KCS attached to its brief in opposition to summary judgment. The merger never
proceeded beyond the discussion stages.
1
The 70 reissued invoices are as follows: 5002-A, 5005-A, 5023-A, 5050-A, 5074-A,
5082-A, 5097-A, 5105-A, 5106-A, 5112-A, 5115-A, 5120-A, 5125-A, 5130-A, 5133-A, 5135-A,
5137-A, 5141-A, 5157-A, 5165-A, 5170-A, 5173-A, 5174-A, 5182-A, 5192-A, 5199-A, 5202-A,
5210-A, 5214-A, 5215-A, 5220-A, 5222-A, 5227-A, 5229-A, 5237-A, 5240-A, 5244-A, 5246-A,
5247-A, 5256-A, 5260-A, 5261-A, 5266-A, 5267-A, 5271-A, 5272-A, 5274-A, 5276-A, 5283-A,
5291-A, 5294-A, 5297-A, 5298-A, 5304-A, 5308-A, 5310-A, 5311-A, 5314-A, 5321-A, 5333-A,
5336-A, 5344-A, 5347-A, 5350-A, 5364-A, 5368-A, 5369-A, 5393-A, 5398-A, and 5400-A. In
addition to these 70 invoices, there are three invoices for which KCS and appellees agreed, at the
time of issuance, that nothing was owed because of issues with the delivered product. These
three invoices, numbered 5251-A, 5255-A, and 5293-A, will be included with the reissued
invoices for the purposes of this appeal.
5
{¶ 6} On September 1, 2006, KCS issued a written letter notifying appellees that
KCS would terminate their relationship effective January 15, 2007. During the
termination period, appellees submitted purchase orders to KCS for more products.
Appellees’ purchase orders reflected the 2005 prices. KCS delivered the requested
product, but ultimately issued invoices based on the prices listed in Schedule A of the
MPDA. Appellees paid KCS based on the 2005 pricing and as indicated on the purchase
orders submitted to KCS. There are 14 of the so-called “divergent invoices.”2
{¶ 7} Finally, there are seven invoices for which the appellees established,
through their evidentiary submissions, that the goods or services identified in the invoices
were never requested, the “additional invoices.” 3 In the additional invoices, KCS
requested payment for storage of surplus product, transactional fees, and for quantities of
colored quartz that were delivered to KCS’s facilities. Prior to the transactions reflected
by the additional invoices, the product requested by appellees would be shipped directly
to appellees’ client, not to KCS’s facility.
{¶ 8} Appellees filed a motion for summary judgment in which they argued that
the parties modified the Schedule A pricing in 2005, that both parties operated under a
modified price structure, and that appellees issued purchase orders, using the 2005
2
The 14 divergent invoices are as follows: 5367-A, 5383-A, 5416-A, 5417-A, 5421-A,
5422-A, 5423-A, 5436-A, 5457-A, 5458-A, 5459-A, 5469-A, 5474-A, and 5487-A.
3
The seven additional invoices are as follows: 5171-A, 5442-A, 5489-A, 5494-A, 5507,
5508, and 5509.
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pricing, which were accepted by KCS without any objections. The trial court granted
summary judgment in favor of appellees on all claims, finding that KCS failed to identify
any genuine issue of material fact necessitating trial. KCS timely appealed, raising the
five assignments of error, which are attached in the appendix to this opinion.
{¶ 9} Before addressing the merits of the trial court’s summary judgment
decision, we will first address KCS’s fourth assignment of error in which KCS contends
that the trial court erred by “permitting appellees to make an issue of [KCS’s] other
lawsuit.” KCS has not identified the place in the record where the trial court allowed
appellees to make an issue over KCS’s previous lawsuit. The trial court’s docket is
silent as to the previous lawsuit. Pursuant to App.R. 16(A)(3), we decline to address
KCS’s argument and overrule its fourth assignment of error.
{¶ 10} We will address KCS’s first, second, third, and fifth assignments of error
together. KCS contends that the trial court erred by granting summary judgment in
favor of appellees on all claims. For the following reasons, KCS’s assignments of error
are overruled.
{¶ 11} Appellate review of summary judgment is de novo, governed by the
standard set forth in Civ.R. 56. Comer v. Risko, 106 Ohio St. 3d 185, 2005-Ohio-4559,
833 N.E.2d 712, ¶ 8. Accordingly, we afford no deference to the trial court’s decision
and independently review the record to determine whether summary judgment is
appropriate. Hollins v. Shaffer, 182 Ohio App. 3d 282, 2009-Ohio-2136, 912 N.E.2d
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637, ¶ 12. While a party requesting summary judgment bears the initial burden to show
the basis of the motion using the evidence allowed under Civ.R. 56(C), once the moving
party satisfies this burden of production, the nonmoving party must offer specific facts
showing a genuine issue for trial. Dresher v. Burt (1996), 75 Ohio St. 3d 280, 293-294,
662 N.E.2d 264.
{¶ 12} Under Civ.R. 56(C), summary judgment is proper when the moving party
establishes that “(1) no genuine issue of any material fact remains, (2) the moving party is
entitled to judgment as a matter of law, and (3) it appears from the evidence that
reasonable minds can come to but one conclusion, and construing the evidence most
strongly in favor of the nonmoving party, that conclusion is adverse to the party against
whom the motion for summary judgment is made.” State ex rel. Duncan v. Mentor City
Council, 105 Ohio St. 3d 372, 2005-Ohio-2163, 826 N.E.2d 832, ¶ 9, citing Temple v.
Wean United, Inc. (1977), 50 Ohio St. 2d 317, 327, 364 N.E.2d 267.
{¶ 13} We note that although KCS identified four claims, it actually advanced two
claims, breach of contract and unjust enrichment. “Punitive damages” is not a
stand-alone claim. It is a measure of damages. Similarly, an action on an account is a
pleading device “used to consolidate several claims which one party has against another.”
AMF, Inc. v. Mravec (1981), 2 Ohio App. 3d 29, 440 N.E.2d 600, paragraph one of the
syllabus. The action on account simplifies pleadings by allowing a party to advance, as
one claim, claims for separate breaches of contract based on a series of transactions by
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providing a summary of accounting for the transactions. Id. at paragraph two of the
syllabus. Therefore, KCS’s claim for an action on account is really one for breach of
contract. We note this is further demonstrated by the fact that KCS provided the
invoices for each individual transaction rather than the running account balance.
{¶ 14} “To succeed on a breach of contract claim, a party must prove the existence
of a contract, that party’s performance under the contract, the opposing party’s breach,
and resulting damages.” Povroznik v. Mowinski Builders, Inc., Cuyahoga App. No.
93225, 2010-Ohio-1669, ¶ 13. In the alternative, “unjust enrichment operates in the
absence of an express contract or a contract implied in fact to prevent a party from
retaining money or benefits that in justice and equity belong to another.” Gallo v.
Westfield Natl. Ins. Co., Cuyahoga App. No. 91893, 2009-Ohio-1094, ¶19. Absent bad
faith, fraud, or some other illegality, an equitable action for unjust enrichment cannot
exist where there is a valid and enforceable written contract. Id.; Sivinski v. Kelley,
Cuyahoga App. No. 94296, 2011-Ohio-2145, ¶ 45.
{¶ 15} KCS’s unjust enrichment claim fails as a matter of law. KCS alleged, and
appellees admitted to, the existence of an underlying contract governing the parties’
relationship with each other. Neither party challenged the enforceability or the validity
of the MPDA. The crux of the parties’ dispute centers on whether the parties’ oral
modification of the MPDA is enforceable. If the oral modification is unenforceable, the
MPDA still governs the parties’ relationship. In light of the fact that a valid and
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enforceable contract exists, Ohio law precludes KCS’s claim for unjust enrichment.
KCS is entitled to compensation for goods and services only according to the terms of the
MPDA. See Aultman Hosp. Assn. v. Community Mut. Ins. Co. (1989), 46 Ohio St. 3d 51,
55, 544 N.E.2d 920. The trial court did not, therefore, err in granting summary
judgment in appellees’ favor upon KCS’s unjust enrichment claim.
{¶ 16} The primary issue raised in the current case is whether the parties’ oral
modification of the price structure in the MPDA is enforceable.
No-Oral-Modification Clause
{¶ 17} KCS alleges that appellees breached the terms of the MPDA by failing to
remit payments, based on the Schedule A pricing, for the outstanding balances reflected
on the 94 invoices, and further claims that any modification of prices should have been
effectuated through a signed writing pursuant to the explicit terms of the MPDA.
Appellees argue that KCS originally invoiced appellees for products based on the 2005
price list thereby waiving the no-oral-modification provision and modifying the price
terms of the MPDA.
{¶ 18} R.C. Chapter 1302 governs sales transactions such as the ones between
KCS and appellees. R.C. 1302.02. R.C. 1302.12(B) provides in pertinent part that a
“signed agreement which excludes modification or rescission except by a signed writing
cannot be otherwise modified or rescinded * * *.” “No-oral-modification clauses are
designed to protect against fraudulent or mistaken oral testimony concerning transactions
10
subsequent to a written contract. Nevertheless, the code drafters recognized the
potential for abuse and various concerns that rigid no-oral-modification clauses may
create. Accordingly, the drafters provided an important exception to the enforceability
of no-oral-modification clauses.” Fields Excavating, Inc. v. McWane, Inc., Clermont
App. No. CA2008-12-114, 2009-Ohio-5925, ¶ 15. If the attempt to modify or rescind
the agreement is not memorialized by a signed writing, the attempt nonetheless can
operate as a waiver of the no-oral-modification provision. Id.; R.C.1302.12(D). R.C.
1302.12 must also be read in conjunction with R.C. 1302.11 (eff. 7-1-62), 4 which
provides that the course of performance between the parties will be relevant to show a
waiver or modification of any term inconsistent with such course of performance.
{¶ 19} Generally in Ohio, the issue of whether a no-oral-modification clause is
waived is a question of fact. Fields Excavating, Inc., 2009-Ohio-5925, at ¶ 21. In this
case, the material facts are not disputed. A “fact-specific inquiry with no disputed facts
does not create a question of material fact preventing summary judgment.” Owners Ins.
v. Barone (June 6, 2011), N.D. Ohio No. 3:10 CV 116.
{¶ 20} It is undisputed that KCS and appellees orally agreed to modify the
Schedule A pricing and operated under the modified 2005 pricing from June 2005
through October 2006. KCS does not dispute it agreed to the modified pricing. It
4
This is the version of R.C. 1302.11 effective during the course of the proceedings.
11
relies solely on the no-oral-modification clause to challenge the enforceability of the
modification.
{¶ 21} Both parties, however, operated under the modified pricing structure and
thereby waived any right to enforce the stringent modification requirement in the MPDA.
See R.C. 1302.12(D); Software Clearing House, Inc. v. Intrak, Inc. (1990), 66 Ohio
App.3d 163, 583 N.E.2d 1056 (holding that even a gratuitous oral agreement to modify a
prior written agreement is binding if it is acted upon by the parties). Appellees
established through their undisputed evidentiary submissions that KCS provided, and
appellees accepted, the 2005 price list and all parties operated under the modified pricing
structure.
{¶ 22} The oral modification of the MPDA pricing is enforceable in this case, and
the MPDA was modified by substituting the Schedule A pricing with the 2005 pricing.
KCS waived the no-oral-modification clause for the purposes of modifying the price
structure and could not revert to the original Schedule A pricing without further
agreement between the parties. It is undisputed that appellees never agreed to revert to
the Schedule A pricing. In light of the fact that KCS waived, through its course of
performance, the no-oral-modification provision, the pricing terms of the MPDA were
modified and the parties were contractually bound to the 2005 pricing structure for the
duration of the MPDA or until further agreement amongst the parties to modify the terms
of the MPDA.
12
Reissued and Divergent Invoices
{¶ 23} We agree with the trial court, upon de novo review, that appellees
established the basis of their motion, i.e., that no genuine issue of material fact existed as
to whether appellees breached the contract. The trial court, therefore, did not err in
granting summary judgment upon KCS’s breach of contract claim regarding the reissued
and divergent invoices.
{¶ 24} KCS cannot establish that appellees breached the modified MPDA.
Appellees paid all that was due and owing according to terms of the modified agreement.
The parties agreed to modify the pricing structure of the MPDA, and appellees were not
contractually bound to pay the outstanding balances on the reissued and divergent
invoices, which were based on the Schedule A pricing. KCS’s assignments of error to
the contrary are overruled.
Additional Invoices
{¶ 25} KCS, in the additional invoices, requested payment for storage of surplus
products, for other transactional fees, and for quantities of colored quartz that were
delivered to KCS’s facilities. Appellees disputed ever requesting the colored quartz
delineated in the additional invoices. Further, appellees argued that the storage and
other transactional fees were not authorized under the MPDA and no other contract
existed governing such fees.
13
{¶ 26} In order to succeed on a breach of contract claim, a party must prove,
among other elements, a contract existed and damages as a result of another’s breach of
contract. Povroznik, 2010-Ohio-1669, ¶ 13. Appellees produced undisputed evidence
satisfying their initial burden to show the basis of the summary judgment motion.
Dresher, 75 Ohio St. 3d at 293-294. Specifically, appellees presented undisputed
evidence that appellees never agreed to purchase the product invoiced. Further, the
MPDA is silent as to storage and transactional fees and the undisputed evidence advanced
by appellees demonstrated that appellees never otherwise agreed to the storage or
transactional fees.
{¶ 27} KCS, in its sole argument relating to the additional invoices, attempted to
create an issue of fact by introducing pictures of some stored product. Even if those
pictures demonstrate that KCS indeed stored the product, the argument is misplaced.
The issue is not whether KCS stored the product. The issue is whether appellees
breached an agreement with KCS to store the product. Pictures of stored products do
not demonstrate that the appellees agreed to have KCS store anything, they merely
demonstrate that KCS stored some product at its facility. KCS’s assignments of error to
the contrary are overruled.
Conclusion
{¶ 28} Reviewing the undisputed evidence, a reasonable trier of fact could reach
only one conclusion. The parties’ oral modification of the MPDA pricing structure is
14
enforceable, and appellees never agreed to pay for the goods or services billed in the
additional invoices. The trial court did not err in granting summary judgment in
appellees’ favor upon all claims. The decision of the trial court is affirmed.
It is ordered that appellees recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the common
pleas court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
SEAN C. GALLAGHER, JUDGE
MARY EILEEN KILBANE, A.J., and
PATRICIA ANN BLACKMON, J., CONCUR
Appendix
“1. The trial court erred when it granted defendant/appellees’ motion for
summary judgment.”
“2. The trial court erred to the prejudice of appellant by granting summary
judgment to appellees on appellant’s contract claim and failing to address
the course of dealing question.”
“3. The trial court erred to the prejudice of appellant in granting summary
judgment to appellees on appellant’s breach of contract for storage fees
relating to appellees’ materials.”
“4. The trial court erred to the prejudice of appellant by permitting
appellees to make an issue of appellant’s other lawsuit and other bills
mailed to appellees, when such issues are irrelevant to the case.”
15
“5. The trial court erred to the prejudice of appellant in granting summary
judgment to appellees on appellant’s unjust enrichment claim.”