J & E Oil Company, Inc. and Jerry Barth v. Atofina Petrochemicals, Inc. ( 2005 )

                                    NUMBER 13-02-675-CV

                                 COURT OF APPEALS

                     THIRTEENTH DISTRICT OF TEXAS

                         CORPUS CHRISTI B EDINBURG

J & E OIL COMPANY, INC., AND JERRY BARTH,                       Appellants,

                                                             v.

ATOFINA PETROCHEMICALS, INC., ET AL,                                 Appellees.

                    On appeal from the 206th District Court

                                        of Hidalgo County, Texas.

                                M E M O R A N D U M   O P I N I O N

     Before Chief Justice Valdez and Justices Hinojosa and Rodriguez

      Opinion by Chief Justice Valdez  

Appellants, J&E Oil Co., Inc. and its owner, Jerry Barth [hereinafter AJ&E Oil@], appeal from a jury verdict and judgment in favor of appellee, Atofina Petrochemicals, Inc., f/k/a/ FINA Oil & Chemical Co [hereinafter AFINA@].  We affirm.

Background

This case rises from two contracts that created an exclusive fuel distribution relationship between FINA and J&E Oil.  During the relevant time period, J&E Oil owned fifty-two gas stations with attached convenience stores throughout South Texas.  Prior to 1996, J&E Oil=s gas stations were supplied by a variety of fuel companies.  In 1996, J&E Oil attempted to find a single fuel supplier for all of its stores; however, after being unable to find a single supplier for all fifty-two stores, J&E Oil opted to contract with two suppliers, Chevron Corporation and FINA.

FINA agreed to act as the sole fuel supplier for twenty-eight of J&E Oil=s stores.  The negotiations between J&E Oil and FINA culminated in 1997 with the execution of a ARevised Branding Proposal@ and a ADistributor Sales Contract@ [hereinafter Athe contracts@].  The contracts together created a ten-year distribution agreement in which J&E Oil promised to purchase 20,544,000 gallons of gasoline and 10,235,000 gallons of diesel fuel annually.  FINA agreed to convert the J&E Oil stores to the FINA brand, supplying the requisite signs, decals and other branding materials, as well as promising to make FINA gasoline available to J&E Oil at its supply terminals.  Other clauses in the contracts provided for a Aconversion incentive rebate,@ controlled the fuel prices, established certain marketing and credit card programs, and allowed for J&E Oil=s participation in two special FINA marketing programs as a reward if certain volumes of FINA gasoline were purchased annually. 

FINA began the process of converting the J&E Oil stores to the FINA brand.  At this point, Barth recommended that a local company, Hooks Sign Company, handle the work of installing the FINA signs at the J&E Oil stores.  FINA agreed and Hooks began the installation process.  There is significant dispute between the parties as to the effect of this agreement; J&E Oil insists that the use of Hooks did not absolve FINA of its contractual responsibility for converting the stores, while FINA argues that J&E Oil, by recommending and insuring Hooks, effectively assumed responsibility for the store conversions. 

Regardless, the J&E Oil stores were not converted by August 1, 1997, the commencement date of the distribution agreement. The twenty-eight stores were not completely converted until October 1998.   By then, various problems had already arisen between the parties: J&E Oil alleged that FINA=s tardiness in converting the stores made J&E Oil lose customers and sales, and further alleged that FINA=s terminals began to suffer supply outages so that J&E Oil could not obtain gasoline for its stores or meet its sales volume requirements.  J&E Oil also complained that FINA refused to pay accrued monetary awards earned from the various marketing incentive programs. FINA alleged that J&E Oil refused to decide on various signage issues, thereby delaying the conversion process, and failed to meet its purchasing requirements.  FINA also insisted that J&E Oil did not qualify for its special marketing programs.  However, neither party terminated the contract despite these disputes.

In August 2000, FINA conveyed its rights under the contracts to ALON USA, L.P.  J&E Oil was willing to work with ALON in place of FINA, but continued to experience supply problems at the ALON fuel terminals, and failed to purchase the required contractual volumes.  By January of 2001, J&E Oil claimed it was no longer in a financial position to endure the inability of ALON to meet its obligations, and, furthermore, it did not have sufficient funds to meet its expenses. ALON then eliminated J&E Oil=s credit line with the company, effectively terminating the contracts. 

J&E Oil sued FINA and ALON, alleging breach of contract; ALON then filed counterclaims against J&E Oil and Barth for breach of contract.  J&E Oil and ALON also filed claims against each other for conversion and theft.  After a trial before a jury, the jury found that FINA, ALON and J&E Oil had all breached their contracts.  However, the jury found that the breaches by FINA and ALON were excused while the breach by J&E Oil was not.  The jury also found that ALON and J&E Oil had converted each other=s property and that J&E Oil had committed theft.  J&E Oil appealed.

Following its appeal to this Court, J&E Oil settled its claims against ALON.  The appeal and cross-appeal were accordingly dismissed.  See J&E Oil Co. v. ALON USA, L.P., Nos. 13‑02‑675‑CV & 13‑04‑441‑CV, 2004 Tex. App. LEXIS 8085, at *2 (Tex. App.BCorpus Christi Sep. 2, 2004, no pet.) (per curiam). We now consider the remaining claims on appeal, which consist of J&E Oil=s claims against FINA.   

Motion for Directed Verdict

By its first issue, J&E Oil alleges that the trial court should have ruled as a matter of law that FINA breached the contracts without an excuse by failing to convert all twenty-eight stores by August 1, 1997.  Therefore, J&E Oil argues, the trial court erred by denying its motion for directed verdict.

J&E Oil=s motion for directed verdict, however, is not in the record before us, although FINA and ALON=s motions for directed verdicts and judgment as a matter of law can be found in the record.  Given that J&E Oil=s motion is not in the record, the trial court=s denial of this motion is not properly before us and we are unable to address this issue on appeal.  See Tex. R. App. P. 34.5.

We see that in the transcript of the hearing on J&E Oil=s motion, J&E Oil stated that its motion for directed verdict said Athat the plaintiffs are entitled to a finding that FINA breached the distributor sales contract. . . . [O]ur motion goes only to that first question of breach.  It does not address at this point any of their affirmative defenses that might be an excuse for the breach.@ (emphasis added). Therefore, J&E Oil=s description in its appellate brief of its motion as including the argument that FINA breached without an excuse contradicts their own statement at the hearing that excuse was not an issue.  Furthermore, the argument that J&E Oil is entitled to a finding that FINA breached the distributor sales contract (which the transcript indicates is the only argument made in the motion) is moot, as the jury found that FINA indeed did breach the contract and FINA did not appeal this finding. 

Accordingly, J&E Oil=s first issue is waived. 

FINA=s Breach of Contract

A.  Legal and Factual Sufficiency

By its second issue, J&E Oil argues that the evidence was legally and factually insufficient to support a finding that FINA=s breach of the contract was excused.

In conducting a legal sufficiency review, all the evidence must be considered in a light most favorable to the party in whose favor the verdict has been rendered, and every reasonable inference deducible from the evidence is to be indulged in that party's favor. See Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998); see also Bradford v. Vento, 48 S.W.3d 749, 754 (Tex. 2001).  We disregard all contrary evidence that a reasonable jury could have disbelieved.  See City of Keller v. Wilson, 168 S.W.3d 802, 819 (Tex. 2005).

            In conducting a factual sufficiency review, we view all the evidence in a neutral light to determine whether the contested finding is so contrary to the great weight and preponderance of the evidence as to be manifestly unjust, shock the conscience, or clearly demonstrate bias. See Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761‑62 (Tex. 2003).

B. Jury Charge

J&E Oil argues that the jury could not have found that FINA=s breach of its contracts with J&E Oil was excused, given that the evidence to support this finding was both legally and factually insufficient.  The jury was asked in Question 1 of the charge: ADid FINA fail to comply with the terms of the Contracts?@  They answered AYes.@^[1]  Question 2 then asked the following:

Was FINA=s failure to comply with the Contracts excused?

You are instructed that FINA=s failure to comply may be excused if you find that any of the following occurred:

1) J&E Oil=s previous failure to comply with a material obligation of this same agreement;

2) J&E Oil=s waiver of the various provisions of the contract of which it complains;

Waiver is the intentional surrender of a known right or intention conduct inconsistent with claiming that right.

3) FINA=s performance was accepted by J&E Oil as full satisfaction of FINA=s original obligations under the Contracts;

4) J&E Oil=s actions which led FINA to reasonably believe, to its detriment, that compliance with a particular part of the contract would not be required;

When a party=s course of conduct leads another party to believe that compliance will not be required, and the second party relies on that belief to its detriment, the original party cannot then seek to enforce that provision of the Contract;

5) J&E Oil is equitably estopped from complaining of FINA=s failure to comply;

AEquitable estoppel@ is established if (a) J&E Oil by words or conduct made a false representation or concealed material facts . . . with the intention that FINA would rely on the false representation or concealment in acting or deciding not to act; AND (b) FINA did not know and had no means of knowing the real facts, and relied to its detriment on the false representation or concealment of material facts;

6) J&E Oil=s prior repudiation of the same agreement;

ARepudiation@ is the indication of a party to a contract, either through words or actions, that he is not going to perform his obligations under the contract in the future;

7) J&E Oil=s failure to satisfy a condition precedent to FINA=s performance . . .;

8) J&E Oil=s failure to purchase at least 1,369,600 gallons of gasoline per month from FINA;

9) FINA could allocate its available support products among all of its customers as FINA, in its sole discretion, deemed reasonable, without liability to J&E Oil for failure to deliver the quantities of gasoline which J&E Oil may have required. 

Answer AYes@ or ANo.@

The jury answered AYes.@  There is no indication which of the nine possible grounds listed in the charge the jury relied upon in reaching its decision that FINA=s breach of contract was indeed excused. Thus, if the evidence is sufficient to support any one of the liability theories available, we will not reverse, regardless of whether any of the other theories of liability are not supported by the evidence.^[2]   See Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 389 (Tex. 2000) (noting that if jury verdict is based on a valid liability theory, invalid theories also presented to the jury do not have to be considered).  The distributor sales contract between FINA and J&E Oil includes a clause entitled AWaiver@ which provides as follows:

The failure of either party hereto in any one or more instances to insist upon the performance by the other party of any term or condition hereof or to exercise any right or privilege herein conferred shall not be construed thereafter as a waiver of any such term, condition, right or privilege, but the same shall continue in full force and effect as herein written.  In addition, the right of either party to require strict performance by the other of any and/or all obligations imposed upon the other by this Contract shall not in any way be affected by any previous waiver, forbearance or course of dealing.

Thus, any breach of the contract by FINA, which the jury declared had occurred by their response to Question 1, could not constitute a waiver by J&E Oil to enforcement of the breached terms of the contracts.  This clause thus precluded FINA=s ability to claim its breach of the contracts was excused by J&E Oil=s waiver of various terms or that its performance, although in breach of the contracts, was accepted by J&E Oil as full satisfaction of its original obligations.

However, the contracts also state that J&E Oil will purchase from FINA no less than eighty percent and no more than 120 percent of the estimated annual quantity of 20,544,000 gallons of gasoline at J&E Oil=s FINA-branded retail stores.  This translates to an annual purchasing requirement of no less than 16,435,200 gallons, which averages to 1,369,600 gallons of gasoline per month.^[3]  The contracts also state that J&E Oil will sell no FINA gas at any location other than a FINA-branded store.  However, in the trial testimony it was undisputed that J&E Oil did not consistently meet its purchasing requirements for its FINA-branded stores, and that it did purchase gasoline from FINA which was sold at an unbranded store. Because the AWaiver@ clause applied equally to both parties, these breaches of the contracts by J&E Oil were not excused by FINA=s failure to insist upon their satisfaction.

Furthermore, the language of the contracts establishes that such a breach would be considered material:  AFINA and [J&E Oil] acknowledge and agree that the estimated annual quantities set forth in this Contract are reasonable, important, and of material significance to the Contract.  [J&E Oil] understands and agrees that the failure by [J&E Oil] to purchase the required volumes of Product shall be a violation of this Contract.@  No other requirements in the contracts are explicitly named to be of material importance.   

It is a fundamental principle of contract law that when one party to a contract commits a material breach of that contract, the other party is discharged or excused from further performance.  Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004) (per curiam).  Thus, when J&E Oil failed to meet its purchasing requirements and sold FINA product at unbranded stores, this constituted a material breach of the contracts and FINA was excused from further performance. 

The language in the contracts and the admissions at trial regarding J&E Oil=s purchases of gasoline from FINA, coupled with the lack of contrary evidence that a jury could not disregard, constitute legally sufficient evidence to support the jury=s finding that FINA=s breach of contract was excused by J&E Oil=s breach of the same contracts.  See City of Keller, 168 S.W.3d at 819. Also, the jury finding that FINA=s breach was excused is not so contrary to the great weight and preponderance of the evidence as to be manifestly unjust. See Golden Eagle Archery, 116 S.W.3d at 761‑62.  Thus, the evidence is legally and factually sufficient to support the outcome reached by the jury. 

J&E Oil=s second issue is overruled. 

J&E Oil=s Breach of Contract

By its third issue, J&E Oil argues that the evidence was legally and factually insufficient to support the jury=s finding that J&E Oil=s own breach was not excused by FINA=s prior breach.

As previously noted, in August of 2000, FINA assigned its rights and obligations under the contracts with J&E Oil to ALON.  Thus, when initiating this suit, J&E Oil filed claims against both FINA and ALON for breach of contract.  FINA did not file any counterclaims against J&E Oil.  ALON, however, did assert claims against J&E Oil for breach of contract and conversion. 

The jury was asked in Question 6 to determine the following:  ADid J&E Oil fail to comply with the Contracts?@  The jury responded:  AYes.@  In Question 7, the jury was asked AWas J&E Oil=s failure to comply with the Contracts between J&E Oil and ALON excused?@  The jury was never asked whether J&E Oil=s failure to comply with its earlier contractual relationship with FINA was excused.  The jury was given the following grounds for finding excuse:

1) FINA and/or ALON=s previous failure to comply with a material obligation of the same agreement;

2) FINA and/or ALON=s waiver of the various provisions of the contact of which it complains; . . .

3) ALON is equitably estopped from complaining of J&E Oil=s failure to comply; . . .

4) ALON=s prior repudiation of the same agreement.

The jury answered ANo,@ indicating that J&E Oil=s breach of contract was not excused. 

Questions 6 and 7 were posed to the jury in order to respond to ALON=s counterclaim against J&E Oil for breach of contract; FINA did not assert any breach of contract claims against J&E Oil.  The language of the questions related to the relationship between ALON and J&E Oil.  The jury did not necessarily find that J&E Oil=s own breach was not excused by FINA=s breach, as it was not required to consider any possible breaches or other behavior by FINA in reaching its decision and could rely solely on the relationship between J&E Oil and ALON.  See Crown Life Ins. Co., 22 S.W.3d at 389.

Because ALON and J&E Oil have settled their appellate claims against each other, we lack jurisdiction to consider claims between these parties.  See Seiter v. Marschall, 147 S.W. 226, 227 (Tex. 1912) (noting that settlement will divest appellate court of jurisdiction). We conclude that this issue relates only to ALON=s counterclaim against J&E Oil and thus, does not affect or pertain to FINA. Accordingly, we will not consider it, and J&E Oil=s third issue is overruled.

Conclusion

Given that the remaining issues raised by J&E Oil on appeal apply only to ALON, the settling party, and that we have overruled all issues raised by J&E Oil pertaining to FINA, we affirm the judgment of the trial court.

Rogelio Valdez,

Chief Justice

Memorandum Opinion delivered and filed

this 27^th day of October, 2005.

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^[1]We note that FINA argues at length in its appellate brief that there was no breach of contract by FINA because (1) there was no requirement in the contracts that the stores had to be converted by August 1, 1997, and (2) J&E Oil, not FINA, assumed responsibility for converting the stores, given that J&E Oil=s recommended sign installer, Hooks Sign Co., would request materials from FINA on an as-needed basis.  FINA also asserts that a store did not necessarily have to be converted to the FINA brand before J&E Oil began purchasing FINA gasoline.

However, we note that the jury, in answering Ayes@ to Question 1, had to find that (1) in order for J&E Oil to comply with its obligation to begin purchasing gasoline on August 1, 1997, FINA was obligated to complete the process of converting all twenty-eight stores to the FINA brand by August 1, 1997, (2) the obligation to convert the stores to the FINA brand was that of FINA, and (3) a store had to be converted to the FINA brand before J&E Oil could purchase FINA gasoline to sell at that store. FINA did not appeal any of these findings.  Therefore, we are bound by the jury=s decision on this question, and we cannot consider the merits of FINA=s assertions as they constitute indirect attacks on unappealed findings.   See Tex. R. App. P. 25.1(c) (AA party who seeks to alter the trial court's judgment or other appealable order must file a notice of appeal.@).

^[2]FINA argues that because J&E Oil=s appellate brief only specifically addresses four of the nine grounds of excuse listed in the jury charge, J&E Oil has waived its complaint regarding the sufficiency of the evidence regarding excuse.  However, the case they cite that is most on point for this proposition, Missouri Pac. R.R. Co. v. Lemon, 861 S.W.2d 501, 509 n.1 (Tex. App.BHouston [14th Dist.] 1993, writ dism=d by agr.), suggests that a sufficiency argument on appeal could be waived by a failure to object to every possible ground but ultimately addresses the merits of the sufficiency challenge.  Given the similarity of the circumstances presented, we will do the same in this case. 

^[3]Another clause in the contracts required that purchases be made ratably and includes Athe requirement to purchase quantities reasonably evenly over the course of each month.@ Neither party appears to dispute the conclusion that the contracts could be violated through a failure to purchase the required monthly volume of gasoline, despite the fact that the contracts required the purchase of a specific annual volume of gasoline.