Jackson Tube Serv., Inc. v. Camaco L.L.C.

[Cite as Jackson Tube Serv., Inc. v. Camaco L.L.C., 2013-Ohio-2344.]
IN THE COURT OF APPEALS FOR MIAMI COUNTY, OHIO
JACKSON TUBE SERVICE, INC. :
Plaintiff-Appellee : C.A. CASE NOS. 2012 CA 19
2012 CA 25
v. : T.C. NO. 10-395
CAMACO LLC : (Civil appeal from
Common Pleas Court)
Defendant-Appellant :
:
..........
OPINION
Rendered on the 7th day of June , 2013.
..........
MATTHEW C. SORG, Atty. Reg. No. 0062971, 2700 Kettering Tower, Dayton, Ohio
45423
Attorney for Plaintiff-Appellee
THOMAS M. GREEN, Atty. Reg. No. 0016361, 800 Performance Place, 109 N. Main
Street, Dayton, Ohio 45402
Attorney for Defendant-Appellant
..........
DONOVAN, J.
{¶ 1} Defendant-appellant Camaco, L.L.C. (hereinafter “Camaco”), appeals a final
2
judgment of the Miami County Court of Common Pleas, General Division, finding Camaco
in breach of contract and ordering it to pay damages to plaintiff-appellee Jackson Tube
Service, Inc. (hereinafter “JTS”), in the amount $320,192.09, as well as post-judgment
interest and court costs. The case proceeded to trial on January 18, 2012. On August 24,
2012, the trial court issued a decision granting judgment in favor of JTS. The trial court
issued a final judgment entry on September 7, 2012. Camaco filed a timely notice of appeal
with this Court on October 3, 2012.
{¶ 2} The parties involved in the instant appeal are JTS, a fabricator of steel
products used in various manufacturing processes, and Camaco, a supplier of parts for the
automobile industry. Between 2006 and 2009, JTS entered into a series of contracts with
Camaco, wherein it agreed to supply the appellant with different sized rolled steel tubing to
be used by third-party manufacturers to assemble automobile seating.
{¶ 3} In July of 2009, JTS informed Camaco that it would not release any more
steel parts for shipment until it paid its outstanding invoices for parts that had already been
delivered. Camaco responded by alleging that JTS had billed it for ten months at an
inflated steel cost and that it would not pay any of the open invoices until JTS agreed to
correct its steel pricing. JTS agreed to adjust the price for orders placed after June 9, 2009.
Camaco believed that the price adjustment should have been applied retroactively by JTS, as
well as prospectively, to any orders negotiated before June 9, 2009. JTS disagreed with
Camaco’s interpretation of their agreement and refused to release any more parts until it was
paid for the existing invoices. Camaco refused to pay the existing invoices unless the prices
were retroactively adjusted.
[Cite as Jackson Tube Serv., Inc. v. Camaco L.L.C., 2013-Ohio-2344.]
{¶ 4} On April 27, 2010, JTS filed a complaint alleging breach of contract and
unjust enrichment based upon Camaco’s failure to pay off the existing invoices. The claims
included open past-due invoices for products sold without dispute, and a series of contracts
identified by the project names Marianna, HB, P415, and 61206-I. On September 8, 2010,
Camaco filed an answer and a counterclaim alleging breach of contract and damages to
cover.
{¶ 5} The case was tried to the bench on January 18, 2012, after which both
parties submitted closing memoranda detailing their respective positions. On August 24,
2012, the trial court issued a decision granting judgment in favor JTS and awarding damages
in the following amounts: 1) $161,832.83 for the open invoices claim; 2) $31,982.88 for the
HB claim; 3) $70,186.81 for the Marianna claim; 4) $29,817.89 for the P415 claim; and 5)
$26,382.68 for the 61206-I claim, for an aggregate award of $320,192.09. The trial court
also ordered Camaco to pay post-judgment interest and court costs, but ordered JTS to notify
Camaco of any proceeds it received from the sale of any salvage it retained due to the
appellant’s breach. The proceeds from the sale were then ordered to be put toward the total
judgment owed by Camaco. The trial court issued a final judgment entry on September 7,
2012.
{¶ 6} It is from this judgment that Camaco now appeals.
{¶ 7} Camaco’s first assignment of error is as follows:
{¶ 8} “THE TRIAL COURT ERRED BY HOLDING CAMACO RESPONSIBLE
FOR THE RISK OF OVERPRODUCTION RELATED TO THE HB AND MARIANNA
CONTRACTS.”
{¶ 9} In its first assignment, Camaco contends the HB and Marianna contracts
4
were “requirement contracts,” and therefore, JTS bore responsibility for the cost associated
with the overproduction of any steel parts it produced pursuant to either contract.
{¶ 10} In its most basic form, a contract is generally defined as “a promise, or a set
of promises, actionable upon breach. Essential elements of a contract include an offer,
acceptance, contractual capacity, consideration (the bargained for legal benefit and/or
detriment), a manifestation of mutual assent and legality of object and of consideration.”
Minster Farmers Coop. Exchange Co., Inc. v. Meyer, 117 Ohio St.3d 459, 2008-Ohio-1259,
884 N.E.2d 1056, at ¶28.
{¶ 11} A meeting of the minds as to the essential terms of the contract is a
requirement for enforcing the contract. Episcopal Retirement Homes, Inc. v. Ohio Dept. of
Indus. Relations, 61 Ohio St.3d 366, 369, 575 N.E.2d 134 (1991). “In order for a meeting
of the minds to occur, both parties to an agreement must mutually assent to the substance of
the exchange.” Miller v. Lindsay-Green, Inc., 10th Dist. Franklin No. 04AP-848,
2005-Ohio-6366, at ¶63. See, also, Zelina v. Hillyer, 165 Ohio App.3d 255,
2005-Ohio-5803, 846 N.E.2d 68, at ¶12 (9th Dist.) (stating that a meeting of the minds
occurs if “a reasonable person would find that the parties manifested a present intention to
be bound to an agreement”). The parties must have a distinct and common intention that is
communicated by each party to the other. McCarthy, Lebit, Crystal & Haiman Co., L.P.A. v.
First Union Mgt., Inc., 87 Ohio App.3d 613, 620, 622 N.E.2d 1093 (8th Dist.1993).
{¶ 12} The Ohio Supreme Court, in Fuchs v. United Motor Stage Co., 135 Ohio St.
509, 21 N.E.2d 669 (1939), at ¶ 2, defined a requirements contract as follows:
A contract in writing whereby one agrees to buy, for sufficient consideration,
5
all the merchandise of a designated type which the buyer may require for use
in his own established business.
{¶ 13} A requirements contract has further been defined as a contract in writing
where one party promises to buy exclusively, and the other party agrees to deliver specific
goods or services which the buyer may need for a certain period of time. Bass, Hurwitz &
Poliner, CPA’s v. State of Ohio, 10th Dist. Franklin No. 88AP-1120, 89AP-16, 1989 WL
87078 (August 3, 1989).
{¶ 14} With respect to the HB and Marianna claims, both contracts were negotiated
through a purchase order issued by Camaco to JTS for a certain number of parts or a blanket
order for an uncertain number of parts. Marcus Sergy, vice president of finance for JTS,
testified that a blanket order is simply a purchase order from the buyer, in this case Camaco,
for a specific part at a specific price, but not a specific quantity. Joe Patterson, sales
coordinator at JTS, testified that after receiving the blanket order, JTS employees would
attempt to estimate and plan the necessary steel requirements to complete the job. Patterson
called this process “forecasting.” Sergy further testified that Camaco would determine the
specific quantities of steel tubing it required as time went on through a series of releases
issued to JTS. JTS would then produce the specific number of parts requested pursuant to
the release. The specific number of parts is referred to as the “firm” number. The releases
issued by Camaco to JTS contained both forecast and firm information. The time it takes
for JTS to produce the parts from the raw material stage to the finished product is called
“lead time.”
{¶ 15} Production of the parts in the HB and Marianna claims was performed by
6
JTS pursuant to the releases transmitted by Camaco which contained the types and amounts
of the parts to be manufactured by JTS. The releases were broken down by week and
covered up to nine weeks in the future. The first two weeks in each release contained
“firm” numbers, and the remaining seven weeks contained “forecast” numbers. The
forecast numbers changed frequently because the parts produced by JTS were subject to the
demands of different automobile manufacturers or their various subcontractors. The
evidence adduced at trial established that on occasion, the firm numbers changed from one
week to another. Eventually, Camaco sought to cancel the HB and Marianna contracts with
JTS because the manufacturers who requested the parts no longer needed them. As a result,
JTS was left with obsolescent parts it manufactured pursuant to the firm and forecast
releases issued by Camaco. When JTS sought to be reimbursed for the obsolescent parts it
produced pursuant to the HB and Marianna contracts, Camaco denied any responsibility and
refused to pay for the parts it says were produced in excess of what it required.
{¶ 16} Initially, we conclude that neither the HB claim nor the Marianna claim
were requirement contracts. In NSK Industries, Inc. v. Bayloff Stamped Products Kinsman,
Inc., 9th Dist. Summit No. 24777, 2010-Ohio-1171, the Ninth District Appellate Court
found that the “Ohio Commercial Code permits buyers and sellers to enter into requirements
contracts in which the parties agree to measure the term of their agreement by either a
seller’s [total] output or a buyer’s requirements rather than by a specific quantity.” Id. at ¶
23. Accordingly, the Ninth District held that because the contract between NSK and
Bayloff was for specific quantities of goods, specific parts, and specific prices, the contract
was not a requirement contract.
[Cite as Jackson Tube Serv., Inc. v. Camaco L.L.C., 2013-Ohio-2344.]
{¶ 17} In the instant case, the record establishes that the HB and the Marianna
contracts contemplated specific quantities of steel tubing products. Camaco was not
requesting all of the parts that JTS could generate. Similar to the contracts at issue in NSK,
blanket purchase orders were issued by Camaco in both the HB and Marianna contracts.
Specific quantities of goods to be produced and assembled, however, were quoted to JTS
from Camaco in the releases specific to each contract. Moreover, the exclusivity element
necessary in requirement contracts was not present in either the HB or the Marianna claims.
Specifically, JTS was free to sell steel tubing products to any other buyer during the term of
the HB and the Marianna contracts. Conversely, Camaco was free to buy steel tubing
products from any other seller during the term of either contract. Contrary to the assertions
made by Camaco, the HB and Marianna claims were not requirement contracts, and the
burden to establish by a preponderance of the evidence that JTS breached the contracts
belonged to Camaco. Camaco failed to meet that burden.
{¶ 18} Joe Patterson testified that all of the steel products produced by JTS for the
HB and Marianna contracts were manufactured inside the “firm” dates set by Camaco.
Patterson further testified that there were no product overbuilds and that no products were
assembled past the firm dates. The trial court found Patterson’s testimony to be credible.
Dan Wickett, corporate purchasing buyer for Camaco, testified that parts produced and
released under a “firm” date should be paid off. Significantly, Camaco adduced no evidence
at trial that any of the goods produced and assembled by JTS for the HB and Marianna
contracts were produced outside the “firm” dates set forth in the releases. Thus, the trial
court did not err when it found that Camaco was responsible for payment of the HB and
Marianna claims.
8
{¶ 19} Camaco’s first assignment of error is overruled.
{¶ 20} Camaco’s second assignment of error is as follows:
{¶ 21} “THE TRIAL COURT ERRED BY NOT DEDUCTING THE FUEL
PREMIUM CHARGE, FREIGHT CHARGE, AND STEEL PRICE DISCOUNTS
CLAIMED BY CAMACO FROM JTS’S OPEN INVOICES CLAIM.”
{¶ 22} In its second assignment, Camaco argues that it was entitled to setoff of the
fuel premium charge, freight charge, and steel price discounts from JTS’s open invoices
claim. Specifically, Camaco asserts that it was entitled to an additional setoff of $2,848.65
for the improper charges from JTS’s open invoice claim of $161,832.83, leaving Camaco’s
obligation on the open invoice claim to be the reduced sum $158,984.18. Camaco disputes
the fuel and freight charges applied by JTS to Invoice #348171.
{¶ 23} Patty Jo DeMarco, materials planner and buyer for Camaco, testified that the
Invoice #348171 contained a fuel and freight charge applied by JTS. DeMarco testified as
follows:
Q: Okay. Looking back at this invoice real quickly, and I know that you said
you didn’t have much knowledge on it, which was 348171; I don’t know if
you still have that in front of you or not.
DeMarco: Yes I do.
Q: What was the normal shipment process for the, the parts that came to
Camaco from Jackson Tube? You guys retrieved, is that fair to say?
A: Yes.
Q: Okay. We didn’t – Jackson Tube didn’t bring a truck to your little –
9
Camaco Lorain and go to your loading dock? You came to us and picked it
up?
A: Only if Jackson Tube was late on the product, they would be in charge of
shipping, yes.
Q: Okay but generally, my point was, Camaco retrieved?
A: Yes.
Q: FOB right? Okay. Why would this [Invoice #348171] have been sent to
Wright Brother’s Airport?
A: Sent where?
Q: Wright Brother’s Airport.
Defense Counsel: I, I – I don’t know if it’s fair to object, but I don’t think it
says that?
DeMarco: Yes, it does.
Plaintiff’s Counsel: Look to the right of your –
DeMarco: It does.
The Court: The objection is overruled.
DeMarco: I am going to say, me looking at this, that would say that I was in a
shut down situation; we [Camaco] didn’t have the material, and we were shut
down and Jackson had to get it to me –
Q: Okay.
A: – quicker than the three and a half hours it would have taken to truck it –
Q: Okay, we don’t –
10
A: – by looking at this.
Q: We don’t know from the look of that who’s, I guess, fault that was, do
we?
A: I couldn’t – I couldn’t honestly say by looking at this, no.
Q: Okay, so that fuel charge, if you – [JTS] had to get it down to the airport,
that was something that would have been a normal charge in this abnormal
situation? You said shut, I take it that didn’t happen very often, right?
A: No it didn’t.
{¶ 24} DeMarco’s testimony regarding Invoice # 348171 establishes that the fuel
and freight charges were assessed to Camaco because JTS was required to, in this rare
instance, arrange the delivery of the parts in an expedited manner since Camaco was in a
“shut down situation.” Under normal circumstances, Camaco would retrieve the finished
parts from JTS’s facility and there would be no fuel/freight charge applied to the invoice.
In the extraordinary event of a shut down, JTS was required to arrange for delivery of the
parts, as it did with respect to Invoice # 348171. Thus, it was not improper for JTS to apply
the fuel and freight charges to Invoice # 348171, and Camaco was not entitled to setoff of
those amounts.
{¶ 25} Regarding Camaco’s argument that it was entitled to a steel price discount
on JTS’s Open Invoice claim, evidence adduced at trial does not support retroactive
application of the steel price adjustment. Significantly, Dan Wickett, Camaco corporate
buyer, specifically testified that JTS never agreed, orally or in writing, to retroactively apply
the price adjustment executed on June 9, 2009. Additionally, there is no evidence in the
11
record to support Camaco’s assertion that it was entitled to the price adjustment for parts
that were shipped after June 9, 2009, even if said parts were ordered prior to that date.
Therefore, Camaco was not entitled to any type of retroactive steel price adjustment, and the
trial court did not err by refusing to apply the additional requested deductions from JTS’s
Open Invoice claim.
{¶ 26} Camaco’s second assignment of error is overruled.
{¶ 27} Camaco’s third assignment of error is as follows:
{¶ 28} “THE TRIAL COURT ERRED WHEN IT FOUND THAT JTS
JUSTIFIABLY WITHHELD SHIPMENT OF PARTS RELATED TO ITS P415 AND
61206-I CLAIMS.”
{¶ 29} In it third assignment, Camaco argues that JTS unjustifiably withheld
shipment of parts with respect to the P415 and 61206-I claims. Camaco does not dispute
that JTS withheld delivery of the parts because of its failure to pay the Open Invoices,
including the HB and Marianna claims. Nevertheless, Camaco asserts that it had no duty to
pay when JTS “unilaterally decided to withhold delivery [on the P415 and 61206-I claims]
because it had cause to dispute or deny the amounts claimed by JTS for its open invoices.”
{¶ 30} Upon review, the record supports the trial court’s finding that Camaco
refused to pay the Open Invoices because JTS would not acquiesce to its demand for a
retroactive price adjustment that was neither discussed or agreed when the parties initially
negotiated the various steel contracts. Simply put, Camaco created the dispute it is now
attempting to take advantage of by claiming that it had no obligation to pay the invoices for
which it had already received the steel parts.
12
{¶ 31} When reasonable grounds for insecurity arise with respect to the
performance of either party, the other may in writing demand adequate assurance of due
performance and until he receives such assurance may if commercially reasonable suspend
any performance for which he has not already received the agreed return. R.C. 1302.67(A).
On July 9, 2009, Joe Patterson sent a demand letter to Dan Wickett at Camaco via email. In
the demand letter, Patterson pointed out that Camaco had failed to pay in excess of
$160,000.00 regarding the open invoices. Wickett responded that Camaco was entitled to
retroactive price adjustments on the open invoices although said adjustment had not been
agreed to orally or in writing. At this point, Camaco was in breach of contract, and
pursuant to R.C. 1302.77(A), the aggrieved party, JTS, had the right to withhold delivery of
goods when the other party failed to make the requisite payments or otherwise breached the
contract. The record establishes that JTS waited a commercially reasonable time for
performance by Camaco. JTS was not obligated to continue to supply parts to Camaco
without payment on prior contracts or some other assurance of payment. Thus, the trial
court did not err when it found that JTS justifiably withheld shipment of parts with respect
to the P415 and 61206-I claims.
{¶ 32} Additionally, because Camaco was responsible for the breach and JTS
rightfully withheld shipment, Camaco was not entitled to be reimbursed by JTS for the
expenses it incurred to procure cover parts. Pursuant to R.C. 1302.85, for a buyer to cover
under the Uniform Commercial Code (U.C.C.), there must be a breach of contract by the
seller. In the instant case, the seller (JTS) did not breach the contract. Rather, Camaco
created the breaching condition in an attempt to leverage a retroactive price adjustment to
13
which it was not entitled. Under these circumstances, Camaco is not entitled to cover under
the express terms of the U.C.C. and R.C. 1302.85.
{¶ 33} Camaco’s third assignment of error is overruled.
{¶ 34} Camaco’s fourth assignment of error is as follows:
{¶ 35} “THE TRIAL COURT ERRED BY PERMITTING JTS TO APPLY THE
SALVAGE VALUE OF THE PARTS SOLD AFTER JUDGMENT, RATHER THAN
CALCULATING THE SALVAGE VALUE FROM THE PRICE OF STEEL AT THE
TIME CAMACO REFUSED TO PAY THE ERRONEOUS INVOICES, OR THE DATE
OF TRIAL.”
{¶ 36} In its fourth assignment, Camaco argues that the date of salvage determined
by the trial court was error. The trial court ordered JTS, within thirty days of entry of the
final judgment, to sell for salvage value all of the completed parts that were retained under
contract with Camaco. After deducting the actual costs incurred from the salvage proceeds,
JTS was ordered to apply said salvage proceeds as a credit towards the total damage award
owed by Camaco. Camaco asserts that the date(s) that the trial court should have utilized
for valuation of the salvage is that date it refused to pay the open invoices, or in the
alternative, the date the actual trial began in the instant case.
{¶ 37} Other than its bare assertion that the trial court erred in determining the date
of salvage, Camaco provides no evidence that it was prejudiced by the court’s chosen date of
valuation. In our view, the steel parts remaining in JTS’s possession were only considered
salvage once the trial court issued its final judgment entry which found the parts to be
salvage.
14
{¶ 38} Camaco’s fourth assignment of error is overruled.
{¶ 39} In its fifth and final assignment of error, Camaco contends that the trial court
erred when it overruled its motion for new trial.
{¶ 40} Initially, we note that Camaco’s motion for a new trial was filed on
September 20, 2012. On October 3, 2012, however, Camaco filed its notice of appeal of
the trial court’s final judgment entry issued on September 7, 2012.
{¶ 41} App.R. 4(B)(2) provides an exception to the thirty-day window for an appeal
from a final judgment. With respect to a motion for a new trial under Civ. R. 59, App.R.
4(B)(2)(b) provides that the time for filing a notice of appeal from the judgment would begin
to run when the trial court entered an order resolving the motion for a new trial.
{¶ 42} Camaco filed its notice of appeal on October 3, 2012. The trial court issued
a decision overruling Camaco’s motion for new trial on November 28, 2012. Prior to that
date, Camaco could have asked this Court to remand the matter to the trial court in order to
resolve the motion for new trial and stay the appellate proceedings. Camaco did not take
advantage of the procedural mechanism afforded it under App.R. 4(B)(2)(b).
{¶ 43} “An appeal is perfected upon the filing of a written notice of appeal. R.C.
2505.04. Once a case has been appealed, the trial court loses jurisdiction except to take
action in aid of the appeal. State ex rel. Special Prosecutors v. Judges, Court of Common
Pleas, 55 Ohio St.2d 94, 97, 9 O.O.3d 88, 378 N.E.2d 162 (1978). The trial court retains
jurisdiction over issues not inconsistent with the appellate court's jurisdiction to reverse,
modify, or affirm the judgment appealed from. Id.; Yee v. Erie Cty. Sheriff's Dept., 51 Ohio
St.3d 43, 44, 553 N.E.2d 1354 (1990). *** Furthermore, the determination as to the
15
appropriateness of an appeal lies solely with the appellate court.” In re S.J., 106 Ohio St.3d
11, 12-13, 2005-Ohio-3215, 829 N.E.2d 1207, at ¶9-10. Accordingly, when Camaco filed
its notice of appeal on October 3, 2012, the trial court was divested of jurisdiction to rule on
the motion for new trial filed on September 20, 2012, and its decision was, therefore, a legal
nullity.
{¶ 44} Camaco’s final assignment of error is overruled.
{¶ 45} All of Camaco’s assignments of error having been overruled, the judgment
of the trial court is affirmed.
..........
HALL, J. and WELBAUM, J., concur.
Copies mailed to:
Matthew C. Sorg
Thomas M. Green
Hon. Christopher Gee