Plantation Foods, Inc. v. C. P. Distribution Service, Inc.--Appeal from 170th District Court of McLennan County

IN THE

TENTH COURT OF APPEALS

No. 10-96-114-CV

PLANTATION FOODS, INC.,

Appellant

v.

C.P. DISTRIBUTION SERVICE, INC.,

Appellee

From the 170th District Court

McLennan County, Texas

Trial Court # 94-2120-4

O P I N I O N

C.P. Distribution Service, Inc., (C.P.), is a brokerage company that locates trucking firms to haul merchandise for its clients. In reference to the lawsuit before us, C.P. contracted with H.O.T. Distribution Services (H.O.T.) to arrange for the shipping of poultry products for the appellant, Plantation Foods, Inc. When H.O.T. defaulted in its payments, C.P. brought suit against Plantation Foods. C.P. alleged that Plantation Foods was liable for payment under several theories of recovery: (1) that Plantation Foods had guaranteed payment to C.P. in the event of H.O.T.'s default; (2) that Plantation Foods was primarily liable to C.P. because H.O.T. was Plantation Foods's agent; and (3) that Plantation Foods, as the consignor on the several bills of lading at issue, was primarily liable for their payment. Plantation Foods filed a general denial and also raised the defenses of (1) prior payment, (2) the statute of frauds, (3) estoppel, and (4) waiver. Trial was before the bench, which found in favor of C.P. and entered a judgment of $32,099.00, plus pre-judgment interest and attorneys' fees.

Through nineteen points of error, Plantation Foods essentially argues ten issues on appeal: (1) C.P. failed to plead guaranty as a means of recovery and, therefore, the trial court erred in entering judgment in favor of C.P. on this theory; (2) the evidence is legally and factually insufficient to support the trier of fact's rejection of Plantation Foods' statute of frauds defense; (3) the evidence is legally and factually insufficient to support the trial court's conclusion that the Plantation Foods employee who allegedly guaranteed payment to C.P. had either the actual or apparent authority to make this representation; (4) the evidence is legally and factually in sufficient to support the trial court's conclusion that H.O.T. acted as Plantation Foods' agent when contracting with C.P.; (5) the trial court erred in failing to make a finding that H.O.T. is an independent contractor; (6) the trial court erred in failing to make a finding that H.O.T. acted as C.P.'s agent in collecting payment for the services C.P. rendered for Plantation Foods; (7) it, Plantation Foods, conclusively established its defense of prior payment; (8) the trial court's findings of fact and conclusions of law fail to support the judgment that Plantation Foods was primarily liable to C.P. as a consignor on C.P.'s contract with H.O.T.; (9) the evidence conclusively establishes that C.P. was estopped from recovery against Plantation Foods; and (10) the trial court erred in calculating the rate of prejudgment interest. We reverse and render judgment in favor of Plantation Foods.

FACTUAL BACKGROUND

The facts are generally not in dispute. In January 1992, Richard Bennett, president and owner of C.P., and Dave Hughes, a former sales agent with C.P., telephoned Roger Gustin, Plantation Foods' Traffic Manager, about possibly establishing a business relationship between the two companies. Gustin informed Bennett and Hughes that H.O.T. was Plantation Foods' "in-house broker" and that any inquiries about hauling Plantation Foods' poultry products should be directed towards it. Bennett then contacted Michael John Guidici, an agent of H.O.T., and an agreement was reached whereby C.P. would locate truckers for Plantation Foods on an as-needed basis.

Over the course of the next six to eight weeks, C.P. arranged for the transportation of Plantation Foods' products on a number of different occasions. Due to the large volume of business C.P. was receiving from H.O.T., and because C.P. was extending a greater and greater line of credit to H.O.T. without being paid, Bennett decided to investigate the financial soundness of H.O.T. Approximately two to three weeks after the date C.P. first began to arrange for the transportation of Plantation Foods' poultry products, Bennett ran a credit check on H.O.T. and then telephoned Gustin to express his concern that H.O.T. appeared to be on the verge of bankruptcy. According to Bennett, Gustin replied, saying, "Don't worry about it. Plantation Foods stands behind H.O.T., and we'll guarantee that you get paid for your loads."

Reassured by Gustin's reply, C.P. continued to carry loads for Plantation Foods. H.O.T., however, failed to pay C.P. for any of its work both prior to and after the guaranty and eventually filed for bankruptcy protection. When C.P. learned that it would be unable to recover payment from H.O.T. for the loads it had brokered, it requested that Plantation Foods pay for the services it had rendered. Plantation Foods refused, and C.P. brought the instant lawsuit.

APPARENT AGENCY

In its twelfth point of error, Plantation Foods argues, among other things, that the evidence is legally insufficient to support the trial court's implied finding that C.P. reasonably relied upon Gustin's statements to establish H.O.T. as Plantation Foods' apparent agent. We agree.

There are three elements to an apparent agency cause of action: (1) the plaintiff must have a reasonable belief in the agent's authority; (2) the belief must be generated by some holding out or neglect of the principal; and (3) the party must justifiably rely on the authority. McDuff v. Chambers, 895 S.W.2d 492, 498 (Tex. App. Waco 1995, writ denied). Plantation Foods restricts its argument to the first of the three elements.

We find as a matter of law that the evidence demonstrates that C.P. did not reasonably believe that H.O.T. was Plantation Foods' agent. Bennett testified that when he had not received payment from H.O.T. after several weeks, he decided to investigate the financial viability of H.O.T. because he wanted to get paid for the work he had done. The only reason Bennett would have been concerned about H.O.T.'s financial viability would be that he knew that he was being paid by H.O.T. If Bennett had actually thought that H.O.T. was acting as Plantation Foods' agent, Bennett would have known that his payment was to come from Plantation Foods and he, accordingly, would not have been concerned with the financial status of H.O.T. Therefore, Bennett, in looking to H.O.T. for his compensation, could not have justifiably relied upon representations by Plantation Foods that H.O.T. was its agent. Plantation Foods' twelfth point is sustained.

ACTUAL AUTHORITY

In part, Plantation Foods in its ninth point contends that the evidence is legally insufficient to support a finding that H.O.T. had actual authority to act on Plantation Foods' behalf. We agree.

Generally, "actual authority" means that authority that the principal intentionally confers upon the agent, or intentionally allows the agent to believe that he possesses, or by want of due care permits the agent to believe that he possesses. Mexico's Indus., Inc. v. Banco Mexico Somex, S.N.C., 858 S.W.2d 577, 583 (Tex. App. El Paso 1993, writ denied); Morey v. Page, 802 S.W.2d 779, 784 (Tex. App. Dallas 1990, no writ). A principal may confer actual authority on an agent either expressly or impliedly, and the existence of an agency relationship may be implied from the conduct of the parties or from the facts and circumstances surrounding the transaction in question. Johnson v. Holly Farms of Texas, Inc., 731 S.W.2d 641, 645 (Tex. App. Amarillo 1987, no writ) (citing Intermedics, Inc. v. Grady, 683 S.W.2d 842, 847 (Tex. App. Houston [1st Dist.] 1984, writ ref'd n.r.e.)); Carr v. Hunt, 651 S.W.2d 875, 879 (Tex. App. Dallas 1983, writ ref'd n.r.e.). The nature and extent to which the principal can control the agent is the key factor in determining the existence of the relationship. Johnson, 731 S.W.2d at 645 (citing English v. Dhane, 156 Tex. 231, 294 S.W.2d 709, 711 (1956); Hughes Engineering Co. v. Eubanks, 307 S.W.2d 603, 604 (Tex. Civ. App. Fort Worth 1957, no writ)).

There is no evidence in the record that Plantation Foods had the authority to control in any way the manner, method, or means adopted by H.O.T. in brokering truckers for Plantation Foods. The record conclusively demonstrates that, throughout the duration of their relationship, whenever Plantation Foods wished H.O.T. to obtain truckers to haul its poultry products, a request would be made and H.O.T., assuming it accepted Plantation Foods' offer, would be left to its own devices to meet the challenge at hand. Plantation Foods played no role in how the goal was achieved. Thus, no evidence was adduced that, under their agreement, Plantation Foods could control the conduct of H.O.T. Plantation Foods' ninth point is sustained.

BILLS OF LADING

In its sixteenth point of error, Plantation Foods contends that the evidence is legally insufficient to support a conclusion that it remained primarily liable to C.P. for the freight charges at issue. We agree.

It is well-settled that the primary obligation to pay transportation costs on a bills of lading rests with the consignor and the secondary obligation with the consignee of the goods. Southern Pac. Transp. Co. v. Commercial Metals Co., 456 U.S. 336, 343, 102 S. Ct. 1815, 1820 (1982); Bankruptcy Estate of United Shipping Co. v. Tucker Co., 474 N.W.2d 835, 840 (Minn. App. 1991); see 49 U.S.C.A. 13706 (West 1997). Primary responsibility for the charges may be shifted to a third party, but the transfer must arise pursuant to statute or clearly be established in the parties' contract or course of dealing. Missouri Pac. R.R. Co. v. Center Plains Indus. Inc., 720 F.2d 818, 819 (5th Cir. 1983); United Shipping, 474 N.W.2d at 840.

One of the third parties to whom the primary responsibility may be shifted is an intermediary broker. See Wenham Transp., Inc. v. United States Gypsum Co., 619 N.E.2d 110, 112 (Ohio App. 1993); United Shipping, 474 N.W.2d at 841. If the parties agree in their contract or through the course of their conduct that the carrier shall look to the broker for payment for his services, then the broker replaces the consignor as the party primarily responsible for the freight charges. See Wenham Transp., 619 N.E.2d at 112; United Shipping, 474 N.W.2d at 841.

Gustin testified and the trial court found that whenever C.P. brokered an agreement for a carrier to haul poultry products for Plantation Foods, C.P. agreed with the carrier to pay it directly for its services. C.P. would then bill H.O.T. for the brokerage services it had provided. Accordingly, C.P. voluntarily assumed the primary responsibility for paying the carriers for their freight charges and C.P. may not, via assignments from these carriers, claim a cause of action against Plantation Foods as remaining primarily responsible for the freight charges. We sustain Plantation Foods' sixteenth point of error.

STATUTE OF FRAUDS

Plantation Foods argues in its third point of error that the evidence is legally insufficient to remove it from the statute of frauds. We agree.

The statute of frauds provides in pertinent part that a promise or agreement to assume the debt of another is not enforceable unless the promise or agreement, or a memorandum of it, is in writing and signed by the person to be charged with the promise or agreement, or someone lawfully authorized to sign for him. Tex. Bus. & Com. Code Ann. 26.01 (Vernon 1987); Ertel v. O'Brien, 852 S.W.2d 17, 22 (Tex. App. Waco 1993, writ denied). C.P. concedes that Gustin's guaranty was not memorialized in writing, but nevertheless argues that one of two exceptions to the application of the statute of frauds applies the "full performance" exception and the "main purpose" doctrine.

Full Performance

While the statute of frauds prohibits the enforceability of certain contracts, it does not preclude the parties from performing on an oral agreement that falls within the statute. See Restatement (Second) Contracts 145 cmt. a (1981). Upon full performance, the statute has no function to achieve, and the legal relations of the parties are the same as if the contract had been enforceable. See id. Therefore, when one party fully performs a contract, the statute of frauds is unavailable to the other who knowingly accepts the benefits and at least partly performs. Enochs v. Brown, 872 S.W.2d 312, 319 (Tex. App. Austin 1994, no writ); 626 Joint Venture v. Spinks, 873 S.W.2d 73, 76 (Tex. App. Austin 1993, writ ref'd n.r.e.). The full-performance exception, however, has no application to the facts of this case.

C.P. argues that it fully performed under Plantation Foods' guaranty when it obtained truckers to haul its poultry products, and therefore, its agreement with Plantation Foods need not have been in writing to be enforceable. The full-performance exception, however, contemplates some action by both parties in furtherance of the agreement. The party attempting to enforce the oral agreement is expected to have fully performed the promises he made, and the party against whom the agreement is being enforced shall have at least partly performed and accepted some benefit from the other party's performance. See Enochs, 872 S.W.2d at 319.

The very existence of this lawsuit clearly indicates that Plantation Foods did not perform its part of the oral agreement because the only promise Plantation Foods allegedly made was to pay C.P. for the services it rendered in the event H.O.T. neglected to. In the absence of some performance on the part of Plantation Foods, C.P. may not avail itself of the full-performance exception.

Main Purpose

Under the "main purpose" doctrine, an agreement to answer for the debt of another need not be in writing to be enforceable if the promissary accepts primary responsibility for the debt and his "leading object" or "main purpose" is to serve some interest of his own. Haas Drilling Co. v. First Nat'l Bank in Dallas, 456 S.W.2d 886, 891 (Tex. 1970); Smith, Seckman, Reid, Inc. v. Metro Nat'l Corp., 836 S.W.2d 817, 820-21 (Tex. App. Houston [1st Dist.] 1992, no writ). There are three elements to an application of the doctrine:

(1) Did the promissary intend to become primarily liable for the debt, in effect making it his original obligation, rather than to merely become a surety for the original obligor?

(2) Was there consideration for the promise?

(3) Was receipt of the consideration the promissary's main purpose or leading object in making the promise, i.e., was the consideration given for the promise primarily for the promissary's own use and benefit.

Haas Drilling, 456 S.W.2d at 890; Smith, Seckman, Reid, 836 S.W.2d at 821.

We will consider only the first element. The record is clear that Gustin's statements could not plausibly be interpreted as an effort to make Plantation Foods primarily liable for H.O.T.'s debt. Gustin's "guaranty" of payment to C.P. was essentially that a guaranty to pay C.P. should H.O.T. default. Nothing was mentioned about removing H.O.T. as the party primarily liable. As there is no evidence to support at least one of the elements of the main-purpose doctrine, C.P. may not rely upon it as a theory of recovery. Plantation Foods' third point of error is sustained.

Due to our disposition of Plantation Foods' third, ninth, twelfth, and sixteenth points, we need not consider its remaining points of error. We reverse and render judgment in favor of Plantation Foods.

BOBBY L. CUMMINGS

Justice

Before Chief Justice Davis,

Justice Cummings, and

Justice Vance

Reversed and rendered

Opinion delivered and filed June 11, 1997

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