Court Opinion

ID: 2983893
Source: CourtListenerOpinion
Date Created: 2015-09-22 21:51:36.261096+00
Date Added: 2024-06-11T12:46:24.100131
License: Public Domain

Affirmed and Memorandum Opinion filed May 29, 2014.

                                      In The

                    Fourteenth Court of Appeals

                               NO. 14-13-00010-CV

                         KING FUELS, INC., Appellant
                                         V.

          BABAR H. HASHIM AND LEE OIL CO., INC., Appellees

                    On Appeal from the 281st District Court
                            Harris County, Texas
                      Trial Court Cause No. 2010-31771

                 MEMORANDUM                       OPINION

      In three issues, appellant King Fuels, Inc. argues that the trial court erred in
calculating its damages, including attorneys’ fees, for breach of a fuel supply
agreement. We hold that the court correctly calculated each category of damages
requested at trial. We also conclude that the record supports the trial court’s
implied findings that the breach induced by appellee Lee Oil Co., Inc. did not
cause King Fuels to terminate the agreement, so the trial court did not err by
awarding certain damages and attorneys’ fees solely against appellee Babar H.
Hashim. We affirm.

                                     BACKGROUND

      In August 2009, appellant King Fuels, Inc. contracted with Austin
Petroleum, Inc. d/b/a Cobra Truck Stop (Cobra) to be its exclusive fuel supplier for
a primary term of 180 months.          Appellee Hashim, the president of Austin
Petroleum, guaranteed the fuel supply agreement.

      The agreement obligated Cobra to purchase all of its gasoline and diesel fuel
through King Fuels, a wholesaler of fuels produced by Shell and other companies.
Under the agreement, Cobra was to sell a minimum of 125,000 gallons of diesel
fuel and 100,000 gallons of gasoline to the public per month. If it did not meet the
gasoline requirement in a given month, Cobra agreed to purchase the remainder of
the gallons at a rate of three cents over the “branded rack” rate, and to be billed at
the end of each calendar month for any additional funds due to King Fuels based
on King Fuels’ schedule of prices.

      Under the agreement, all gasoline supplied would be Shell-branded as Shell
does not permit its wholesalers to commingle branded and unbranded gasoline.
King Fuels agreed to pay the necessary costs and expenses of branding the gas
station as a Shell dealership, which turned out to be more than $150,000. These
expenses included “purchasing fascia, signs, sheet metal, logos, and other
signage.”

      The fuel supply agreement also included provisions for liquidated damages
for different types of breaches that might occur. Under paragraph thirteen of the
agreement, Cobra agreed to pay King Fuels five cents per gallon for each gallon it
purchased from another seller during the contract’s term.

                                          2
      Under paragraph twenty, Cobra also agreed that if it committed a breach that
caused King Fuels to terminate the contract, it would pay King Fuels liquidated
damages of two cents multiplied by (1) either the average number of gallons Cobra
sold per month or the minimum gallonage Cobra was required to sell, whichever
was greater; and (2) the remaining number of whole months in the contract, up to a
maximum of sixty months. Cobra further agreed that in such an event, it would
pay King Fuels the net value of the brand signage and associated improvements,
calculated as the sum of the “debrand cost as invoiced to [King Fuels]” and “the
original purchase price and cost of installation of [King Fuels] provided
improvements as reflected on the attached Exhibit ‘D’, less depreciation.” The
Exhibit D that appears in our record does not list any equipment, however.

      The parties agreed that each and every remedy in the agreement would be
“cumulative and . . . in addition to every other remedy hereunder, at law or in
equity.” The parties also agreed that in the event a dispute under the contract
resulted in litigation, the losing party would be liable for the winning party’s costs
and expenses, including reasonable attorneys’ fees.

      Unbeknownst to King Fuels, it was not in fact Cobra’s exclusive fuel
supplier after their agreement took effect in August 2009. Eventually, King Fuels
discovered that Cobra had been purchasing fuel from appellee Lee Oil. From the
effective date of the agreement through February 9, 2010, Cobra bought 95,510
gallons of gasoline fuel and 99,759 gallons of diesel fuel from Lee Oil.

      King Fuels also had difficulty collecting payment for fuel it delivered to
Cobra. In accordance with its usual practice, King Fuels notified Cobra that it
would electronically draft Cobra’s account as payment for the fuel, but the draft
was returned. King Fuels contacted Hashim, who assured King Fuels he was going
to take care of the matter so it could re-present the draft to the bank. King Fuels

                                          3
tried presenting the draft to the bank twice more; both times the draft was returned.
As a result, King Fuels began delivering fuel to Cobra on a cash-on-demand basis.

       King Fuels eventually terminated the fuel supply agreement. According to
Michael Graves, CEO of King Fuels, the decision to terminate an agreement
“depends on the financial stability of the individual more than anything else,”
including “what kind of personal or corporate guarantees we have, what the net
worth of the individual is, our background or history with that person,” and that
“there’s a whole lot of factors that go into it.” Graves explained that King Fuels
was concerned about the possibility that Shell would cancel its master agreement
with King Fuels if it discovered its products were being commingled with non-
Shell gasoline. Ultimately, the decision to terminate was not the result of a single
incident, but rather “everything in total, the huge returned drafts, the . . .
commingling of fuel there and everything else that was going on, that’s . . . just
one bad thing after another,” according to Graves. Cobra’s bank later foreclosed
on the gas station, and King Fuels purchased it out of foreclosure.

       King Fuels filed suit in Harris County district court, originally naming
Cobra, Hashim, and Lee Oil as defendants. 1 The original petition alleged that
Cobra and Hashim had breached the fuel supply agreement by purchasing fuel
from other sources, and that Lee Oil had tortiously interfered with the agreement
by supplying the fuel.         King Fuels alleged it had terminated its fuel supply
agreement with Cobra as a result of this breach. King Fuels also alleged the
defendants had acted fraudulently and made misrepresentations, and had conspired
together to accomplish the fraud. King Fuels eventually nonsuited Cobra.
       1
          King Fuels also sued Aims Stores, LLC d/b/a Key Exxon and Abdul Khader, with
whom it had an exclusive agreement to supply fuel for a different station, as well as Alexander
Oil, a company that it alleged had supplied some fuel to that station. King Fuels later non-suited
its claims against Alexander Oil, and the trial court signed a take-nothing judgment on its claims
against Aims Stores and Khader, which are not at issue in this appeal.

                                                4
       The case was tried to the bench.            King Fuels requested relief under
paragraph twenty of the agreement as compensation for its damages from
terminating the agreement with Cobra. King Fuels calculated its damages under
paragraph twenty as $110,000 for the initial branding expenses and $120,000 2 for
fuel that would have been sold under the remainder of the contract. Additionally,
King Fuels sought $9,763.45 in damages under paragraph thirteen for fuel that
Cobra purchased from Lee Oil in violation of the agreement. Hashim did not
answer or appear at trial. Lee Oil asserted that it was not aware of the fuel supply
agreement, and alternatively that any interference by it was not a cause of the
agreement’s termination. Lee Oil also argued that if the court found it liable for
tortious interference, liability should be apportioned between it and Hashim.

       The trial court awarded King Fuels a default judgment against Hashim,
including $120,000 in actual damages (plus prejudgment interest) and $38,000 in
reasonable attorneys’ fees. The court also rendered judgment that King Fuels was
entitled to $9,763.45 in actual damages (plus prejudgment interest) from Lee Oil.
The judgment allowed King Fuels to recover all costs of court from Hashim and
Lee Oil, jointly and severally. No findings of fact or conclusions of law were
properly requested or filed.

                                        ANALYSIS

       King Fuels raises three issues on appeal. First, it contends that the trial court
miscalculated available damages. Second, King Fuels argues the trial court erred
as a matter of law in failing to award the full amount of contract damages against
Lee Oil. Third, King Fuels argues the trial court should have held Lee Oil jointly
and severally liable for the total damage award. We consider each issue in turn.

       2
         This figure represented two cents per gallon multiplied by 100,000 gallons per month
multiplied by sixty months.

                                             5
I.     Standard of review

       The record does not reflect that King Fuels made a proper request for
findings of fact and conclusions of law. See Tex. R. Civ. P. 296, 297. Where
findings of fact and conclusions of law are neither requested nor filed, “the trial
court’s judgment implies all necessary fact findings in support of the judgment.”
Schoeffler v. Denton, 813 S.W.2d 742, 744 (Tex. App.—Houston [14th Dist.]
1991, no writ). These implied findings may be challenged for legal and factual
sufficiency when the appellate record includes the reporter’s and clerk’s records, as
it does here. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex.
2002).

       A party challenging the legal sufficiency of an adverse finding on an issue
upon which it had the burden of proof at trial must establish, as a matter of law, all
essential facts in support of the issue. Sterner v. Marathon Oil Co., 767 S.W.2d
686, 690 (Tex. 1989); TH Invs., Inc. v. Kirby Inland Marine, L.P., 218 S.W.3d 173,
189 (Tex. App.—Houston [14th Dist.] 2007, pet. denied). The party “must show
that there is no evidence to support the fact finder’s finding and that the evidence
conclusively establishes the opposite of the finding.” Indian Oil Co., LLC v.
Bishop Petroleum, Inc., 406 S.W.3d 644, 652 (Tex. App.—Houston [14th Dist.]
2013, pet. denied) (citing Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex.
2001)). A party challenging the factual sufficiency of an adverse finding on an
issue on which it had the burden of proof at trial must demonstrate that the finding
“is against the great weight and preponderance of the evidence” so as to be clearly
wrong and unjust. Dow Chem. Co., 46 S.W.3d at 242; TH Invs., 218 S.W.3d at
190.

                                          6
II.   The trial court did not err in calculating the damages available under
      the agreement.
      In its first issue, King Fuels argues that the trial court miscalculated its full
array of damages under the agreement’s various liquidated damages provisions.
We find no error in the trial court’s calculations: King Fuels did not establish as a
matter of law that it was entitled to recover any branding expenses, and the trial
court awarded King Fuels the full amount of post-termination lost sales it
requested at trial. King Fuels has not challenged the trial court’s calculation of
damages for pre-termination lost sales.

      The interpretation of an unambiguous contract is a question of law, which
we review de novo. Cajun Constructors, Inc. v. Velasco Drainage Dist., 380
S.W.3d 819, 825 (Tex. App.—Houston [14th Dist.] 2012, pet. denied).               Our
primary concern is to ascertain the parties’ true intentions as expressed in the
contract. Weaver v. Jamar, 383 S.W.3d 805, 810 (Tex. App.—Houston [14th
Dist.] 2012, no pet.). “[T]he parties’ intent is governed by what they said, not by
what they intended to say but did not.” Fiess v. State Farm Lloyds, 202 S.W.3d
744, 746 (Tex. 2006).

      King Fuels has not established as a matter of law that the agreement allowed
it to recover damages stemming from its initial branding investments in the Cobra
gas station. Paragraph twenty dictated that the net value of the brand signage and
associated improvements would be calculated as the sum of the “debrand cost as
invoiced to [King Fuels]” and “the original purchase price and cost of installation
of [King Fuels] provided improvements as reflected on the attached Exhibit ‘D’,
less depreciation . . . .” (italics added). But there is no evidence that the station
was debranded or that the parties ever listed improvements on the attached Exhibit
D, which contains only a heading and is otherwise blank. Although King Fuels

                                          7
submitted evidence that it did pay for certain expenses involved in branding the
Cobra station, none of those expenses are reflected on Exhibit D. Under the plain
terms of the agreement, therefore, King Fuels may not recover any of those
expenses upon termination, and the trial court properly did not award them. 3

       King Fuels also complains on appeal that the liquidated damages calculation
for post-termination sales under paragraph twenty should have included diesel as
well as gasoline sales, resulting in an award of $270,000. But the award King
Fuels did receive—$120,000—was the full amount it asked for at trial. Whether or
not the contract unambiguously contemplated calculation based on both gasoline
and diesel sales, King Fuels chose to request compensation based only on gasoline.
Thus, any error in calculating post-termination lost sales under paragraph twenty
belongs to King Fuels, not the trial court. See Bass v. Walker, 99 S.W.3d 877, 889
(Tex. App.—Houston [14th Dist.] 2003, pet. denied) (holding that appellants could
not complain that the trial court erred by giving a settlement credit of only
$100,000 rather than $205,724.50 after specifically requesting a credit of $100,000
during closing argument). 4

       3
         King Fuels also points to a memorandum signed by the parties, which was separate
from the fuel supply agreement but executed on the same day. The memorandum acknowledged
that King Fuels paid more than $150,000 to brand the station. This provision does not
demonstrate an intent that King Fuels should be reimbursed for these costs upon termination,
however. To the contrary, the memorandum states only that “[i]n consideration of” King Fuels’
payment, all rebates received from the station’s operation shall be paid to King Fuels.
       4
           Texas Rule of Appellate Procedure 33.1(d) permits a party in a nonjury case to
complain for the first time on appeal about “the legal or factual insufficiency of the evidence—
including a complaint that the damages found by the trial court are excessive or inadequate.” We
would face a different issue if King Fuels had requested $270,000 at trial and did not object to
the trial court’s awarding $120,000. King Fuels’ failure to request and prove greater damages
does not make the evidence supporting the $120,000 awarded by the trial court legally or
factually insufficient.

                                               8
III.   The trial court did not err in failing to award post-termination damages
       and attorneys’ fees against Lee Oil.
       In its second and third issues, King Fuels argues that the trial court erred in
failing to award the full amount of contract damages, including attorneys’ fees,
against Lee Oil. In particular, King Fuels contends that the court failed to award
damages against Lee Oil cumulatively under paragraphs thirteen and twenty as
required by the agreement. The trial court awarded $9,763.45 in damages against
Lee Oil, which King Fuels characterizes as an award calculated using the
liquidated damages formula for pre-termination lost sales in paragraph thirteen.
King Fuels’ position is that Lee Oil also should be jointly and severally liable for
the $120,000 in damages that the trial court awarded only against Hashim, which
King Fuels characterizes as an award of liquidated damages for post-termination
lost sales under paragraph twenty. 5

       We note that the trial court was not asked to make findings, so it did not
specify whether its awards were tied to particular paragraphs of the agreement.
For purposes of our analysis, however, we assume without deciding that King
Fuels’ characterizations are correct. Even under that assumption, we disagree with
King Fuels’ argument because there is evidence to support the trial court’s implied
finding that Lee Oil’s interference caused only pre-termination damages to King
Fuels, and this finding was not against the great weight of the evidence. We also
hold that King Fuels was not entitled to recover attorneys’ fees against Lee Oil.

       5
          King Fuels has not separately argued on appeal that the trial court’s award of $120,000
against Hashim was a failure to award damages against him cumulatively under both paragraphs,
nor has it asked us to modify the judgment against Hashim. Similarly, King Fuels’ arguments at
trial did not clearly request the full array of damages against each party individually. We
therefore restrict our analysis to whether the record supports the trial court’s calculation of
damages against Lee Oil.

                                               9
      Tortious interference requires proof that (1) contracts existed that were
subject to the defendant’s interference; (2) the defendant willfully and intentionally
committed acts of interference; (3) the acts proximately caused damages; and (4)
actual damages or loss occurred. Faucette v. Chantos, 322 S.W.3d 901, 913 (Tex.
App.—Houston [14th Dist.] 2010, no pet.). An action for tortious interference uses
the same measure of damages as would an action for the underlying breach of the
contract at issue. Anderson, Greenwood & Co. v. Martin, 44 S.W.3d 200, 219
(Tex. App.—Houston [14th Dist.] 2001, pet. denied).       The award should put the
plaintiff in the same economic position he would have occupied absent the
interference, i.e. had the contract actually been performed.         American Nat’l
Petroleum Co. v. Transcon. Gas Pipe Line Corp., 798 S.W.2d 274, 278 (Tex.
1990).

      In light of these principles, the trial court’s decision to award damages
against Lee Oil under paragraph thirteen means that it necessarily found Lee Oil’s
interfering acts caused Cobra to violate paragraph thirteen. Paragraph twenty
requires Cobra to pay King Fuels liquidated damages for lost gasoline sales “[i]n
the event [Cobra] breaches its obligations causing [King Fuels] to terminate the
contract.”   King Fuels argues these damages also should have been awarded
against Lee Oil because the trial court made an implied finding that Cobra’s
breach—induced by Lee Oil—caused King Fuels to terminate the agreement. We
disagree.

      In order to award $120,000 in damages against Hashim under paragraph
twenty, the trial court necessarily had to find that Cobra breached the agreement
and caused its termination, so the judgment implies a finding to that effect. But the
trial court awarded only $9,763.45 in pre-termination damages against Lee Oil
under paragraph thirteen, which implies a finding that Lee Oil’s tortious

                                         10
interference with the agreement caused only those damages—in other words, that
those damages put King Fuels in the economic position it would have occupied
absent Lee Oil’s interference. We conclude that King Fuels has not proven by
conclusive evidence or the great weight of the evidence that Lee Oil’s interference
also caused the termination and $120,000 in post-termination damages.

      Although there is an implied finding that a breach by Cobra caused King
Fuels to terminate the agreement, there was evidence that purchasing fuel from Lee
Oil was not the only breach Cobra committed. For example, there was testimony
that Cobra’s drafts had been returned three times and that Cobra was continually
behind in making payments.       Furthermore, Graves testified that “more than
anything else,” King Fuels considers the financial stability of the individual in
determining whether or not to terminate a fuel supply agreement. Although Graves
also said that King Fuels probably would not have continued the agreement if
Cobra had become current in its payments, the trial court—as trier of fact—was
entitled to resolve any factual disputes.    The court also heard evidence that
although Lee Oil allegedly delivered fuel to another location with which King
Fuels had an exclusive supply agreement, King Fuels chose not terminate that
agreement.

      On this record, the trial court could reasonably have concluded that it was
Cobra’s payment defaults and lack of financial stability that caused King Fuels to
terminate the agreement. Because King Fuels has not established by conclusive or
overwhelming evidence that Lee Oil’s interference caused the termination and
$120,000 in liquidated post-termination damages under paragraph twenty, the trial
court did not err in failing to award those damages against Lee Oil. See Dow
Chem. Co., 46 S.W.3d at 242.

                                        11
       King Fuels makes a related argument that the trial court erred in not holding
Lee Oil jointly and severally liable with Hashim for the paragraph twenty damages.
In King Fuels’ view, both the party who breaches a contract and the party who
tortiously interferes with it are jointly and severally liable for all actual damages
incurred. Yet even if King Fuels were correct that this principle governs cases in
which the interference and breach cause the same damages (a question we need not
decide), it has no application here given the trial court’s implied finding that Lee
Oil’s interference caused only paragraph thirteen damages.

       The trial court also did not err in awarding attorneys’ fees solely against
Hashim. Although King Fuels argues that fees are simply a fourth element of
damages under the contract, “[c]ourts have long distinguished attorney’s fees from
damages.” In re Nalle Plastics Family Ltd. P’ship, 406 S.W.3d 168, 172 (Tex.
2013); see id. at 173 (“Not every amount, even if compensatory, can be considered
damages.”). The general rule in Texas is that “unless provided for by statute or by
contract between the parties, attorney’s fees incurred by a party to litigation are not
recoverable against his adversary either in an action in tort or by suit upon a
contract.” Turner v. Turner, 385 S.W.2d 230, 233 (Tex. 1964) (emphasis added);
see also Gannett Outdoor Co. of Tex. v. Kubeczka, 710 S.W.2d 79, 90 (Tex.
App.—Houston [14th Dist.] 1986, no writ) (“Attorney’s fees are not recoverable in
a tort action unless authorized by statute.”).

       Here, there was no contract between Lee Oil and King Fuels, and thus no
agreement that Lee Oil would pay attorneys’ fees in the event of litigation. The
cases King Fuels cites are inapposite because they involve torts arising out of the
tortfeasor’s breach of a contract.6         Here, King Fuels’ claim is that Lee Oil’s

       6
        See, e.g., Gill Sav. Ass’n v. Chair King, Inc., 797 S.W.2d 31, 32 (Tex. 1990); Citizens
Bank & Trust Co. of Baytown v. Ertel, No. 01-98-00548, 2001 WL 26141, at *12 (Tex. App.—
Houston [1st Dist.] Jan. 11, 2001, pet. denied) (mem. op., not designated for publication); Ramos
                                               12
interference caused Cobra to breach its contract, not that Lee Oil’s interference
arose out of Cobra’s breach. Even the agreement’s provision for attorneys’ fees
only purports to govern disputes “hereunder which result[] in litigation” (emphasis
added).     Although the dispute between King Fuels and Lee Oil concerns
interference with the fuel supply agreement in which the fee provision appears, the
dispute is not “[]under” that agreement because Lee Oil is not a party.                   We
therefore overrule King Fuels’ second and third issues.

                                          CONCLUSION

       Having overruled each of King Fuels’ issues, we affirm the trial court’s
judgment.

                                    /s/            J. Brett Busby
                                                   Justice

Panel consists of Justices McCally, Busby, and Wise.

v. Chapa, No. 04-95-99592, 1997 WL 438754, at *10–11 (Tex. App.—San Antonio Aug. 6,
1997, no writ) (mem. op., not designated for publication); Wilson v. Ferguson, 747 S.W.2d 499,
504 (Tex. App.—Tyler 1988, writ denied).

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