Court Opinion

ID: 3074913
Source: CourtListenerOpinion
Date Created: 2015-10-16 01:05:03.401811+00
Date Added: 2024-06-11T11:41:55.467916
License: Public Domain

In The

                               Court of Appeals
                   Ninth District of Texas at Beaumont
                          ____________________
                             NO. 09-12-00478-CV
                          ____________________

                CLIPPER BULK SHIPPING, LTD., Appellant

                                       V.

                 SUN COAST RESOURCES, INC., Appellee
_______________________________________________________          ______________

                   On Appeal from the 136th District Court
                         Jefferson County, Texas
                        Trial Cause No. D-189,774
________________________________________________________          _____________

                         MEMORANDUM OPINION

      Sun Coast Resources, Inc. sued Clipper Bulk Shipping, Ltd. for breach of a

contract involving a purchase of “Marine Gasoil” (MGO). Clipper’s counterclaim

included claims for breach of contract and breach of warranty. The trial court

granted a directed verdict in favor of Sun Coast on its claim against Clipper. The

jury returned a verdict against Clipper on a revocation of acceptance issue, and

determined the amount of Sun Coast’s damages.

                                        1
      The jury also found Sun Coast breached the agreement with Clipper, and

awarded Clipper damages. The trial court signed a judgment based on the jury

verdict. Clipper appealed. 1

                                      BACKGROUND

      Sun Coast, a fuel distributor, agreed to sell 100 metric tons of MGO to

Clipper for the chartered vessel M/V Chios Voyager. The invoice price was in

excess of $67,000. The flashpoint of the MGO had to be at least 60˚ Celsius (140˚

Fahrenheit). Sun Coast delivered the MGO to the Chios Voyager at the Port of

Beaumont. Samples were reserved from the MGO delivery. The delivery receipt,

or “bunker receipt,” indicated the MGO’s flashpoint was 60˚ Celsius/150˚

Fahrenheit. The Chios Voyager left the Port of Beaumont. No testing of the MGO

was done prior to the ship’s departure.

      Dennis Hansen, Clipper’s senior operations manager, testified that six or

seven days after the ship sailed, he received a notification from the ship owners

that they had tested a sample of the MGO and discovered a problem with the

flashpoint. Hansen notified Sun Coast by email. He invited Sun Coast to test its

own sample which, like the ship owners’ sample, had been taken from the MGO

      1
       Sun Coast filed a cross-appeal but did not present any separate issues. The
cross-appeal has been abandoned to the extent it sought greater relief than that
provided by the trial court.

                                          2
delivered to the ship. Sun Coast set up a test in Houston. The test took

approximately one hour. Test results showed that the MGO had a flashpoint of 58˚

Celsius.

      Clipper informed Sun Coast that Clipper needed to “debunker” the MGO

because of its failure to meet specifications. Sun Coast first asked about

debunkering at sea, but then asked if the ship could return to Houston for

debunkering. Hansen testified “[t]here was no way” that the ship could have made

it back to Houston or Beaumont “without consuming these off-spec bunkers.”

Clipper “debunkered” the ship in Trinidad, sold the MGO for $17,940, and refused

to pay Sun Coast any amount for the MGO. The jury also heard that Clipper did

not test the new fuel it took on in Trinidad.

      Deniese Huggins, Sun Coast’s chief financial officer, testified it was not

common for Sun Coast to test MGO purchased from a refinery, and Lorie Mitchell,

Sun Coast’s sales representative, similarly testified that Sun Coast does not test to

make sure the MGO meets the specifications. Huggins indicated that Sun Coast

relies on the bill of lading, a certification or proof that the refiner is providing what

Sun Coast requests.

      Clipper did not ask for the MGO to be tested in port. Hansen testified to the

obligations regarding testing that Clipper had under the contract with the owners of

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the vessel. The contract was before the jury, as was Hansen’s interpretation of the

contract. Hansen indicated that five samples of the MGO were to be taken when

the ship took delivery of the MGO---one given to the charterer’s representative,

two kept on board the vessel, and one given to the supplier. The fifth sample had to

be sent to a reputable lab for analysis. He testified this was Clipper’s obligation,

and Clipper did not fulfill it.

       Mitchell believed that it was reasonable for Clipper to rely on the bunker

receipt and the representations made by Sun Coast regarding the specifications.

Captain Stefan Wozniak, a “master of ocean-going vessels,” explained that the

industry practice is for bunkers not to be tested until after the ship has left port and

that it is reasonable to do so. Wozniak testified that it “would be preferable if the

industry practice was to test bunkers before a ship left[,]” but “[t]hat is not what we

do.” Hansen indicated that he does not see the necessity of testing the MGO while

the ship is in port if there is no “red flag” raised on a bunker delivery receipt.

       Hansen agreed that Clipper is under a duty to comply with the requirements

of the Clipper/owner contract, and Clipper did not comply. He further indicated

that the contract between Clipper and the vessel owners places the burden of

sampling and testing the bunkers on Clipper.

                                           4
                           REVOCATION OF ACCEPTANCE

      Clipper argues the evidence is legally insufficient to support a finding that

Clipper was not entitled to revoke its acceptance of the MGO. In a legal

sufficiency review, an appellate court credits evidence favorable to the judgment if

a reasonable fact-finder could, disregards contrary evidence unless a reasonable

fact-finder could not, and reverses the fact-finder’s determination only if the

evidence presented in the trial court would not enable a reasonable and fair-minded

fact-finder to reach the finding under review. City of Keller v. Wilson, 168 S.W.3d
802, 807, 827 (Tex. 2005). Legal sufficiency challenges are sustained where the

record discloses that: (1) there is a complete absence of evidence of a vital fact; (2)

the court is barred by rules of law or evidence from giving weight to the only

evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact

is not more than a mere scintilla; or (4) the evidence established conclusively the

opposite of a vital fact. Serv. Corp. Int’l v. Guerra, 348 S.W.3d 221, 228 (Tex.

2011). More than a scintilla of evidence exists if the evidence rises to a level that

would enable reasonable and fair-minded people to differ in their conclusions.

Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004). A jury may

reasonably accept or reasonably reject any or all of the testimony from any

witness. Keller, 168 S.W.3d at 819.

                                          5
      Clipper asserts that in view of the failure of the MGO to meet specifications,

Clipper had the right to revoke its acceptance of the product. The jury was

instructed in Jury Question No. 1 (an instruction Clipper does not challenge) as

follows:

             Clipper Bulk Shipping, Ltd. was “entitled to revoke
      acceptance” only if (1) the difference in the flash point substantially
      impaired the value of the Marine Gas Oil to Clipper . . . , and (2) its
      acceptance of the goods was reasonably induced by either the
      difficulty of discovery of the flash point or by the seller’s assurances.

See Tex. Bus. & Com. Code Ann. § 2.608 (West 2009). The jury heard testimony

from Mitchell and Wozniak that the test took only one hour -- evidence that there

was little difficulty in discovery of the flashpoint. The jury also heard testimony

that Clipper had a duty to sample and test under its contract with the ship’s owners,

and that Clipper did not fulfill its duty. Under the circumstances, the jury could

reasonably reject the testimony of witnesses who believed it reasonable to rely on

the delivery receipt without testing. There was more than a scintilla of evidence

that Clipper waited an unreasonable amount of time before inspecting the MGO.

See Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983) (A legal

sufficiency challenge will be sustained when the evidence offered to prove a vital

fact is more than a scintilla.). Given the testimony regarding Clipper’s duty to test

the sample, its failure to do so, and the short amount of time required to test a

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sample, a reasonable fact-finder could conclude that Clipper’s failure to test timely

was unreasonable, and that Clipper’s acceptance of the MGO was not “reasonably”

induced by either the difficulty of discovery of the flashpoint or by the seller’s

assurances. We overrule issue one.

                                     DAMAGES

      Clipper argues the evidence was not factually sufficient to support the jury’s

answers to Jury Questions No. 3 and No. 8 concerning damages. In a factual

sufficiency challenge, the reviewing court considers and weighs all of the

evidence, and can set aside a verdict only if the evidence is so weak or if the

finding is so against the great weight and preponderance of the evidence that it is

clearly wrong and unjust. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex.

2001).

      The jury awarded Sun Coast $67,817.96 for economic damages that resulted

from Clipper’s failure to pay the submitted invoice. The evidence established

Clipper did not pay any amount on the invoice. Clipper argues nevertheless that it

should have been given an offset for the $17,940 received for the off-spec bunkers

sold while the ship was at sea. Clipper’s offset argument is premised upon its claim

that it had a right to revoke acceptance, which the jury found it did not have.

Hansen testified that Clipper deducted the $17,940 from its cross-claim for breach

                                         7
of contract against Sun Coast, but that is not payment on the invoice. The evidence

is factually sufficient to support the jury’s damages finding in Question 3.

      The jury awarded Clipper $7,000 on its cross-claim for damages for Sun

Coast’s failure to deliver the MGO according to specifications. Clipper argues that

the jury award seems to reflect the approximate difference between the invoice

value of the fuel which Clipper obtained from Sun Coast and Clipper’s estimate of

its own damages. Clipper contends the calculation is wrong.

      While Clipper claimed to have reduced its damages by an amount

representing the value of the fuel it retained and sold, the jury was not required to

accept that testimony or to believe that the amount was reasonable. The jury was

not required to accept Clipper’s calculations on any part of its damage claim, and

could reject all or part of the testimony concerning damages as not credible.

Mitchell testified that, had Clipper tested the sample of MGO in port, the MGO

could have been debunkered in Beaumont and sold at the same price as Sun Coast

sold it to Clipper. She explained that the fuel could have been off-loaded and used

for other specified purposes; there was no evidence to the contrary. The fact that

Clipper may have sold Sun Coast’s product at below market value does not mean

Clipper acted reasonably in doing so. Considering Clipper’s burden of proof and

the jury’s role in assessing the credibility of the witnesses, we are not convinced

                                          8
that the amount of the jury’s damage award represents an error requiring reversal

of the judgment and a new trial. See Tex. R. App. P. 44.1. Issue two is overruled.

                                     JURY CHARGE

      In its final issue, Clipper argues the trial court erred in denying Clipper’s

request to submit the breach of warranty claim to the jury. The standard of review

for jury charge error is abuse of discretion. Tex. Dep’t of Human Servs. v. E.B., 802
S.W.2d 647, 649 (Tex. 1990) (op. on reh’g). We may not reverse for charge error

unless the error is harmful. Boatland of Houston, Inc. v. Bailey, 609 S.W.2d 743,

749-50 (Tex. 1980); see also Shupe v. Lingafelter, 192 S.W.3d 577, 579-80 (Tex.

2006) (Trial court’s refusal to submit instruction on negligent entrustment was

harmless where the jury failed to find negligence in response to the jury question

on negligence generally; by answering the negligence question, the jury provided

answer to negligent entrustment.).

      Submitting the controlling issues to the jury in a logical, simple, clear, fair,

correct, and complete manner is the goal of the jury charge. Hyundai Motor Co. v.

Rodriguez, 995 S.W.2d 661, 664 (Tex. 1999). A “controlling issue” is an issue that

requires a factual determination to render judgment in the case. Smooth Solutions

Ltd. P’ship v. Light Age, Inc., No. 04-08-00093-CV, 2009 WL 1804846, at **3-4

(Tex. App.—San Antonio June 24, 2009, no pet.). The trial judge must submit to

                                          9
the jury the controlling questions, instructions, and definitions raised by the

pleadings and supported by the evidence. See Triplex Commc’ns v. Riley, 900
S.W.2d 716, 718 (Tex. 1995); see also Tex. R. Civ. P. 278. The trial court has

broad discretion to fashion the jury charge, so long as it is legally correct. Hyundai

Motor, 995 S.W.2d at 664.

      In connection with Clipper’s proposed liability and damages questions, the

trial court refused to submit instructions on the meaning of “[f]ailing to comply

with an express warranty” and a list of the elements of damages for breach of

warranty. The questions submitted to the jury regarding Sun Coast’s liability and

damages, and the jury’s answers are as follows:

      Question No. 7
      Did Sun Coast Resources, Inc. fail to deliver to the M/V Chios
      Voyager Marine Gas Oil with a specification of a minimal flashpoint
      above 60 degrees Celsius?

      Answer: Yes.
      ....
      Question No. 8
      What sum of money, if any, paid now in cash would fairly and
      reasonably compensate Clipper Bulk Shipping, Ltd. for damages, if
      any, that resulted from [Sun Coast’s] failure to comply with the
      agreement found in Question 7?
      ....
      Answer: $7,000.

The liability and damages questions proposed by Clipper and refused by the

trial court are as follows:
                                         10
      Was the failure of plaintiff to comply with a warranty, if any, to
      provide marine gas oil with a minimum flash point of 60˚ Celsius
      cause defendant to sustain damages[?]

      What sum of money, if any, now paid in cash would fairly and
      reasonably compensate defendant for its damages, if any, sustained as
      a result of [Sun Coast’s] failure to comply with its warranty?

      Breach of contract and breach of warranty are distinct causes of action with

separate remedies. Med. City Dallas, Ltd. v. Carlisle Corp., 251 S.W.3d 55, 60

(Tex. 2008) (citing Tex. Bus. & Com. Code Ann. §§ 2.711, 2.714)). A claim can

sometimes be subsumed within the other in the jury charge context; it depends on

the pleadings, evidence, and charge in the case. Smooth Solutions, 2009 WL
1804846, at *4. The liability question submitted by the trial court regarding Sun

Coast targeted the specific conduct claimed by Clipper to constitute a breach of

warranty.

      Section 2.714(a) of the Business and Commerce Code provides that where

the buyer has accepted goods and given notification of breach, he may recover as

damages for any nonconformity of tender the loss resulting in the ordinary course

of events from the seller’s breach, “as determined in any manner which is

reasonable.” Tex. Bus. & Com. Code Ann. § 2.714(a) (West 2009); see also Tex.

Bus. & Com. Code Ann. § 2.715 (West 2009) (incidental and consequential

damages). The jury considered Clipper’s damages claim, which included incidental
                                       11
and consequential damages. In awarding damages, the jury ascertained Clipper’s

damages from Sun Coast’s failure to supply a product with a proper flashpoint. We

conclude any error in the charge does not require a new trial. See Tex. R. App. P.

44.1(a). Issue three is overruled. The judgment is affirmed.

      AFFIRMED.

                                              ____________________________
                                                   DAVID GAULTNEY
                                                         Justice

Submitted on June 26, 2013
Opinion Delivered October 17, 2013

Before McKeithen, C.J., Gaultney and Horton, JJ.

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