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Martin ARMENDARIZ, Appellant, v. James HUDGENS, d/b/a El Paso Cattle, GP, and John Hudgens, d/b/a El Paso Cattle, GP, Appellees.
This is an appeal from an order granting summary judgment against Appellant Martin Armendariz, dismissing his claims for breach of contract and quantum meruit against Appellees, James Hudgens, d/b/a El Paso Cattle, GP, and John Hudgens, d/b/a El Paso Cattle, GP (hereinafter “EP Cattle”). Armendariz filed suit after he sold a herd of cattle but was not fully paid under the sales contract. Under the traditional summary judgment standard, EP Cattle carried the burden to disprove as a matter of law either the existence of, or breach of the claimed contract. To do so, it needed to prevail on two issues. First, it needed to disprove that certain statements and actions of a third-party, Simon Chavez, could be imputed to EP Cattle under one or more agency theories. Second, EP Cattle needed to prove as a matter of law that its claimed role as a “consignee” in the transaction absolved it of any liability for breach of contract where the contract documents themselves state that EP Cattle was the purchaser of the cattle. We conclude that EP Cattle succeeded, but only in part on the first question, and not at all on the second. Accordingly, we reverse in part, and affirm in part the summary judgment on the contract claim. We affirm the summary judgment's dismissal of a quantum meruit claim.
A. Factual Background
1. The negotiation
In November of 2012, Armendariz and Jose Bremer, who jointly owned a herd of cattle located in Chihuahua, Mexico, looked for a cattle buyer in the United States. Bremer gave Armendariz authority to negotiate a deal with Simon Chavez, who was in the business of purchasing cattle in the El Paso area and whom Armendariz believed was “paying the best price” for cattle at that time. Armendariz initially contacted Chavez by phone in November of 2012 to begin negotiations. According to Armendariz, Chavez represented that he was the “buyer” for EP Cattle, and that he was negotiating the purchase on behalf of EP Cattle, who Chavez claimed was the actual purchaser in the transaction.1 Based on Chavez's representations, Armendariz believed that he and Bremer were selling the cattle to EP Cattle, rather than to Chavez. Armendariz and Chavez agreed upon a total net purchase price of $654,115.67, with $280,202.71 to go to Bremer, and the remainder, approximately $348,837.00, to go to Armendariz.
Chavez indeed was a cattle buyer for EP Cattle, but as it turns out, only for a specific volume of cattle of a certain weight that EP Cattle would then turn and sell to its customer, Swift & Henry. The cattle that Armendariz and Bremer were selling, however, were not in the quantity or weight class for Swift & Henry's specifications, and none of the cattle that Armendariz and Bremer sold wound up going to Swift & Henry.2
2. The cattle crossing
In order for the cattle to be legally crossed into the United States from Mexico, two things needed to happen. First, it was necessary to retain the services of a Mexican broker to file the proper paperwork to initiate the transfer, and second, the Mexican broker was required to consign the cattle to an entity that was bonded and authorized by the United States Department of Agriculture to accept the cattle at the border crossing. It is undisputed that Chavez did not have the necessary bonding or authority to accept the cattle for the border crossing, but that EP Cattle did. And this is where the dispute begins.
According to the deposition testimony of John Hudgens, (a partner in EP Cattle), as well as Ismael Lopez, (EP Cattle's accountant and bookkeeper), Chavez approached EP Cattle to serve as the consignee for the sale of the cattle in order to effectuate the border crossing. Hudgens testified that EP Cattle agreed to serve as the consignee and that Chavez in turn agreed to pay EP Cattle a commission for its services. EP Cattle thereafter retained the services of Miranda Brokerage to serve as the Mexican broker to authorize the shipment to the United States. Miranda Brokerage thereafter prepared two invoices, both dated December 3, 2012, for its services. The first invoice listed Bremer as the client and shipper, and EP Cattle as the consignee, specifying a total of 124 head of steers, and 890 head of heifers. A second invoice listed Armendariz as the shipper, and EP Cattle as the consignee, specifying a total of 136 steers. As noted, both invoices state that EP Cattle is the consignee, but they also both state that the cattle are “Cobrar A” EP Cattle (translated on the document as “For the account of”). Neither invoice defined the term “consignee.”
It is undisputed that the entire herd of cattle crossed into the United States on that same day. The USDA border crossing documents state that the herd was sold by Bremer and Armendariz to Miranda Brokerage, who was serving as the shipper. After the cattle crossed the border, they were placed in designated and numbered pens in a cattle yard in Santa Teresa, commonly used for this purpose.
3. The invoice preparation
After the cattle crossed the border, Armendariz, Bremer, and Chavez met with Lopez in EP Cattle's offices in El Paso. During this meeting, Chavez, with Armendariz's authorization, gave Lopez instructions regarding the amounts owed to Armendariz and Bremer for the sale, less the commissions owed to Miranda Brokerage, and instructed Lopez on how to wire transfer the money to them. In addition, Armendariz and Bremer gave Lopez their bank account numbers, and were told they were “going to get a transfer.” Although Armendariz recalled that Chavez gave instructions to Lopez on how to prepare the invoices for the sale, he admittedly did not hear what those instructions were.
During the meeting, Lopez prepared two invoices, both of which were on EP Cattle's letterhead. The first invoice had the following information:
NAME: JOSE L. BREMER
This invoice listed a total of 890 heifers of various weights, for a total purchase price of $568,167.56, minus Miranda Brokerage's fee of $22,443.54, for a total due of $545,724.02. A comments sections appeared to have wiring instructions for the funds payable to Armendariz. The second invoice had the following information:
NAME: MARTIN ARMENDARIZ
This invoice listed a total of 124 steers of various weights, for a total purchase price of $85,948.11, minus Miranda Brokerage's fee of $2,632.42, for a total due of $83,315.69. It had under the comments section what appear to be wiring instructions to Jose Bremer, which on our copy is struck through.
4. Payments made to Armendariz and Bremer
The cattle were thereafter shipped to various buyers in the United States, all of whom were Chavez's customers, with the proceeds initially going to EP Cattle and with EP Cattle later dispersing those payments to Bremer and Chavez. In particular, EP Cattle paid Bremer $280,202.71 by wire transfer on December 10, 2012, and Bremer thereafter considered that he had been paid in full for his share of the sale.3 On December 14, 2012, Armendariz received and accepted a payment of $48,837 from Chavez by wire transfer to his account. Armendariz therefore calculated that he was still owed $300,000 for the sale of the cattle.
According to Lopez, Chavez thereafter came to his office and said he had paid all the parties involved the remaining amounts they were owed, and that he was entitled to be reimbursed by EP Cattle. Based on Chavez's representation, and his calculation of the amounts remaining to be paid, Lopez generated a check for Hudgens's signature. It is undisputed that on December 19, 2012, Hudgens signed a check on EP Cattle's behalf, in the amount of $460,338.32, made out to 24 Trading Company, LLC, a d/b/a/ that Chavez had started using in April of that year. The check referenced the two invoice numbers that Lopez had prepared on the day of the cattle crossing. Hudgens testified that in signing the check, he relied on Lopez's calculations and his belief that Chavez had paid all of the parties what they were owed. And of course, had that been the case, there would be no dispute. But as the parties would later learn, Chavez failed to pay Armendariz the balance owed for the cattle.
B. Procedural History
1. The lawsuit
Armendariz subsequently filed a lawsuit against EP Cattle and 24 Trading Company, LLC, raising claims for breach of contract against both entities, as well as a claim for quantum meruit. Armendariz later nonsuited its claim against 24 Trading Company, LLC after learning that it had declared bankruptcy.
For its part, EP Cattle denied that it had a contract with Armendariz, alleging that Chavez was acting as an “independent operator” in the transaction, and that he was responsible for any payment owed to Armendariz. Armendariz then filed a second amended petition, as well as a supplemental petition, alleging that Chavez had actual or apparent authority to act on EP Cattle's behalf in entering into the contract to purchase the cattle, or that EP Cattle had later ratified Chavez's actions. In addition, Armendariz asserted a claim against EP Cattle for quantum meruit, contending that EP Cattle had accepted the benefits of the transaction. In response, EP Cattle denied all of the allegations, contending that it never agreed to purchase the cattle, that its role in the transaction was limited to that of a consignee, and that it had paid all of the amounts it owed in that role without accepting or retaining any benefits in its purported role as a purchaser.
2. The summary judgment motions
Both parties filed their own summary judgment motions. Armendariz's motion contended that the undisputed facts show that EP Cattle had agreed, through Chavez who was acting as its agent, to serve as the purchaser of the cattle, and that EP Cattle still owed him $300,000 for the sale. EP Cattle opposed the motion, and also filed its own motion for partial summary judgment on Armendariz's claim, seeking dismissal of all of its claims. In its motion, EP Cattle argued that the summary judgment evidence conclusively established that Chavez was not an employee or agent of EP Cattle, and that he had no actual or apparent authority to act on its behalf in entering into the purchase agreement. In addition, EP Cattle argued that there was no evidence to support a conclusion that it did anything to ratify the agreement or that it accepted any benefits under the agreement. As discussed in more detail below, EP Cattle contends that the evidence instead established that its only role in the transaction was to serve as a consignee for the sale, and that it fulfilled that role by dispersing payments after the cattle were all shipped and sold to Chavez's customers.
The trial court denied Armendariz's motion for summary judgment, but granted EP Cattle's motion, dismissing all of Armendariz's claims against it. This appeal follows.4
II. Issues On Appeal
Armendariz globally claims that the trial court erred by granting EP Cattle's motion for summary judgment because the summary judgment evidence raised genuine issues of material fact (Issue One). See Malooly Bros., Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970) (allowing general issue challenging summary judgment). In Issue Two, Armendariz more specifically claims that under theories of actual authority, apparent authority, or ratification, it presented genuine issues of material fact as to whether EP Cattle is liable for the acts of Chavez. Issue Three contends that the summary judgment evidence raises a fact issue on any challenged element of its breach of contract claim. Finally, Issue Four contends that Armendariz raised a genuine issue of fact on his quantum meruit claim.
III. Standard of Review
We review a trial court's decision to grant summary judgment de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). EP Cattle's motion for summary judgment cites to the standard governing traditional summary judgment motions, and we therefore treat it as such. Under a traditional motion for summary judgment, the moving party carries the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Helix Energy Sols. Group, Inc. v. Gold, 522 S.W.3d 427, 431 (Tex. 2017). Stated otherwise, EP Cattle must have conclusively negated at least one of the elements for each one of Armendariz's claims. Frost Nat'l Bank v. Fernandez, 315 S.W.3d 494, 508 (Tex. 2010). Evidence is conclusive if reasonable people could not differ in the conclusions drawn from it. Gold, 522 S.W.3d at 431. Once the movant establishes its right to summary judgment, the burden then shifts to the non-movant to present evidence which raises a genuine issue of material fact on the disputed issue. See City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678 (Tex. 1979).
Evidence favorable to the non-movant is taken as true in deciding whether there is a disputed issue of material fact. Fort Worth Osteopathic Hospital, Inc. v. Reese, 148 S.W.3d 94, 99 (Tex. 2004); El Paso Tool and Die Co., Inc. v. Mendez, 593 S.W.3d 800, 804-05 (Tex.App.--El Paso 2019, no pet.). All reasonable inferences, including any doubts, must be resolved in favor of the non-movant. Fort Worth Osteopathic Hospital, Inc., 148 S.W.3d at 99.
A. Breach of Contract Claim
In Issues One through Three, Armendariz contends that questions of fact remain on his claim for breach of contract against EP Cattle. Behind these issues lies this sharp conflict: In support of its motion for summary judgment, EP Cattle largely relies on the testimony of Hudgens and Lopez that disclaim EP Cattle's role in this transaction. In response, Armendariz attached his own affidavit that described conversations with Chavez, and he also focuses on the several invoices and contract documents for the sale of the cattle. EP Cattle disputes that any of Chavez's statements can be attributed to it because Chavez was not its agent. In response, Armendariz advances several theories that link Chavez to EP Cattle under the law of agency (actual authority, apparent authority, ratification). Armendariz also relies on the contract documents themselves which list EP Cattle as the “purchaser.” To explain those documents, EP Cattle contends it was only the consignee.
The first grouping of issues we face address the agency theories, and the second addresses the consignment claim.
1. Whether Chavez had actual or apparent authority to act as EP Cattle's agent
a. General principles of agency law
Agency is a consensual relationship between two parties “by which one party acts on behalf of the other, subject to the other's control.” Reliant Energy Services, Inc. v. Cotton Valley Compression, L.L.C., 336 S.W.3d 764, 782-83 (Tex.App.--Houston [1st Dist.] 2011, no pet.); see also Corral-Lerma v. Border Demolition & Envtl. Inc., 467 S.W.3d 109, 121 (Tex.App.--El Paso 2015, pet. denied), opinion modified and supplemented, 474 S.W.3d 481 (Tex.App.--El Paso 2015, no pet.) (“An agent is a person who is authorized by another to transact business or manage some affair by that person's authority and on account of it.”). A principal is liable for the acts of its agent only when the agent has actual or apparent authority to do those acts. Sanders Oil & Gas GP, LLC v. Ridgeway Elec., 479 S.W.3d 293, 301 (Tex.App.--El Paso 2015, no pet.). Therefore, absent either actual or apparent authority, an agent cannot bind a principal. Protect Envtl. Services, Inc. v. Norco Corp., 403 S.W.3d 532, 540 (Tex.App.--El Paso 2013, pet. denied).
The authority of an agent to act for its principal depends on the words or conduct of the principal toward either the agent, creating actual authority, or toward a third party, creating apparent authority. Sanders Oil & Gas GP, LLC, 479 S.W.3d at 301; see also Gaines v. Kelly, 235 S.W.3d 179, 182 (Tex. 2007). Texas law does not presume agency and the party asserting agency has the burden of proving its existence. IRA Resources, Inc. v. Griego, 221 S.W.3d 592, 597 (Tex. 2007); Sanders Oil & Gas GP, LLC, 479 S.W.3d at 301.
An agent may possess general authority to act on behalf of the principal, which gives the agent the authority to act in virtually any capacity to transact business on behalf of his principal. Alternatively, that agent may have only “special” or limited authority to transact a limited number of tasks assigned or entrusted to him, which gives the agent the power to engage in conduct in furtherance of those specific assigned duties. Great American Casualty Co. v. Eichelberger, 37 S.W.2d 1050, 1052 (Tex.Civ.App.--Waco 1931, writ ref'd); see also Wheeler v. Sajovich, No. 03-09-00367-CV, 2010 WL 2540689, at *8 (Tex.App.--Austin June 23, 2010, no pet.) (mem. op., not designated for publication) (recognizing that a “special agent” is “generally limited to the powers expressly conferred by the contract with the principal.”), citing Mecom v. Gallagher, 213 S.W.2d 304, 306 (Tex.Civ.App.--El Paso 1947, no writ). A principal is only responsible for the action of its agent when the agent acts within the scope of that authority--whether general or limited--as it existed at that time. See Gaines, 235 S.W.3d at 184-185 (recognizing that “the relevant issue in determining a principal's liability for an agent's act is not merely the existence of an agency relationship, but rather the scope of that agency”); see also First Valley Bank of Los Fresnos v. Martin, 144 S.W.3d 466, 471 (Tex. 2004) (recognizing that “apparent authority is limited to the scope of responsibility that is apparently authorized.”).
b. The law on actual authority
Actual authority to serve as another's agent is based on written or spoken words or the conduct of the principal communicated to the purported agent. Sanders Oil & Gas GP, LLC, 479 S.W.3d at 301. In order to establish the existence of actual authority, the record must contain evidence proving that either the purported principal “(1) intentionally conferred authority on another to act as its agent, or (2) the principal intentionally, or by want of due care, allowed the agent to believe that it possessed authority to act as the principal's agent.” See Sanders Oil & Gas GP, LLC, 479 S.W.3d at 301-302. In determining whether an agent had actual authority to act for his principal, we examine only the principal's words and conduct relative to the agent, and do not consider the representations made by the agent to the third party. Id. at 302.
Actual authority to serve as another individual's agent includes both express and implied authority. Id. at 301; 2616 S. Loop L.L.C. v. Health Source Home Care, Inc., 201 S.W.3d 349, 356-57 (Tex.App.--Houston [14th Dist.] 2006, no pet.). Express authority is delegated to an agent by words of the principal that expressly authorize the agent to do an act or series of acts on behalf of the principal. Sanders Oil & Gas GP, LLC, 479 S.W.3d at 301. Implied authority is the authority of an agent to do whatever is necessary and proper to carry out the agent's express powers. Id. An agent that does not have express actual authority cannot have implied authority. Id., citing Reliant Energy, 336 S.W.3d at 783.
c. EP Cattle disproved Chavez's actual authority to buy Armendariz's cattle
EP Cattle's owner affirmatively disclaimed Chavez's authority to buy Armendariz's cattle on its behalf. Armendariz responds that the record contains conflicting evidence on that issue, pointing out that EP Cattle admittedly gave Chavez authority during this same time period to purchase cattle for one of its primary customers, Swift & Henry.5 But the summary judgment record showed the majority of the cattle that Armendariz and Bremer sold did not fit within the criteria that EP Cattle had specified when it authorized Chavez to make purchases on its behalf. Out of the 1,104 cattle sold, 890 were heifers rather than the steers as specified in the Swift & Henry agreement, and not all the 214 steers that were sold met the weight criteria specified in that agreement. As important, the undisputed evidence revealed that the steers were not ultimately sold to Swift & Henry and were instead sold and shipped to Chavez's customers. Therefore, Chavez's actions in purchasing the cattle from Armendariz and Bremer fell outside the scope of the limited authority he had been given to purchase steers for delivery to Swift & Henry. We therefore conclude that Chavez did not have actual authority to contract with Armendariz and Bremer to purchase the cattle in question. See, e.g., Gaines, 235 S.W.3d at 185 (an “agent's authority is presumed to be co-extensive with the business entrusted to his care, it includes only those contracts and acts incidental to the management of the particular business with which he is entrusted.”).6
d. The law on apparent authority
Apparent authority is based on a theory of estoppel, which arises “either from a principal knowingly permitting an agent to hold [himself] out as having authority or by a principal's actions which lack such ordinary care as to clothe an agent with the indicia of authority, thus leading a reasonably prudent person to believe that the agent has the authority [he] purports to exercise.” Gaines, 235 S.W.3d at 182. Apparent authority may arise when a principal intentionally or negligently induces parties to believe that a person is the principal's agent although the principal has not conferred any actual authority on that person. See Protect Envtl. Services, Inc., 403 S.W.3d at 540-41.
The essential elements required to establish that an agent took an action with apparent authority are: “(1) a reasonable belief in the agent's authority; (2) generated by some holding out or neglect of the principal; and (3) a justifiable reliance on the authority.” Protect Envtl. Services, Inc., 403 S.W.3d at 541; see generally Baptist Memorial Hosp. System v. Sampson, 969 S.W.2d 945, 947-48 n.2 (Tex. 1998). In determining whether apparent authority exists, we look only to the conduct of the principal leading a third party to believe the agent has authority to act on its behalf, and therefore declarations made by the agent to a third party, without more are “incompetent to establish either the existence of the alleged agency or the scope of the alleged agent's authority.” See Gaines, 235 S.W.3d at 183-84; Gibson v. Bostick Roofing & Sheet Metal Co., 148 S.W.3d 482, 491 (Tex.App.--El Paso 2004, no pet.). Therefore, even a “good faith belief” on the part of a third-party is not enough to establish the existence of apparent authority. See Protect Envtl. Services, Inc., 403 S.W.3d at 540.
e. The record does not conclusively negate apparent authority
EP Cattle claims the record conclusively negates apparent authority because it never gave Chavez a business card or title, and it had no knowledge of the negotiations and terms of the agreement at issue. Moreover, Armendariz sought out Chavez, and not EP Cattle, when he was looking for a buyer. Conversely, Armendariz contends that the evidence conflicts on this issue, first noting that EP Cattle permitted Chavez to have an office on its property, where some of the parties' negotiations and transactions took place on that property.
EP Cattle had its offices in a trailer that it shared with Chavez, 24 Trading Company, and the Mexican SAGARPA (the Mexican equivalent of the USDA).7 In addition, the undisputed evidence demonstrated that the entrance to the trailer had a sign saying, “El Paso Cattle Company.” Armendariz contends that a reasonable person who “walks into a business's office to negotiate a transaction” and observes a sign saying “El Paso Cattle Company” would be entitled to assume that the person with whom he was negotiating was an agent of EP Cattle.
Of course, the mere fact that a business allows an individual to be housed in its office building, even when that person is employed by the business or is otherwise affiliated with it, is insufficient, standing alone, to give rise to a reasonable belief that the individual had the right to act as the business's agent in negotiating contracts. See, e.g., Peek/Howe Real Estate, Inc. v. Brown & Gay Engineers, Inc., No. 14-11-00510-CV, 2012 WL 3043026, at *4 (Tex.App.--Houston [14th Dist.] July 26, 2012, no pet.) (mem. op., not designated for publication) (evidence was insufficient to show that a management company caused a third party to reasonably believe that one of its employees was authorized to execute a contract on its behalf despite fact that employee could be reached at the location where company had its offices). But here, there is a bit more. While in the office, Chavez directed Lopez--EP Cattle's accountant--on how to draw up the invoices, and the invoices he prepared were all on EP Cattle letterhead. The invoices did not identify Chavez, or his entity as the buyer, but instead listed EP Cattle as the “purchaser.” EP Cattle argues that Lopez's actions were expected in a transaction where EP Cattle was acting as a consignee. That is an issue we address more specifically in the third issue, but we are sufficiently persuaded that Armendariz has presented some facts raising an inference that Armendariz held a reasonable belief in Chavez's authority to act on behalf of EP Cattle, and that he had a justifiable belief of that authority. In summary, the signage on the trailer, along with Lopez preparing paperwork on EP Cattle's letterhead at Chavez's direction is some evidence of an affirmative holding out. Accordingly, we sustain the sub-part of Issue Two as it addresses apparent agency.
2. Whether EP Cattle ratified the agreement
The third subpart to Issue Two, Armendariz contends that even if Chavez did not have actual or apparent authority to enter into the purchase agreement on behalf of EP Cattle, the summary judgment evidence raised a question of fact regarding whether EP Cattle later ratified the agreement based on what occurred during the meeting with Lopez.
a. The law on ratification
“[R]atification is a doctrine of agency law, and allows a principal to be bound by an agent's unauthorized contract in circumstances where the principal becomes aware of the contract and retains benefits under it.” Willis v. Donnelly, 199 S.W.3d 262, 273 (Tex. 2006); see also Samson Expl., LLC v. T.S. Reed Properties, Inc., 521 S.W.3d 26, 37 (Tex. App.--Beaumont 2015), aff'd, 521 S.W.3d 766 (Tex. 2017). Once ratified, a formerly unauthorized act is treated as if it had originally been authorized. See Verizon Corporate Servs. v. Kan-Pak Sys., Inc., 290 S.W.3d 899, 906 (Tex.App.--Amarillo 2009, no pet.).
As we have previously recognized, the elements of ratification include: (1) approval by act, word, or conduct; (2) with full knowledge of the facts of the earlier act; and (3) with the intention of giving validity to the earlier act. Gibson, 148 S.W.3d at 492. The Texas Supreme Court has also stated that ratification includes the principal retaining a benefit under the agreement that it ratifies. Willis, 199 S.W.3d at 273; see also Hooks v. Samson Lone Star, Ltd. P'ship, 457 S.W.3d 52, 66 (Tex. 2015) (finding in oil and gas pooling context that party conclusively established ratification based the lessors receiving notice of an amendment and accepting royalties under that amendment). Whether retention of a benefit is a separate requirement or not, we conclude that Armendariz's ratification claims would fail because the only two EP Cattle representatives to testify stated they did not have full knowledge of the underlying transaction, which is an element of the claim.
b. The record contains insufficient evidence to support a finding of ratification
In order to demonstrate that the principal had full knowledge of the material facts, there must be evidence that it knew that a purported agent had engaged in a prior act that did not legally bind it, and that it had a right to repudiate the act. See PanAmerican Operating v. Maud Smith Estate, 409 S.W.3d 168, 176 (Tex.App.--El Paso 2013, pet. denied). In addition, there must be evidence that, with this full knowledge, the ratifying party acted under the agreement, performed under it, or otherwise affirmatively acknowledged it. Id. Evidence of ratification may be expressed or implied from a course of conduct. See Fowler v. Resolution Tr. Corp., 855 S.W.2d 31, 35 (Tex.App.--El Paso 1993, no writ); see also Miller v. Kennedy & Minshew, P.C., 142 S.W.3d 325, 343 (Tex.App.--Fort Worth 2003, pet. denied).
Simply because Lopez met with Armendariz and Chavez after the cattle crossing to prepare the invoices does not establish that EP Cattle had full knowledge of what Chavez had previously represented about his relationship to EP Cattle. There is nothing in the record to suggest that anyone present at the meeting communicated this information to Lopez. That leaves only EP Cattle's summary judgment proof that it did not know about the prior negotiations. And if retention of a benefit is an elemental requirement for ratification, the record conclusively disproves that EP Cattle actually retained a benefit in this case. EP Cattle dispersed the payments to Bremer and Chavez, without retaining any of the profits from the sale. And while EP Cattle contemplated receiving a commission from the sale, the record indicates that it ended up with no commission, nor did it receive any other benefits from the transaction.
Armendariz's Issue Two is sustained in relation to the apparent agency claim, but it is overruled in all other respects.
3. Whether EP Cattle breached a contract with Armendariz
In Issue Three, Armendariz, contends that the summary judgment evidence raised a fact question regarding whether he entered into a contract with EP Cattle for the sale of the cattle. The issue additionally asserts that there is some evidence that EP Cattle breached that agreement by failing to pay Armendariz the amounts owed for the alleged purchase agreement.
EP Cattle supported its motion for summary judgment on this claim by contending it was not bound by Chavez's representations (the issue we address above) and its claim it never agreed to act as buyer of the cattle. Faced with the two invoices that its accountant prepared which list EP Cattle as the “purchaser,” it claims only to have been the consignee in the arrangement. It additionally claims that it fulfilled the role as consignee by paying the proceeds from the final sale of the cattle as directed by Chavez.
In order to establish a claim for breach of contract, Armendariz needed to allege and ultimately prove (1) the existence of a valid contract, (2) performance or tendered performance on his part, (3) breach of the contract by the EP Cattle, and (4) damages resulting from that breach. See Walker v. Presidium, Inc., 296 S.W.3d 687, 693 (Tex.App.--El Paso 2009, no pet.). “Both express and implied contracts require the element of mutual agreement, ‘which, in the case of an implied contract, is inferred from the circumstances.’ ” McAllen Hosps., L.P. v. Lopez, 576 S.W.3d 389, 392 (Tex. 2019), quoting Haws & Garrett Gen. Contractors, Inc. v. Gorbett Bros. Welding Co., 480 S.W.2d 607, 609 (Tex. 1972). A mutual agreement contemplates a “meeting of the minds of the parties as implied from and evidenced by their conduct and course of dealing, ․ the essence of which is consent to be bound.” Id.
Armendariz's breach of contract claim is grounded in one or both of the following factual claims: (1) Chavez's representation that he was contracting on behalf of EP Cattle, or (2) the terms specified in the contract documents. We have already addressed Chavez's representations as a basis for the contract claim. But in his summary judgment response, Armendariz also included his own affidavit that states:
Once the sale was agreed upon, and the cattle were delivered to EP Cattle by delivery to the pens in Santa Teresa, New Mexico, Simon Chavez and I met with Ismael Lopez, who was working as a bookkeeper for EP Cattle. On behalf of EP Cattle, Ismael Lopez generated the invoices for the sale of the cattle from Jose Bremer and me to EP Cattle, true and correct copies of which invoices are attached to this Affidavit. These invoices show that EP Cattle purchased 1,014 head of cattle from me (which cattle were sold by me in conjunction with Jose Bremer). The purchase price for this cattle was a net of $568,167.56 on Invoice 12-716 and $85,948.11 on Invoice 12-717. These invoices were prepared by Ismael Lopez on behalf of EP Cattle. Copies of these invoices are attached hereto as Exhibit “1,” and are incorporated herein by reference.
As we set forth above, both invoices are all on EP Cattle letterhead and identify the transaction as a “purchase.” EP Cattle's owner acknowledges that the face of the document shows EP Cattle is the purchaser:
Q. And it shows El Paso--I mean El Paso Cattle is the purchaser on this document, correct, from looking at the document?
Q. And it's for 890 head of cattle.
A. 890 heifers, yes.
He also agreed the EP Cattle would be the record owner of the cattle once they crossed the border and that payment for any sale would be first remitted to EP Cattle:
Q. And there would be a record that would show El Paso Cattle would own these cattle when they went into the pens and when they went out of the pens and there was money coming in El Paso Cattle hopefully would get paid. Is that right?
A. What you're saying is that El Paso had the consignment on those cattle.
Q. That's what I'm saying. Is that accurate?
Nonetheless, EP Cattle contends it disproved the existence of a sales contract through Hudgens's and Lopez's affidavits stating that EP Cattle was only a “consignee.” The invoices do not describe the terms of any consignment relationship, nor do the invoices use that term. Black's Law Dictionary defines the term “consign” as “1. To transfer to another's custody or charge. 2. To give (goods) to a carrier for delivery to a designated recipient. 3. To give (merchandise or the like) to another to sell, [usually] with the understanding that the seller will pay the owner for the goods from the proceeds.” Consign, Black's Law Dictionary (10th ed. 2014). The Tyler Court of Appeals offered this explanation of the term in a pre-UCC transaction:
Under pre-code law, where there was a consignment, an owner of goods placed them in the possession of another under a contract for their sale and the return of the proceeds of sale, less a commission or discount, or for the return of the goods in case they remained unsold. The distinguishing characteristics of a consignment were that the consignee did not take title to the goods and was not obliged to pay the price unless he sold or otherwise disposed of them ․
Fuller v. Texas Western Fin. Corp., 635 S.W.2d 787,789 (Tex. Civ. App.--Tyler 1982), writ ref'd n.r.e., 644 S.W.2d 442 (Tex. 1982), quoting 50 Tex.Jur.2d Sales, § 22.
American Jurisprudence offers a similar description:
When goods are shipped or delivered with the understanding that the receiving party will sell them for the supplying party and remit to him the proceeds, or will return to him the goods themselves should a sale prove impossible, a consignment is created if the supplier retains control over the manner of selling sufficient to render the recipient his agent. A bailment for sale arises, with title to the goods remaining in the consignor until a sale is made to a third party. Except to the extent that he is obligated to remit to the consignor any sales proceeds, the consignee never becomes personally liable for the purchase price, and the consignor assumes the risk of loss or damage as long as the goods remain unsold.
1 Am.Jur.2d Proof of Facts § 253 (Originally published in 1974) (footnotes omitted).8 It may also have a more technical meaning if used in the context of the transportation of goods. Black's Law Dictionary 307 (6th ed. 1990) (“In a commercial use, ‘consignee’ means one to whom a consignment may be made, a person to whom goods are shipped for sale, or one to whom a carrier may lawfully make delivery in accordance with his contract of carriage, or one to whom goods are consigned, shipped, or otherwise transmitted.”).
The UCC, as adopted in the Business and Commerce Code, provides additional guidance for two species of consignment arrangements: the “sale on approval” and “sale or return.” See Tex. Bus. & Com. Code Ann. § 2.326 and § 2.327, § 2.403(b). Article Nine also provides additional guidance on the priority of security interests in consignment transactions. E.g., Tex. Bus. & Com. Code Ann. § 9.102 (20) (defining term); § 9.103(d); § 9.324 (drafter note 7); § 9.202.
But whatever the context, the parties' agreement will determine if they have entered into a sale or consignment arrangement. Fuller v. Texas W. Fin. Corp., 644 S.W.2d 442, 443 (Tex. 1982) (“The trial court should determine from any agreements between the parties whether a sale or return was intended or whether the parties unequivocally ‘otherwise agreed’ to create a consignment.”); Charles M. Stieff, Inc. v. City of San Antonio, 130 Tex. 594, 111 S.W.2d 1086 (Tex. [Comm'n Op.] 1938) (concluding evidence showed only a consignment); Abraham & Co., Inc. v. Mansour Rahmanan & Co., Inc., No. 14-96-01120-CV, 1998 WL 93743, at *3 (Tex.App.--Houston [14th Dist.] Mar. 5, 1998, no pet.) (not designated for publication) (evidence supported finding of sale verse consignment). It is the terms of the parties' agreement, perhaps as supplemented by statutory provisions, that will determine the duties and obligations of the consignee.
Given this backdrop, we conclude that EP Cattle has not demonstrated the absence of a genuine issue of material fact on the contract claim. Stated otherwise, Armendariz has raised a scintilla of evidence for the existence and breach of a contract in this case. He offered his own testimony of an agreement and two invoices under EP Cattle's letterhead that state a price, quantity, and describe the type of transaction as a “purchase.” EP Cattle's owner acknowledged the invoices show it as the purchaser. The invoices contain handwritten notations for the bank accounts to which payments were to be made to Armendariz and Bremer. EP Cattle made a payment to Bremer, but not to Armendariz. While it did not make the payment based on Chavez's representations, that may or may not constitute a valid reason to a factfinder so as to excuse a claimed breach.
And while EP Cattle uses its claimed status as a consignee to explain the invoices and its other actions, the summary judgment record does not clearly define the consignee's role in this transaction. As we note above, the term consignment can have different meanings. Several of the meanings create an obligation by the consignee to pay the consignor upon actual sale of the goods to an end buyer. That the EP Cattle invoices had routing information for payment to Armendariz would be consistent with that kind of relationship, as would EP Cattle's payment to Jose Bremer. Accordingly, proving that it was the consignee, when the consignor is not paid after a final sale of the goods does not as a matter of law absolve EP Cattle of liability.9 For that reason, we conclude that EP Cattle failed to meet its burden under the traditional summary judgment standard on the breach of contract claim.
Armendariz's Issues One and Three are sustained.
B. The Claim for Quantum Meruit
In Issue Four, Armendariz argues that the summary judgment evidence raised a question of fact regarding whether he was entitled to relief on his claim for quantum meruit.
1. The law on quantum meruit
Quantum meruit is an equitable remedy that allows a party to recover the reasonable value of services rendered and knowingly accepted. Sanders v. Total Heat & Air, Inc., 248 S.W.3d 907, 913 (Tex.App.--Dallas 2008, no. pet.), citing Vortt Exploration Co., Inc. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990). In the absence of an express contract, quantum meruit damages are available under a theory of an implied contract. Gibson, 148 S.W.3d at 489. In other words, the plaintiff must allege that he is entitled to quantum meruit damages based upon an agreement implied by law to pay for beneficial services rendered and knowingly accepted, where nonpayment for the services would “result in an unjust enrichment to the party benefited by the work.” Vortt Exploration Co., Inc., 787 S.W.2d at 944. To recover quantum meruit damages, the plaintiff must prove that: “(1) he rendered valuable services or furnished materials; (2) for the person sought to be charged; (3) such services and materials were accepted, used and enjoyed by the person sought to be charged; and (4) under such circumstances as reasonably notified the person sought to be charged that the plaintiff in performing such services was expecting to be paid by the person sought to be charged.” Gibson, 148 S.W.3d at 489-490.
2. EP Cattle disproved the quantum meruit claim because it retained no benefits
Armendariz contends that the summary judgment evidence contains evidence that EP Cattle was benefited by his transaction with Chavez, pointing out that EP Cattle accepted the cattle at the border crossing, sold them to various buyers in the United States and collected payments from those buyers. This argument, however, overlooks the undisputed fact that after it shipped the cattle to Chavez's buyers, EP Cattle dispersed all of the payments it received from the sale to Chavez and Bremer, did not retain any of the profits for itself, and did not even collect the commission that Chavez had promised to give it.
Armendariz contends, however, that even if EP Cattle did not receive an actual benefit from the transaction, the evidence demonstrated that it could have received a benefit in its role as consignee, as it had the “right to resell the cattle, pay the purchase price to the original sellers, and retain any excess.” The argument is misplaced. At its heart, a claim for quantum meruit contemplates that the defendant must have actually received and retained a benefit, which must be disgorged in order to prevent the defendant from being unjustly enriched. See Vortt Exploration Co., Inc., 787 S.W.2d at 944; see also Power v. GSE Consulting, LP, No. 02-16-00175-CV, 2017 WL 2686324, at *6 (Tex.App.--Fort Worth June 22, 2017, no pet.) (mem. op., not designated for publication) (recognizing that plaintiff did not have a valid claim for quantum meruit where there was no evidence that defendant was unjustly enriched by plaintiff's work). Armendariz has not pointed to any benefit that this, or any other court, could order EP Cattle to disgorge.
Accordingly, we conclude that the record contains insufficient evidence to support Armendariz's claim for quantum meruit damages.
Armendariz's Issue Four is Overruled.
We affirm in part and reverse in part.
1. EP Cattle is a general partnership between James Hudgens and his brother John Hudgens, which at all relevant times was engaged in the business of trading cattle.
2. In particular, the record reflects that in October of 2012, EP Cattle gave Chavez authority to act on its behalf for the purpose of purchasing between 3,000 to 4,000 steers weighing between 350 to 400 pounds, which EP Cattle needed in order to fulfill its contract with Swift & Henry. The herd that Armendariz and Bremer sold contained only 124 steers, not all of which met the weight requirement.
3. Bremer later made an assignment to Armendariz of any other interest he might have had to the funds still owed under the parties' agreement.
4. On appeal, Armendariz only challenges the trial court's granting of EP Cattle's motion for summary judgment and does not contend that the trial court erred by denying his motion.
5. The record indicates that in the past, EP Cattle had used Chavez on other occasions to act as an independent contractor to assist it with finding cattle for purchase to fulfill its contractual obligations to its customers. However, both Hudgens and Lopez testified that in April of 2012, EP Cattle decided to discontinue that relationship after learning that Chavez was in some kind of “trouble” and was having difficulty purchasing cattle in the area. There is no indication in the record that Armendariz was aware of Chavez's prior relationship with EP Cattle at the time that he was negotiating his contract with Chavez.
6. Armendariz argues that there was corroborating evidence we should consider in determining whether Chavez had actual authority to enter into the agreement on EP Cattle's behalf, such as evidence of the statements Chavez made to him and Bremer during their meetings. He also urges we consider evidence that the parties met in EP Cattle's office on at least two occasions, and evidence that they used EP Cattle's bookkeeper to prepare invoices. The argument is misplaced, however, as there must first be evidence of actual authority before we can consider evidence to “corroborate” the existence or scope of that authority. See, e.g., McAfee v. Travis Gas Corp., 137 Tex. 314, 153 S.W.2d 442, 446 (1941) (where plaintiff presented prima facie evidence that defendant had a general “master and servant relationship” with alleged agent, plaintiff could present corroborating evidence to establish that agent was acting within the scope of that relationship). We do, however, consider this evidence in analyzing Armendariz's claim that Chavez had apparent authority to act on EP Cattle's behalf when he purchased the cattle, or that EP Cattle later ratified the parties' purchase agreement.
7. Although Armendariz was less than clear regarding when and where his negotiations with Chavez took place, we will assume for purposes of this appeal that at least one meeting took place in this trailer.
8. Professor Winship described the consignment arrangement this way:In the area of private commercial law the key concepts in the consignment transaction were simple. The owner or title-holder of the goods gave possession of the goods to an agent or bailee for sale, who would sell the goods to third persons and remit the proceeds to the owner-principal less the agreed-upon commission. On the sale to the third party, title passed directly from the owner-principal to the third party. “Agency” rules governed the authority of the agent and the rights and obligations of both principal and agent. Location of “title” resolved disputes over such matters as risk of loss and rights of the agent's creditors.Peter Winship, The “True” Consignment Under the Uniform Commercial Code, and Related Peccadilloes, 29 S.W.L.J. 825, 826 (1975).
9. That of course assumes that Armendariz was the consignor, and not Chavez. We do not decide that question here. Our holding is limited to saying that under the traditional summary judgment standard, EP Cattle has not disproved the breach of contract claim as a matter of law.
JEFF ALLEY, Chief Justice
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Docket No: No. 08-17-00231-CV
Decided: July 27, 2020
Court: Court of Appeals of Texas, El Paso.
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