Opinion
No. 05-05-00719-CV
Opinion Filed June 27, 2006.
On Appeal from the 44th Judicial District Court, Dallas County, Texas, Trial Court Cause No. 03-12740-B.
Affirm.
Before Justices RICHTER, LANG, and MAZZANT.
MEMORANDUM OPINION
This is a summary judgment case. The trial court granted summary judgment for appellee Simons Petroleum, Inc. against Samrod Corporation, Karim Mahmoudizad, and Michael Mazaheri. Only Mazaheri is appealing the trial court's judgment. Having reviewed the record before us, we affirm the judgment with respect to Mazaheri.
BACKGROUND
Simons is a fuel oil distributor that sells fuel oil to retailers. It also operates "Pathway Network," through which customers/truck operators purchase fuel from Simons at specific truck stops that have contracted to facilitate fuel sales on behalf of Simons. Samrod operates a truck stop in Irving, Texas, known as the Big "D" Travel Center, which was in the Pathway Network from the fall of 2001 until July of 2004. Mahmoudizad and Mazaheri are partners in the store and own shares of stock in Samrod.
In September of 2001, Mahmoudizad and Mazaheri each executed a personal guaranty for any and all present and future debts owed by Samrod to Simons. These were continuing guaranties that applied to all sales and/or services made by Simons to Samrod until revoked with thirty days notice to Simons. Shortly thereafter, Simons entered into a sales contract with Samrod that provided for the direct sale of diesel fuel from Simons to Big D. This fuel would then be sold by Big D to its customers. On a separate occasion, Simons and Samrod executed a Pathway Network Affiliation agreement whereby Big D became a member of the Simons' Pathway Network and agreed to allow Simons to maintain a fuel inventory on site for sale to its Pathway Network customers. After February 15, 2004, the arrangement changed. Big D sold its own fuel to Pathway Network customers, and Simons reimbursed Samrod.
On December 4, 2003, Simons filed suit against Samrod, claiming that Samrod had failed to pay Simons $286,745.58 for diesel fuel delivered to Big D. Simons asserted breach of contract, sworn account, and quantum meruit as causes of action. Simons also sued Mahmoudizad and Mazaheri for breaching the guaranties that they had given to Simons for Samrod's debt. Mazaheri terminated his guaranty by letter dated February 9, 2004.
Simons subsequently filed its motion for traditional and no-evidence final summary judgment. The traditional portion of the motion was based upon the causes of action asserted in the original petition. Simons also responded to five affirmative defenses raised by Samrod and Mahmoudizad in their original answer. The no-evidence portion of the motion asserted that there was no evidence as to two additional affirmative defenses raised by Samrod and Mahmoudizad.
Generally, such hybrid motions are disfavored because they are confusing. However, Simons specifically labeled each portion of the motion and noted that the attached evidence pertained only to the traditional portion.
Mazaheri's original answer consisted of a general denial. Following Simons' motion for summary judgment, Mazaheri filed an amended answer that raised five affirmative defenses, two of which are relevant to this appeal. Mazaheri asserted that Simons' claims were barred by the post-guaranty termination transactions between Simons and Samrod and by Simons' payments to Samrod as part of the Simon/Samrod Pathway Network agreement.
Mazaheri also filed a Motion for Summary Judgment and Response to Plaintiff's Motion for Summary Judgment. He claimed that he was entitled to summary judgment on Simons' cause of action for breach of guaranty because:
(1) After February 15, 2004, sales were made from Samrod's inventory to Simons' customers through the Pathway Network agreement;
(2) These sales were, in reality, payments from Samrod to Simons;
(3) Under Texas law, payments are applied to the oldest account items unless there is an agreement to apply the payments in a different manner;
(4) Simons paid Samrod $404,765.84 for the fuel that was supplied to Pathway Network customers instead of properly crediting the payments against the unpaid balance of $286,745.48; and
(5) If Simons had reflected Pathway Network transactions as payments against the invoices that were the subject of the litigation, his liability under the guaranty would have been eliminated.
Mazaheri made essentially the same argument as an affirmative defense, claiming that Simons' claims were barred because the payments/sales after the termination of Mazheri's guaranty were required to be applied against the debt guaranteed by Mazaheri.
Simons filed an amended petition asserting that the Pathway Network Affiliation Agreement was a separate agreement from the one at issue in the lawsuit. Specifically, Simons claimed that no sales of diesel fuel occurred between Samrod and Simons pursuant to the Pathway Network agreement and that it was not claiming breach of that agreement in the lawsuit. Simons also amended its traditional summary judgment to respond to the affirmative defenses raised by Mazaheri's first amended answer. The no-evidence portion of the motion remained essentially the same. Without specifying the grounds for its ruling, the trial court granted Simons' amended motion for summary judgment, denied Mazaheri's motion, and ordered that Simons recover from Mahmoudizad and Mazaheri jointly and severally actual damages in the amount of $286,745.58, plus interest and attorneys' fees. Only Mazaheri now appeals. Mazaheri does not allege that Simons failed to prove its breach of contract or sworn account causes of action against Samrod. Rather, in three issues, Mazaheri argues that the trial court erred in granting summary judgment in favor of Simons because the evidence supported his defense. In his fourth issue, Mazaheri argues in the alternative that the judgment should be corrected to reflect a credit issued by Simons.
Because the no-evidence portion of the motion is not relevant to the case before us, we will not address it further.
STANDARD OF REVIEW
The standard of review in summary judgment cases is well-established. When both parties move for summary judgment, each party bears the burden of establishing that it is entitled to judgment as a matter of law. City of Garland v. Dallas Morning News, 22 S.W.3d 351, 356 (Tex. 2000). A plaintiff moving for summary judgment on its own cause of action must conclusively prove all essential elements of its claim. MMP Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986). A defendant moving for summary judgment on an affirmative defense has the burden to conclusively establish that defense. McIntyre v. Ramirez, 109 S.W.3d 741, 748 (Tex. 2003). When reviewing cross-motions for summary judgment, the appellate court considers all evidence presented by both parties. Howard v. INA County Mut. Ins. Co., 933 S.W.2d 212, 217 (Tex.App.-Dallas 1996, writ denied). The reviewing court will render the judgment that the trial court should have rendered. City of Garland, 22 S.W.3d at 356.
ISSUES ONE, TWO, AND THREE: APPLICATION OF PAYMENTS
There is no dispute that Samrod owed Simons $286,745.58 for fuel delivered to Big D, that Mazaheri had guaranteed payment for this fuel, that there were no specific directions from Samrod regarding application of payments, or that Simons paid Samrod over $400,000 pursuant to the Pathway Network agreement after termination of Mazaheri's guaranty. On appeal, Mazaheri essentially reiterates the affirmative defense raised in his motion for summary judgment. In short, Mazaheri's principal argument is that Big D's provision of its own diesel fuel to Simons' customers pursuant to the Pathway Network agreement constituted payment to Simons and that these payments, had they been credited against the oldest part of Samrod's account, would have eliminated his liability under the guaranty.
Mazaheri asserts that the trial court erred in granting summary judgment in favor of Simons because the summary judgment established his affirmative defense. After carefully reviewing the summary judgment evidence, we cannot agree. See Bassett v. American Nat'l Bank, 145 S.W.3d 692, 696 (Tex.App.-Fort Worth 2004, no pet.) (nonmovant asserting an affirmative defense must provide enough summary judgment evidence to create a fact issue on each element of the defense).
The summary judgment evidence
Mazaheri's guaranty was a continuing guaranty that applied to all sales and/or services made by Simons to Samrod. It could be revoked with thirty days notice to Simons. Mazaheri mailed a letter on February 9, 2004, to Simons terminating his guaranty. Thus, the guaranty was in place for a minimum of thirty days from that date.
In or about October 2001, Simons entered into a contract with Samrod d/b/a Big D Travel Center wherein Samrod agreed to purchase, and Simons agreed to sell, all of the diesel fuel required for Big D. Subsequent to the execution of the sales agreement and at Samrod's request, the terms of the sales agreement were orally modified to allow Samrod to purchase diesel fuel from suppliers other than Simons. After this modification, Samrod would contact Simons if it wished to purchase fuel. If satisfied with Simons' quoted price, Samrod would agree to purchase the fuel, and Simons would then deliver the requested fuel. If not satisfied with Simons' price, Samrod would obtain the fuel from another supplier. Although the original written sales agreement expired in October 2002, Samrod continued to request and accept delivery of diesel fuel from Simons through July 2003. Samrod failed to pay Simons for diesel fuel delivered from June 2003 through July 2003. In its response to Simons' request for admissions, Samrod admitted that it had accepted the deliveries from Simons and that it had not paid for them.
The Pathway Network agreement involved numerous parties, including the network of truck stops around the country and the truckers that purchase diesel fuel through the network. Under the Pathway Network agreement, truck stops are either a Simons Supply Location with Simons supplying the fuel or a Non-supply Location with the affiliated truck stop supplying the fuel. Big D was a Simons Supply Location through February 15, 2004 and then was a Non-supply Location until July 2004. Thus, prior to February 15, 2004, Simons delivered fuel to Big D for sale to Pathway Network customers and maintained a Pathway Network inventory there. All fuel delivered to Big D as a part of the Pathway Network agreement remained the property of Simons, and all sales were between Simons and its Pathway Network customers, with Samrod simply facilitating the sale for an administrative fee. While Big D operated as a Non-supply Location, fuel sales were made to Simon's Pathway Network customers from the Big D-owned inventory. Simons then reimbursed Samrod for each gallon of Big D fuel inventory sold to a Pathway Network customer, less an administrative fee. Therefore, Simons did not sell any diesel fuel to Samrod pursuant to the Pathway Network agreement.
Accounting for the Pathway Network transactions and the direct fuel sale transactions was done separately by Simons. No setoff or credits had ever been made between the debts Samrod owed to Simons on direct diesel fuel sales and the payment owed by Simons to Samrod on the Pathway Network agreement.
Discussion
Mazaheri's claim is based on the well-established Texas rule that, when there is a running account with various items of debts and credits occurring at different times and there is no direction regarding payment from the debtor, payments on the account as a whole are applied to the oldest unpaid portion of the account. See Prowell v. Berry-Barnett Grocery Company, 462 S.W.2d 53, 54 (Tex.Civ.App.-Waco 1971, writ ref'd). On the other hand, Texas also follows the common law rule that mutual debts do not extinguish each other. See Permian Petroleum Co. V. Petroleos Mexicanos, 934 F.2d 635, 653 (5th Cir. 1991). Mutual debts arising from separate and distinct obligations are not to be offset one against the other in the absence of agreement or determined by judicial action. Crest Const., Inc. v. Murray, 888 S.W.2d 931, 952 (Tex.App.-Beaumont 1994), rev'd on other grounds.
Mazaheri argues that, because only one account existed between Simons and Samrod, the crediting of payments owed under the Pathway Network agreement, "payments" of fuel to Simons' Pathway Network customers from Big D's inventory while Big D operated as a Non-supply Location should have been applied to the oldest part of the account-or, as Mazaheri claims, to the balance that Samrod owed to Simons for the fuel delivered to Big D for sale to Big D's customers. Thus, Mazaheri's defense is viable only if the summary judgment evidence at least raises a fact issue regarding the existence of only one Simons/Samrod account.
The summary judgment evidence here establishes that two separate accounts existed between Samrod and Simons at the time Mazaheri terminated his guaranty-the direct fuel sales account whereby Big D purchased fuel from Simons for sale to Big D's customers and the Pathway Network account whereby Big D simply facilitated fuel sales to Simons' customers. The explicit terms of the Pathway Network agreement required Simons to make payments to Samrod as a Non-supply Location. And there is no evidence of an agreement to allow offsets between the two accounts.
There is no fact issue with respect to Mazaheri's asserted defense regarding the existence of only one account. Given that two separate accounts existed, application of payments owed by Simons on the Pathway Network agreement to the separate debt of Samrod on the direct fuel sales account would result in an impermissible offset. Thus, the trial court did not err in granting Simons' motion for summary judgment. We overrule Mazaheri's first three issues.
ISSUE FOUR: CREDIT
In the alternative, Mazaheri argues that the judgment amount does not reflect a credit in the amount of $3,593.23. Mazaheri requests that the judgment amount be corrected to reflect this additional credit.
The record reflects that Simons acknowledged that an additional $3,593.23 "appeared" to be owed to Samrod under the Pathway Network. However, Simons further noted that it was unclear whether the amount should be paid because the sales were made after Big D ceased to be a member of the Pathway Network. The trial court had no other evidence before it besides this admission of a potential credit.
We conclude that the trial court did not have sufficient evidence to offset the judgment amount and, therefore, did not err by including the $3,593.23 in the judgment amount. Because we have no more evidence before us than did the trial court, we cannot modify the judgment as Mazaheri requests. We overrule his fourth issue.
CONCLUSION
Having overruled all of Mazaheri's issues, we affirm the judgment of the trial court with respect to Mazaheri.