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Stripe-A-Zone, Inc. v. M.J. Scotch Family Limited Partnership

Court of Appeals of Texas, Second District, Fort Worth

April 13, 2017






         This appeal arises from a bench trial that concerned a claim for breach of an oral contract. Appellant Stripe-A-Zone, Inc. (Stripe-A-Zone) appeals the trial court's judgment awarding damages to appellee M.J. Scotch Family Limited Partnership (Scotch). In four issues, Stripe-A-Zone contends that the evidence is insufficient to prove the formation of a contract, that the evidence shows that any such contract was subject to the statute of frauds, and that evidence precludes the application of any exceptions to the statute of frauds. We affirm.

         Background Facts

         According to Stripe-A-Zone's president David Sargent, in 2008, Robert Taccia, with whom Sargent had prior business dealings, arranged a transfer of money from Scotch to Sargent in his personal capacity (not in his capacity as Stripe-A-Zone's president). Scotch sent $212,000 through a wire transfer to Stripe-A-Zone's bank account (rather than to Sargent's personal account). Taccia gave Stripe-A-Zone's account number to Scotch so that Scotch could complete the transfer. Sargent testified that when he "received the loan it was to [him] and [he] put it into [his] company." He explained, "I didn't need personal money so I wired [the loan] to Stripe-A-Zone instead of my personal account." He testified, "It was not Stripe-A-Zone's money, but that's where it went." Later, he stated, "[T]he money was loaned to me and then I gave it to the company."

         Sargent also testified that he did not know of Scotch at the time and did not meet the Scotch family until about six months after the transaction occurred. He explained that he believed that he had an agreement with Taccia and that Taccia had a separate agreement with Scotch. He did not view the transaction as a loan but instead viewed the money he had received as funds that "Taccia had owed [him] over a period of several years on . . . manufacturing that we had done together[,] and it was his way of repaying me for the money they paid him."

         Stripe-A-Zone-not Sargent personally or Taccia-eventually began repaying the $212,000 to Scotch at a rate of $4,000 per month. The record contains copies of several checks from Stripe-A-Zone's operating account to Scotch for that amount. Stripe-A-Zone sent the last $4,000 payment to Scotch in September 2012. According to Sargent, he stopped making payments at that time because "Taccia told [him] that he had done some business with [Scotch]" and that Scotch owed Taccia money. In all, Stripe-A-Zone repaid Scotch at least $96,000 (twenty-four payments of $4,000 each) of the $212,000 that Scotch originally transferred to Stripe-A-Zone.[2]

         The testimony of Michael Scotch, Scotch's president, establishes that he viewed the transaction differently than Sargent did. Michael testified that in 2008, Scotch sent Stripe-A-Zone money as a loan and expected to be repaid with interest. He expressed that he viewed the loan as an investment and that the money was given to "Sargent in care of Stripe-A-Zone." In October 2012, when Stripe-A-Zone stopped repaying Scotch, Michael sent a letter to Sargent that stated in part,

In January 2008, [Scotch] loaned your company . . . monies in the amount of $212,000.00. Your company started making payments in the amount of $4,000.00 back to [Scotch] in October 2010. . . . You were also instructed by Alex Tandy, attorney,[3] to directly mail the payments to [Scotch] . . . .
. . . The October 2012 . . . payment is now in default. . . . If the October 2012 payment is not received within . . . 10 days, then you will force [Scotch] to take other actions against you and your company.

         Michael conceded that he had no documents establishing an explicit loan agreement between Stripe-A-Zone and Scotch. He acknowledged that repayment of the $212,000 at $4,000 per month would take "more than a year" to complete.

         Tamara Scotch, Scotch's vice president, testified that Scotch made a loan "to Stripe-A-Zone through [Sargent]."[4] She expressed her understanding that the loan carried a 9% interest rate and would be "paid back at any time that [Scotch] requested it" through either payments or a lump sum. She recognized that the parties never executed a written contract for the loan, but she stated that Taccia told her that Sargent "[was] good for" the money. Tamara stated that the parties discussed that Scotch could be repaid in less than a year and at any time Scotch asked for the money. Tamara testified that Sargent and Taccia knew each other well and had worked on many business deals together. Contrary to Sargent's testimony, Tamara testified that she met Sargent before agreeing to loan money to Stripe-A-Zone.

         In April 2014, Scotch sued Stripe-A-Zone. Scotch alleged that Stripe-A-Zone had borrowed money from Scotch for business purposes and that Stripe-A-Zone had repaid only some of the money. Scotch asserted that it had demanded Stripe-A-Zone to pay the rest of the amount but that Stripe-A-Zone had refused. Thus, Scotch brought several causes of action, including breach of contract. Scotch sought damages for the unpaid balance and also asked for an award of attorney's fees. Stripe-A-Zone answered the suit with a general denial and by pleading that the statute of frauds precluded Scotch's recovery.

         After a bench trial, the trial court signed a judgment awarding Scotch $116,000 ($212,000 less the repaid $96,000) in compensatory damages and $15,000 in attorney's fees. The court entered the following findings of fact and conclusions of law:

         Findings of Fact

1. The presence of sufficient circumstantial evidence necessary to find an implied agreement is a question of fact. The actions of the parties, to wit the payment of $212,000 by [Scotch] coupled with $96,000 in payments by Stripe-A-Zone, provides sufficient basis to find an implied-in-fact contract existed between the parties. Further there is sufficient evidence to find the funds were a loan from [Scotch] to [Stripe-A-Zone]. There was no written agreement signed by the parties.
2. The weight of the evidence shows that the full amount of $212,000 was delivered from [Scotch's] bank account to [Stripe-A-Zone's] account on January 29, 2008 via a wire transfer to a bank account number supplied by [Stripe-A-Zone's] agent Robert Taccia.
3. In the latter part of 2008 [Scotch] made demand on [Stripe-A-Zone's] agent Robert Taccia for full payment of the loan. This demand was not honored.
4. The weight of the evidence shows [Stripe-A-Zone] partially performed [its] repayment obligations. [Stripe-A-Zone] began repayment in October, 2010. Payments consisted of checks in the amount of $4,000, drawn on [Stripe-A-Zone's] corporate operating account, addressed to [Scotch] as the payee, and delivered to the parties' mutual attorney Alex R. Tandy. [Stripe-A-Zone] paid its last check in September 2012. In total ...

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