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Texas Black Iron, Inc. v. Arawak Energy International Ltd.

Court of Appeals of Texas, Fourteenth District

July 11, 2017

TEXAS BLACK IRON, INC., Appellant
v.
ARAWAK ENERGY INTERNATIONAL LTD., Appellee

         On Appeal from the 215th District Court Harris County, Texas Trial Court Cause No. 2016-68885

          Panel consists of Justices Boyce, Jamison, and Brown.

          OPINION

          Marc W. Brown Justice.

         Texas Black Iron, Inc. (TBI), and Arawak Energy International Ltd. entered into a purchase order for certain oil and gas drilling equipment. Arawak prepaid TBI for the entire purchase order. TBI failed to deliver certain equipment and paid Arawak a partial refund. Arawak returned some of the delivered equipment and sought a refund under the buy-back provision of the purchase order. TBI refused. Arawak filed claims against TBI for breach of contract and suit on sworn account. Arawak also applied for a temporary injunction. After a hearing, the trial court granted Arawak a temporary injunction precluding TBI from altering, pledging, or reselling any of the equipment that Arawak had returned to TBI and from frustrating Arawak's attempts to sell the returned equipment. We affirm the temporary injunction.

         I. Background

         TBI is a Texas corporation that distributes oil and gas drilling equipment. Arawak is a United Arab Emirates limited company that provides oil and gas exploration and development services. On February 22, 2016, TBI and Arawak executed a purchase order. Under the purchase order, TBI agreed to supply Arawak with various sizes and quantities of casing and pup joints at set prices. The purchase order included this provision:

BUY-BACK CONDITION. 75% OF PURCHASE VALUE AFTER DELIVERY OF RETURNED CASING TO VENDOR'S UMM AL QUWAIN YARD AND INSPECTION AT BUYER'S COST.

         Arawak prepaid TBI the total amount of just over $2.8 million for the equipment. TBI did not deliver the 13-5/8″ casing and pup joints, for which Arawak had paid TBI over $1.1 million. TBI refunded Arawak $400, 000 for the 13-5/8″ equipment. Arawak further sought a refund from TBI for $768, 304 under the buy-back provision for all of the 26″ casing, a portion of the 20″ casing, and one 20″ casing pup joint. TBI did not refund any of this amount.

         In October 2016, Arawak filed suit against TBI for breach of contract and suit on sworn account. Arawak alleged that TBI owed $1, 481, 047 for its breach of the purchase order and on the sworn account. Arawak also requested that the trial court issue a temporary restraining order (TRO) and a temporary injunction. TBI brought counterclaims against Arawak, alleging breach of contract, fraud, fraudulent inducement, and violations of the Texas Deceptive Trade Practices Act. The trial court entered a TRO that enjoined TBI from altering, pledging, or reselling the returned equipment.

         The trial court held a hearing on Arawak's application for temporary injunction. Jon Nelson testified for Arawak. According to Nelson, Steve Yamin, president of TBI, told Nelson that TBI could not pay Arawak the 75-percent buy-back price because "the industry was in a serious downturn and that the pipe itself was essentially, basically marketable at ten cents on the dollar and he did not have the money to pay [Arawak] back." Nelson did not believe Yamin intended to honor the buy-back provision because:

• "[h]e did not believe he had an obligation to honor the 75 percent commitment";
• "he did not have the funds to pay"; and
• "there's no money and there's no intent and the fact that the purchase price for that property, that asset had fallen so significantly in these hard times, he wasn't going to do that."

         Yamin also told Nelson that business was "as bad as he could remember." Nelson stated he was concerned that without an injunction Yamin could sell the returned equipment and the funds could be "converted because there are still funds owed to us." Nelson also stated he was concerned that TBI's assets could become "tied up in bankruptcy" because of two monetary judgments against TBI. Nelson believed that the returned equipment was "an asset and it's ours and we should be able to mitigate our damages" "by sale to a third party."

         Yamin testified for TBI. According to Yamin, the lawsuit was about the contract and "money." Yamin stated that TBI had rights to the returned equipment and would not protect it while the underlying dispute was being resolved.

         The trial court signed an order granting temporary injunction. The trial court found that "good cause exists for the issuance of a Temporary Injunction." The trial court stated: "It appears to the Court that harm is imminent to Arawak, and if the Court does not issue the temporary injunction, Arawak will be irreparably injured because [TBI] may alter, destroy, or resell the drilling equipment that is at issue in this dispute, which would interfere with Arawak's attempt to mitigate its damages." The trial court further stated:

The potential injury to Arawak is irreparable if TBI is not enjoined from altering, pledging, or reselling any of the equipment that Arawak has returned to TBI because Arawak will lose its ability to recover any damages in the event [TBI] becomes insolvent or is otherwise unable to satisfy any judgment issued as a result of Arawak's claims against them.

         The order provided:

1. TBI and/or any of its officers, agents, servants, employees, attorneys, representatives, or any person in active concert or participation with them are ENJOINED from altering, pledging, or reselling any of ...

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