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Minsa Corporation v. SFTC, LLC

Court of Appeals of Texas, Seventh District, Amarillo

November 28, 2017


         On Appeal from the 287th District Court Bailey County, Texas Trial Court No. 9258; Honorable Gordon H. Green, Presiding

          Before QUINN, C.J., and CAMPBELL and PIRTLE, JJ.



         This appeal arises from a dispute between Appellant, Minsa Corporation, a corn flour supplier, and Appellee, SFTC, LLC, d/b/a Santa Fe Tortilla Company, a corn flour manufacturer, regarding the quality of white corn flour purchased by SFTC from Minsa. Following a three-day bench trial, the trial court entered a net-judgment in favor of SFTC. Presenting four issues in its original brief and reiterated in its reply brief, Minsa challenges the judgment. By issues one and two, Minsa contends there is no evidence or insufficient evidence of (1) a breach of express warranty or contract or (2) causation between the alleged breach and SFTC's claimed damages because it required expert testimony.[1] By issue three, Minsa asserts the trial court erred in its damages calculations in favor of SFTC which were based on speculative and unreasonable loss presumptions and which denied its claim for stipulated damages in the amount of $110, 238.54. By its final issue, Minsa disputes the award of attorney's fees to SFTC as being unsupported by the factors in Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812, 818 (Tex. 1997), or the Lodestar method announced in El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 764 (Tex. 2011). We affirm in part, reverse and remand in part, and reverse and render in part.


         Minsa mills, distributes, and sells corn flour used in the production of tortillas and tortilla chips. SFTC produces corn tortillas and corn tortilla chips. In October 2012, SFTC began using Minsa's corn flour in the production of its tortilla chips. Satisfied with the results of the tortilla chips, SFTC considered using other Minsa products in making table tortillas. During negotiations, Minsa made certain representations, including a representation that finished products made with its flour had an estimated shelf life of thirty days. Specifically, the specification sheet for Minsa's Excel 30ES white corn flour provided, "[t]he finished product has an estimated shelf life of 30 days under adequate handling and packaging conditions."

         From December 2012 until June 2013, SFTC purchased 320 metric tons of Excel 30ES white corn flour from Minsa. The arrangement was for Minsa to provide the flour to SFTC on credit for forty-five days. In April 2013, SFTC began receiving complaints from its customers that white corn tortillas were breaking before expiration of the thirty-day shelf life. The first documentation of SFTC's complaint to Minsa was reported via a "Customer Complaint Form" on April 23, 2013. The details included in the form provide, "this customer is having problems with the final product the tortilla get [sic] hard and breaks . . . ." Minsa responded by authorizing the return of 274 fifty-pound bags of its white corn flour for which Minsa issued a credit to SFTC.

         On April 24, 2013, Minsa sent a technical support team to SFTC's factory to investigate the problem and make suggestions as to how to correct any continuing issues. Based on those recommendations, SFTC increased the amount of softener in its white corn flour products and increased the moisture content of its finished tortillas. Shortly after making these changes, SFTC's customers began complaining about a new shelf-life problem-premature molding. The record established that on June 19, 2013, Kenny Kalfin, SFTC's managing member, emailed David Herrera, Minsa's sales representative, about the mold complaints. Kalfin indicated that tortillas produced on May 30, 2013, and June 4, 2013, turned "moldy" within fifteen to twenty days from production. At that time, Minsa authorized the return of an additional 438 fifty-pound bags of its white corn flour and issued SFTC an accompanying credit.

         Due to the continuing quality issues regarding the white corn flour purchased from Minsa, SFTC refused to pay for corn flour from April 2013 to June 2013, and in late June 2013, SFTC ceased using Minsa as its corn flour supplier. In June 2013, Minsa issued a credit to SFTC for credits SFTC had issued to its retail customers in April for tortilla products pulled from store shelves. Minsa did not, however, issue any additional credits for returns SFTC authorized on behalf of its customers thereafter.

         When a settlement was not reached on SFTC's unpaid account, on October 15, 2013, Minsa sent a demand letter to SFTC for the outstanding balance of $110, 238.54. When payment was not made, Minsa filed suit on December 5, 2013. Minsa alleged claims for suit on sworn account, breach of contract, quantum meruit, and promissory estoppel. In addition to seeking recovery of the balance of the account, Minsa also sought recovery of reasonable and necessary attorney's fees. SFTC generally denied Minsa's claims, and in May 2014, asserted its own counterclaims for breach of contract, breach of express warranty, breach of implied warranty of fitness for a particular purpose, and violation of the Texas Deceptive Trade Practices Act.

         At the commencement of trial, the parties stipulated that SFTC owed Minsa $110, 238.54-$48, 504.00 for yellow corn flour and $61, 734.54 for white corn flour, after all offsets and credits had been given. Based on the evidence and testimony presented, the trial court entered judgment canceling $61, 734.54 from the balance owed based on a finding that the Excel 30ES white corn flour was a "non-conforming" good. The court awarded SFTC damages for breach of contract and breach of warranty claims totaling $138, 976.67 ("Loss of profits-January 2013 - April 2014" of $88, 619.68 and "credits to customers and distributors" of $50, 356.99), plus reasonable and necessary attorney's fees of $46, 325.00. As to the balance of SFTC's account, the trial court awarded Minsa judgment in the sum of $48, 504.00, plus prejudgment interest in the amount of $5, 269.53, and reasonable and necessary attorney's fees of $22, 500.00.

         The trial court entered findings of fact and conclusions of law. As relevant to the issues on appeal, the trial court found that the unpaid balance on SFTC's account was $110, 238.54 (as stipulated by the parties), which consisted of $48, 504.00 for yellow corn flour and $61, 734.54 for white corn flour (Findings of Fact 11 and 12). By Conclusions of Law 3, 4, and 5, the trial court concluded that SFTC revoked its acceptance of non-conforming Excel 30ES white corn flour with timely and reasonable notice after Minsa failed to seasonably cure the issues with the white corn tortillas.

         Sufficiency of the Evidence

         In an appeal from a judgment rendered after a bench trial, the trial court's findings of fact have the same weight as a jury's verdict. MBM Fin. Corp. v. Woodlands Operating Co., L.P., 292 S.W.3d 660, 663 n.3 (Tex. 2009) (citing Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994)). Those findings, however, are not conclusive when a complete reporter's record is filed if the contrary is established as a matter of law or if there is no evidence to support the findings. Middleton v. Kawasaki ...

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