Laredo Hides Co., Inc. v. H & H Meat Products Co., Inc.

Bissett, Justice. This is a breach of contract case. Laredo Hides Company, Inc., the buyer, sued H & H Meat Products Company, Inc., the seller, to recover damages for breach of a written contract for the sale of cattle hides. Trial was to the court without a jury. A take nothing judgment in favor of defendant was rendered. Plaintiff has appealed.

The controlling facts of the case are undisputed. H & H Meat Products Company, Inc. (H & H) is a meat processing and packing corporation, located in Mercedes, Texas. It sells cattle hides as a by-product of its business. Laredo Hides Company, Inc. (Laredo Hides) is a corporation, located in Laredo, Texas. It purchases cattle hides from various meat packers in the United States and ships them to tanneries in Mexico.

A written contract dated February 29, 1972, was executed whereby Laredo Hides agreed to buy H & H's entire cattle hide production during the period March through December, 1972. . . . On March 3, 1972, the first delivery of hides was made under the contract . . . a Laredo Hides check [was delivered] to H & H in payment for the shipment.

On Friday, March 17, 1972, Laredo Hides, having been notified that the next load of hides was ready for delivery, issued its check for $9,000.00, payable to the order of H & H . . . [the check was delayed in the mail. H & H demanded payment within a matter of hours. When Laredo Hides could not meet this demand, H & H notified Laredo Hides that it considered the delay in payment a breach of contract. H & H cancelled the contract and refused to deliver any more hides. The court held that H & H's action was unjustified and that by refusing to deliver hides, H & H was the party that found itself in breach of contract.]

Laredo Hides, on March 3, 1972, had contracted with a Mexican tannery for the sale of all the hides which it expected to purchase from H & H under the February 29, 1972, contract. Following the cancellation by H & H of the contract, Laredo Hides, in order to meet the requirements of its contract with the tannery, was forced to purchase hides on the open market in substitution for the hides which were to have been delivered to it under the contract with H & H.

H & H's total production during the months April through December, 1972, was 17,218 hides. Under the contract with H & H, the price was $9.75 per hide for bull, steer and heifer hides, and $9.75 per hide for cow hides if the shipment was under 5% cow hides. In the event the shipment was more than 5% cow hides, the price on the excess of cow hides over 5% was reduced to $7.50 per cow hide. The market price for hides steadily increased following the execution of the contract in question. By December 31, 1972, the average cost of bull hides was about $33.00 each and the average cost of cow, heifer and steer hides was about $22.00 each. The total additional cost to Laredo Hides of purchasing substitute hides from other suppliers was $142,254.48. The additional costs (transportation and handling charges) to Laredo Hides which resulted because of the purchases from third parties amounted to $3,448.95. . . .

. . . We now confront the issue of damages. The guidelines for determining a buyer's remedies in a case where there is a breach of a contract for the sale of goods by a seller are found in Chapter 2 of the Texas Business and Commerce Code. . . When there is a repudiation of the contract by the seller or a failure to make delivery of the goods under contract, the buyer may cover under § 2.711. He may have damages under § 2.712 "by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller", and "may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages provided by the chapter; or, he may, under § 2.713, have damages measured by "the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages" provided by the chapter.

Laredo Hides instituted suit in May, 1972, and filed its amended petition (its trial pleading) on October 24, 1972, when performance was still due by H & H under the contract. It prayed for specific performance, or in the alternative ". . . damages at least in the amount of one hundred thousand dollars ($100,000), the same being the damages proximately caused by defendant's breach of the contract . . ." There was never a trial amendment of this petition. There were no exceptions by H & H to Laredo Hides' pleadings. Trial commenced on February 28, 1973, was recessed on March 2, 1973, resumed on May 15, 1973, and ended May 16, 1973. Judgment was signed and rendered on August 6, 1973.

Laredo Hides offered uncontroverted evidence of the hide production of H & H from April to December, 1972. It also established the price for the same number of hides which it was forced to buy elsewhere. There was testimony that purchases had to be made periodically throughout 1972 since Laredo Hides had no storage facilities, and the hides would decompose if allowed to age. Furthermore, White, a C.P.A., testified as to statistical summaries which he made showing the cost of buying substitute hides. These summaries were made from invoices which are also in evidence. All of this evidence was admitted without objection. Clearly, Laredo Hides elected to pursue the remedy provided by § 2.712 of the Code, and by its pleadings and evidence brought itself within the purview of the "cover" provisions contained therein.

It is not necessary under § 2.712 that the buyer establish market price. Duesenberg and King, Sales and Bulk Transfers under the U.C.C. § 14.04 Matthew Bender (1974). Where the buyer complies with the requirements of § 2.712, his purchase is presumed proper and the burden of proof is on the seller to show that "cover" was not properly obtained. Spies, Sales, Performance and Remedies, 44 Tex. L. Rev. 629, 638 (1966). There was no evidence offered by H & H to negate this presumption or to "establish expenses saved in consequence of the seller's breach", as permitted by § 2.712.

The difference between the cover price and the contract price is shown to be $134,252.82 for steer hides and $8,001.66 for bull hides, or a total of $142,254.48. In addition, Laredo Hides offered evidence of increased transportation costs of $1,435.77, and increased handling charges of $2,013.18. These are clearly recoverable as incidental damages where the buyer elects to "cover". §§ 2.715(a); 2.712(b). . .

There is no evidence that Laredo Hides, in any manner, endeavored to increase its damages sustained when H & H refused to deliver any more hides to it. Laredo Hides, in purchasing the hides in substitution of the hides which should have been delivered under the contract, acted promptly and in a reasonable manner. The facts of this case regarding the issue of liability of H & H and the issues pertaining to damages suffered by Laredo Hides, have been fully and completely developed in the court below. The facts upon which judgment should have been rendered for Laredo Hides by the trial court are conclusively established. It, therefore, becomes the duty of this Court to render judgment which the trial court should have rendered. . . .

Applying the rules announced by the above cited cases and authorities to the instant case, we hold that the record does not support the findings of fact made by the trial judge and there is no legal justification for the conclusion of law reached by the court. Accordingly, the judgment of the trial court is reversed, and judgment is here rendered for Laredo Hides in the amount of $152,960.04, together with interest thereon at the rate of 6% per annum from August 6, 1973, the date judgment was rendered by the trial court, until paid.

Reversed and rendered.