Textile Rubber & Chemical Co. v. Thermo-Flex Technologies, Inc.Textile Rubber & Chemical Co. v. Thermo-Flex Technologies, Inc.
This is the second appeal of this case, which arose out of a dispute between the parties over an agreement to sell certain carpet-making technology for $3 million. In the first appeal, we affirmed the trial court’s decision that the plaintiff, Thermo-Flex Technologies, Inc., was entitled to $500,000 in damages as a matter of law, based upon the defendant Textile Rubber and Chemical Company, Inc.’s failure to make an installment payment, but remanded the case for a jury to decide additional damage claims.
Textile Rubber and Chemical Co. v. Thermo-Flex Technologies,
When reviewing the grant... of a motion for summary judgment, this Court conducts a de novo review of the law and the evidence. To prevail at summary judgment, the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.
(Footnotes omitted.)
Smith v. Gordon,
So viewed, the record showed that at all times relevant to this dispute, Larry Mullinax was the president and owner of 50 percent of the outstanding shares of Thermo-Flex Technologies, Inc., which was in the business of developing a thermoplastic recyclable backing system for carpets. Mullinax also was the president, chief executive officer, chief financial officer, and owner of Technology Works, Inc., a consulting firm in the area of thermoplastic technology.
Due to his expertise in the area, Textile Rubber and Chemical Company, Inc. hired Mullinax to serve as its consultant in the application of thermoplastic technologies in the flooring industry. Mullinax had previously been an employee of Textile and had a longstanding relationship with its founder. Textile paid Mullinax $100,000 a year for his role as a consultant. Mullinax informed Textile that his other company, Thermo-Flex, had developed a thermoplastic recyclable backing system that was ready to go to market and proposed a partnership between the two companies. Mullinax repeatedly advised Textile that the technology developed by Thermo-Flex did not produce a significant amount of “volatile organic compounds” (“VOCs”), which would raise environmental concerns and would be an important issue to potential customers. Textile chose not to perform its own independent testing of Thermo-Flex’s technology for VOCs after Mullinax advised that such testing was unnecessary and would be “a waste of money.”
Textile and Mullinax ultimately concluded that it made more business sense for Textile to simply purchase the thermoplastic backing technology from Thermo-Flex rather than form a partnership. Consequently, on August 11, 2006, Thermo-Flex sold its technology to Textile in return for $3 million in installment payments (the “Agreement”). The Agreement specified that Textile would make three separate payments of $500,000 to Thermo-Flex on the closing date of the sale, on January 1, 2007, and on December 31, 2007, respectively. The Agreement provided that the remaining $1.5 million would be paid in quarterly installments based upon a formula relating to Textile’s future net income and net profits. In addition to these installment payments, Textile agreed that it would “pay to [Thermo-Flex] all costs and expenses, including reasonable attorney[ ] fees incurred by [Thermo-Flex] in enforcing any of the covenants and provisions of this Agreement and incurred in any action brought by [Thermo-Flex] against [Textile] on account of the provisions hereof.”
With respect to the quality of the technology purchased, the Agreement provided that Textile was buying the technology
in an “as is” condition, that no warranties of any type (whether for merchantability or fitness for a particular purpose or use, express or implied, or otherwise) [were] being made by [Thermo-Flex], and that any and all such warranties [were] . . . expressly disclaimed to the fullest extent allowed by Georgia law. The bill of sale for the technology contained a similar disclaimer of all express or implied warranties.
Following execution of the Agreement, Textile paid the $500,000 due at closing and on January 1, 2007. In the summer of 2007,
Unwilling to accept Textile’s unilateral changes to the payment arrangements, Thermo-Flex sued Textile for anticipatory breach of contract and sought contractual damages of $2,000,000, plus accrued interest, court costs, and attorney fees. Textile counterclaimed for breach of contract on the ground that the technology was defective for containing problematic levels of VOCs. Textile also successfully moved to add Mullinax and Technology Works as third-party defendants and asserted cross-claims against them for tortious interference with contract, breach of warranty, fraud, negligent misrepresentation, breach of duty to principal, and indemnity.
The trial court thereafter granted partial summary judgment to Thermo-Flex, concluding that the uncontroverted evidence showed that Textile had committed an anticipatory breach of contract by unilaterally changing the payment arrangements. Regarding the measure of damages, the trial court ruled that Thermo-Flex was entitled to entry of judgment in the amount of $500,000 plus interest based upon Textile’s failure to make the December 31, 2007 installment payment. As to the $1.5 million in installment payments relating to Textile’s future net profits, the trial court ruled that Thermo-Flex was “entitled to some or all of the $1.5 million if it [could] show with reasonable certainty the extent to which [Textile] could have used the technology profitably.” Additionally, the trial court granted summary judgment to Thermo-Flex on Textile’s breach of contract counterclaim, reasoning that any oral representations concerning VOCs would constitute inadmissible parol evidence and could not be used to vary the plain terms of the warranty disclaimers in the Agreement. The trial court reserved ruling on the issue of attorney fees.
Textile appealed to this Court, and we affirmed in part and vacated in part the trial court’s decision. See
Textile Rubber & Chemical Co. v. Thermo-Flex Technologies,
Following remand, Textile paid to Thermo-Flex the $500,000 plus accrued interest in satisfaction of the judgment relating to the unpaid December 31, 2007 installment payment. Thermo-Flex then moved for summary judgment on its claim for attorney fees predicated on its recovery of those damages. Thermo-Flex argued that it was entitled to attorney fees pursuant to
Mullinax and Technology Works also moved for summary judgment, contending that there were no genuine issues of material fact as to Textile’s cross-claims for tortious interference with contract, breach of warranty, fraud, negligent misrepresentation, breach of duty to principal, and indemnity.
1. Textile first claims that the trial court erred in ruling that Thermo-Flex’s demand letter complied with the notice requirements imposed by
(1) be in writing, (2) to the party sought to be held on the obligation, (3) after maturity, (4) [state] that the provisions relative to payment of attorney fees in addition to principal and interest will be enforced, and (5) [state] that the party has 10 days from the receipt of such notice to pay the principal and interest without the attorney fees.
Gen. Elec. Credit Corp. of Ga. v.
Brooks,
Here, Thermo-Flex relied upon a demand letter that its counsel sent to Textile’s counsel by e-mail and first class mail, return receipt requested, on January 9, 2009 (the “Demand Letter”). The Demand Letter quoted the attorney fees provision contained in the Agreement and stated that Thermo-Flex intended to enforce that provision in this case. The Demand Letter further provided: “Pursuant to
Textile argues that the Demand Letter did not substantially comply with the notice requirements of
(a) Contrary to Textile’s contention, its full payment obligations have matured. An anticipatory breach of contract accelerates the maturity of the indebtedness and entitles the creditor to demand the face value of the total unpaid debt. See
Valley View Church of God in Christ u. King,
(b) We likewise reject Textile’s argument that the Demand Letter was deficient because Thermo-Flex ultimately will recover an
amount less than the face value of the $1.5 million payment obligation. A creditor substantially complies with the notice requirements of
For these reasons, there was no genuine issue of material fact as to whether the Demand Letter issued by Thermo-Flex was defective under
2. Textile next argues that the trial court erred in granting summary judgment to Mullinax and Technology Works on its cross-claims for breach of warranty, fraud, negligent misrepresentation, breach of duty to principal, and indemnity. 2 We affirm the trial court’s grant of summary judgment on Textile’s cross-claims for breach of warranty and indemnity, but we conclude that there were genuine issues of material fact precluding summary judgment on the cross-claims for fraud, negligent misrepresentation, and breach of duty to principal.
(a) Textile maintains that the trial court erred in ruling that its cross-claim for breach of warranty against the third-party defendants could not succeed in light of the dismissal of its counterclaim for breach of warranty against Thermo-Flex. But, in its brief filed in the trial court, Textile conceded that summary judgment would be proper on this cross-claim if we affirmed the trial court’s grant of
summary judgment to Thermo-Flex on Textile’s breach of warranty
(b) Textile also maintains that the trial court erred in ruling that its fraud and negligent misrepresentation cross-claims failed as a matter of law because it could not prove reasonable reliance. Both fraud and negligent misrepresentation require the injured party to prove reasonable reliance upon the alleged misrepresentations of the tortfeasor. See
Hardaway & Co. v. Parsons, Brinckerhoff, Quade & Douglas, Inc.,
The trial court’s ruling was erroneous because it incorrectly assumed that Mullinax and Technology Works were entitled to invoke and enforce the disclaimer provision of the Agreement even though they were not parties to that contract. The disclaimer provision in the Agreement referred only to warranties by the “Seller,” defined in the Agreement as Thermo-Flex. Nor did the disclaimer in the bill of sale refer to representations or warranties by non-contracting parties. Moreover, the mere fact that someone would benefit from the performance of a contract is insufficient to give that person standing to enforce the contract.
Marvel Enterprises v. World Wrestling Federation Entertainment,
It is true that under certain circumstances, an agent of a contracting party may be entitled to rely upon a disclaimer or merger clause contained in the contract to preclude claims against the individual agent for his or her alleged representations. See
Tampa Bay Finance v. Nordeen,
(c) Textile further maintains that the trial court erred in ruling that its cross-claim for breach of duty to principal failed as a matter of law because it could not prove proximate cause. An essential element of a tort claim for breach of duty is that the alleged negligence be a proximate cause of the plaintiffs injury. See
Hoffman v. Insurance Co. of North America,
The trial court erred in concluding that a jury could not find that Mullinax’s alleged misrepresentations proximately caused Textile’s damages.
It is well settled that there can be no proximate cause where there has intervened between the act of the defendant and the injury to the plaintiff, an independent, intervening, act or omission of someone other than the defendant, which was not foreseeable by defendant, was not triggered by defendant’s act, and which was sufficient of itself to cause the injury.
(Citation omitted.)
Pruette v. Phoebe Putney Memorial Hosp.,
In the instant action, a jury could find that Textile’s act of entering into the Agreement containing the disclaimer provision was triggered by the misrepresentations of its paid consultant and expert, Mullinax. Likewise, a jury could find that Mullinax reasonably could have anticipated or foreseen that his misrepresentations concerning the level of VOCs while serving as a paid consultant and expert would lead Textile to enter into the Agreement. Proximate cause is generally an issue for the jury, see
Walker,
(d) Finally, Textile maintains that the trial court erred in ruling that its indemnity cross-claim failed as a matter of law because it did not meet the requirements of such a claim under the common law. 5
The duty to indemnify may arise by operation of law, independently of contract. If a person is compelled to pay damages because of negligence imputed to him as the result of a tort committed by another, he may maintain an action for indemnity against the person whose wrong has thusbeen imputed to him. Here, no wrong has been imputed to [Textile], nor does [Textile] have any vicarious liability. Rather, [Textile’s] duty to pay stemmed from its contractual obligation [to Thermo-Flex]. Under these circumstances, common law indemnity principles do not apply.
(Punctuation and footnotes omitted.)
Nguyen v. Lumbermens Mut. Cas. Co.,
Judgment affirmed in part and reversed in part.
Notes
Where, as here, the underlying contract “provides for the payment of reasonable attorney! 1 fees without specifying any specific percent,”
Textile does not challenge the trial court’s grant of summary judgment on its cross-claim for tortious interference with contract or present any argument with respect to that claim in its appellate brief. Any challenge to that ruling by the trial court thus has been abandoned. See Court of Appeals Rule 25 (a) (3) and (c) (2);
Steed v. Fed. Nat. Mtg. Corp.,
In
Yee,
the defendant served as an agent of both the buyer and seller, but he was not paid to act as the agent of the buyer. See
Yee,
Mullinax and Technology Works also contend that by entering into the Agreement containing the disclaimer provision, Textile was estopped from and waived any claim that it relied upon or was injured by the representations of Mullinax. Again, however, Mullinax and Technology Works’ contention is predicated upon the false assumption that they were entitled to rely upon the protections afforded by the Agreement, even though they were not parties to the contract, third-party beneficiaries, or merely agents of a contracting party.
Textile does not contend that it had an express or implied indemnification contract with Mullinax and Technology Works.