Jackson Tube Serv., Inc. v. Camaco L.L.C.

Citation: 2013 Ohio 2344Docket: 2012 CA 19

Court: Ohio Court of Appeals; June 7, 2013; Ohio; State Appellate Court

Original Court Document: View Document

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Camaco, L.L.C. appeals a judgment from the Miami County Court of Common Pleas, which found it in breach of contract and ordered it to pay Jackson Tube Service, Inc. (JTS) $320,192.09 in damages, along with post-judgment interest and court costs. The case arose from a series of contracts between JTS and Camaco, where JTS supplied rolled steel tubing for automobile seating. In July 2009, JTS halted shipments until outstanding invoices were paid, leading Camaco to dispute the invoiced amounts, claiming they were inflated. JTS offered to adjust pricing for future orders but refused to retroactively alter prices for previous contracts. JTS subsequently filed a complaint in April 2010 for breach of contract and unjust enrichment. After a bench trial on January 18, 2012, the court ruled in favor of JTS on August 24, 2012, detailing damages from various project claims and a total award of $320,192.09. The court also mandated that JTS inform Camaco of any proceeds from salvaged materials, which would offset the judgment amount. Camaco’s appeal includes a contention that the trial court improperly assigned it the risk of overproduction related to the HB and Marianna contracts.

Camaco asserts that the HB and Marianna contracts qualify as "requirement contracts," thereby placing the financial burden for any overproduction of steel parts on JTS. A contract is fundamentally defined as a promise or set of promises enforceable upon breach, requiring essential elements such as offer, acceptance, capacity, consideration, mutual assent, and legality. A meeting of the minds, indicating mutual agreement on the contract's essential terms, is necessary for enforcement. The Ohio Supreme Court defines a requirements contract as an agreement where one party buys all merchandise of a specified type as needed for their business. In this case, both contracts were established through purchase orders from Camaco to JTS, detailing fixed prices but not quantities. JTS's vice president of finance explained that the blanket order did not specify a quantity, while the sales coordinator indicated that JTS would estimate steel needs through a forecasting process after receiving the blanket order. Camaco determined specific quantities over time through releases to JTS, which contained both forecast and firm information regarding the number of parts to be produced. The duration from raw material to finished product is known as "lead time."

JTS manufactured parts for the HB and Marianna contracts based on releases from Camaco, which specified quantities and delivery timelines. The initial two weeks of each release included "firm" quantities, while the subsequent weeks contained "forecast" quantities, which were subject to change due to varying demands from automobile manufacturers. Although firm numbers occasionally changed, Camaco eventually canceled the contracts, leaving JTS with excess parts. JTS sought reimbursement for these parts, but Camaco denied responsibility, claiming JTS produced more than needed. 

The court concluded that the HB and Marianna contracts were not requirement contracts, as they specified distinct quantities rather than allowing for total output or buyer requirements. The exclusivity element typical of requirement contracts was absent, allowing JTS to sell to other buyers and Camaco to source from other sellers. Camaco failed to provide evidence of any breach of contract by JTS, with testimony confirming that all parts were produced within the designated firm dates. The trial court found JTS was entitled to payment for the claims, rejecting Camaco's arguments. Additionally, Camaco's request to deduct certain charges from JTS's invoices was also deemed erroneous by the trial court.

Camaco claims it was entitled to a setoff of $2,848.65 for fuel premium, freight charges, and steel price discounts from JTS’s open invoice claim of $161,832.83, reducing its obligation to $158,984.18. Camaco disputes the fuel and freight charges on Invoice #348171, with materials planner Patty Jo DeMarco testifying that these charges were applied because JTS expedited delivery due to Camaco being in a "shut down situation." Normally, Camaco retrieved parts from JTS, and in rare cases of shutdowns, JTS would handle delivery, justifying the charges. Consequently, Camaco was not entitled to a setoff for these amounts.

Additionally, regarding the steel price discount, evidence presented at trial indicated that JTS never agreed to retroactively apply a price adjustment made on June 9, 2009, to parts shipped after that date, even if ordered prior. Thus, Camaco was not entitled to any retroactive steel price adjustment, and the trial court correctly refused to apply these deductions. Camaco's second assignment of error is overruled. Furthermore, Camaco’s third assignment of error claims the trial court erred in finding JTS justifiably withheld shipment of parts related to its P415 and 61206-I claims.

Camaco claims JTS unjustifiably withheld shipments of parts related to the P415 and 61206-I claims due to unpaid invoices, including those for HB and Marianna. While Camaco acknowledges the withholding was due to its failure to pay, it contends it had no obligation to pay because JTS disputed the amounts owed. However, the trial court found that Camaco's refusal to pay stemmed from its demand for a retroactive price adjustment not agreed upon during contract negotiations, indicating Camaco created the dispute. Under R.C. 1302.67(A), JTS was entitled to seek assurance of performance and could suspend deliveries due to non-payment. A demand letter from JTS highlighted Camaco's overdue payments exceeding $160,000. Camaco’s assertion of entitlement to price adjustments was unsupported, leading to a breach of contract. Therefore, JTS was justified in withholding shipments, and Camaco was not entitled to reimbursement for cover expenses, as JTS had not breached the contract. Camaco’s third assignment of error was overruled.

In its fourth assignment, Camaco argued the trial court erred by using the salvage value of parts sold post-judgment instead of at the time of Camaco's refusal to pay or at trial. The court ordered JTS to sell the retained parts for salvage and apply the proceeds to Camaco's damages. Camaco contended that the valuation for salvage should have been based on its refusal to pay or the trial date.

Camaco's assertion that the trial court erred in determining the date of salvage lacks supporting evidence of prejudice from the court's valuation date. The court deemed the steel parts salvage only upon issuing its final judgment. Camaco's fourth assignment of error is overruled. Regarding the fifth assignment of error, Camaco argued that the trial court erred in denying its motion for a new trial filed on September 20, 2012. However, after filing a notice of appeal on October 3, 2012, Camaco did not seek to remand the matter for the motion's resolution before the trial court's decision on November 28, 2012. Under App.R. 4(B)(2)(b), the appeal period begins once the trial court resolves the new trial motion. Consequently, the trial court lost jurisdiction to rule on the motion after Camaco filed its appeal, rendering the court's decision a legal nullity. Thus, Camaco’s final assignment of error is overruled, and all assignments of error are rejected, affirming the trial court's judgment.