2004 WL 1243183 (N.D. Tex. 2004)
Defendant Banco Nacional de Comercio Exterior, S.N.C. ("Bancomext") and Plaintiff Compressors Plus, Inc. d/b/a Owens Compressors Plus have filed cross-motions for summary judgment with respect to plaintiff's claim for declaratory relief and defendant's counterclaim for recovery on a sworn account. For the reasons stated herein, plaintiff's motion should be granted in part and defendant's motion should be denied.
I.
Plaintiff is a Texas corporation that purchases remanufactured compressors for commercial resale to end users.1 In April 2001, plaintiff purchased 586 compressors from Service Tech de Mexico, S.A. de C.V. ("Service Tech"), a Mexican company with manufacturing facilities in Monterrey, Mexico. As part of the sales agreement, Service Tech warranted that its compressors were "free from defects in workmanship and materials and will be repaired or replaced if, upon inspection at our plant, they are found to be defective within one year from the year of purchase." Prior to the expiration of the one-year warranty period, plaintiff discovered latent defects in many of the compressors. Plaintiff returned 135 compressors to Service Tech for repair and demanded performance under the warranty. However, Service Tech was unable to honor some of the warranty claims because of an overwhelming number of claims received by dissatisfied customers.
Despite these problems, plaintiff and Service Tech continued to transact business with one another. In the fall of 2002, the parties reached an agreement whereby, in return for special payment terms, plaintiff issued a blanket purchase order for 600 compressors. Service Tech, in turn, assigned five invoices totaling $370,503.08 to Bancomext as part of a discounting agreement. Plaintiff acknowledged this transaction by signing two sets of documents for each invoice, an Assignment and Payment Instructions and a Letter of Acceptance of Merchandise. Each assignment provides, in pertinent part:
We hereby inform you that we have endorsed the accounts receivable to Banco Nacional de Comercio Exterior, S.N.C. ("Bancomext") that have arisen (or will arise) from our commercial transactions.
By this letter we instruct you to pay invoice # ______, with date of _______, for the amount of $ _________, from Service Tech de Mexico, S.A. de C.V. to the account number . . . of [Bancomext] or any other account in favor of any third party designated by ("Bancomext") [sic] or it's [sic] assignee from time to time.
The letter of acceptance reads:
By this letter we manifest our acceptance of the merchandise specified in invoice # ________, with date of ________, for the amount of US$ ____________, from Service Tech de Mexico, S.A. de C.V. The merchandise is in accordance with the quality and quantity requested and will be paid in full according to the terms specified in the invoice.
Given its history of problems with Service Tech, plaintiff demanded the right to inspect the compressors prior to shipment. At least two shipments were rejected following inspections in November 2002 and January 2003. Service Tech supposedly repaired the defects and shipped the compressors to plaintiff's warehouse in Mesquite, Texas, where, after further inspection, the goods were accepted for delivery. However, in February 2003, plaintiff discovered quality problems with several compressors. Plaintiff decided to reinspect the entire inventory and so far has found that 54% of all compressors sold by Service Tech have some kind of manufacturing defect. To date, plaintiff has spent $119,697.38 to repair the defective compressors and estimates it will incur an additional $359,710.75 in repair costs based on the current failure rate. Until this matter is resolved, plaintiff has refused to pay any of the five invoices assigned to Bancomext.
On May 26, 2003, plaintiff filed suit against Service Tech and Bancomext in Texas state court. As part of its complaint, plaintiff seeks a declaratory judgment that Bancomext is subject to all "defenses to payment (including offsets) as against Service Tech" and "that because amounts owed by Service Tech to Plaintiff exceed amounts Plaintiff would otherwise have to pay under the assigned invoices, Plaintiff has no liability to Defendant Bancomext . . ." Bancomext, joined by Service Tech, timely removed the case to federal court.2 Defendants then filed separate counterclaims to recover the sum of $370,503.08 due and owing under the five invoices assigned to Bancomext. The case is before the court on cross-motions for summary judgment. The parties have briefed the issues and the motions are ripe for determination.
II.
Summary judgment is proper when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A dispute is "genuine" if the issue could be resolved in favor of either party. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Thurman v. Sears, Roebuck & Co., 952 F.2d 128, 131 (5th Cir.), cert. denied, 113 S.Ct. 136 (1992). A fact is "material" if it might reasonably affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Matter of Gleasman, 933 F.2d 1277, 1281 (5th Cir. 1991).
When a case is presented to the court by way of cross-motions for summary judgment, each party has the burden of producing evidence to support its motion. Ghoman v. New Hampshire Insurance Co., 159 F.Supp.2d 928, 931 (N.D. Tex. 2001). The movant has the initial burden of showing the absence of a genuine fact issue. Duffy v. Leading Edge Products, Inc., 44 F.3d 308, 312 (5th Cir. 1995); Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995). The burden then shifts to the nonmovant to show that summary judgment is not proper. Duckett v. City of Cedar Park, 950 F.2d 272, 276 (5th Cir. 1992). The parties may satisfy their respective burdens by tendering depositions, affidavits, and other competent evidence. Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 113 S.Ct. 82 (1992). All the evidence must be viewed in the light most favorable to the party opposing the motion. Rosado v. Deters, 5 F.3d 119, 122 (5th Cir. 1993). However, conclusory statements, hearsay, and testimony based merely on conjecture or subjective belief are not competent summary judgment evidence. Topalian, 954 F.2d at 1131.
III.
Bancomext sues to collect $370,503.08 on five unpaid invoices. In order to maintain an action on a sworn account under Texas law,3 Bancomext must prove that: (1) there was a sale and delivery of merchandise or the performance of services; (2) the amount of the account is just, that is, the prices were charged in accordance with an agreement or were customary and reasonable; and (3) the amount due is unpaid. See Adams v. H & H Meat Products, Inc., 41 S.W.3d 762, 773 (Tex. App.—Corpus Christi 2001, no pet.); Powers v. Adams, 2 S.W.3d 496, 499 (Tex. App.—Houston [14th Dist.] 1999, no pet.). Plaintiff admits it received the compressors from Service Tech and has not paid the outstanding invoices. Therefore, the only issue is whether the amount charged by Service Tech is "just."
Resolution of this issue turns on whether plaintiff may assert its defenses to payment against the assignee of the invoices, Bancomext. Section 9.404(a) of the Texas Business and Commerce Code provides, in pertinent part:
Unless an account debtor has made an enforceable agreement not to assert defenses or claims . . ., the rights of an assignee are subject to:
(1) all terms of the agreement between the account debtor and assignor and any defense or claim in recoupment arising from the transaction that gave rise to the contract; and
(2) any other defense or claim of the account debtor against the assignor that accrues before the account debtor receives a notification of the assignment authenticated by the assignor or the assignee.
TEX. BUS. & COMM. CODE ANN. § 9.404(a) (Vernon 2002).
A "waiver of defense" agreement is enforceable by an assignee who takes an assignment: (1) for value; (2) in good faith; (3) without notice of a claim of a property or possessory right to the property assigned; and (4) without notice of a defense or claim in recoupment. Id. § 9.403(b).
The question squarely presented is whether plaintiff and Service Tech entered into an enforceable "waiver of defense" agreement under section 9.403(b) of the Texas Business and Commerce Code. Although precedent is scant, the court concludes that the assignments and letters of acceptance executed by plaintiff, either separately or together, do not constitute such a waiver. Neither document contains language explicitly waiving the right to assert claims and defenses against Bancomext. One commentator has suggested the following language as a "typical example" of a waiver of defense clause:
Buyer understands and agrees that Buyer will settle directly with the Original Seller all claims, setoffs, counterclaims and other defenses there may be against the Original Seller and that Buyer shall not set up any such claim, setoff, counterclaim or other defense against any such subsequent holder.
Stephen G. Cochran, 28 TEXAS PRACTICE SERIES, Consumer Rights and Remedies § 14.6 n.1 (3d ed. 2002). The documents signed by plaintiff contain no similar verbiage. The court need not speculate on the myriad types of boilerplate language that might be found to constitute enforceable agreements under section 9.403(b). It is sufficient for present purposes to hold that a "waiver of defense" agreement cannot arise, as Bancomext suggests, from signing documents manifesting an acceptance of goods and promising to pay the assignee in full.
RECOMMENDATION
Plaintiff's motion for partial summary judgment should be granted with respect to its claim that the assignments and letters of acceptance do not constitute an enforceable "waiver of defense" agreement under section 9.403(b) of the Texas Business and Commerce Code. In all other respects, the motion should be denied. Bancomext's motion for summary judgment should be denied in its entirety.