Frank's International, Inc. v. Smith International, Inc.

OPINION ON REHEARING LAURA CARTER HIGLEY, Justice. Appellee, Smith International, Inc. (“Smith”), sued appellant, Frank’s International, Inc. (“Frank’s”), for breach of contract and conversion, and the parties filed cross-motions for summary judgment. Frank’s appeals from a summary judgment rendered in favor of Smith on its breach of contract claim. 1 In what we construe as four issues, Frank’s contends that the trial court erred by (1) granting Smith’s motion for summary judgment and denying 2 Frank’s’ motion for summary judgment, 3 (2) granting declaratory relief not requested in Smith’s motion for summary judgment, (3) denying Frank’s’ post-judgment motions, and (4) assessing an incorrect rate of post-judgment interest. On June 28, 2007, we reversed and remanded for a trial on the merits. Smith moved for rehearing. We grant the motion, withdraw our opinion dated June 28, 2007, and issue this opinion in its stead. Our disposition and judgment remain unchanged. We reverse and remand for a trial on the merits. Summary of Facts and Procedural , History Smith, a Delaware corporation with its principal place of business in Texas, and Frank’s, a Texas corporation with its principal place of business in Texas, are both *560 engaged in the provision of oilfield equipment and attendant services. On January 1, 2002, Smith and Frank’s entered into an “Overseas Consignment and Servicing Agreement Ecuador” (the “First Agreement”), pursuant to which Smith “rented” or “consigned” certain oilfield tools to Frank’s in Texas, which Frank’s, in turn, “subleased” to end users in Ecuador through its wholly-owned subsidiary, Frank’s International Ecuador, C.A. (“Frank’s-Ecuador”). Frank’s-Ecuador is organized under the laws of Ecuador and has its principal place of business in Ecuador. Article 1 of the First Agreement provided that [Frank’s] shall be responsible for and shall handle the shipping of the Tools, spare parts, and servicing equipment from Houston, Texas, to the destination in [Ecuador], [Frank’s] shall be responsible for and shall handle the proper receipt at such destination and the importation into [Ecuador] of any Tools, spare parts, and servicing equipment. In addition, [Frank’s] shall bear and pay the cost of the import duties and all other charges relating to such importation. (Emphasis added.) Article 7 provided that [Frank’s] shall retain twenty (20%) of the rental revenues, 50% of the service charges and 10% of the list prices for the tools sold to END USERS as a consequence of tools being damaged.... [Frank’s] will be invoiced by [Smith] for 80% of the rental revenues, on a monthly basis within the first ten (10) days of each month and 90% of the list price of parts charged to END USERS within thirty (30) days of the loss. All payments due [Smith] ... shall be tendered at par, in U.S. dollars, within forty-five (45) days from the date of [Smith’s] invoice ..., provided that, if required by applicable law of [Ecuador], [Frank’s] shall withhold such taxes assessed on [Smith] as a result of such payments. Consistent herewith, [Frank’s] warrants that it shall tender in a proper and timely manner all amounts so withheld to the applicable governmental entity in [Ecuador] and supported by appropriate tax receipts. (Emphasis added.) Article 8, “Taxes,” provided that each of [Smith] and [Frank’s] shall be responsible for its respective taxes that may be assessed upon [sic] as a result of the income derived by each pursuant to this Agreement, whether such taxes are assessed or imposed by the government of [Ecuador] or by any other governmental body or agency. Consistent herewith, each of the parties shall be responsible for any other governmental taxes by whomsoever assessed or levied as a result of its performance of this Agreement. Frank’s states that, pursuant to Article 7, it withheld from the percentage of revenues it paid to Smith certain taxes assessed on Smith by the government of Ecuador and that Frank’s paid those sums to Ecuador. Smith states that in 2003 it learned that Frank’s was withholding 25 percent of Smith’s invoiced amounts to satisfy Smith’s purported tax obligations to Ecuador, and a dispute arose. Smith contended that it did not owe taxes to Ecuador; rather, the taxes were assessed against Frank’s and improperly withheld. On August 1, 2003, Smith and Frank’s executed an amendment to the First Agreement, pursuant to which Article 7 was deleted “in its entirety” and revised to read as follows: [Frank’s] will retain twenty-five (25%) of the rental revenues, fifty (50%) of the *561 service charges and ten percent (10%) of the list prices of any parts sold to end users as a consequence of tools being damaged.... [Frank’s] will be invoiced by [Smith] for seventy-five (75%) of the rental revenues, on a monthly basis within the first ten (10) days of each month, and ninety percent (90%) of the list price of parts charged to end users within thirty (30) days of the date of loss. On January 1, 2004, a second “Overseas Consignment and Servicing Agreement” (the “Second Agreement”) was executed directly between Smith and Frank’s’ subsidiary, Frank’s-Ecuador. 4 The parties agreed that the Second Agreement “supersedes any and all prior agreements, negotiations, or understandings between the parties and is the sole agreements [sic] between the parties with regards [sic] to the matters described herein. The parties acknowledge that the [First Agreement] ... shall be cancelled, effective January 1, 200].” (Emphasis added.) At the time of the execution of the Second Agreement, Frank’s had withheld $207,874.90 under the First Agreement to satisfy what Frank’s contended was Smith’s tax assessment in Ecuador and, which Smith contended was a tax assessment against Frank’s and not itself. On November 17, 2004, Smith sued Frank’s under the First Agreement for breach of contract, conversion, and a declaration that no taxes could have been owed by Smith to Ecuador under the First Agreement such that Frank’s could have been entitled to withhold payment from Smith. In May 2005, Smith moved for summary judgment on its claims on the grounds that Frank’s expressly promised to pay Smith certain revenues, that Smith fully performed its obligations under the First Agreement, and that Frank’s had not paid $207,874.90 of Smith’s invoices. Smith sought to recover this sum, as well as declaratory relief, pre- and post-judgment interest, and costs. To support its motion, Smith attached the First Agreement, the Amendment, the Second Agreement, and the affidavits of Mark Kosicki, senior international tax manager for Smith; Don Pinkston, worldwide credit manager for Smith; and Geoffrey H. Bracken in support of attorney’s fees. In August 2005, in its response to the motion for summary judgment, Frank’s contended that Smith did not have a cause of action under the First Agreement because that agreement had been expressly cancelled by the Second Agreement. In addition, Frank’s contended that, because it was undisputed that Smith’s goods were used in Ecuador, that Smith received revenues for such use, and that revenues earned in Ecuador are subject to taxation by the government of Ecuador, there were genuine issues of material fact regarding Smith’s obligations to pay taxes to Ecuador, such that summary judgment was not proper. Frank’s also objected to the sufficiency of Kosicki’s affidavit. As evidentiary support for its contentions, Frank’s attached to its response the Second Agreement and the affidavit of its Chief Financial Officer, Mark Margavio. On September 29, 2005, Frank’s filed a cross-motion for summary judgment, contending that Smith had no legal basis for a breach of contract claim because the Second Agreement expressly cancelled the First Agreement. As evidentiary support, *562 Frank’s attached the First and Second Agreements. Smith filed a response to Frank’s’ motion for summary judgment, in which it contended that Frank’s had misinterpreted the meaning of the word “cancel” and that all parties understood that Smith was not waiving its prior claims by the execution of the Second Agreement. Smith appended the evidence it had previously submitted with its own motion for summary judgment. On January 27, 2006, after a hearing, the trial court granted partial summary judgment for Frank’s, dismissing Smith’s conversion claim. On the same day, the trial court granted summary judgment in favor of Smith on the breach of contract claim and declared that Smith “could not and did not incur any foreign withholding obligation under the parties’ January 1, 2002 agreement.” The trial court ordered that Smith recover from Frank’s the principal amount of $207,874.90, pre-judgment interest at 18% per annum from November 17, 2004 until the date of judgment, post-judgment interest at 18% per annum from the date of judgment until the date the judgment is satisfied, and costs. The trial court stated that its judgment constituted a final judgment. On February 14, 2006, Frank’s moved for new trial and for leave to supplement its summary judgment evidence. After a hearing, the trial court denied the motions. In addition, Frank’s moved for a ruling on its August 2005 objections to Smith’s summary judgment evidence. No order appears in the record. On April 11, 2006, Frank’s moved to correct what it alleged was a clerical mistake in the rate of interest stated in the judgment. This appeal ensued. Summary Judgment In what we construe as its first issue, Frank’s contends that the trial court erred by granting Smith’s motion for summary judgment and denying Frank’s’ motion for summary judgment as to Smith’s breach of contract claim. Specifically, in three sub-issues, Frank’s contends that no valid agreement exists to support Smith’s breach of contract claim, that Smith’s affidavit evidence is insufficient, and that Frank’s raised fact issues that precluded summary judgment. Frank’s asks this court to “reverse the trial court’s judgment in favor of Smith and the order denying [Frank’s’] motion for summary judgment and render judgment in favor of [Frank’s] dismissing Smith’s claims.” In the alternative, Frank’s requests that we “reverse the trial court’s final judgment and remand ... for trial on the merits.” A. Standard of Review We review a trial court’s granting of a traditional summary judgment de novo. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex.2003). A summary judgment under Rule of Civil Procedure 166a(c) is properly granted only when a movant establishes that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Tex.R. Crv. P. 166a(c); KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex.1999). A plaintiff moving for summary judgment must prove that it is entitled to summary judgment as a matter of law on each element of his cause of action. MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex.1986); Rizkallah v. Conner, 952 S.W.2d 580, 582 (Tex.App.-Houston [1st Dist.] 1997, no pet.). A defendant moving for summary judgment must either (1) disprove at least one element of the plaintiffs cause of action or (2) plead and conclusively establish each essential element of an affirmative defense to rebut plaintiffs cause. Cathey *563 v. Booth, 900 S.W.2d 339, 341 (Tex.1995). In deciding whether there is a disputed material fact precluding summary judgment, evidence favorable to the non-mov-ant will be taken as true, every reasonable inference must be indulged in favor of the non-movant, and any doubts resolved in its favor. Knott, 128 S.W.3d at 215. The movant must conclusively establish its right to judgment as a matter of law. See MMP, 710 S.W.2d at 60. A matter is conclusively established if reasonable people could not differ as to the conclusion to be drawn from the evidence. City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005). When, as here, both sides move for summary judgment and the trial court grants one motion and denies the other, we review the summary judgment proof presented by both sides and determine all questions presented. See CenterPoint Energy Houston Elec., L.L.P. v. Old TJC Co., 177 S.W.3d 425, 430 (Tex.App.-Houston [1st Dist.] 2005, pet. denied). B. Analysis The essential elements of a breach of contract claim are (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained as a result of the breach. Valero Marketing & Supply Co. v. Kalama Int’l, 51 S.W.3d 345, 351 (Tex.App.-Houston [1st Dist.] 2001, no pet.). 1. Existence of a Valid Contract In its first sub-issue, Frank’s contends that the trial court erred in granting summary judgment in favor of Smith because Smith’s breach of contract claim is based on a contract that no longer exists. Frank’s contends that the First Agreement, upon which Smith sued, is no longer a valid agreement because it was cancelled and superseded by the Second Agreement. Smith contends that its mere cancellation of the First Agreement did not, without some mention of an intent by Smith to release its claims, operate to discharge Frank’s’ liability for the breach that occurred prior to the cancellation of the First Agreement. Frank’s responds that the act of cancelling the First Agreement necessarily extinguished any claim that arose under that agreement, without regard to Smith’s intent. Smith responds that Frank’s misconstrues the meaning of the word, “cancel,” citing Black’s Law Dictionary, the Texas Business and Commerce Code (“UCC”) 5 , and case law. 6 Generally defined, “cancellation” means “annulment or termination of a promise or an obligation.” See Black’s Law DictioNARY 197 (7th ed.1999). Pursuant to section 2.106 of the UCC, a “ ‘cancellation’ occurs when either party puts an end to the contract for breach by the other.” See Tex. Bus. & Com.Code Ann. § 2.106 (Vernon 1994). As Smith contends, section 2.106 provides that, when a contract is cancelled, “the canceling party retains any remedy for breach of the whole contract or any unperformed balance.” See id. However, Chapter 2, entitled “Sales,” governs only those contracts and agreements that involve “the present or future sale of goods.” Id. “Goods” include all things moveable at the time of identification to the contract. *564 Id. at § 2.105. A “sale” consists of the passing of title from the seller to the buyer, for a price. Id. at § 2.106. Here, pursuant to the First Agreement, which the parties titled a “Consignment and Servicing Agreement,” the parties agreed that “OWNER [Smith] shall rent Tools to CONSIGNEE [Frank’s]” and that “CONSIGNEE [Frank’s] shall sublease Tools under CONSIGNEE’S responsibility to END USERS in ECUADOR.” (Emphasis added.) The parties agreed that Frank’s was free to offer its own rental terms and conditions in negotiating with end users, provided that any terms or conditions offered by Frank’s were to be “based on,” and “no less favorable than,” Smith’s terms and conditions. Pursuant to the agreement, Frank’s was required to report to Smith each month concerning the specific tools “rented,” the name of the end user to whom Frank’s “rented” the tools, the dates the tools were “rented,” and the “type of rental”' — whether “stand-by rental time” or “operating rental time.” In addition, the parties agreed that “CONSIGNEE [Frank’s] shall provide servicing for and repairs to the Tools within [Ecuador] and such other assistance to OWNER [Smith] as otherwise described.” Furthermore, the First Agreement states that “all tools and servicing equipment ... are and shall always remain the property of [Smith],” that Frank’s “shall always represent that the Tools, spare parts and servicing equipment are the property of [Smith]” and that, in the event of any termination of the agreement, Frank’s must return all tools and equipment to Smith. Because the agreement expressly excludes any passage of title from a seller to a buyer, we conclude that the First Agreement is not a contract for the sale of goods within chapter 2 of the UCC. See id. Hence, as Frank’s contends, article 2.106 of the UCC does not govern the First Agreement. The First Agreement, however, expressly creates a contract for the rental and sublease of goods (tools). Section 2A of the Business and Commerce Code, “Leases,” governs “any transaction, regardless of form, that creates a lease of goods.” Tex. Bus. & Com.Code AnN. § 2A.102 (Vernon 1994). Hence, article 2A of the UCC applies to the First Agreement. However, pursuant to its terms, the First Agreement also constitutes a contract for repair services. The UCC does not govern a contract for services; rather, such a contract is governed by case law. Southwestern Bell Tel. Co. v. FDP Corp., 811 S.W.2d 572, 574 (Tex.1991). When, as here, a contract contains a mixture of goods and services, a determination of which law, the UCC or case law, governs the contract as a whole depends on whether the agreement is “predominantly” for the supply of goods or “predominantly” for services. See Cont’l Casing Corp. v. Siderca Corp., 38 S.W.3d 782, 787 (Tex.App.Houston [14th Dist.] 2001, no pet.). The First Agreement provides that Smith will furnish certain servicing equipment to Frank’s “free of charge” for the purpose of maintenance and servicing of the rental tools while they are in Ecuador. The servicing of the tools appears incidental to their rental. This conclusion is supported by the compensation structure in the First Agreement and amendment, whereby the parties agreed that Smith would invoice Frank’s for 75-80 percent of the “rental revenues” and only 50 percent of the service charges to end users. We conclude that the First Agreement is predominantly a contract for the lease of goods and thus the agreement is governed by Section 2A of the UCC rather than by case law. *565 Section 2A.505 of the UCC provides that, on cancellation of a lease contract, all obligations that are still executory on both sides are discharged, but any right based on prior default or performance survives, and the canceling party also retains any remedy for default of the whole lease contract or any unperformed balance. Unless the contrary intention clearly appears, expressions of “cancellation,” “rescission,” or the like of the lease contract may not be construed as a renunciation or discharge of any claim in damages for an antecedent default. Tex. Bus. & Com.Code ANN. § 2A.505. Here, pursuant to section 2A.505, the cancellation of the First Agreement cannot be construed as a discharge of any right belonging to either party based on an antecedent breach by the other unless such intention clearly appears in the Second Agreement. See id. It is undisputed that the Second Agreement is silent with regard to the discharge of any claims that arose prior to the cancellation of the First Agreement. In order for Frank’s to prevail on this issue, which was raised by Frank’s motion for summary judgment, Frank’s had the burden to conclusively show that any rights Smith had to recover for a breach that occurred prior to the cancellation of the First Agreement were retroactively extinguished by the cancellation. Frank’s’ sole evidentiary support appended to his motion for summary judgment on this point was the First and Second Agreements. It is undisputed that there is not any language with regard to intent as to antecedent claims contained in this evidence. Hence, there is no merit to Frank’s first sub-issue. 2. Sufficiency of the Summary Judgment Proof In its second sub-issue, Frank’s contends that the affidavit of Mark Ko-sicki, Smith’s senior international tax manager, which was Smith’s sole evidence of a breach by Frank’s, is insufficient to support summary judgment on Smith’s breach of contract claim because Kosicki’s affidavit is not based on personal knowledge and because the affidavit is speculative and conclusory. As evidentiary support for its motion for summary judgment, Smith attached the First and Second Agreements, which demonstrated that a contract existed in which Frank’s expressly agreed to pay Smith for rental revenues. In addition, Smith appended the affidavit of Don Pinkston, worldwide credit manager for Smith, who attested that Frank’s was “delinquent in the amount of $207,874.90.” Smith also attached several invoices and billing statements. Frank’s has not disputed that Smith fully performed its obligations under the First Agreement. Thus, Smith supported the first, second, and fourth elements of its breach of contract claim. Frank’s contends that Kosicki’s affidavit, which was Smith’s evidence as to the third element, that of breach, is insufficient. Rule of Civil Procedure 166a(f) requires that “affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.” Tex.R. Crv. P. 166a(f). The record shows that Kosicki attested in his affidavit that he is competent to testify, that the facts he sets out are based on his personal knowledge, and that this knowledge derives from his status as a certified public accountant, his employment as senior international tax manager for Smith, and his personal familiarity with the First and Second Agreements and with the past and present business relationship between Smith and Frank’s. Kosicki has satisfied the requirement that “affidavits shall be *566 made on personal knowledge” because he has made an affirmative showing of how he became personally familiar with the facts. See Waite v. BancTexas-Houston, N.A., 792 S.W.2d 538, 540 (Tex.App.-Houston [1st Dist.] 1990, no writ). Kosicki’s job responsibilities can qualify him to have personal knowledge of the facts stated in the affidavit. See id. Frank’s also contends that Ko-sicki’s affidavit is speculative and concluso-ry with regard to a breach by Frank’s of the First Agreement in withholding certain payments to Smith to satisfy Ecuadorian taxes. 7 In that regard, Kosicki attested as follows, in pertinent part: Article 7 of the [First Agreement] provides that, if required by the laws of Ecuador (the “Territory”), [Frank’s] shall withhold from its payments to Smith any taxes that are assessed on Smith as a result of Frank’s’ payments to Smith. This provision concerns foreign withholding taxes, which are levied by governments upon revenues generated within the foreign country by out-of-country companies. In this instance, if revenues were generated in Ecuador, then a withholding tax of 25% would be assessed by the government of Ecuador on the revenues derived by the non-Ecuadorian entity to receive the income. As stated in the [First Agreement], Smith and [Frank’s] are both U.S. companies. No part of the [First Agreement] is to be performed anywhere other than in the U.S. It is my understanding that [Frank’s] (the U.S. company) provided the consigned tools to its wholly-owned subsidiary in Ecuador, [Frank’s-Ecuador]. Under these circumstances, [Frank’s] (the U.S. company) and [Frank’s-Ecuador] would be the two companies engaging in activity in and payments out of Ecuador, not Smith. Any foreign tax assessment would have been imposed on [Frank’s], not Smith. (Emphasis added.) Specifically, Frank’s challenges the emphasized language “it is my understanding that” and “would have been imposed on” as speculative and con-clusory, and thus incompetent to support summary judgment. Generally, a statement of subjective belief, which is not supported by other summary judgment proof, is insufficient. Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 122 (Tex.1996). Statements must be “so direct and unequivocal that perjury could be assigned against the affi-ant if the statement is false.” Draper v. Garcia, 793 S.W.2d 296, 300 (Tex.App.-Houston [14th Dist.] 1990, no writ). An affidavit stated in terms of the affiant’s “understanding” of the “circumstances” or what “would” happen constitutes mere speculation and has no probative force. See Drennan v. Community Health Inv. Corp., 905 S.W.2d 811, 821 (Tex.App.Amarillo 1995, writ denied). In addition, conclusory statements in affidavits are not competent evidence to support a summary judgment. Rizkallah, 952 S.W.2d at 589. A conclusory statement is one that does not provide the underlying facts to support the conclusion. Id. at 587. The statement of Kosicki’s subjective belief, that his “understanding” was that Frank’s was actually supplying tools to Frank’s-Ecuador and that, “under these circumstances,” a tax “would have been imposed on Frank’s” are statements of Kosicki’s opinions about a hypothetical sce *567 nario. As Frank’s contends, Smith does not unequivocally, as is required, state what the circumstances were as a matter of fact. See Draper, 793 S.W.2d at 300. The issue then becomes whether Ko-sicki’s assertions are supported by other factual statements in his affidavit that are sufficient to support Smith’s burden of proof. See Rizkallah, 952 S.W.2d at 588. Kosicki does not unequivocally attest to any facts that support his conclusion that the income Smith received from the rental of its tools in Ecuador was not subject to Ecuadorian tax law. 8 Smith’s other summary judgment evidence, namely, the Agreement, demonstrates that the clear purpose of the Agreement between Frank’s and Smith, which is entitled “Overseas Consignment and Servicing Agreement Ecuador,” was to generate a stream of revenues from Ecuador, of which 80 percent of rental revenues, 90 percent of parts, and 50 percent of services flowed back to Smith in the United States. Article 7 of the Agreement states in pertinent part that all payments owed to Smith would be timely tendered, “provided that, if required by the applicable law of the Territory [Ecuador], [Frank’s] shall withhold such taxes assessed on [Smith] as a result of such payments.” Had the parties contemplated that “[n]o part of the Agreement [was] to be performed anywhere other than in the U.S.,” as Kosicki attests, this portion of Article 7 would be meaningless. Further, Article 8, which provides in pertinent part that “each of [Smith] and [Frank’s] shall be responsible for its respective taxes that may be assessed upon [sic] as a result of the income derived by each pursuant to this Agreement, whether such taxes are assessed or imposed by the government of [Ecuador] or by any other governmental body or agency,” also demonstrates that the parties contemplated that taxes may be imposed on Smith based on the income it derived under the Agreement in Ecuador. Smith’s evidence does not demonstrate that Frank’s’ withholding of certain sums from its payments to Smith to satisfy taxes owed to the government of Ecuador, as contemplated under the Agreement, constituted a breach of the Agreement. Hence, Smith’s summary judgment evidence is insufficient to support summary judgment on Smith’s breach of contract claim. In its motion for rehearing, Smith contends that, even if Kosicki’s affidavit is insufficient, the affidavit that Frank’s appended to its response to Smith’s motion for summary judgment, that of Frank’s’ Chief Financial Officer, Mark Margavio, is sufficient evidence of breach to support summary judgment on Smith’s breach of contract claim. Frank’s did not move for summary judgment on the element of breach. However, when, as here, both sides move for summary judgment and the trial court grants one motion and denies the other, we review the summary judgment proof presented by both sides and determine all questions presented. See Old TJC Co., 177 S.W.3d at 430. In his affidavit, Margavio attests that “Ecuadorian law (First Title — Income Tax, Section II — Withholding Tax for Payments Outside the Country, Article 105)” provides in pertinent part as follows: *568 Those who send, pay or credit on earned taxable income, either directly, by means of compensation or with intercession of commercial firms either to national or foreign firms or other intermediary, must retain and pay 25% on the taxable part of the respective payment or credit in account. Margará) attests that, as required, Frank’s and Frank’s-Ecuador were “obligated and did charge to end users of [Smith’s] tools [Smith’s] rental rates and charges, which were collected for [Smith] and remitted to [Smith] and in part to the government of Ecuador.” In addition, Margará attests that, pursuant to the Ecuadorian law cited, which imposes a withholding tax on payments to foreign firms on income earned in Ecuador, Frank’s retained 25 percent of its payment to Smith as taxes and submitted such taxes directly to the government of Ecuador. Margará further attests that Frank’s made 18 payments to Smith from January 2003 to March of 2004 and that these payments reflected withholding for taxes and commissions owed to Ecuador; that Smith did not object that such payments constituted partial payments; and that, of the $207,875.02 currently being sought by Smith, $205,527.04 was paid to the government of Ecuador and $2,347.98 was paid in commissions to “IPM.” Margará attests that Frank’s is not delinquent in the payment of any amount to Smith and has paid in full all balances owed. Smith has not shown that Margavio’s affidavit constitutes evidence that Frank’s breached the Agreement by withholding taxes from the amounts paid on Smith’s invoices. In sum, we conclude that Smith has failed to meet its burden to prove that it is entitled to summary judgment as a matter of law on each element of its cause of action. See MMP, 710 S.W.2d at 60; Rizkallah, 952 S.W.2d at 589. Accordingly, we sustain Frank’s’ second sub-issue. CONCLUSION We overrule Frank’s’ first sub-issue, that there was not a valid agreement in existence to support Smith’s breach of contract claim, because Frank’s failed to meet its burden to conclusively show that any rights Smith had to recover for a breach that occurred prior to the cancellation of the First Agreement were extinguished by the cancellation. We sustain Frank’s’ second sub-issue, that Smith failed to meet its burden to prove that it is entitled to summary judgment as a matter of law on each element of its cause of action. Having sustained Frank’s’ second sub-issue, we do not reach the remaining issues presented on appeal. We reverse the trial court’s judgment and remand for further proceedings. Footnotes [1] The trial court granted Frank’s’ motion for summary judgment on Smith’s conversion claim. Smith’s conversion claim is not at issue in this appeal. [2] We are aware that the trial court granted, in part, Frank’s’ cross-motion for summary judgment by dismissing Smith’s conversion claim and that the record does not contain a denial of Frank’s’ motion as it concerns Smith’s breach of contract claim. In some cases a ruling can be implied. See Tex.R.App. P. 33.1(a)(2)(A). Here, both Smith's and Frank’s' motions addressed the same issue, i.e., both argued the existence of a valid contract. After the trial court granted summary judgment for Smith, it awarded damages, including interest and attorneys’ fees, to Smith. The trial court’s judgment states that it disposed of all parties and issues in the case. This is evidence that the trial court found no fact issues and resolved the matter of the existence of a valid contract in favor of Smith. Such a ruling in Smith's favor necessarily denied Frank’s’ motion on the same issue. See Salinas v. Rafati, 948 S.W.2d 286, 288 (Tex. 1997). [3] Because the trial court implicitly denied Frank’s’ motion for summary judgment on the breach of contract claim, we apply the standard of review applicable to cross-motions for summary judgment. Generally, we do not have jurisdiction to hear the denial of a motion for summary judgment on appeal. Ackermann v. Vordenbaum, 403 S.W.2d 362, 365 (Tex. 1966). However, an exception applies when, as here, the trial court has denied one motion and has granted the other, resulting in a final judgment. Commn’rs Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997). [4] Smith and Frank’s-Ecuador presently conduct business with one another under the Second Agreement. According to Frank’s, Frank’s-Ecuador currently withholds a portion of Smith’s invoices to satisfy Smith’s tax obligations to Ecuador — without dispute from Smith. [5] See Tex. Bus. & Com.Code Ann. §§ 1.101— 48.102 (Vernon 1994 & Supp.2006). [6] The First and Second Agreements provide that the laws of Texas and the United States govern the interpretation and the enforcement of the agreements. The parties expressly agreed that the U.N. Convention on Contracts for the International Sale of Goods does not govern the matters set forth in the agreements. [7] Frank’s raises a defect in substance that may be raised for the first time on appeal. Mathis v. Bocell, 982 S.W.2d 52, 59 (Tex. App.-Houston [1st Dist.] 1998, no pet.); see also AIC Mgmt. v. Baker, No. 01-02-01074-CV, 2003 WL 22724629, at *1-2 & n. 1 (Tex. App.-Houston [1st Dist.] Nov. 20, 2003, pet. denied) (mem. op.). [8] With respect to Ecuadorian tax law, neither Smith nor Frank’s attempts to meet the requirements of Texas Rule of Evidence 203, which governs the determination of the laws of foreign countries. See TexR. Evid. 203. Rather, Smith contends that the laws of Ecuador simply do not apply to Smith.