## Facts

- European Import Co., Inc. (“European”) operated package liquor stores in Houston and purchased alcoholic beverages and related merchandise from Lone Star Co., Inc. (“Lone Star”), a liquor wholesaler, during 1974.
- Rose Marie Bagnoli was European’s president and a major shareholder. While European was in financial trouble, she hired Dr. William L. Blachman to help manage and revive the business.
- Disagreements later developed within European over operational control, including who could place purchase orders with suppliers such as Lone Star.
- Lone Star delivered liquor and merchandise to European pursuant to orders placed during this period, including transactions connected to Blachman’s dealings with Lone Star.
- Lone Star was not paid and offered unpaid invoices totaling $98,621.99, along with testimony from a Lone Star employee explaining the invoices and Lone Star’s billing and accounting procedures.
- Lone Star sued European on a sworn account for the unpaid invoices and also sued Bagnoli individually based on a written personal guaranty of European’s indebtedness.
- European filed a sworn denial and asserted a counterclaim seeking damages and statutory penalties for alleged violations of the Texas Liquor Control Act.
- Bagnoli denied executing the guaranty, and alternatively asserted that her signature was obtained by fraud and duress.
- After a jury trial on special issues, the jury found for Lone Star on the account and on the guaranty, and rejected European’s counterclaim. The trial court entered judgment for Lone Star.
- European and Bagnoli appealed.

## Issues

1. Whether the evidence was legally and factually sufficient to support the jury’s finding that European owed Lone Star $98,621.99 for goods sold and delivered.
2. Whether European was bound by the transactions with Lone Star on the theory that Blachman had authority (actual or apparent) to contract and place orders on European’s behalf.
3. Whether Bagnoli executed a personal guaranty, and if so, whether fraud or duress rendered the guaranty unenforceable.
4. Whether European proved Texas Liquor Control Act violations that entitled it to penalties or damages, or that defeated or reduced Lone Star’s recovery.

## Decision

- The court held the invoices and explanatory testimony provided sufficient evidence to support the jury’s finding on the amount due and European’s liability for the account.
- The court upheld the determination that European was bound by the transactions because the evidence supported a finding that Blachman had authority to act for European in dealing with Lone Star.
- The court affirmed enforcement of the personal guaranty against Bagnoli, concluding the evidence supported the jury’s findings and did not establish actionable fraud or legal duress.
- The court affirmed the take-nothing judgment on European’s Liquor Control Act counterclaim because European did not prove a basis for statutory penalties or damages that would offset or bar Lone Star’s claim.
- The court modified the judgment in a limited manner as to form and otherwise affirmed the judgment.

## Legal Principles

- When a defendant files a sworn denial in response to a sworn account, the plaintiff must prove the account as in an ordinary suit on an open account; invoices and testimony from a knowledgeable witness may support a finding that goods were sold and delivered and establish the amount owed.
- A principal may be bound by contracts made by an agent acting with actual authority, and may also be bound when the principal’s conduct creates apparent authority on which a third party reasonably relies.
- A written guaranty is enforceable according to its terms if executed by the guarantor; whether it was executed and whether defenses apply are generally fact questions for the jury when evidence conflicts.
- Fraud requires proof of a material misrepresentation (or other actionable conduct), reliance, and resulting injury; allegations unsupported by evidence will not defeat a guaranty.
- Duress requires a wrongful act or threat that destroys free agency; financial distress or hard bargaining, without wrongful compulsion by the other party, is not legal duress.
- A counterclaim for statutory penalties or damages under the Texas Liquor Control Act requires proof of the statutory basis for recovery; alleged regulatory violations do not automatically cancel liability for goods delivered.

## Conclusion

The court of appeals upheld Lone Star’s recovery for $98,621.99 on its account against European and enforced Bagnoli’s personal guaranty, concluding the evidence supported the jury’s findings that European was bound by Blachman’s authority and that fraud, duress, and Liquor Control Act theories did not defeat Lone Star’s claim; the judgment was modified only as to form and otherwise affirmed.


European Import Co., Inc. v. Lone Star Co., Inc., 596 S.W.2d 287 (1980)