Shell Oil Co. v. Stiffler , 87 Utah 176 ( 1935 )

The plaintiff, Shell Oil Company, brought this action against the defendants M. Ernest Stiffler and Edith Stiffler upon what is denominated in the pleadings, a "lease and consignment contract" and "service station lease." By the terms of the "service station lease" defendants leased to the plaintiff certain premises in Ogden City, Utah, upon a rental of $35 per month and 1 cent per gallon for each gallon of gasoline purchased from the Shell Oil Company over and above 3,500 gallons during such month. By the terms of the "lease and consignment contract" the Shell Oil Company subleased to the defendants, M. Ernest Stiffler and Edith Stiffler the same premises and appointed the Stifflers "agent" with the authority specified and limited in the contract. The agent was to conduct an authorized filling station for Shell products. The Shell Oil Company was to deliver and keep on consignment such quantities of gasoline and other motor fuel as the company may determine to be sufficient to meet the requirements for sales at the service station. The agent was to be responsible for all gasoline and other motor fuel delivered. The agent was to sell to cash customers at the retail price established by the company, pay all operating expenses, buy exclusively from the company, and do and perform a number of things, some further of which will be referred to later in this opinion.

Both documents evidencing the contract were prepared by the plaintiff, signed at one time, and will be treated as a single contract, and, except when separately referred to, will be referred to as the lease consignment service station contract. The rent was based upon the quantity of gasoline sold. Even the basic rent appears to be closely related to or based upon what, in the judgment of the parties, would be the minimum quantity of gasoline sold per month. The parties, except when referred to by name, will be referred to as plaintiff and defendants, respectively, except the American Petroleum Company, which company, when referred to, will be designated by name or as the corporate defendant.

From defendants' statement of the case, it appears the plaintiff seeks to enjoin the defendants Stiffler from purchasing or selling gasoline except such as is furnished by plaintiff. The controversy arises over what the parties refer to as "third structure" gasoline, or gasoline also referred to as "Green Streak Gasoline." Plaintiff's complaint is based upon the "lease and consignment contract." By answer, defendants interposed certain defenses, and by counterclaim sought to recover damages for breach of the contract. To meet this countercharge, plaintiff by reply set up what is referred to as a "waiver" or modification of the terms of the original contract.

Plaintiff and appellant asserts that every material fact involved in the cause is either admitted in the pleadings and stipulated by counsel in open court or is established by evidence free from conflict; and that the crux of the controversy turns upon the construction to be placed upon the written contracts between the plaintiff Shell Oil Company and defendants M. Ernest Stiffler and his wife, Edith Stiffler. Defendants do not controvert the statement. This eliminates all questions relating to evidence admitted or excluded over objection.

The corporate defendant, American Petroleum Corporation, may be disregarded, as judgment of the trial court was in favor of all the defendants, and the corporate defendant has not appealed, and neither party to the appeal has discussed any matters by which the corporate defendant is affected.

Certain equipment, such as gasoline pumps, gasoline storage tanks, oil and grease containers, and some incidental equipment, was furnished by the plaintiff. The defendants were to buy exclusively from the plaintiff and

"keep in stock for sale at said service station under the Company's trade marks and trade names adequate quantities of such lubricating oils, greases and other petroleum products as are marketed by the Company."

In so far as compensation, price, or other reference to what was to be paid or received is concerned, aside from the $35 per month rent and 1 cent per gallon above 3,500 gallons per month and the sale of oils and greases, the only reference to recompense is that the plaintiff company shall allow certain commissions on the gasoline sold. Whether the defendants were to receive a commission, or on what basis the oils and greases were to be sold or what profit was to be taken, does not appear, except defendants were to pay plaintiff "the Company's wholesale prices, unless otherwise stipulated by separate written contract, payment to be cash on delivery," and they were to exercise due diligence to promote and increase the sale of the company's products.

The parties operated under the arrangement without controversy from September 1, 1931, until the early part of February, 1932. At that time the plaintiff began to market what is called a new type or "third structure" gasoline, called "Green Streak." The "Green Streak" gasoline handled by the plaintiff in Utah was acquired by it from the Utah Oil Refining Company. The plaintiff declined to sell or supply defendants with the third structure or "Green Streak" gasoline as claimed by defendants upon two grounds: (1) That it was not included within the terms of the contract; and (2) that it was not gasoline.

The defendant M. Ernest Stiffler had presented to him by plaintiff what has been referred to as a waiver, modification or a supplemental contract and was advised that unless it was signed and accepted the plaintiff would not deliver to defendants any "Green Streak" or "third structure" gasoline. For a period defendants refused to sign the waiver or modification agreement and thereupon found that the cheaper grade or "Green Streak" was taking the market and defendants' business was dwindling. Finally, "under protest," as defendant M. Ernest Stiffler puts it, he alone signed the document which was in the form of a letter addressed to M. Ernest Stiffler and reads:

"San Francisco, Cal. "Ogden, Utah, February 15, 1932.

"M. Ernest Stiffler, 23rd Adams Avenue, Ogden, Utah.

"Dear Sir: We are about to commence the marketing of a third structure gasoline.

"This will confirm our mutual agreement that if any of such gasoline is delivered to you by us it shall not be deemed to have been delivered to you on consignment in pursuance of the Consignment Contract between us dated September 1st, 1931, but for all such gasoline which we may deliver to you, you will pay us in cash on delivery, our dealer net tank truck price for that grade of gasoline as posted on the date of delivery at our depot at Ogden, Utah, including all Motor Vehicle Fuel Taxes. We reserve the right to decline to deliver any of said gasoline to you at any time.

"Nothing herein contained shall be construed to impair the continued force and operation of the above mentioned Consignment Contract or of any valid supplement or modification thereof, but the same shall not be applicable to the delivery of third structure gasoline.

"No third structure gasoline delivered by us to you shall be taken into consideration in computing the amount of any rental or other periodical payment payable by us under any lease, or other agreement, of whatsoever nature with you.

"Please endorse a confirmation of your agreement with the foregoing on one copy of this letter, which is handed you in duplicate, and return to us the copy so endorsed.

"Yours very truly,

"AMD: DR H Shell Oil Company "AH S.A. Dibble."

"Confirmed and agreed to M.E. Stiffler."

The defendants continued to purchase "Green Streak" gasoline from the plaintiff until about the middle of April, 1932, when by arrangement with the plaintiff, defendants secured the delivery of "Green Streak" from a Mr. E.A. Peterson who had a favorable contract with plaintiff whereby he was able to and did, according to an understanding with plaintiff, deliver "Green Streak" gasoline to defendants so defendants had the same margin as provided in the original "lease consignment service station contract." This arrangement soon terminated and Mr. Stiffler again demanded delivery of "Green Streak" gasoline by the plaintiff under the terms of the "lease consignment service station contract." The plaintiff company declined to deliver. The defendants then began to purchase third structure or a cheap grade of gasoline from the American Petroleum Corporation. The gasoline purchased from that corporation was delivered by it and put into one of the gasoline tanks belonging to plaintiff on the leased premises. This gasoline was sold by defendants from the tank and by way of the pump, the property of the plaintiff, to the retail trade — the trade always being advised that such gasoline was not a product of the Shell Oil Company. The pump from which the gasoline purchased from the American Petroleum Corporation was sold, upon which the "Shell" name appeared, was painted over by defendants in an attempt to obliterate the name.

The trial court heard the evidence and refused to grant plaintiff any relief, granted the personal defendants judgment for damages on their counterclaim and directed plaintiff to specifically perform under the terms of the "lease consignment service station contract" of September 1, 1931.

The granting or refusal of an injunction, whether temporary or permanent, as a general rule rests in the sound discretion of the court under the circumstances and 1 facts of the particular case. This court has quoted from the case of Chambers v. Livermore, 15 Mich. 381, 388, and approved the following:

"Specific performance, even of a binding contract, is not a matter of right; and a court of equity will refuse it, and turn the complainant over to his remedy at law, if not clearly satisfied that it embodies the real understanding of the parties." Swanson v. Sims, 51 Utah 485, 496, 170 P. 774, 777.

The record discloses facts and circumstances such that the application for injunctive relief, requiring defendants to desist from purchasing gasoline from any one other than plaintiff, is addressed to the conscience of the chancellor, and discloses such a situation that the chancellor "may, in the exercise of a sound discretion, either grant the prayer or deny 2 it, as the facts and circumstances of the case may seem to require." Melrose v. Low, 80 Utah 356,360, 15 P.2d 319, 320. This was done. It therefore follows that the judgment, in so far as it denied injunctive relief to the plaintiff, must be affirmed.

The trial court further entered judgment that the complaint of the plaintiff be dismissed upon the ground that plaintiff had no cause of action for injunctive relief. Injunctive or general equitable relief being the only relief sought by plaintiff, we are of the opinion there was no error in dismissing plaintiff's complaint.

The court, however, upon the counterclaim of defendants Stiffler granted their prayer, which was in the alternative either for specific performance or cancellation of the contract, to the extent of requiring specific performance and for damages. This situation presents more difficulty. The plaintiff's complaint was upon the "consignment service station contract." As hereinbefore stated, there were two documents but are herein, except when otherwise separately referred to, regarded as a single contract and we think should be so construed. In substance and effect it was a contract whereby the company agreed to sell and deliver all gasoline and other motor fuel, lubricating oils, greases, and other petroleum products marketed by the plaintiff company to the defendants Stiffler in such quantities as to be sufficient to meet the requirements for sales at the service station, which the defendants agreed to operate for a period of five years. The defendants also agreed during the life of the agreement to buy exclusively from the company and keep in stock for sale at the service station the petroleum products of the company. There were other provisions as to rents, description of premises, records, agency, diligence in operation, inspection, etc.

The proposition contained in the contract and upon which the construction of the contract turns, as maintained by both parties, revolves about the question of recompense or compensation the defendants were to receive for the operation of the service station for the exclusive purpose of marketing the petroleum products of plaintiff. As 3 heretofore indicated, the trouble arose as to whether the so-called "Green Streak" gasoline was included in the original contract. Plaintiff maintains that it was not. Defendants maintain it was. Plaintiff's manager, when the question first arose, stated he was advised to tell service station operators that "Green Streak" was not gasoline. They were then told "Green Streak" was not included in the contract. In an attempt to settle the matter, the plaintiff requested the signing of the modification agreement hereinbefore quoted, and refused to deliver gasoline under the contract to defendants unless the modification for exclusion of "Green Streak" and other provisions affecting compensation and payments were agreed to.

We are of the opinion the "lease consignment service station contract" by its terms reveals the intent of the parties was to include "Green Streak" gasoline as one of the "petroleum products marketed by Company." Notwithstanding what may have been said to the contrary, the record clearly discloses that it was gasoline; that it was a petroleum product; that it was a motor fuel; and that it was marketed by the plaintiff company. Paragraph 6 of the contract provides, among other things, that:

"To recompense the Agent for the Agent's expenditures herein contemplated and as compensation to the Agent (the ``Agent' refers to the defendants), the Company shall allow the Agent commissions as follows:

"(a) On each gallon of gasoline of Company's commercial gasoline sold 3c.

"(b) On each gallon of Company's Super Shell or specially blended gasoline or motor fuel sold 3c."

Plaintiff company argues that the contract provided for delivery and sale of but two brands or types of gasoline, viz., "Commercial" gasoline and "Super Shell" gasoline. Had it been the intention of the parties to so limit the products to be handled the plaintiff who drew the contract and against whom it must be most strongly construed [Continental Oil Co. et al. v. Fisher Oil Co. 4 (C.C.A.) 55 F.2d 14] could have limited the description to such brands as were known on the market by the specific trade names. It did not choose to do so. It would appear that the intention and purpose of the contract was to require the defendants to handle all petroleum products marketed by the company, and in order to bind defendants accordingly not only mentioned "commercial" gasoline and "Super Shell" gasoline, but also "specially blended" gasoline or "motor fuel" sold.

Because of the record as to the nature and character of "Green Streak" gasoline there would scarcely seem to be ground for argument, let alone the question of construction. The facts warrant the conclusion that such was the intention of the plaintiff when the contract was made. Plaintiff, by the express terms of the contract, was willing to bind itself to deliver to the defendants "all petroleum products marketed" by it. The construction put upon the contract by the trial court was correct. No error was committed in construing the lease and consignment contract to require the company to supply the "agent" with "Green Streak" gasoline.

We are thus brought to the question of the effect, if any, of the alleged modification agreement upon the status of the parties to the original "lease consignment service station contract." The action was brought upon the original contract which, if unmodified by Mr. Stiffler's signing in approval of the contents of the letter above quoted, was in full force 5 and effect and would be breached at the time the plaintiff company refused to deliver "Green Streak" gasoline to defendant. If the signing of the letter modified the original contract, then what is the status of the parties? The complaint pleaded an unmodified contract. The allegations of the answer and counterclaim caused the plaintiff by reply to plead the alleged modification contract signed by Mr. Stiffler. The lease consignment service station contract is joint in all of its terms and contemplates joint performance by the parties thereto. There are no several or joint and several provisions therein.

Subject to certain exceptions not present in the instant case, M. Ernest Stiffler, one of the joint promisors in the lease consignment service station contract, had no power to effect a modification of the contract without the consent of his joint promisor. There are neither pleadings nor proof that Edith Stiffler had consented to any modifications of the contract or by conduct or otherwise had consented thereto. There was no waiver or modification or estoppel as to both parties. Nothing is shown to make M. Ernest Stiffler the agent of Edith Stiffler to work a surrender of her right to performance of the contract as originally drawn.

It would seem to be fundamental that if the plaintiff company desired a modification of the contract or a waiver of any of its terms it was the duty of the plaintiff to secure assent thereto by all parties affected, otherwise abide by the contract as made.

There was no consideration moving from the plaintiff company to the defendants for the alleged modification or waiver of the provisions of the contract. Defendants contend that the supplemental agrement of May 13, 1932, is without legal force or effect because it is not supported by any 6 consideration. Appellant contends that there was ample consideration. Section 75 of the Restatement of the Law of Contracts defines consideration thus:

"(1) Consideration for a promise is (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification or destruction of a legal relation, or (d) a return promise.

"(2) Consideration may be given to the promisor or to some other person. It may be given by promisee or by some other person." (Subdivision 2 is quoted not for applicability, but for complete statement of the definition.)

The case of Prye v. Kalbaugh, 34 Utah 306, 97 P. 331, 334, is cited by appellant as supporting the definition quoted from the Restatement of the Law of Contracts, supra. Also the case of Utah National Bank v. Nelson, 38 Utah 169,111 P. 907. In the former case the contract related to the sinking of a well for a specified sum, provided no rock formation was encountered. Rock formation, however, was encountered. It was then agreed that the work should proceed and that a reasonable compensation in addition to the originally stated compensation should be paid. It was held that after the work had been commenced the parties altered the contract, and that the plaintiff was entitled to recover the reasonable value for his work subsequently performed. The court in effect found and held that the modified contract was a new contract, and in passing upon the question of consideration, said:

"A new contract must, of course, have a consideration. But it is not essential that it should be ``a new or additional consideration' in the sense as was requested [referring to an instruction]. If the original contract is still executory on both sides either in whole or in part, and the parties in forming a new contract waive or release any liability created by the original contract, such waiver is a consideration for the promise of the party whose liability is thus released."

In the instant case the contract is executory on both sides. Here ends the analogy as well as the application of the rule to the case before us. Here no attempt was made to create a new contract, nor was one created. No waiver or release of a liability was made nor contemplated by the plaintiff in the alleged modification agreement. No consideration can be found bringing this case within the rule of the Prye-Kalbaugh Case above cited.

In the case of Utah National Bank v. Nelson, supra, the question arose over a consideration for a promissory note given to the bank at the request of a third party. The case falls within the second subdivision of the definition as given in the Restatement, supra. A number of the cases are collected and analyzed in the Utah National Bank v. Nelson Case.

Applying the definition of consideration, as above quoted from the Restatement of the Law of Contracts, as rigidly as may be, can it be said that the plaintiff promised anything — can there be found an act, a promised act, a forbearance — can there be discovered the creation, the modification or destruction of a legal relation? What return promise or bargain did the plaintiff bargain or bind itself to give in exchange for the claimed waiver, relinquishment, surrender of a right, or a promise on the part of the defendants? No additional act, not even a promise to act, other than or different from that found in the original agreement, can be found in the alleged modification agreement not found in the original agreement. There is no forbearance on the part of the plaintiff.

It is argued by appellant that by the provisions of the supplemental agreement the defendants were released and discharged of all duties, responsibilities, and expenses incident to the handling of the new gasoline. That they were released of the obligation of selling, storing, handling, accounting for, and maintaining the necessary facilities for disposing of the new gasoline, and the obligation to use their best efforts to promote its sale.

We are unable to make application of the argument as counsel does. The supplemental agreement provided:

"That if any of such gasoline is delivered to you by us it shall not be deemed to have been delivered to you on consignment in pursuance of the Consignment Contract between us dated September 1st, 1931, but for all such gasoline which we may deliver to you, you will pay us cash on delivery * * * We reserve the right to decline to deliver any of said gasoline to you at any time."

This statement would not seem to relieve or release the defendants from anything. If anything, it amounted to a reservation on the part of the plaintiff company either to deliver or not as it might elect and at a reduced price. To say that defendants were released of the obligation of selling and storing the gasoline is saying something not found in the supplemental agreement.

The alleged modification or supplemental agreement expressly continued in force the original contract, but attempted to make it inapplicable to third structure gasoline, yet gave to the plaintiff company the right to deliver or refuse to deliver, but required the defendants to receive, pay for, and sell the same and other petroleum products as provided in the original contract. There was no creation of a new legal relation between the parties, no destruction of the legal relation presently existing, and no modification in the sense of a changed legal status, no promise to do or refrain from doing anything the plaintiff was not already bound to do. The net result of the attempted modification of the contract was an indirect way of reducing the price of a part of the product plaintiff was bound to sell and deliver, with the privilege of selling and delivering or refusing to do so as the plaintiff might be moved or prompted to do. We are not overlooking the fact that incidentally the plaintiff was also to be relieved of applying the stipulated amount of rent to be paid on gasoline sold of the third structure grade. This does not help plaintiff's position.

It is stated in the case of Montgomery County v. New FarleyNational Bank 200 Ala. 170, 75 So. 918, that the modification of a contract of sale by merely remitting part of the price is without consideration. That mutual assent to such modification is not enough. The authorities are not in complete harmony. Many of the cases are distinguishable upon the facts. The differences arise principally out of the application of the proven facts to the law, or vice versa. A number of the cases are collected and considered by the Supreme Court of Alabama in the case ofShriner v. Craft, 166 Ala. 146, 51 So. 884, 886, 28 L.R.A. (N.S.) 450, 139 Am. St. Rep. 19. After referring to and applying the doctrine of the cases to consideration for modification of a contract, that court said:

"Other cases have gone a step further, and have held that, if one party finds himself in such a position that he cannot carry out the contract on the terms provided, and notifies the other party that he will abandon the contract unless different terms are granted, said second party has the option either to let the contract be abandoned, and depend on his action for damages, or to make the new agreement, the consideration being that he considers it worth more to him to have the benefits of the new agreement, than to recover his damages for the breach of the original contract."

The facts of the case before us do not reveal a situation such as that outlined in the above quotation. In the case from which the above quotation is taken it is further said that the class of cases to which that doctrine has been applied has reached a dangerous limit by permitting one party to be bound by his promise to another who has promised nothing beyond what he is already obligated to perform under the contract.

Plaintiff concedes that the contract reasonably construed required it to deliver petroleum products to defendants in such quantities as to fairly and fully meet the trade demands of defendants. Defendants offered in open court to perform according to the terms of the original contract, or if 7 the court thought specific performance would be a hardship upon plaintiff, to then terminate the contract entirely and leave the parties where they were before the contract was entered into. The plaintiff refused, insisting upon either cancellation of the "sub-lease-consignment" contract only or injunctive relief amounting to a requirement on the part of the defendants to specifically perform. "A court of equity is a court of conscience, and anyone appealing to or asking the aid of such court should come into it with clean hands" and be willing to do equity. Swanson v. Sims, supra. Likewise, anyone who seeks equity must be willing to do equity.

As to the question of damages, the court found specifically the quantities of gasoline sold by the defendants which were purchased from the American Petroleum Corporation after the plaintiff refused to sell defendants any "Green Streak" gasoline and upon which defendants suffered a loss of 8 two cents per gallon. This quantity was found to be 21,324 gallons during the period from April 15, 1933, to August 24, 1933. It appears from the evidence that during the first part of the month of April defendants purchased "Green Streak" from plaintiff and the last part from the American Petroleum Corporation. What quantity was bought from each does not appear. It does appear, however, that during the months of May, June, July, and the first 24 days of August, defendants purchased from the American Petroleum Corporation 19,005 gallons of third structure gasoline which defendants sold to the trade at a price which limited the profit to 2 cents per gallon, while under the contract with plaintiff, the defendants were entitled to a 4-cent margin between the purchase price and retail price. The evidence as to any damage in excess of that amount is indefinite. Judgment was entered for $418 damages. Defendants did not prove damages in excess of $380.10.

We think the judgment should be reduced to the latter amount and when so reduced should be affirmed. Such is the order. Respondents Stiffler to recover costs.

ELIAS HANSEN, C.J., and FOLLAND, and EPHRAIM HANSON, JJ., concur.