American Petrofina Co. of Texas v. D & L Oil Supply, Inc.

• Jurisdiction: Oregon
• Parties: AMERICAN PETROFINA COMPANY OF TEXAS, a corporation, Appellant-Cross-Respondent, v. D & L OIL SUPPLY, INC., a corporation, and Theodore Kightlinger and Mildred Kightlinger, husband and wife, Respondents-Cross-Appellants. TC 78638; SC 25059.
• Citation: American Petrofina Co. of Texas v. D & L Oil Supply, Inc., 583 P.2d 521, 283 Or. 183 (Or. 1978)
• Court: Oregon Supreme Court
• Decision Date: 01 August 1978

Page 521

583 P.2d 521

283 Or. 183

AMERICAN PETROFINA COMPANY OF TEXAS, a corporation Appellant-Cross-Respondent, v. D & L OIL SUPPLY, INC., a corporation, and Theodore Kightlinger and Mildred Kightlinger, husband and wife, Respondents-Cross-Appellants.

TC 78638; SC 25059.

Supreme Court of Oregon, Department 1.

Argued and Submitted Jan. 12, 1978.

Decided Aug. 1, 1978.

[283 Or. 184-A] David A. Rhoten, Salem, argued the cause for appellant-cross-respondent. With him on the brief were Rhoten, Rhoten & Speerstra and Don A. Dickey, Salem.

Thomas B. Brand, Salem, argued the cause for respondents-cross-appellants. With him on the brief were Brand, Lee, Ferris & Embick, Richard D. Lee and D. Erik Larson, Salem.

Before DENECKE, C. J., HOWELL and LENT, JJ., and GILLETTE, J. Pro Tem.

LENT, Justice.

This is an action at law arising out of a series of disputes between a supplier of petroleum products, American Petrofina Company ("Fina"), and a regional distributor, D & L Oil Supply, Inc. ("D & L"), which has its place of business in Salem. The case was tried to the court without a jury. The major problem on appeal involves Fina's obligations to D & L under a price support agreement. Fina's appeal challenges the sufficiency of the evidence to support the trial court's judgment for D & L in this and other particulars. ¹ We view the evidence in the light most favorable to D & L, and must affirm the trial court's judgment unless we can say there was no evidence to support it. See Hendrix v. McKee, note 1 Supra, 281 Or. 123, 126, 575 P.2d 134.

In March of 1971 the parties entered into a written agreement, entitled a "Distributor Sales Contract," under which Fina agreed to sell and D & L agreed to buy gasoline and other petroleum products. The price support dispute concerns the sale of gasoline only. Although the contract did not specify a price per gallon, it is undisputed that throughout the period involved in this case the base price to be paid by D & L was $0.1465 per gallon for regular gasoline and three cents more per gallon for premium.

The written contract does not refer to price support, but at the time it was executed the parties orally agreed that Fina would, under certain circumstances, furnish price support. They are now in sharp disagreement about the terms of that oral agreement. Fina did furnish some price support, but not the amount to which D & L claims it was entitled. Further background information will help to clarify the parties' contentions.

D & L, from its Salem location, supplied a number of independent retail service stations in the Willamette Valley and on the coast. In order to remain competitive as independent service stations, these retail dealers had to sell gasoline to the public at a price lower than that being charged by the major brand service stations in their trading areas. In order to supply gasoline to these stations at a price which would permit them to maintain their competitive status as independent stations, D & L looked to the price support to be furnished by Fina.

For pricing purposes, Fina and D & L divided the area served by D & L into a number of zones. The price support furnished by Fina on a particular purchase of gasoline depended on the price situation in the zone to which that gasoline was to be delivered and where it was to be sold by a given retail station. The rate of price support furnished during a given period for a particular price zone was tied to the retail price of major brand gasoline. Fina, shortly after the initial agreement, provided D & L with a schedule for price support (which Fina calls a "Competitive Price Allowance" or "CPA") from which the following figures are excerpted:

Major Retail   CPA   Net Jobber Price
                ------------  -----  ----------------
                    .369       -0-        .1465
                    .359      .0025       .1440
                    .349      .0075       .1390
                    .339      .0125       .1340
                    .329      .0175       .1290
                    .319      .0225       .1240
                    .309      .0275       .1190
                    .299      .0325       .1140
                    .289      .0375       .1090
                    .279      .0475       .0990
                

This schedule refers to prices for regular gasoline. The price to be paid by D & L for premium gasoline was three cents per gallon more than it paid for regular under the same circumstances. Although regular and premium were accounted for separately, the same amount of price support was to be furnished for premium gasoline as was furnished for regular at a given time in a given zone.

As can be seen from the schedule, when the "major retail" price for regular gasoline dropped below $0.369 per gallon, Fina was to furnish price support. The net price to D & L can be determined at any given "major retail" price by determining the agreed amount of price support per gallon ("CPA") from the schedule and subtracting that figure from D & L's base price of $0.1465. The result of this calculation is shown in the schedule as the "Net Jobber Price."

The dispute concerns the meaning of the term "Major Retail" in this schedule and how it was to be determined. Fina's position is that the existence and amount of price support for gasoline furnished for sale in a particular zone was to be determined with reference to the "protected price" at two or more major oil company service stations within that zone. "Protected price" apparently means a retail price at which the major oil company would provide its dealers with price support sufficient to permit them to maintain their customary profit margin. ² Fina personnel testified that company policy was to provide price support based only on the protected price of two or more major companies with stations in the pricing zone. They did not explain how the amount of price support would be determined if two or more major companies were supporting their dealers but at different prices.

D & L's version of the oral agreement was that price supports were to be based, according to the above schedule, on the lowest retail price actually charged for regular gasoline by any major brand station within the price zone. The trial court accepted D & L's position, and there was evidence to support it. Mr. Kightlinger, the owner of D & L, testified that the oral agreement was that price support would be furnished with reference to the lowest price charged by a major station within the zone, and that he and Fina's representative had never discussed any requirement that the major retail price which would trigger the price support had to be a "protected" price. D & L personnel regularly surveyed the retail prices charged at other stations in the various zones and reported this information to Fina when requesting additional price support. There was, of course, evidence which contradicted Mr. Kightlinger's version of the agreement. However, the trial court as finder of fact was entitled to believe Mr. Kightlinger. We may not reweigh the conflicting evidence. Hendrix v. McKee, supra at 125-26, 575 P.2d 134.

Fina also contends that there is no evidence to support the trial court's determination of the amount of damages to which D & L was entitled as a result of Fina's failure to credit D & L's account with price support in the agreed amounts. We conclude that, although there was evidence of damage, the evidence does not support the method of calculation adopted by the trial court; therefore, the case must be remanded for a proper determination of damage.

The method of calculation proposed by D & L, and adopted by the trial court, was to determine, on a day-by-day basis, the amount of price support per gallon which Fina should have provided for each price zone, and to multiply that figure by the number of gallons of gasoline sold by stations in that zone while that level of price support should have been in effect. In that way the total amount of price support which D & L contended that Fina should have paid was calculated, and from the total thus obtained the amount of support actually paid during the contract period was subtracted.

There is evidence to support D & L's figures as to the amount of support per gallon which Fina should have provided according to D & L's version of the agreement, and there is no dispute about the amount actually paid. The difficulty involves the determination of the number of gallons to which the price support figure, which varied considerably over time and also among the various zones, was to be applied.

All of the oral and documentary evidence establishes that between April 1971, when deliveries under the contract began, until November 30, 1971, when a change in accounting methods was made, the price support program was implemented by reducing the invoice price of each truckload of gasoline purchased by D & L according to the destination shown for that load on the bill of lading. The evidence also establishes that during this period D & L did not provide Fina with gallonage sales figures for the various stations which it supplied. Frequently the destination indicated on the bill of lading was Salem, where D & L maintained its storage facilities, but some or all of that gasoline was later delivered by D & L to retail stations in other price zones where a different level of price support might be in effect.

Prior to December 1, 1971, there was never any attempt by the parties to account for the amount of gasoline sold in each price zone by any means other than the designation of destination of each load on the bill of lading. The only reasonable inference is that the parties agreed that those designations would be the basis for the price support calculations.

After December 1, 1971, Fina required, and D & L furnished, meter readings from the various stations supplied by D & L, and price support amounts were determined with reference to the gasoline actually sold in each price zone during a given period. The evidence does not, however, support a damages calculation based on the assumption that this same method of accounting was in...