Bent v. Leemon Oil Co., Inc., 93-74349.

• Court: U.S. District Court — Western District of Michigan
• Writing for the Court: GADOLA
• Citation: Bent v. Leemon Oil Co., Inc., 849 F.Supp. 1180 (W.D. Mich. 1994)
• Decision Date: 14 April 1994
• Docket Number: No. 93-74349.,93-74349.
• Parties: Damaris BENT, Plaintiff, v. LEEMON OIL CO., INC. d/b/a RKA Petroleum Companies, Defendant.

849 F. Supp. 1180

Damaris BENT, Plaintiff, v. LEEMON OIL CO., INC. d/b/a RKA Petroleum Companies, Defendant.

No. 93-74349.

United States District Court, E.D. Michigan, S.D.

April 14, 1994.

Jamal J. Hamood, Stone & Biber, Troy, MI, for plaintiff.

Richard P. O'Brien and Marc A. Fishman, Marc A. Fishman Assoc., Southfield, MI, for defendant.

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

GADOLA, District Judge.

In November 1993, this court granted plaintiff's motion for preliminary injunction under the equitable relief provision of the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. § 2805. On January 5, 1994, plaintiff filed the instant motion for summary judgment. Defendant Leemon Oil Co., Inc. ("Leemon Oil") responded January 21, 1994. Plaintiff filed a reply (entitled "Supplemental Response" and attaching exhibits) on February 18, 1994. Oral argument was heard April 6, 1994.

I. Facts

Defendant Leemon Oil is a Michigan corporation licensed to act as a distributor of petroleum products which bear the Union 76 trademark. In June 1992, plaintiff was assigned the lease on a Union 76 minimart/gas station with a monthly rent of $3,750. The lease has a five-year term which began October 31, 1991 and expires November 1, 1996. Upon expiration, the lease by its terms is automatically renewed for a new five-year term unless thirty days written notice is given.

Both Leemon Oil and the real property subject to the lease are solely owned by Roger K. Albertie. The lease nevertheless names as the lessor, "Price/Mart Corp." In the State of Michigan, no corporate entity has obtained a certificate from the Corporations and Securities Bureau authorizing it to do business under the name Price/Mart Corp.

Subsection (a)(xv) of paragraph 14 of the lease provides that the lease shall automatically terminate if, among other enumerated events, "there occurs any circumstances under which termination of a franchise is permitted under the provisions of the Federal Petroleum Marketing Practices Act, 15 U.S.C. § 2801." By this term, as well as others, the lease clearly contemplates that it creates a franchise relationship between the parties that is subject to the PMPA.

In August 1993, plaintiff was served with a "Demand for Possession" of the premises which alleged that plaintiff owed lessor $146,250.00 in rent.¹ Plaintiff also received a thirty-day notice to quit which alleged that there was no written lease and stated as the reason for the eviction "Landlord no longer wants you as tenant." Plaintiff filed the instant action under 15 U.S.C. § 2801, et seq., alleging that defendant had breached the notification and cause for termination requirements of the PMPA.

Throughout the pendency of this action, right up until the hearing on this motion for summary judgment, defendant's defense to this action has been its claim that the lease was not subject to the PMPA because the lease was with a non-franchising entity, Price/Mart Corp., that was now doing business as Price Gasoline, Inc. Defendant's counsel initially tried to claim, without any supporting documentation, that Price Gasoline leased the premises from Albertie, the owner, and then sublet the premises to plaintiff. In addition to there being no documentation of this transaction, the lease at paragraph 4 affirmatively states that there is no underlying estate or encumbrance. In short, defendant offers no evidence or legal argument that would support a finding that the lease of the land was not an integral part of the franchise agreement between Leemon Oil and plaintiff.

Plaintiff seeks summary judgment on the ground that defendant has taken the position in state court that it and not Price/Mart Corp. or Price Gasoline, Inc. is the true lessor of the property. As evidence of this, plaintiff presents the pleading of defendant Leemon Oil which opposes plaintiff's motion to set aside a default judgment that defendant obtained from the state court in a state court action brought by Leemon Oil for the collection of unpaid fuel bills and unpaid rent. In that state court action, in which Leemon Oil, defendant herein, was the plaintiff, and Damaris Bent, plaintiff herein, was the defendant, Leemon Oil states that Damaris Bent

knows full well that the initial landlord to the underlying lease is not sic longer in existence, and that Leemon Oil is the proper party in interest ... plaintiff has, in fact, tendered her last two (2) rent payments to Leemon Oil. Leemon Oil merely chose to use the Price Mart name in the summary proceedings action for the sake of expediency. As noted by Leemon Oil's letterhead, attached as Exhibit E to this Brief and as Exhibit 3 to plaintiff's brief, both "Leemon Oil" and "Price Mart Stations" are affiliates of RKA Petroleum Companies. Accordingly, plaintiff, who has long acknowledged Leemon Oil as her landlord, should be estopped from disclaiming that relationship in a blatant attempt to establish a defense when none exists in this case.

Exhibit 7 to Plaintiff's Motion (emphasis added). Despite this clear evidence that Leemon Oil is the landlord of the premises at issue, and in fact views itself as such, defendant Leemon Oil has had the audacity to continue to argue before this court, right up until the hearing on this motion, that Leemon Oil is not the manager of the property.

Defendant admitted in its written response and at oral argument that there is not and has never been any such corporation licensed in the state of Michigan to do business as Price/Mart Corp. In its written response, defendant argues, "however, as between Mr. Albertie, the owner of the real estate, and any of the nine (9) corporations, which for economy of dollars share the same letter-head, Price Gasoline, Inc., is the managing landlord of the subject premises. Leemon Oil Co., Inc., is not engaged in any business other than the sale of petroleum." Defendant's Brief at 3-4. Finally, at oral argument, knowing full well that there was not a stitch of evidence to support its position that Leemon Oil was not the lessor, defendant's counsel conceded that Leemon Oil is the lessor of the property and that, to the best of counsel's knowledge, Price/Mart Corp. never existed.

II. Analysis

The PMPA defines a franchise as, inter alia, any contract between a distributor and a retailer, under which a distributor authorizes or permits a retailer to use, in connection with the sale of motor fuel, a trademark which is owned by a refiner which supplies motor fuel to the distributor which authorizes or permits such use. 15 U.S.C. § 2801(1)(A). Defendant Leemon Oil has admitted since the outset of these proceedings that it has a motor fuel supply agreement with plaintiff which creates a franchise relationship; the only question has been whether defendant could be held responsible for the eviction when a non-existent company named Price/Mart Corp. was named on the lease as the lessor. Defendant now admits that it is also the lessor and that the lease is within the franchise relationship.

Congress enacted the PMPA in an effort to protect "franchises from arbitrary or discriminatory termination or non-renewal of their franchises." Brach v. Amoco Oil Co., 677 F.2d 1213, 1216 (7th Cir.1982), quoting S.Rep. No. 95-731, 95th Cong., 2d Sess. 15, reprinted in 1978 U.S.Code Cong. & Ad. News 873, 874 ("Senate Report").

The franchise relationship in the petroleum industry is unique in that the franchisor commonly not only grants a trademark license and supplies the products but also leases the service station premises to the franchisee. As Congress noted, "this relationship is often complex and characterized by at time competing interests."

Id. (emphasis added). In enacting the PMPA, Congress intended to allay, inter alia, concerns that there generally is a gross disparity in bargaining power between franchisor and franchisee, and that termination or nonrenewal disrupts the reasonable expectations of the parties that the franchise relationship will be a continuing one. Id. In every case of termination or non-renewal under the PMPA, there must be strict compliance with the notice provisions of the PMPA. Hanes v. Mid-America Petroleum, Inc., 577 F.Supp. 637, 646 (W.D.Mo.1983), citing Escobar v. Mobil Oil Corp., 678 F.2d 398, 400 (2d Cir.1982); Thompson v. Kerr-McGee Refining Corp., 660 F.2d 1380, 1390 (10th Cir. 1981); Mobil Oil Corp. v. Clark, 652 F.2d 2, 3 (8th Cir.1981).

A. Preemption of State Tenancy Laws by the PMPA

Defendant weakly argues that where a franchisor claims a franchisee is not paying rent on the lease in a timely manner that the franchisor is free to employ state summary proceedings to evict the franchisee. As support for this proposition, defendant offers two Georgia state law cases, Bates v. Chevron U.S.A., Inc., 151 Ga.App. 544, 260 S.E.2d 367 (1979) and Walters v. Chevron U.S.A., Inc., 154 Ga.App. 636, 269 S.E.2d 495 (1979) which defendant claims stand for the proposition that the PMPA does not preempt state tenancy laws and eviction proceedings.

The Georgia cases cited by defendant merely stand for the proposition that the proper place for a franchisee to raise a claim of wrongful eviction is in federal court, as plaintiff in this case has done, and not in state court as a defense to an eviction proceeding. Furthermore, the facts of those cases differ from the facts in this case in two very significant respects. First, the franchisees in both of the Georgia cases cited by defendant were holdover tenants who had no current lease with the petroleum franchisor. Second, both of those franchisees had sought relief in a federal court and had lost on their federal law claims.

Clearly, the legislative history quoted in Brach, cited supra, demonstrates that Congress contemplated that the PMPA would cover leasehold disputes as well as disputes over other aspects of the franchise relationship. As the Georgia court noted, the PMPA "drastically affected the legal relationships...