Chevron, U.S.A., Inc. v. Lesch, 86

• Decision Date: 07 March 1990
• Docket Number: No. 86,86
• Citation: 319 Md. 25,570 A.2d 840
• Parties: CHEVRON, U.S.A., INC. et al. v. Warren Robert LESCH et al. Sept. Term 1988.
• Court: Maryland Court of Appeals

Page 25

319 Md. 25

570 A.2d 840

CHEVRON, U.S.A., INC. et al. v. Warren Robert LESCH et al.

No. 86 Sept. Term 1988.

Court of Appeals of Maryland.

March 7, 1990.

Motion for Reconsideration Denied April 2, 1990.

Donald E. Sharpe (Elizabeth C. Kelley, Piper & Marbury, David D. Patton, all on brief), Baltimore, Charles N. Ketterman (Montedonico & Mason, Chartered, both on brief), Baltimore, for petitioners.

Glenn E. Bushel (Ira L. Oring, Melnicove, Kaufman, Weiner & Smouse, P.A., Baltimore, H. Patrick Stringer, Jr. and Mudd, Harrison & Burch, Towson, all on brief), for respondent.

Argued before MURPHY, C.J., and ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS and BLACKWELL, ^* JJ.

McAULIFFE, Judge.

Dr. Warren R. Lesch and his wife were severely burned and suffered the loss of their home and its contents when an explosion occurred in their garage in July 1985. The Lesches filed suit in the Circuit Court for Harford County contending that the explosion was caused by the negligence of Malcolm Weeks, an employee of Walker's Chevron, Inc. (Walker's Chevron). Walker's Chevron owned and operated an automobile service station business located on Conowingo Road in Bel Air, Maryland. It leased the premises, and also purchased gasoline, oil, and lubricants from Bay Oil, Inc. (Bay Oil), a jobber. ¹ Walker's Chevron was a "branded station"; that is, it displayed the signs and colors of a particular brand, Chevron, and sold only that brand of gasoline and oil. ² Bay Oil purchased the Chevron products that it sold to Walker's Chevron from Chevron U.S.A., Inc. (Chevron U.S.A.), a national oil company.

The Lesches sued Weeks, Walker's Chevron, Bay Oil, and Chevron U.S.A. The claims against Weeks and Walker's Chevron are based on Weeks's alleged negligence in failing to properly repair a leak in the gas tank of the Lesch automobile, and on the vicarious liability of Walker's Chevron as the employer of Weeks. The claim against Bay Oil is grounded on the theory that Walker's Chevron and its employees were servants of Bay Oil, subject in fact to its control.

The complaint against Chevron U.S.A. proceeds on theories of apparent agency, or agency by estoppel. The Lesches contend that Chevron U.S.A. created, or knowingly allowed to exist, a situation that actually conveyed to the Lesches the reasonable belief that Weeks was an employee of Chevron U.S.A., and therefore possessed the skill that they had the right to expect of one under the control and supervision of a major oil company. They entrusted the repair work to Weeks and Walker's Chevron because of that belief, and they suffered damage because of that reliance.

Before trial, Bay Oil and Chevron U.S.A. filed motions for summary judgment. Judge Cypert O. Whitfill granted the motions, concluding from facts not in dispute that Bay Oil neither possessed nor exercised that degree of control over Walker's Chevron which would give rise to vicarious liability, and that any belief entertained by the Lesches that employees of Walker's Chevron were employees of Chevron U.S.A. was not justified by the facts, and was unreasonable as a matter of law.

With the concurrence of all parties, and under circumstances we find were appropriate, Judge Whitfill entered final judgment in favor of Bay Oil and Chevron U.S.A., expressly finding that there was no just reason for delay. Maryland Rule 2-602(b). The plaintiffs appealed, and the Court of Special Appeals reversed, directing that both judgments be vacated. Lesch v. Chevron, 75 Md.App. 669, 542 A.2d 1292 (1988). We granted certiorari, and we now reverse the judgment of the intermediate appellate court.

The facts surrounding the repair in question, and the subsequent explosion, are as follows. On 14 July 1985, Dr. Lesch became aware that the gas tank of his Buick automobile was leaking, apparently as a result of having been struck by a metal rod he had run over earlier in the day. He pushed the car out of his garage and hosed down the garage floor. The next morning, he called Walker's Chevron, with whom he dealt regularly, and reported the problem. Weeks arranged to have Dr. Lesch's car towed to the service station, and after determining that there was a small puncture in the tank, called Dr. Lesch. The content of that conversation is in dispute, but in any event, Weeks proceeded to attempt a repair. He cleaned the tank in the area of the hole with a solvent, pressed air conditioning duct tape into or over the hole, inserted a screw into the hole and covered the patch with a multi-purpose epoxy. After allowing the epoxy to set up for one to two hours, Weeks put several gallons of gasoline in the tank and checked it for leaks. Finding none, he filled the tank and parked the car. Dr. Lesch picked up the car the next day. Weeks explained the nature of the repair to Dr. Lesch, and said he had not observed any leaks. Weeks suggested, however, that Dr. Lesch "keep an eye on it." That afternoon and evening, Dr. Lesch made several checks for evidence of leaks, but saw nothing. The next morning, however, he and his wife smelled an odor of gasoline, and went to the garage to investigate. Dr. Lesch said that he was careful not to turn on any lights, or to activate the electric garage door opener. Perceiving a significant odor of gasoline in the garage, he stated that he disengaged the garage door from the electric opening device, and manually raised the door. He said that when the door reached a certain height it activated a light on the housing of the electric door opener, and the explosion occurred. Dr. Lesch suffered second degree burns to 45 percent of his body, and Mrs. Lesch incurred second and third degree burns to 45 percent of her body. Their home and all of its contents were destroyed by the ensuing fire.

Additional facts pertaining to the relationship that existed between the Lesches and Walker's Chevron, and between the several defendants, as well as additional facts bearing on the possible appearance of an agency relationship between Walker's Chevron and Chevron U.S.A., will be set forth as we discuss the separate theories of liability.

I. Bay Oil--The Claim of Actual Agency

Bay Oil is a petroleum products jobber doing business primarily in Harford, Cecil and Baltimore counties. It has, for some time, purchased petroleum products from several national gasoline producers, and sold those products to branded and unbranded retail gasoline service stations. It became a Chevron jobber in 1972, after which it provided Chevron products to branded Chevron dealers. Contractual rights and obligations between Bay Oil and Chevron U.S.A. for the period of time involved in this case were controlled by a Branded Jobber Petroleum Products Agreement dated 11 September 1984. As part of this agreement, Bay Oil was authorized to supply Chevron products and "insignia" ³ to those retail stations that were approved by Chevron U.S.A. as acceptable outlets for Chevron branded products.

The service station involved in this case was first approved as a Chevron branded station in 1976. The business of that station was then owned by Ben Walker, and was operated as a sole proprietorship. Ben Walker had been in the service station business for some time, and had owned the business at this particular station since the mid-1960's. Prior to that time, he had owned a service station business on Rock Spring Road, approximately two miles from the Conowingo Road station. The Rock Spring Road location was a branded Sinclair station, and Ben Walker traded there as Walker's Sinclair. When he moved his business to Conowingo Road, he continued to operate as Walker's Sinclair. In the mid or late 1960's, B.P. Oil, Inc. bought Sinclair, and Walker's Sinclair became Walker's BP. In 1976, Bay Oil obtained a leasehold interest in the Conowingo Road property from B.P. Oil, Inc., and in turn entered into a sublease with Ben Walker. It was at that time that Bay Oil entered into a Reseller's Contract with Walker, and Walker's BP became Walker's Chevron.

The original Reseller's Contract, which was apparently extended by an oral agreement of the parties, was a fairly simple document consisting of two pages. Bay Oil agreed to sell and deliver, and Ben Walker agreed to buy, certain quantities of Chevron gasoline, oil, and lubricants. Additionally, Bay Oil agreed to lease an eight foot internally lighted Chevron sign and a credit card imprinter to Walker. The contract did not grant Bay Oil any control over the operation of Walker's business, and included this provision:

It is the spirit and intent of this contract that Buyer will have the right to conduct and carry on the business of selling at retail, automobile fuel and gasoline and lubricating oils and greases, wholly free and independent of any domination or control by Seller; and nothing in this contract is intended or shall be construed to give Seller any domination or control of Buyer's said business.

The original lease agreement between Bay Oil and Walker's Chevron was also an uncomplicated pre-printed document consisting of two pages. It provided, at paragraph 10, that:

The provisions of this lease shall not be construed as reserving to the Lessor any right to exercise any control over the business or operations of the Lessee conducted upon the leased premises or to direct in any respect the manner in which any such business and operations shall be conducted.

Although these provisions are not controlling, they may be of assistance in determining the intent of the contracting parties.

In support of their contention that Bay Oil exercised actual control over Walker's Chevron, plaintiffs point to a letter of 16 December 1982 from Bay Oil to Ben Walker. This letter advised Walker "of certain problems regarding the operation of your service station," and stated that if Walker wished to continue to occupy the premises, then he would be expected to conform to certain conditions. The conditions stated in the letter were:

1. The...