Johnson v. Shell Oil Co. of California

• Decision Date: 12 March 1936
• Docket Number: 25872.
• Citation: Johnson v. Shell Oil Co. of California, 55 P.2d 609, 185 Wash. 393 (Wash. 1936)
• Parties: JOHNSON et ux. v. SHELL OIL CO. OF CALIFORNIA et al.
• Court: Washington Supreme Court

55 P.2d 609

185 Wash. 393

JOHNSON et ux. v. SHELL OIL CO. OF CALIFORNIA et al.

No. 25872.

Supreme Court of Washington, En Banc.

March 12, 1936

Appeal from Superior Court, Snohomish County; Ralph C. Bell, Judge.

Action by Arthur G. Johnson and wife against the Shell Oil Company of California and another. From a judgment dismissing the action, plaintiffs appeal.

Judgment reversed, with instructions.

Vanderveer & Bassett, of Settle, and Clarence J. Coleman, of Everett for appellants.

Hyland Elvidge & Alvord, of Seattle, for respondents.

BEALS Justice.

During the year 1928, Arthur G. Johnson engaged in business in the city of Everett as the proprietor of a grocery store and automobile service station. On May 28th of that year, he entered into a 'service station lease agreement' with Shell Oil Company of California, a corporation, one of the defendants herein, and, on December 7th following, the parties signed a supplemental contract, designated as 'license and consignment contract.' By the earlier of the two contracts, plaintiff rented his service station to the defendant company for three years from August 1, 1928 the lease calling for the payment of rental as follows: '3. Rental: The rental for the said premises shall be equivalent to two cents (2¢) per gallon for each and every gallon of Shell gasoline purchased by the lessor during each calendar month for the entire term of the lease. The lessor will be credited monthly with said rental on merchandise credit memoranda according to statement as forwarded by the lessee on the first day of each month, i. e., rental for September will be credited on October statement. * * *'

By the second contract above referred to, the corporation appointed Mr. Johnson its agent for the purpose of operating the service station. The contract describes in considerable detail the duties and obligations of the respective parties; the following portions of paragraphs 5 and 6 being material to the matters now Before us:

'5. The agent is hereby authorized to sell for cash to customers who take immediate delivery such gasoline of the company as may be in the custody of the agent on consignment at said service station, but only at the retail price which may be established and specified by the company from time to time therefor. The agent shall not dispose of any gasoline of the company except in strict accordance with the authority hereby conferred.

'6. * * * To recompense the agent for the agent's expenditures herein contemplated and as a compensation to the agent the company shall allow the agent a commission of four ($.04) cents per gallon for all gasoline sold at said service station.

Under these agreements, as above quoted, Mr. Johnson was to receive, by way of rental, two cents a gallon upon the gas which he sold, and an additional 4 cents a gallon by way of commission. The service station was operated under these agreements until March 29, 1929, when defendant S. H. Starr, representing defendant Shell Oil Company, procured Mr. Johnson's signature to an agreement entitled 'service station sublease,' which materially cnahged the terms and conditions upon which the service station should thereafter be operated.

During the month of April, 1933, Mr. Johnson and Elna Johnson, his wife, instituted this action against Shell Oil Company of California and S. H. Starr, alleging that Mr. Johnson's signature to the contract of March, 1929, had been fraudulently procured, and that the real and primary purpose of this contract was to enable the oil company to reduce the amount which it was obligated to pay the service station. It was alleged that plaintiffs' knowledge of the English language was limited, that they were inexperienced in business; that the contract had been misrepresented to them; and that they had been damaged in a considerable sum by the fraud practiced upon them.

The action came on for trial upon the second amended complaint and the defendants' answer thereto. At the close of plaintiffs' case, defendants' counsel moved to dismiss, and challenged to sufficiency of the evidence, stating as the first ground in support of the motion that the action was predicated on fraud; that the fraud, if any, was committed in March, 1929, and that the action was not commenced for more than three years thereafter. The trial court sustained defendants' motion, and entered judgment dismissing the action, basing the judgment expressly upon the sole ground that the action had not been commenced within the time limited by law. From this judgment, plaintiffs have appealed to this court. In this opinion, we shall refer to appellant Arthur G. Johnson as though he were the sole appellant, and to respondent Shell Oil Company of California, a corporation, as though it were the only respondent.

We shall first consider the question of the statute of limitations. Both parties rely upon paragraph 4, § 159, Rem.Rev.Stat., which reads as follows:

'Within three years: * * *

'4. An action for relief upon the ground of fraud, the cause of action in such case not to be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud'

--appellant contending that he did not discover the facts constituting the fraud until within three years next preceding the institution of the action, while respondent contends that over three years elapsed after appellant was fully advised both as to the nature and terms of the contract which he had signed and as to respondent's interpretation thereof, and that therefore the action was not commenced within the time limited by law.

Appellant testified that Mr. Starr brought the contract of March 29th to him at the service station, that appellant was then very busy waiting on several customers, and that, seeing that Mr. Starr had some papers, appellant asked him if there was a new contract to sign, to which Mr. Starr replied in the negative, adding, however, that, if appellant would sign the paper, it would accelerate the payment of the 2 cents per gallon which appellant was receiving under the contract of lease above referred to, and that this payment would be credited to appellant at the time gas was delivered instead of paid in a lump sum a month later. Appellant's testimony is corroborated by that of his wife and his sister, who were present in the service station at the time the papers were signed. The last portion of the fifth paragraph of the 'service station subleas,' signed March 29, 1929, reads as follows: 'As a further consideration for this covenant and agreement, the sublessor promises and agrees at all times while this agreement shall be and remain in full force and effect to sell and deliver to the sublessee for resale from the demised premises gasoline at a price to sublessee not greater than the tank wagon price for commercial gasoline effective date of sale at Everett, Wash., said tank wagon price being no cents per gallon more than the sublessor's tank waggallon price for commercial gasoline as determined and posted at sublessor's depot at Everett, Wash., including Washington State Motor Vehicle Fuel Tax. Commercial gasoline shall not be deemed to be any specially blended product or gasoline compounded with nonhydrocarbon substances.'

At the time appellant signed this contract, he also, at Mr. Starr's request, wrote 'accepted' on a letter directed to him, signed by Shell Oil Company, which letter reads as follows: 'Supplementary to that lease bearing date the 28th day of May, 1928, and that sub-lease bearing date the 29th day of March, 1929, the undersigned hereby agrees to pay you each month, a sum equivalent to one (1¢) cent per gallon for each gallon of Shell Gasoline purchased under and during the term of said sublease.'

Appellant testified that he did not receive copies of either of these papers at the time he signed them, but that three or four weeks later he received copies through the mail. He also testified that, previous to signing these documents, he had received a total payment of 6 cents upon each gallon of gas which he sold, and that thereafter he received only 4 cents a gallon. It seems probable that respondent accomplished this change by raising its 'tank wagon price' and deducting appellant's 4 cents a gallon from the increased figure.

It must be remembered that, prior to the signing of the agreement of March 29, 1929, appellant had been operating under a consignment contract. The gas which he sold belonged to respondent. Under the last agreement signed, the situation was fundamentally changed; appellant then agreeing to maintain a gas station on the property described and to sell exclusively respondent's products, which respondent agreed to deliver to appellant at a price 'not greater than the tank wagon price for commercial gasoline effective date of sale at Everett, Wash., said tank wagon price being no cents per gallon more than the sublessor's tank wagon price for commercial gasoline as determined and posted at sublessor's depot at Everett, Wash.' Clearly the business relation between the parties was greatly changed. Referring to this contract, Mr. Starr testified:

'Q. Well, did you tell him what that was about? A. Yes, indeed.

'Q. You told him that would enable him to collect his rental at the time that the gasoline was dumped instead of at the end of the month? A. That is one of the things I told him.

'Q. Did you tell him that it would alter his margin of profit, and that after he had signed that he would receive a profit of four cents a gallon instead of six cents a gallon? A. No, sir.

'Q. You didn't tell him that? A. No, sir.

'Q. Now, that document refers to tank wagon price, doesn't it? We are referring now to Plaintiff's Exhibit 'C' for identification. A. Yes, it does....