Murphy Oil USA, Inc. v. Brooks Hauser

• Decision Date: 17 February 1993
• Docket Number: No. CV 3-92-791.,CV 3-92-791.
• Citation: Murphy Oil USA, Inc. v. Brooks Hauser, 820 F.Supp. 437 (D. Minn. 1993)
• Parties: MURPHY OIL USA, INC., Plaintiff, v. BROOKS HAUSER d/b/a Brooks' Foods, Inc., Defendant.
• Court: U.S. District Court — District of Minnesota

820 F. Supp. 437

MURPHY OIL USA, INC., Plaintiff, v.BROOKS HAUSER d/b/a Brooks' Foods, Inc., Defendant.

No. CV 3-92-791.

United States District Court, D. Minnesota, Third Division.

February 17, 1993.

David L. Doyle, Pope & John, Chicago, IL, and Terese W. Wallschlaeger, Zelle & Larson, Minneapolis, MN, for plaintiff.

Joseph A. Thomson, Lindquist & Vennum, Minneapolis, MN, for defendant.

MEMORANDUM OPINION AND ORDER

KYLE, District Judge.

Introduction

This matter is before the Court on plaintiffMurphy Oil USA, Inc.'s ("Murphy Oil")Motion for Summary Judgment.Murphy Oil alleges breach of the Lease and Franchise Agreement and Sales Agreement with defendantBrooks Hauser("Brooks") and seeks a declaratory judgment that Murphy was justified in terminating the franchise under the Petroleum Marketing Practices Act, 15 U.S.C. § 2801 et seq.("PMPA" or "the Act") and the terms of the Lease and Franchise Agreement.

Background

On January 25, 1991, Brooks purchased a Lease and Franchise Agreement for the Spur station located at 4311 Shoreline Drive, Spring Park, Minnesota from Terry and Bonita Labatt.The Labatts had previously entered into the Lease and Franchise Agreement with Murphy Oil for the operation of a gas station at that location, and a Sales Agreement for the purchase of petroleum products.The Labatts assigned the Lease and Franchise Agreement to Brooks as part of the purchase agreement.¹

The Lease and Assignment describe the premises which Murphy leased as "All of Lot 11 of Coronado Park, Lake Minnetonka ... except for that part being used for road purposes...."Lease and Assignment, Plaintiff's Exhs.A and C.During the time the Labatts leased the premises, Murphy also rented a portion of the building (900 square feet or approximately 24% of the building) on the lot to a retail drycleaning operation.In April, 1991, that portion was leased to Wet Spot, a watercraft rental business.Wet Spot paid $850.00 per month in rent directly to Murphy Oil.Murphy Oil, through Charles G. Clair, the area manager who dealt with Brooks, claims that Brooks never requested a reduction of his rent by virtue of Murphy Oil's separate leasing of the retail space.ClairAff., ¶ 4.Brooks continued to make full rental payments through July of 1992.

In addition to rental payments, Murphy Oil also charged Brooks a monthly common area maintenance fee of $850.00 for services such as garbage collection, sewer and water fees, outside lighting, lawn maintenance, snow-plowing and sweeping.This amount did not change when Wet Spot moved into the retail space on the premises leased by Brooks.Brooks claims he complained to Murphy Oil about the fact that the common area maintenance fees remained the same despite the presence of another tenant and that Murphy Oil never corrected the situation.HauserAff., ¶ 4.

The Lease and Franchise Agreement provides that the rental payment is $8,200.00², payable on or before the first of each month.Lease and Franchise Agreement, Plaintiff's Exh. A.The Agreement incorporates the grounds for termination or nonrenewal listed in the PMPA (cited in fullinfra) and states that Murphy Oil

expressly reserves the right to repossess such premises after said termination or nonrenewal, and operate such premises through its employees or agents.

Id.

On September 22, 1992, Brooks gave Murphy Oil a check for $8,200.00 for September's rent, but the check was returned for insufficient funds.On October 13, 1992, Brooks gave Murphy Oil two checks, each in the amount of $8,200.00, to cover rent for August and October of 1992.Murphy Oil was subsequently notified by its bank that payment on both checks had been stopped.

By certified letter dated October 20, 1992, Murphy Oil notified Brooks that three months rental payments, totalling $24,600, were overdue, in violation of the provisions of the Lease and Franchise Agreement.Murphy Oil also stated that if payment was not made by October 27, 1992, Murphy Oil would be forced to terminate the Agreement.When Brooks failed to remit payment, Murphy Oil sent a second certified letter, notifying Brooks that Murphy Oil would terminate the Lease and Franchise Agreement and related Sales Agreement on January 29, 1993.As of December 1, 1992, Brooks had failed to make any rental payments for the months of August, September, October or November of that year.

On December 1, 1992, Murphy Oil sent Brooks a third certified letter, notifying Brooks that, in light of his failure to make any rental payments for August through November, amounting to a $32,800 deficiency, it intended to terminate the Lease and Franchise Agreement and related Sales Agreement on December 15, 1992.As of December 16, Brooks had neither made the required rental payments nor vacated the premises.

Murphy Oil also claims that Brooks owed Murphy Oil $8,576.42 for petroleum purchased from Murphy Oil in September 1992.The Sales Agreement requires Brooks to pay $8,757.00 for each delivery of gasoline made by Murphy Oil to Brooks' gas station.However, on occasion, the amount delivered and pumped into the underground storage tanks was less than the number of gallons of petroleum products worth $8,757.00.Brooks claims, and Murphy Oil does not deny, that Murphy Oil generally credited his account with the overcharge amount.³Murphy Oil admits that after Brooks failed to pay for the September load of gasoline, it began crediting any overcharge on subsequent, paid-for deliveries toward the payment of the September load.SevelandAff., ¶ 4.⁴Therefore, it is not clear how much of the $8,757.00 claimed by Murphy Oil remains unpaid.

Murphy Oil commenced this action on December 2, 1992, seeking (a) a declaratory judgment that its termination of Brooks' Lease and Franchise Agreement was proper and lawful, and (b) an order requiring Brooks to relinquish possession of the leased premises.Murphy Oil also seeks recovery of the rental and gasoline payments it claims it is owed.Murphy Oil argues that Brooks's failure to make timely payments for rent and gasoline justifies its termination of the Lease and Franchise Agreement pursuant to both the Agreement itself and the PMPA, and that it has complied with the relevant notice provisions of the PMPA in terminating the Agreement.

In response, Brooks has asserted a counterclaim, charging Murphy Oil with breach of contract (Count I) insofar as Murphy Oil did not provide him with 100% of the space described in the lease; continued to charge Brooks the full amount for common maintenance after another tenant leased part of the premises; overcharged him for gasoline and failed to credit the overcharges to Brooks' account; and that the rental payment of $8,200.00 is unconscionable and not a "reasonable" term of the Lease and Franchise Agreement within the meaning of the PMPA § 2802(b)(2)(A).Brooks requests damages for Count I of the Counterclaim.In Count II, Brooks seeks a determination that Murphy has failed to comply with the PMPA by overcharging Brooks for rent and common area charges, overcharging him for petroleum, attempting to terminate Brooks based on unreasonable provisions of its Lease and Franchise Agreement and Sales Agreement, and attempting to terminate Brooks upon insufficient notice and without providing an adequate opportunity to cure.

Discussion

I.SUMMARY JUDGMENT STANDARD

The moving party is not entitled to summary judgment unless the movant can show that no genuine issue exists as to any material fact.Fed.R.Civ.P. 56(c).In considering a summary judgment motion, a court must determine whether "there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party."Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202(1986).The role of the court is not to weigh the evidence but instead to determine whether, as a matter of law, a genuine factual conflict exists.Agristor Leasing v. Farrow,826 F.2d 732, 733(8th Cir.1987)."In making this determination, the court is required to view the evidence in the light most favorable to the non-moving party and to give that party the benefit of all reasonable inferences to be drawn from the facts."Id. at 734.

When a motion for summary judgment is properly made and supported with affidavits or other evidence as provided in Fed.R.Civ.P. 56(c), the non-moving party may not merely rest upon the allegations or denials of the party's pleading, but must set forth specific facts, by affidavits or otherwise, showing that there is a genuine issue for trial.Lomar Wholesale Grocery, Inc. v. Dieter's Gourmet Foods, Inc.,824 F.2d 582, 585(8th Cir.1987), cert. denied,484 U.S. 1010, 108 S.Ct. 707, 98 L.Ed.2d 658(1988).Moreover, summary judgment must be entered against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case,⁵ and on which that party will bear the burden of proof at trial.Celotex Corp. v. Catrett,477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265(1986).

II.PETROLEUM MARKETING PRACTICES ACT

The PMPA establishes federal standards governing the termination of petroleum franchise relationships and defines the rights and obligations of the franchisor and franchisee with respect to termination and nonrenewal.A franchisor may terminate any franchise if certain notification requirements are met and the termination is for a reason listed in the Act. 28 U.S.C. § 2802(b)(1).The PMPA contains an extensive list of grounds for termination or nonrenewal in subsections 2 and 3 of § 2802(b).Paragraphs A and C of subsection 2 are relevant to this case and provide as follows:

For purposes of this subsection, the following are grounds for termination of a franchise or nonrenewal of a franchise relationship:

(A) A failure by the franchisee to comply with any provision of the franchise, which provision is both reasonable

...