Nazi v. Jerry's Oil Co.
| Decision Date | 18 July 2014 |
| Docket Number | No. W2013-02638-COA-R3-CV,W2013-02638-COA-R3-CV |
| Parties | HANNA (JOHN) NAZI, ET AL. v. JERRY'S OIL COMPANY INC. |
| Court | Tennessee Court of Appeals |
Appeal from the Circuit Court for Madison County
In this contract dispute, the parties disagree as to whether the signatory of the contracts may be personally liable thereon, as well as to whether the contract provides for a fuel surcharge. We affirm in part, vacate in part, and remand for further proceedings.
Adam C. Crider, Jackson, Tennessee, for the appellant, Jerry's Oil Co., Inc.
Robert T. Keeton, III, Huntingdon, Tennessee, for the appellee, Hanna (John) Nazi and Banham (Ben) Nazi.
OPINIONThis case arises out of a dispute between Defendant/Counter-Plaintiff/Appellant Jerry's Oil Co., Inc. ("Jerry's Oil"), a fuel supplier, and the Handy Peddler, a retail service station owned and operated by Plaintiff/Counter-Defendants/Appellees, Hanna (John) Nazi ("John Nazi") and/or Banham (Ben) Nazi ("Ben Nazi," together with John Nazi, "Appellees"). There is no dispute in this case that the Handy Peddler operates as a soleproprietorship, rather than a corporation. In the Spring of 2007, John Nazi executed four separate contracts with Jerry's Oil in order to purchase fuel and oil for the Handy Peddler: a Petroleum Purchase Contract, a Security Agreement, a Fuel Supply Agreement, and a Promissory Note. All of the contracts were prepared by Jerry's Oil. Of the four contracts entered into regarding Jerry's Oil supplying fuel and oil to the Handy Peddler, all were signed by John Nazi and none indicated that Ben Nazi was in any way involved.
The Petroleum Purchase Contract was executed on March 29, 2007. The introductory clause of the Petroleum Purchase Contract states that the contract is "by and between Handy Peddler and Jerry's Oil Company, Inc." John Nazi signed his name for Buyer's Representative, but indicated "Handy Peddler" thereunder. The Buyer is noted as "John Nazi Handy Peddler."
Also on March 29, 2007, John Nazi executed a Security Agreement on behalf of the Handy Peddler in favor of Jerry's Oil. The agreement provided that the Handy Peddler granted Jerry's Oil a security interest in the Handy Peddler's furniture, fixtures, equipment, inventory, machinery, and other items. On the Security Agreement, John Nazi signed his name, but thereunder indicated that his title was "Manager."
A few days later, on April 2, 2007, John Nazi executed a Fuel Supply Agreement. The alleged breach of this agreement is the central issue in this case. The Fuel Supply Agreement required the "Retailer" to pay Jerry's Oil for various obligations under the contract. The Retailer was defined by the contract as the Handy Peddler. On the signature block at the conclusion of the document, John Nazi executed the agreement by only signing "John Nazi." Although the Fuel Supply Agreement included a space for the signatory to designate his or her title, this space was left blank by John Nazi. Further, on April 20, 2007, John Nazi also executed a Promissory Note in favor of Jerry's Oil.1 The Promissory Note specifically identified John Nazi "doing business as" the Handy Peddler, without any designation or title.
Under the Fuel Supply Agreement, Jerry's Oil agreed to supply Handy Peddler with fuel on an exclusive basis, and in exchange the Handy Peddler agreed to pay a price calculated pursuant to "Exhibit B." "Exhibit B," in turn, provides that gasoline cost would constitute the "BP rack price" plus a $0.01 markup. The diesel cost was similarly calculated as a $0.00 markup over the "BP rack price." Exhibit B further provides that the "rack price"is defined as Jerry's Oil's "actual cost, from time-to-time, for Fuel according to [Jerry's Oil's] most recent invoice for the appropriate grade of Fuel plus applicable taxes and freight." The agreement also set forth conditions for the Handy Peddler to become and remain a BP2 -branded station and for earning potential rebates and incentive payments.
On June 29, 2012, Jerry's Oil filed suit in the General Sessions Court of Madison County against John Nazi, doing business as the Handy Peddler, for non-payment on outstanding fuel invoices pursuant to the Fuel Supply Agreement. Counsel for John Nazi then made it known that Ben Nazi, John Nazi's brother, was the sole proprietor of the Handy Peddler. An Amended Civil Summons was filed on August 28, 2012, in which Jerry's Oil added Ben Nazi as a defendant. The action alleged that John Nazi and/or Ben Nazi owned and operated Handy Peddler, and Jerry's Oil sought a judgment in the amount of $25,000 plus interest and attorney's fees. Following trial, judgment was entered against both John and Ben in the amount of $24,999.99, plus attorney's fees and court costs.
On November 9, 2012, Appellees appealed the judgment to Circuit Court and also filed a Complaint against Jerry's Oil for breach of contract, alleging that Jerry's Oil: (1) failed to provide earned rebates; (2) failed to provide earned incentives; and (3) charged a fuel surcharge on deliveries not authorized under the agreement.
Jerry's Oil filed an Answer denying the allegations and asserting that the claims are barred, in part, by the statute of limitations. Jerry's Oil also brought a Counter-Claim against Defendants for: (1) non-payment of outstanding fuel invoices; (2) lost profits on the remainder of the term of the agreement: (3) contractual indemnification under the agreement for failure of Handy Peddler to remain a BP-branded station; (4) punitive damages based on Handy Peddler holding out to the public that it was a BP-branded station; and (5) possession of personal property under the Security Agreement.
A bench trial was held on November 1, 2013. Specifically at issue in this appeal are the questions of whether John Nazi should be personally liable for breach of the Fuel Supply Agreement and whether fuel surcharges charged by Jerry's Oil throughout the duration of the parties' business relationship were authorized by the parties' contracts. With regard to the issue of John Nazi's individual liability, Appellees contend that John Nazi was merely serving as a manager for Ben Nazi, the true proprietor of the Handy Peddler, and that, as such, no personal liability may attach to John Nazi. In contrast, Jerry's Oil focused on the parties' contracts, as discussed above, which Jerry's Oil contended shows that John Nazi was the proprietor of the Handy Peddler.
The parties also disagreed as to whether a fuel surcharge was authorized by the contract. The term "fuel surcharge" is not found in any of the parties' contracts. Both John Nazi and Ben Nazi denied that they had contracted to pay a fuel surcharge. However, the Appellees admitted that they noticed the fuel surcharge during the performance of the contract, but decided not to dispute the charge until this lawsuit was filed. Another witness, Alan Kee, a dispatcher of Espey Oil Company, when asked whether a fuel surcharge was "industry standard," replied that "we [i.e., Espey Oil Company] don't charge fuel surcharge." Instead, he agreed that his company "just charge[s] freight and adjust[s] it accordingly." Moreover, Robert Gilliam, the sales manager in charge of the Handy Peddler's accounts for Jerry's Oil during the time period at issue, answered in the negative when asked whether "a fuel surcharge was ever contracted with the Handy Peddler for delivery of fuel?" However, Jerry Wilhite, the owner of Jerry's Oil, testified that the term "freight" as used in Exhibit B, necessarily includes a fuel surcharge, which takes into account the rising cost of transportation of the fuel. According to Mr. Wilhite, the authorized freight charge was calculated as the sum of two related charges: the "base freight charge" of $0.05 per gallon of fuel purchased and a "fuel surcharge" calculated by multiplying the base freight charge by a figure generated weekly by the United States Department of Energy. In the invoices sent to the Handy Peddler, the charges were separated. Mr. Wilhite testified that this charge was customary in the industry.
After Jerry's Oil presented its case, John Nazi moved for a directed verdict (more properly termed an involuntary dismissal in a bench trial, discussed in detail, infra) on the issue of John Nazi's individual liability as an owner of the Handy Peddler. The court found that Jerry's Oil failed to prove its case against John Nazi, individually, and dismissed all claims as to John Nazi. In ruling on this issue, the court stated that there was nothing indicating that John Nazi was acting as an owner from 2011 through 2012, when the alleged breach occurred. Thereafter, John Nazi voluntarily dismissed his claims against Jerry's Oil.
At the close of trial, the court entered judgment in favor of Jerry's Oil on its breach of contract claim for non-payment of the fuel invoices and lost profits. The court denied Jerry's Oil's claim for indemnification for any charges that may have been owed to BP. With respect to Ben Nazi's claims, the court found in favor of Jerry's Oil on the rebates and incentives, but ruled for Ben Nazi on the issue of the fuel surcharge, concluding that such a charge was not contemplated in the parties' contract. After offsetting damages awarded to Ben Nazi, the final judgment was entered against Ben Nazi totaling $99,875.71, plus court costs. Written orders on the dismissal of the claims against John Nazi and the remaining issues were entered on November 8, 2013, and November 15, 2013, respectively. The order dismissing the claims against John Nazi also noted that the claims asserted by John Nazi had been voluntarily dismissed. While this appeal was pending, the trial court entered an...
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