Neugent v. Beroth Oil Co.

• Decision Date: 05 March 2002
• Docket Number: No. COA01-242.,COA01-242.
• Citation: 560 S.E.2d 829,149 NC App. 38
• Parties: Gary M. NEUGENT, Plaintiff/Counterdefendant, and Cindy P. Neugent, Counterdefendant, v. BEROTH OIL COMPANY, 4 Brothers Food Store, Ltd., Vernice V. Beroth, Jr., and Walter Beroth, Defendants.
• Court: North Carolina Court of Appeals

560 S.E.2d 829

149 NC App. 38

Gary M. NEUGENT, Plaintiff/Counterdefendant, and Cindy P. Neugent, Counterdefendant, v. BEROTH OIL COMPANY, 4 Brothers Food Store, Ltd., Vernice V. Beroth, Jr., and Walter Beroth, Defendants.

No. COA01-242.

Court of Appeals of North Carolina.

March 5, 2002.

Michelle D. Reingold, for plaintiff/counterclaim-defendants-appellants.

Hendrick Law Firm, by T. Paul Hendrick and Matthew H. Bryant, for defendants-appellees.

TYSON, Judge.

Gary M. Neugent ("plaintiff") appeals from the trial court's order granting Beroth Oil Company, 4 Brothers Food Store, Ltd., Vernice V. Beroth, Jr., and Walter Beroth (collectively "defendants") summary judgment on plaintiff's claims, and plaintiff and Cindy P. Neugent, counterclaim-defendant, appeal from the trial court's order granting Beroth Oil Company summary judgment on its counterclaim. We affirm in part, and reverse and remand in part.

I. Facts

Prior to 1986, Amoco Oil Company ("Amoco") constructed a motor fuel station at 831 South Main Street in Kernersville on land it leased from Mr. Peddycord. In 1986, Amoco leased the improvements to plaintiff (the "Amoco lease"). Plaintiff purchased motor fuel directly from Amoco through an Amoco dealer supply agreement ("Amoco DSA"). The Amoco DSA and lease were renewed 1 November 1993 for three additional years. The Amoco DSA established the motor fuel's price at "Amoco's dealer buying price." Amoco's dealer buying price ("DBP")is a formula price term, which allows Amoco to adjust prices in response to the commercial dynamics in the market place. The Amoco DSA also provided that "[i]f this Agreement is assigned by Amoco to an Amoco jobber, the prices to be paid by Dealer for motor fuel and other products hereunder shall be as established by said jobber." (Emphasis in original). "Jobber" is a term of art in the motor fuel industry used to describe an intermediate distributor who sells motor fuel to other dealers rather than directly to consumers.

Beroth Oil Company, Inc. ("Beroth") operates as an Amoco motor fuel jobber in Forsyth and other North Carolina counties. Sometime between August of 1994 and February of 1995, Beroth purchased the land from Mr. Peddycord and took assignment of the land lease with Amoco. Beroth is a North Carolina corporation organized 13 June 1986. Vernice and Walter Beroth, and two other brothers, are shareholders and officers. Vernice and Walter Beroth are also shareholders and officers of another North Carolina corporation organized 9 January 1985 named 4 Brothers Food Store, Ltd. ("4 Brothers"). All twenty-seven 4 Brothers stores sell Amoco motor fuel. Some of the 4 Brothers stores are located in Kernersville where the Amoco station plaintiff operated was located.

During 1994, Amoco decided to sell its retail motor fuel stations in North Carolina. Plaintiff testified in deposition that "[e]arly in 1994, Amoco decided to pull out of its locations in North Carolina." Amoco's dealer leases provided that if Amoco ever decided to sell its stations, its lessees would have the first opportunity to purchase. Amoco notified its lessees that they could exercise their "rights of first refusal" and purchase Amoco's stations. Plaintiff stated that "they [would] have to give me first—right of refusal, and I [would] have 30 days to exercise it...." Amoco also provided its jobbers the opportunity to bid on and purchase the stations, if the lessees did not exercise their rights and purchase.

In October of 1994, Vernice and Walter Beroth and plaintiff met to discuss whether plaintiff would be interested in purchasing Amoco motor fuel from Beroth rather than directly from Amoco. What was actually said at the meeting is disputed, but all parties agree that Beroth's pricing of Amoco motor fuel was discussed. Walter and/or Vernice Beroth mentioned the price of "6 ¢ over Beroth's cost." The two parties interpreted the word "cost" differently. Plaintiff understood that "cost" meant the price Beroth purchased motor fuel from Amoco, known as the "rack price," and Vernice and Walter Beroth understood that "cost" meant the rack price plus tax and freight charges.

After the 1994 meeting, plaintiff decided not to become a Beroth dealer and decided to exercise his "right of first refusal" contained in his Amoco lease and to purchase the station from Amoco. By December of 1994, plaintiff was unable to complete the purchase of the station from Amoco. Plaintiff testified that his "financing fell through."

After plaintiff failed to purchase the station, Beroth, as one of Amoco's jobbers, bid on and purchased the station, assumed the Amoco lease and the Amoco DSA sometime in December of 1994. The Amoco lease and the Amoco DSA were due to expire 31 October 1996.

On or about 18 January 1995, Beroth began supplying Amoco motor fuel to plaintiff. The motor fuel was sold to plaintiff under an electronic meter marketing plan. Beroth delivered motor fuel to the station's underground storage tanks, which Beroth owned and maintained, on consignment. Beroth retained title to the motor fuel in the storage tanks until it was sold to the consumer through metered fuel pumps. At that time, Beroth established the price it charged to plaintiff. Beroth billed plaintiff on Monday, Wednesday and Friday. Beroth normally delivered motor fuel twice a week.

Plaintiff remained a Beroth dealer, selling Amoco motor fuel until 27 May 1999. From about 18 January 1995 until 30 November 1995, Beroth and plaintiff operated under the plaintiff's Amoco lease and Amoco DSA that Beroth acquired when it purchased the station from Amoco. Plaintiff understood that he would "operate on Amoco's lease until Beroth ... came up with a lease...."

In the fall of 1995, plaintiff received a draft of a proposed lease and dealer supply agreement from Beroth's attorney. Plaintiff and his counsel reviewed the agreements, and plaintiff signed a new lease ("Beroth lease"), a new dealer supply agreement ("Beroth DSA"), and an unlimited absolute guaranty effective 1 December 1995. Cindy P. Neugent signed the guaranty only on 23 February 1996.

On or about 4 July 1996, plaintiff claims to have discovered that Beroth had been billing him for a freight charge of 1.427 cents per gallon delivered in addition to the rack price plus six cents per gallon. Plaintiff never notified Beroth of his dissatisfaction with the price and continued to accept, sell, and pay for Amoco motor fuel sold by Beroth.

On 31 December 1998, the Beroth lease and the Beroth DSA expired, and plaintiff failed to renew. On 1 January 1999, plaintiff became a hold-over tenant. Plaintiff paid Beroth rent for January and February, but failed to pay rent for March, April, or May 1999. Plaintiff also failed to pay Beroth for motor fuel he purchased from 10 through 17 May 1999.

Beroth notified plaintiff in writing of his default on 11 March 1999, and plaintiff vacated the property on 27 May 1999. Beroth applied plaintiff's deposit of $13,000.00 and a $541.00 credit for returned stock toward past due amounts. Plaintiff and Cindy P. Neugent, counterclaim-defendant, claim that plaintiff deposited approximately $17,000.00, and this remains a disputed issue of fact. A letter from Beroth's counsel to plaintiff dated 22 June 1999 demanded remaining past due rent and payment for motor fuel in the amount of $16,768.95. Plaintiff responded by filing suit on 25 June 1999 alleging (1) breach of contract, (2) civil conspiracy, (3) fraud, (4) punitive damages, and (5) unfair and deceptive trade practices.

Defendants answered denying all allegations and affirmatively pled the defenses of (1) Statute of Frauds, (2) Statute of Limitations, (3) assumption of the risk, (4) frivolous action, (5) frivolous punitive damage claim, (6) unclean hands, (7) waiver, (8) failure to mitigate, (9) plaintiff's breach, and (10) the Petroleum Marketing Practices Act, 15 U.S.C.S. § 2802 et seq. on 16 August 1999. Only Beroth Oil Company counterclaimed for past due rent and motor fuel payments and named Cindy P. Neugent as a counterclaimdefendant.

On 27 September 1999, defendants amended their answer to add the additional affirmative defenses of (11) G.S. § 25-2-607, (12) corporate veil, (13) estoppel, (14) failure of consideration, (15) rejection of offer, (16) ratification, and (17) G.S. § 25-2-202. On 26 October 1999, plaintiff and counterclaim-defendant replied to Beroth's counterclaim and affirmatively pled the defenses of (1) duress, (2) failure of consideration, (3) fraud, (4) illegality, and (5) payment. Defendants moved for summary judgment.

The trial court entered judgment for defendants on all of plaintiff's claims and granted judgment for Beroth on its counterclaim in the amount of $15,826.89 for past due rent and motor fuel, attorney's fees of $2,374.03, prejudgment interest of $1,852.90, and costs of $3,892.63 on 23 October 1999. Plaintiff and counterclaim-defendant appeal. Defendants did not cross-appeal.

II. Issues

Plaintiff assigns as error the trial court's (A) granting of summary judgment for defendants on plaintiff's claims where disputed issues of material fact exist regarding: (1) breach of contract, (2) fraud, (3) unfair and deceptive trade practices, and (4) civil conspiracy; and (B) granting of summary judgment for Beroth on its counterclaim because of plaintiff and counterclaim-defendant's meritorious affirmative defenses of (1) duress, (2) failure of consideration, (3) fraud, (4) illegality, and (5) payment.

III. Breach of Contract

Plaintiff contends that defendants represented and agreed that the price of motor fuel sold to plaintiff would be 6 cents per gallon "above Beroth's cost," and that Beroth "breached this contract by charging Mr. Neugent an additional 1.4 cents per gallon, above Beroth's cost, as a delivery charge."

Plaintiff argues that Walter and/or Vernice Beroth breached an oral contract made at the October 1994 meeting, and also claims that "Beroth breached its.... Dealer...