Nodak Oil Co. v. Mobil Oil Corp.
| Decision Date | 31 March 1975 |
| Docket Number | Civ. No. 4846. |
| Citation | 391 F. Supp. 276 |
| Parties | NODAK OIL CO., a North Dakota Corporation, Plaintiff, v. MOBIL OIL CORP., a Foreign Corporation, Defendant. |
| Court | U.S. District Court — District of South Dakota |
John Hjellum, Hjellum, Weiss, Nerison, Jukkala & Vinje, Jamestown, N. D., for plaintiff.
J. Gerald Nilles, Nilles, Hansen, Selbo, Magill & Davies, Ltd., Fargo, N. D., Robert C. Fox, Chicago, Ill., for defendant.
Judgment was entered in the above entitled case pursuant to a jury verdict. Actual damages in the sum of $734.42, without interest, and exemplary damages in the sum of $100,000.00, together with costs, were awarded to Plaintiff, Nodak Oil Co. (Nodak).
At the close of all the evidence, Defendant, Mobil Oil Corporation (Mobil), made a Rule 50 motion for a directed verdict. The motion was denied. The matter is now before the Court on Mobil's motion for a judgment in accordance with its motion for a directed verdict, or, in the alternative, for a new trial.
This is a diversity action. Nodak is a corporation organized and existing under the laws of North Dakota with its registered office in Jamestown, North Dakota. Mobil is a foreign corporation organized and existing under the laws of New York, with its principal office in New York.
In April, 1972, Nodak executed an agreement with Jetstream, Incorporated, a North Dakota corporation with its registered office and place of business in the City of Jamestown, North Dakota, for the purchase of a carwash owned and operated by Jetstream in Jamestown. The date of sale was to be May 1, 1972, and concurrent with the purchase, the Plaintiff also leased the real property on which the carwash operated.
The primary purpose of the operation was the sale of gasoline. At the time of the sale, Jetstream had a dealers' contract for the purchase of gasoline and motor oil with Mobil. During the week of April 3, 1972, the President and majority stock holder of Nodak, Ray D. Mering, had a discussion with Marvin E. Houchin, the Division General Manager of Mobil, who had jurisdiction over the Division of Mobil which included the State of North Dakota. Mering told Houchin of his desire to become a Mobil distributor in connection with the carwash operation, and to purchase gasoline, oil and other Mobil supplies at distributor prices.
On April 20, 1972, Mering was invited by Ralph Roberts, one of the owners of Jetstream, Inc., to accompany him to Fargo to meet with N. A. Deighton, Fargo District Manager of Mobil, and Herschel Thompson, Area Manager for Mobil, which area included Jamestown. That same day, after returning from the meeting, Mering wrote Deighton acknowledging the visit and restating his desire to operate Jetstream with Mobil products commencing May 1, 1972. He requested confirmation of a proposed arrangement discussed at the April 20th meeting.
On May 1, 1972, Ed Heidzig, a Mobil representative, was on hand to read the pumps at the Jetstream carwash and to ascertain the amount of gasoline in the tanks. On or about the same date, Thompson and Heidzig informed Mering that Nodak could not continue under the contract which Nodak's predecessor, Jetstream, Inc., had with the Defendant. Mobil would not sell to Nodak without a contract. They presented Mering a Retail Dealers Contract, and a withdrawal letter, dated April 28, 1972, and a proposed hauling allowance. The instruments were executed by Nodak at the request of Thompson and Heidzig, and delivered to Mobil. Enclosed with the documents was Mering's letter, which read:
."
Nodak had been informed it could not buy Mobil products without a contract. On May 11, 1972, a representative of Mobil advised Mering by telephone that the instruments previously signed by Mering had been approved by Mobil, except for the hauling allowance.
Mering then ordered product delivery and thereafter Mobil delivered to Nodak 8,400 gallons of gasoline on each of the dates May 12, May 17, May 25, and May 31, 1972. All the loads were hauled by Transport, Inc., a commercial carrier, and Nodak received a one percent discount for payment within ten days of delivery. Prior to May 26, 1972, the instruments which Nodak signed and delivered to Mobil for execution had not been returned, and during this period, while taking deliveries from Mobil, Nodak, unknown to Mobil, was engaged in negotiating a jobbers contract with Champlin Petroleum Company.
On May 26, 1972, Heidzig and Thompson returned to Mering's office and presented him with an executed Retail Dealer's contract and a letter signed by N. A. Deighton. The letter outlined the competitive allowance, but denied Nodak the right to haul Mobil products. On May 25, Nodak's Mering had written to Mobil's Kansas City office expressing displeasure with its relationship, and on May 31, Mering wrote Mobil a second letter "cancelling the Retail Dealer Contract between Mobil and Jetstream Car wash". The second letter was also sent to Mobil's Kansas City office.
On May 29, 1972, the Cook Sign Company of Fargo was instructed by Nodak to remove the Mobil identification from the Jetstream site and to put up a Champlin sign. Upon being alerted, Mobil's local representative, Thompson, called John D. Olive, the Regional Manager for Champlin Petroleum Company, Sioux Falls, South Dakota, and told him that Mobil had a contract with Nodak.
Champlin then ceased negotiations with Nodak and refused to discuss a jobbers contract until the Mobil matter was cleared up. In response to Mering's letter of May 31, Mobil's attorney wrote Mering, under date of June 6, asserting there was no provision in the contract to terminate it prior to April 30, 1973, and advising that Mobil would not accept the cancellation. Throughout the month of June, 1972, Nodak's attorney requested Mobil to acknowledge that it did not have a "contract" with Nodak. Some time later, Mobil's legal department determined that because Mobil had not accepted all the terms as proposed by Nodak, no contract existed between the two. Mobil advised its representatives of this determination, and on July 19, 1972, N. A. Deighton, its Fargo representative, called John Olive of Champlin, and informed him that Mobil no longer considered it had any contracts with Nodak, and that Champlin Petroleum Company was free to deal with Nodak.
Olive acknowledged the call in a letter to Deighton on July 24, 1972, and asked for an "appropriate instrument of termination of all agreements between Mobil and Nodak." Mobil did not respond to this request, and its explanation for doing so was that it "did not feel it necessary". Nodak thereafter was unable to effect a jobber's contract with Champlin, and brought suit against the Defendant for "unlawfully, oppressively, fraudulently and maliciously" persuading Champlin not to enter into a contract.
The crucial statement upon which this lawsuit rests was the statement by Mobil's representative Thompson to John Olive of Champlin inquiring, "are you aware that Mobil Oil has a contract with Nodak?" This call is alleged to have caused Champlin to withdraw from its intention to make Nodak a Champlin jobber.
The statement can be given two interpretations. First, that a contract document had in fact been executed by both parties. It is Mobil's contention that this was a true representation, and thus could not under any circumstances constitute a basis for fraud. A second interpretation would be that the contract document executed by the parties was legally valid and enforceable. This would be a legal representation, and it is the theory of Mobil that fraud cannot be predicated upon a misrepresentation of law.
Before analyzing the two possible interpretations, it becomes necessary, as evidenced by the brief of Mobil, to note the time frame in which the crucial statement was made. The call from Thompson asserting that a contract did exist between Mobil and Nodak was made to Olive, the Regional Manager for Champlin on May 29, 1972. It was not until July 19, 1972, after further examination by Mobil's legal department, that Mobil's Fargo representative advised Champlin's Olive that Mobil had no existing contract with Nodak, and that Champlin was free to deal with Nodak without fear of interference with any contract right of Mobil. The telephone call of May 29, must be viewed in the framework of the time it was made and the information possessed by Mobil's Herschel Thompson at that time. It cannot be equated to the message relayed in July which resulted from the reevaluation of Mobil's legal department as to the validity of the contracts.
In essence, Mobil's position is that the representation made was that a contract existed which did in fact exist. To the extent this representation implied the contract was valid and enforceable, it was a representation of law, which will not support an allegation of fraud. It is Mobil's contention that considering all the evidence in the light most favorable to Nodak, as a matter of law, Nodak has wholly failed to establish fraud.
North Dakota has taken the position, as have other midwestern states, that fraud cannot be predicated upon a misrepresentation of law. The Supreme Court of North Dakota in Hellebust v. Bonde, 42 N.D. 324, 172 N.W. 812 (1919) stated:
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