Peterson v. Sinclair Refining Co.

• Decision Date: 01 October 1963
• Citation: 123 N.W.2d 479,20 Wis.2d 576
• Parties: John PETERSON and Verna Peterson, his wife, Plaintiffs and Appellants, and Rural Mutual Insurance Company, Impleaded Plaintiff and Appellant, v. SINCLAIR REFINING COMPANY, Defendant and Respondent, Norbert Bougie, Defendant, Integrity Mutual Insurance Company, Defendant and Appellant.
• Court: Wisconsin Supreme Court

Page 479

123 N.W.2d 479

20 Wis.2d 576

John PETERSON and Verna Peterson, his wife, Plaintiffs and Appellants, and Rural Mutual Insurance Company, Impleaded Plaintiff and Appellant, v. SINCLAIR REFINING COMPANY, Defendant and Respondent Norbert Bougie, Defendant Integrity Mutual Insurance Company, Defendant and Appellant.

Supreme Court of Wisconsin.

Oct. 1, 1963.

Smith, Smith & Roels, De Pere and Kaftan, Kaftan & Kaftan, Green Bay, for appellants Peterson.

Harry Hoeffel, Appleton, for impleaded plaintiff.

Everson, Whitney, O'Melia & Everson, Green Bay, for defendant Integrity Mut. Ins. Co. Welsh, Trowbridge, Bills, Planert & Gould, Green Bay, for defendant Sinclair Refining Co.

Evrard, Evrard, Duffy, Holman & Faulds, Green Bay, for defendant Bougie.

Hoeffel & Coughlin, Appleton, for impleaded plaintiff-respondent.

WILKIE, Justice.

Since there are two separate appeals we will consider them separately.

Liability of Sinclair Refining Company

The primary issue raised in the appeal by the Petersons and their insurer, Rural Mutual, may be stated as follows: Did the contract between the Petersons and Sinclair for the sale and delivery of fuel oil contain an implied promise of safe delivery which could not be avoided by hiring an independent contractor to make physical delivery and which promise, in the event of unsafe delivery, could give rise to liability on the part of Sinclair for damages to the Petersons and their insurer, Rural Mutual?

The relationship between the Petersons and Sinclair regarding the fuel oil delivered to the Peterson home on December 9, 1959, was established by Mrs. Peterson's phone call to the Sinclair terminal in Green Bay on the morning of the accident. She ordered the fuel oil in the name of her husband. The testimony of Bougie and James Smith, branch manager of Sinclair in Green Bay, reveals that when a customer placed an order with the branch office, a clerk at the office prepared an 'order notice' and placed this notice in the pigeonhole box of the driver who normally serviced the customer. Because the testimony reveals that from 1939 until the date of the accident Bougie handled all but a few deliveries of Sinclair products to the Petersons, it is reasonable to believe that Bougie received Mrs. Peterson's order via the order notice in his pigeonhole box. Hence, the phone conversation established a contract for sale and delivery of fuel oil. Bougie's trip on the afternoon of December 9th was an incident in the performance of the contract between Sinclair and Peterson.

Did the agreement contain an implied promise of safe delivery which, if breached, would give rise to a tort action based upon the contractual obligation? ¹ Based upon the substance of the conversation and the conduct of Sinclair pursuant to Mrs. Peterson's order, an 'implication in fact' cannot be found. The Sinclair employee who received the order made no express statements guaranteeing the safety of the customer against the risks of careless delivery. The mere fact of physical delivery does not imply a promise to minimize dangers arising out of the movement of combustible materials. However, a promise of safe delivery can be 'implied in law.'

When the court implies a condition or promise 'in law,' it is imposing this factor upon the parties regardless of their original intentions and in order to accomplish substantial justice in a given set of circumstances. ²

What are the circumstances of this case which justify the 'implication in law' of Sinclair's promise of safe delivery?

The Petersons had purchased most of their petroleum products from Sinclair since 1939. From 1939 until 1959 the pattern of transactions reveals that the customers reasonably believed that at all times they were dealing with Sinclair, with its general commercial reputation being a factor in every transaction. The Petersons placed most of their orders directly with the Sinclair terminal; the invoices were prepared by Sinclair; the bills originated in Sinclair's office; when the Petersons paid by check, it was made payable to Sinclair; if they received a receipt from the driver for a cash payment, the receipt would designate him as the 'representative' of the company. When the Petersons had technical trouble with their fuel oil furnace, a Sinclair representative suggested mechanical changes. The delivery truck bore the trade color of Sinclair green and the trade name was painted upon the truck. The driver wore Sinclair uniforms and insignia. On this pattern of dealing, the Petersons believed that they were dealing with Sinclair when they purchased petroleum products, and Sinclair took numerous steps to reinforce this belief.

Sinclair knew that different petroleum products were simultaneously delivered in a single truck, with the attendant chance of misdelivery and the risk of accident that followed that mode of delivery.

Joint delivery of gasoline and fuel oil was necessary if the company was to efficiently service those customers who needed both products. A requirement of two trips would unnecessarily increase the distribution costs. Given a pattern of dealing in which the customer may reasonably believe that he is dealing in all dimensions of transactions in petroleum products with Sinclair, and given Sinclair's knowledge of a risk-creating method of delivery, it follows that the court may imply in law a promise of safe delivery in the contract established by the phone conversation on the day of the accident.

This court has recognized that the breach of a contractual duty may give rise to a tort action predicated upon failure to carry out the contractual promise to the other party to the agreement.

In Colton v Foulkes (1951), 259 Wis. 142, at p. 146, 47 N.W.2d 901, at p. 903, the court quoted approvingly from 38 Am.Jur., Negligence, p. 661, sec. 20:

"Predicating Duty upon Contract. Ordinarily, a breach of contract is not a tort, but a contract may create the state of things which furnishes the occasion of a tort. The relation which is essential to the existence of the duty to exercise care may arise through an express or implied contract. Accompanying every contract is a common-law duty to perform with care, skill, reasonable expedience, and faithfulness the thing agreed to be done, and a negligent failure to observe any of these conditions is a tort, as well as a breach of the contract. In such a case, the contract is mere inducement creating the state of things which furnishes the occasion of the tort. In other words, the contract creates the relation out of which grows the duty to use care. Thus, a person who contracts to make repairs can be held liable for his negligence in doing the work. Although, as a general rule, mere failure to perform a contract cannot serve as the basis of a tort liability for negligence, and there are authorities which state that liability for negligence in the violation of a duty imposed by contract involves misfeasance rather than nonfeasance, the tendency has been to recognize that liability for negligence may be predicated upon a lack of due care in failing to act as well as upon a negligent performance. The sound rule appears to be that where there is a general duty, even though it arises from the relation created by, or from the terms of, a contract, and that duty is violated, either by negligent performance or negligent nonperformance, the breach of the duty may constitute actionable negligence." ³

This general rationale was reinforced in Presser v. Siesel Construction Co. (1963), 19 Wis.2d 54, at p. 58, 119 N.W.2d 405, at p. 408:

'This court has held the negligent performance or nonperformance of a duty created by a contract may constitute actionable negligence. Colton v. Foulkes (1951), 259 Wis. 142, 47 N.W.2d 901.'

The trial court's conclusion of law, to wit:

'2. The duty of delivering petroleum products from seller to buyer may be delegated to an independent contractor.'

takes the view that even if an implied condition of safe delivery could be found in the agreement, this duty could be delegated to an independent contractor. This court has held that a contractual obligation to protect the safety of others cannot be allocated to an independent contractor.

In Presser v. Siesel Construction, supra, Siesel, a general contractor entered into a contract with the federal government to do remodeling work at a Nike site. Under the terms of the contract with the government, Siesel was obligated to comply with all pertinent provisions of the 'General Safety Requirements' manual in order to provide for the safety of the employees and other persons. Siesel subcontracted all the details of construction to 15 subcontractors. An employee of a subcontractor was injured as a result of the active negligence of its employer-subcontractor. Siesel claimed that because it was not actively negligent, and because the injury was not the result of a latent defect for which it had given no warning, it was not liable. The court rejected its claim, 19 Wis.2d at p. 58, 119 N.W.2d at p. 408:

'The basis of Siesel's liability as found by the verdict was negligence in the manner of performing the contract with the government. Siesel contends it, as a general contractor subcontracting all the work, had only a common law duty to warn of latent defects and not to place a barricade around the Nike elevator at the magazine level. There is a conflict of authorities whether the duty required for a negligence action can be predicated upon a contract. See Annotations, 38 A.L.R. 403, 492, 493, and 69 A.L.R. 522. This court has held the negligent performance or nonperformance of a duty created by a contract may constitute actionable negligence. Colton v. Foulkes (1951), 259 Wis. 142, 47 N.W.2d 901. Restatement, 2 Torts p. 1030, sec. 385. We do not accept the rationale of Foster v. Herbison Construction Co. (1962), Minn., [63,] 115 N.W.2d 915 and Larson v. Heintz Construction Co. (1959), 219 Or. 25, 345 P.2d 835,...