Providence v. Drake Petroleum Co. Inc
| Decision Date | 01 October 2010 |
| Docket Number | C.A. No. PB 09-5630 |
| Parties | PROVIDENCE, S.C., CFN, INC., FRANK ZABATTA and WANDA ZABATTA v. DRAKE PETROLEUM COMPANY, INC. |
| Court | Rhode Island Superior Court |
SILVERSTEIN, J.This matter is before the Court for decision following a bench trial on the merits. The Plaintiffs, CFN, Inc. (CFN), Frank Zabatta, and Wanda Zabatta (collectively, Plaintiffs), seek to enjoin Defendant Drake Petroleum Company, Inc. (Drake or Defendant) from foreclosing two mortgages securing loans in connection with a contract for the supply of fuel and the re-imaging of a gas station. In addition, Plaintiffs seek an order discharging the mortgages, terminating the security interest in the recorded financing statement against Plaintiffs' property, and a declaration that Plaintiffs have fulfilled all of their contractual obligations. The Plaintiffs also seek an award of compensatory damages, together with interest, costs, and attorney's fees. Defendant counterclaims for breach of contract, seeking a judgment in the amount of $109,261.53, plus attorney's fees, costs, and expenses, as well as an order vacating the Temporary Restraining Order1 and permitting Defendant to proceed with foreclosure of the mortgages on Plaintiffs' property.
CFN is a Rhode Island corporation operating a gas station, convenience store, and car wash located at 1525 Mineral Spring Avenue, North Providence, Rhode Island (Property). (Tr. 70.) Anthony Zabatta (Zabatta) is the president of CFN, and the real estate on which CFN operates is owned by Zabatta's parents, Frank and Wanda Zabatta (Zabattas). (Tr. 70.) Drake is a distributor of Sunoco brand gasoline and other related products. (Compl. ¶5.) At the end of 2005, following the expiration of a previous fuel supply contract with Sunoco, Zabatta began negotiations with George Giacobbi and Gary Plumer (Plumer), the area manager for Drake. (Tr. 71-72.) During these negotiations, the parties discussed the terms by which CFN would purchase fuel from Drake, a signing bonus that Drake would provide to CFN, and the re-imaging of the gas station as dictated by Sunoco standards.2
These negotiations were memorialized in an August 25, 2006 letter of intent (Letter of Intent) drafted by Drake and executed by Zabatta on September 6, 2006. (Tr. 27; Pl.'s Ex. 3.) In the Letter of Intent, Drake proposed to (1) provide CFN with a $100,000 signing bonus; (2) convert the gas station to the Sunoco Horizon Image; (3) supply Sunoco branded gasoline; and (4) provide $2,000 annually for maintenance. (Pl.'s Ex. 3.) More specifically, as part of the reimaging process, Drake proposed:
"[r]emoval of existing mansard canopy fascia with installation of Sunoco blue vertical fascia. Will also round canopy corners with installation of new graphics, paint location, including building to specifications, provide new twin pole ID and 3 product LED pricesign reimage dispensers, and install Horizon graphics on each side of the car wash building. Drake's total expense will be approximately] $40,000.00." (Pl.'s Ex. 3.)
In the months leading up to the parties' execution of the Dealer Sales Contract (Contract), Plumer assembled vendor bid proposals in order to calculate the re-imaging budget. (Def.'s Ex. C.) On December 27, 2006, the parties executed the finalized Contract and Guaranty.3 (Pl.'s Ex. 2.) In addition to stipulating the terms for the purchase and supply of gasoline, 4 Drake also agreed to provide CFN with a cash advance of $100,000 as a signing bonus and $40,000 "to install improvements at the premises, including but not limited to the installation of a new twin pole ID digital price sign, refac[ing the] canopy with Sunoco fascia and Horizon decals, redecal[ing the] dispenser and install[ing] valances and paint[ing] premises to Sunoco specifications."5 (Pl.'s Ex. 2 ¶ 25.)
In order to repay the $140,000 loan, 6 the Contract specified that $0.0311 would be added to each gallon of gasoline actually purchased by CFN. (Pl.'s Ex. 2 ¶26.) By adding $0.0311 toeach gallon, the loan would be fully amortized by the time CFN fulfilled its obligation to purchase 4, 500, 000 gallons of gasoline. (Pl.'s Ex. 2 9, 26.) In the event the Contract was terminated early, CFN would be required to pay Drake the sum of all of the following: (1) principal balance remaining on the $140,000 loan; (2) any and all costs, expenses (including attorneys fees), and damages arising as a result of a default; and (3) any and all other sums owed by CFN. (Pl.'s Ex. 2 ¶ 26.)
As additional security for the $140,000 loan, at the time the Contract was executed, the parties concurrently executed a note, guaranty, security agreement, a mortgage securing the payment of the $140,000 loan, and a second mortgage securing the performance of obligations under the Contract (Loan Documents). (Tr. 66-68.; Pl.'s Exs. 2, 11-14.) The Loan Documents ensured that CFN's obligation to repay the loan and its performance obligations under the Contract were secured by mortgages on the Property.
Following execution of the Contract, Plumer began the re-imaging process. In January 2007, he contacted Chris Krebs (Krebs) at Everbrite—an ID sign manufacturer for Sunoco—to request the specifications for the gas station's ID sign to be used in the permit application with the City of North Providence. (Tr. 94-95, 110-11; Def.'s Ex. H.) Krebs completed the engineering drawings for the seven-foot sign in April 2007, and Plumer submitted the application. (Tr. 110-11; Def.'s Ex. G.)
Throughout the course of the re-imaging, Plumer hired the contractors and oversaw the renovations and construction at the Property. Plumer contends that at several points throughout the re-imaging, requests were made by CFN leading to expenditures exceeding what had been budgeted for in the Contract by $21,761.53 (Overruns). (Tr. 118; Def.'s Ex. J.) As a result, in December 2007, Plumer presented Zabatta with an Agreement to Amend Dealer Sales Contract (Amendment), which Zabatta refused to sign.7 (Tr. 61-62, 127; Pl.'s Ex. 10.)
Zabatta now contends that Drake knew about many of its requests before calculating the $40,000 budget and should have increased the loan amount under the Contract to reflect these costlier expenditures. (Pl.'s Post Trial Mem. 6.) Plumer contends that these expenditures were made after execution of the Contract and with Zabatta's knowledge that the requests would result in overages and would necessitate execution of a contract amendment. (Def.'s Reply Mem. 1.)
In the months that followed, market conditions led to reduced sales at the gas station and Zabatta's gasoline orders reduced by half. (Tr. 53-54.) As a result, Zabatta approached Plumer about a temporary allowance8 to assist CFN in competing with a new Hess station that had opened nearby. (Tr. 53-54; 79.) Although Plumer may have accommodated the request on a few orders, Drake was ultimately unable to reduce the price, and Zabatta indicated to Plumer that CFN wished to terminate the Contract and "look elsewhere." (Tr. 53-54, 56, 80.)
In connection with this termination request, on June 3, 2008, Plumer faxed Zabatta a letter (Pay-off Letter) reflecting the unamortized balance of the loan, as well as the Overruns from the re-imaging. (Tr. 56, 80; Pl.'s Ex. 8.) The Pay-off Letter stated that "Drake would agree to mutually terminate [the Contract] at any point in the future that [CFN's] balance [was] paid in full." (Pl.'s Ex. 8.) Drake agreed to terminate the Contract if the account balance of $136,522.33—reflecting the remaining amortization balance and the re-imaging Overruns—was paid off. (Tr. 125.) Zabatta claims he did not question the amount stated in the Pay-off Letter, having previously seen the Overruns amount in the Amendment. (Tr. 99-100.) Although Zabatta did not immediately pay off the account balance indicated in the Payoff Letter, he began looking for another oil company, eventually signing with Irving. (Tr. 81-83.)
On or about December 29, 2008, CFN tendered a check to Drake in the amount of $107,251.91 (Check). The check amount, with the exception of some disputed credits, represented the fully amortized balance of the $140,000 loan due under the Contract.9 (Tr. 82-83, 91.) Drake subsequently cashed the Check, and CFN thereafter affiliated with Irving. (Tr. 83.)
On January 20, 2009, a Notice of Default (Notice) was sent to CFN notifying Zabatta that the Contract was in default, and requesting payment of the additional $21,761.53 representing the outstanding expenditures for the re-imaging. (Tr. 92; Def.'s Ex. B.) The Notice stated that:
(Def.'s Ex. B.)
CFN failed to comply with the Notice, and Defendant alleges that Plaintiffs are in default under the Contract. (Def.'s Reply Mem. 2.) As a result, Drake notified CFN of its intention to invoke its rights under the mortgages and to foreclose.
CFN now seeks declaratory and injunctive relief to prevent foreclosure. Drake counterclaims to recover the $21,761.53 Overruns, as well as lost profits from the approximately 3, 500, 000 gallons of gasoline not purchased under the Contract. (Tr. 129.)
The Court decides non-jury trials pursuant to its power under Rule 52, which provides that "[i]n all actions tried upon the facts without a jury... the court shall find the facts specially and state separately its conclusions of law thereon." Super. R. Civ. P. 52(a). Under Rule 52, "the trial justice sits as a trier of fact as well as law." Parella v. Montalbano, 899 A.2d 1226, 1239 (R.I. 2006) (quoting Hood v....
To continue reading
Request your trial