Steiner v. Mobil Oil Corp.

• Decision Date: 11 October 1977
• Citation: 20 Cal.3d 90,141 Cal.Rptr. 157
• Court: California Supreme Court
• Parties: , 569 P.2d 751, 22 UCC Rep.Serv. 865 Joseph R. STEINER, Plaintiff and Respondent, v. MOBIL OIL CORPORATION, Defendant and Appellant. L.A. 30741.

Page 157

141 Cal.Rptr. 157

20 Cal.3d 90, 569 P.2d 751, 22 UCC Rep.Serv. 865

Joseph R. STEINER, Plaintiff and Respondent, v. MOBIL OIL CORPORATION, Defendant and Appellant.

L.A. 30741.

Supreme Court of California, In Bank.

Oct. 11, 1977.

McCutchen, Black, Verleger & Shea, Max K. Jamison, Jack D. Fudge, David A. Destino and Nelson S. Anthony, Los Angeles, for defendant and appellant.

Joseph A. Lazaroni and Stanley Sapiro, Los Angeles, for plaintiff and respondent.

TOBRINER, Justice.

In this case, over one year after apparently accepting plaintiff's offer, the Mobil Oil Corporation sought to impose upon plaintiff the very contractual terms which plaintiff expressly rejected in his offer. As justification for its conduct, Mobil asserted that the crucial provision of plaintiff's offer was lost in the labyrinth of the Mobil bureaucracy, and thus that Mobil decisionmakers had no opportunity to pass on plaintiff's offer as such. As we shall see, however, the trial court correctly concluded that section 2207 of the California Uniform Commercial Code ¹ bars Mobil from in this way converting its own error into plaintiff's misfortune.

Section 2207, subdivision (1), provides that parties may form an agreement, even if the terms of offer and acceptance do not entirely converge, if the offeree gives a definite expression of acceptance, and if the terms of acceptance do not explicitly condition agreement upon the offeror's consent to the offeree's new proposed terms. In this case, as the trial court found, defendant Mobil did not condition its acceptance of plaintiff's offer upon plaintiff's agreement to Mobil's alteration of plaintiff's offer and thus a contract was formed. Section 2207, subdivision (2), provides in turn that, if the terms of the offer and acceptance differ, the terms of the offer become part of a contract between merchants if the offer expressly limits acceptance to its own terms, or if the varying terms of the acceptance materially alter the terms of the offer. As the trial court found, under either of these clauses, the terms of Steiner's offer must prevail, because Steiner's offer was expressly conditional upon Mobil's agreement to provide a guaranteed discount, and Mobil's substitution of a discount terminable at its discretion materially affected Steiner's interests.

Accordingly, the trial court did not err in granting judgment for plaintiff, and we shall thus affirm its judgment.

1. The facts in this case.

Defendant Mobil Oil Corporation, ² in appealing from a judgment for plaintiff Steiner, does not challenge the facts as found by the trial court, but rather confines itself to an attack on the trial court's conclusions of law. The facts in this case, thus, are not in dispute.

Joseph R. Steiner is an independent service station operator. He purchases the gasoline which he sells from Mobil, but, except for any incidental rights which the gasoline contract confers, Mobil owns no interest in Steiner's property.

In 1971, the third party who leased the service station property to Steiner informed him that the property was for sale. Steiner contacted Mobil sales representative Tony Montemarano. Montemarano informed Steiner that Mobil would not purchase the property, but that Mobil was interested in assisting Steiner in making the purchase.

Thereafter, Steiner entered into extended negotiations with J. S. Chenen, Mobil's area manager and Montemarano's superior. Steiner and Chenen agreed that Mobil would supply the down payment on the property, amounting to $30,000. In return, Steiner would enter into a 10-year contract with Mobil. The contract would treat the cash advance as a prepaid competitive allowance, to be amortized over the 10-year period through Steiner's purchase of 5.8 million gallons of gasoline.

The negotiations did not terminate with the agreement concerning the down payment. Steiner had concluded that he would not be able to do business successfully if he were compelled to purchase gasoline from Mobil at the standard tank wagon price. As the trial court found, Steiner told Chenen that he, Steiner, "needed a firm competitive allowance for the length of his distributor's agreement to make his cash flow adequate to meet the payments on the property." Steiner and Chenen agreed that a satisfactory arrangement with Mobil would include not only the $30,000 prepaid competitive allowance, but also a further competitive allowance reducing Mobil's tank wagon price by 1.4 cents per gallon. Mobil would also supply Steiner with $3,000 worth of improvements.

As Chenen made clear to Steiner, neither Chenen nor his immediate supervisor, district manager D. L. Dalbec, possessed the authority to accept the negotiated terms on Mobil's behalf. The negotiations therefore did not culminate in an agreement as such but rather in a proposal to be submitted to R. D. Pfaff, the division general manager, who did possess authority to agree to the proposal on Mobil's behalf.

Moreover, the proposal did not take the form of a documented single contract. Chenen and Steiner utilized a series of standard Mobil forms in putting together the proposal, modifying the forms where necessary. Steiner signed those of the forms, such as the basic retail dealer contract, which required his signature. The package of documents which comprised the proposal, therefore, needed only Pfaff's approval to become effective.

Near the close of the process of negotiating and assembling the proposal, Steiner obtained a copy of the standard Mobil form which would embody the 1.4 cents per gallon competitive allowance. This form, which did not require Steiner's signature, stated: "This allowance may be changed or discontinued by us at any time upon notice to you in writing. . . ." Upon receipt of the form Steiner immediately contacted Chenen by telephone, told Chenen that he would not go ahead with the deal if Mobil could revoke the competitive allowance at any time, and demanded assurances that no such revocation would occur.

In order to placate Steiner, Chenen, after consultation and authorization from Dalbec, sent Steiner a letter, dated December 2, 1971, which declared "(P) The ten year Retail Dealer Contract dated December 15, 1971, effective January 1, 1972, is signed by you on the basis that Mobil grant a $30,000 Prepaid Competitive Allowance, and a $.014 Competitive Allowance at time of delivery. (P) If Mobil management does not accept in full the above conditions outlined in your competitive offer, the above mentioned contract will be void." (Emphasis added.)

The trial court found that "Chenen was authorized by Mobil to write the letter" to Steiner. Moreover, as the trial court also found, because of the letter, "through . . . Chenen and Dalbec Mobil had both knowledge and notice" of Steiner's demand for a guaranteed competitive allowance. "Mobil had reason to know that the transaction and agreement would be materially affected and that plaintiff would not enter therein if (the guaranteed discount) term was not part of the 'package.' " The trial court further concluded that, for Chenen and Dalbec, the transmission of Steiner's offer to division general manager Pfaff "was part of their regular duties" and thus that Chenen and Dalbec "were obligated, in the exercise of good faith and ordinary care and diligence, to communicate the substance of plaintiff's (offer) to Pfaff."

In fact, however, Chenen and Dalbec did not transmit to Pfaff the letter which Chenen had sent to Steiner; Mobil's copy of that letter remained in the district office files. In preparing the proposal for submission to Pfaff, Chenen and Dalbec assembled a package which included the various documents that Steiner had executed, the standard form providing the revocable 1.4 cents per gallon competitive allowance, and various memoranda explaining the advantages of the deal for Mobil. Early in 1972, several months after Chenen and Dalbec had transmitted the proposal to him, Pfaff approved it as submitted.

Chenen informed Steiner of Pfaff's approval by telephone. Steiner had called Chenen to find out what was happening with the proposal which they had negotiated. Chenen told Steiner that Mobil had a check for him, and that the next thing for Steiner to do was to open an escrow account and proceed with the purchase of the property.

Subsequently, Montemarano delivered to Steiner at his service station a manila folder containing the documents approved by Pfaff. These documents, the trial court found, were "numerous and complex in nature." Nonetheless, there was no cover letter describing the contents of the folder. Although the folder included Mobil's standard competitive allowance form, with its clause providing for revocation at will, Montemarano did not call this fact to Steiner's attention.

Thus, as the trial court found, at no time after Chenen sent Steiner the December 2 letter "did Mobil advise (Steiner) that a non-cancellable allowance would not be part of the agreement." Moreover, Steiner "did not at any time reread all of the documents delivered to him by Mobil, particularly the form letter . . . setting forth the provision regarding the 1.4 cents per gallon competitive allowance being cancellable." Mobil did not "specifically bring" to Steiner's attention "the statements made in the form letter . . . concerning the cancellable condition of the competitive allowance."

By April 1972, Steiner had completed the process of acquiring the service station property. Beginning in March, Mobil afforded Steiner the benefit of the 1.4 cents per gallon competitive allowance in billing him for gasoline and continued to do so until the summer of 1973. On July 16, 1973, Chenen informed Steiner by letter that, in accordance with the provisions of Mobil's notice of competitive allowance, Mobil would reduce Steiner's discount to 0.5 cents per gallon as of August 1, 1973.

Steiner brought this suit in the Los Angeles County Superior Court, seeking declaratory...