Sutton v. Chevron Oil Co.

• Decision Date: 06 June 1973
• Docket Number: No. 1065,1065
• Citation: 85 N.M. 604,514 P.2d 1301,1973 NMCA 84
• Parties: Charles M. SUTTON, Individually and Administrator and Personal Representative of the Estate of Mona Ray Sutton, Deceased, Plaintiff-Appellant, v. CHEVRON OIL COMPANY et al., Defendants-Appellees.
• Court: Court of Appeals of New Mexico

Page 1301

514 P.2d 1301

85 N.M. 604

Charles M. SUTTON, Individually and Administrator and Personal Representative of the Estate of Mona Ray Sutton, Deceased, Plaintiff-Appellant, v. CHEVRON OIL COMPANY et al., Defendants-Appellees.

No. 1065.

Court of Appeals of New Mexico.

June 6, 1973.

Certiorari Granted July 18, 1973.

Arthur O. Beach, Joseph L. Smith, Smith & Ransom Law Offices, Albuquerque, for plaintiff-appellant.

Donald L. Jones, K. Gill Shaffer, Shaffer & Butt, Albuquerque, for defendants-appellees.

OPINION

SUTIN, Judge.

Plaintiff appeals from a summary judgment granted Chevron Oil Company. (Chevron) arising out of a claim for damages for wrongful death caused by alleged negligence of defendant Sharp, the lessee and operator of a Chevron oil station.

We reverse.

Chevron did business as Standard Oil Company of Texas (Standard).

On June 15, 1968, Standard, lessor, leased the service station and premises, located at 845 Juan Tabo Blvd., N.E., Albuquerque, New Mexico, to defendant, Leland A. Sharp. This was entitled 'Dealer Lease.' It did not authorize Sharp to make necessary repairs to vehicles owned by the public, but it did not deny Sharp this right.

On June 15, 1968, Standard, as Seller, entered into a 'Sales Agreement' with Sharp as Buyer, in which Standard agreed to sell and deliver gasoline, motor fuel, lubricating oil and petroleum products to Sharp, and Sharp agreed to purchase and sell.

The 'Dealer Lease' provided in part that Sharp was '* * * engaged in an independent business, and nothing herein contained shall be construed as granting to (Standard) any right to control (Sharp's) business or operations, or the manner in which the same shall be conducted.'

The Sales Agreement, in addition, provided in part that Standard '* * * has no right to exercise any control over any of (Sharp's) employees, all of whom are entirely under the control and direction of (Sharp), who shall be responsible for their actions and omissions. * * *'

Sharp, by deposition, testified that as far as he knew he was an independent contractor operating on his own and not for someone else.

While the Dealer Lease and Sales Agreement were in effect, the plaintiff's Toyota had been entrusted to Sharp for maintenance and repairs. The accident, which resulted in the fatality of plaintiff's wife, occurred when the brakes failed and the right front wheel of the Toyota came off.

The trial court found:

* * * (T)here is no genuine issue as to any material fact and as grounds therefor the Court relies upon the decision of the New Mexico Supreme Court in the case of Shaver v. Bell, et al., 74 N.M. 700 (397 P.2d 723), and the authorities cited in the movant's Memorandum Brief, there being an absence of fact which would support a conclusion that Chevron Oil Company exercised or had the right of control over the operations of the station by the lessee, Sharp, or his employee, Buss. (Emphasis added)

The issue on this appeal is: Was there an absence of fact which would support a conclusion that Chevron exercised or had the right of control over the operation of Sharp's Chevron Service Station?

We believe the trial court erred in two respects: (1) There is a genuine issue of fact whether Chevron exercised or had the right to exercise control over the operation of the station by Sharp or his employee, Buss; (2) 'control' is not the exclusive method of determining liability of Chevron for the negligence of Sharp and Buss.

(1) There is a Genuine Issue of Fact Whether Chevron Exercised or had the Right to Exercise Control.

A. The Private Agreement Between Chevron and Sharp is not Binding on the Public.

The first point to determine is whether an innocent member of the public who deals with a nationally known service station operation is bound by the private agreements between Chevron and Sharp. We say 'no.'

The 'Dealer Lease' created a landlordtenant relationship between Chevron and Sharp. The 'Sales Agreement' created a purchase agreement between Chevron and Sharp. These agreements are secret, private documents which establish the legal relationship between these parties. They govern their respective rights and duties and determine the liability of each party to the other arising out of litigation in which each party seeks relief from the other.

The motoring public is not aware of the existence of these documents, have no notice of the existence of these documents, nor any knowledge of their contents.

First, it has long been the rule that a third person who deals with an agent is not bound by any secret or private instructions given to an agent by the principal. South Second Livestock Auction, Inc. v. Roberts, 69 N.M. 155, 364 P.2d 859 (1961); Sterling v. B. & E. Constructors, Inc., 74 N.M. 708, 397 P.2d 729 (1961); Douglass v. Mutual Ben. Health & Accident Ass'n,42 N.M. 190, 76 P.2d 453 (1937); Echols v. N. C. Ribble Company, 85 N.M. 240, 511 P.2d 566 decided March 2, 1973.

Sutton believed that Sharp and Buss were agents and servants of Chevron. He was not bound by the provisions of the documents that Sharp was engaged in an independent business, not subject to any control by Chevron.

Second, it is a matter of common and general knowledge that Chevron, under various names, owns, possesses and operates service stations throughout the United States, including the State of New Mexico and the City of Albuquerque; that it engages in substantial national advertising; that it issues Chevron credit cards, sells Chevron products, uses Chevron uniforms, insignia, signs; that its station operators perform services on automobiles; that the purpose of owning, possessing and operating service stations is to encourage the patronage of the motoring public for the benefit of other stations supplied by Chevron. It invites the motoring public to use the facilities of its service stations and it knows the public will make use of its premises, its operators, and seek the services of its operators as well as make purchases of its products, without knowledge of the legal relationship between the parties.

Third, the motoring public has no duty to inquire about the legal relationship between Chevron and Sharp, or to determine whether a master-servant, principal-agent, landlord-tenant or independent business relationship exist, or to request the production of all written documents for inspection, nor any duty to request the presence of Chevron personnel for examination, nor any duty to obtain an oral or written opinion from Chevron that it has no control over Sharp, and is not liable for the negligence of Sharp. The motoring public relies upon the integrity, the reliability, and the economic and financial status of Chevron. The legal relationship is usually discovered after injury has occurred or litigation has begun.

Fourth, we weigh the balance between the value of the private documents of Chevron, and Chevron's duty to the motoring public. We believe the burden rests on Chevron to make known to the public at each service station that the possessor is engaged in an independent business; that Chevron has no right to exercise any control over any of the possessor's business operations and employees; that all of the business operations of the possessor are under his control and direction, and the possessor, not Chevron, is responsible for its actions and omissions.

Fifth, the written agreement between Chevron and Sharp does not determine the issue of control. Jackson v. Standard Oil Company of California, 8 Wash.App. 83, 505 P.2d 139 (1972). After stating contract provisions, identical with those in this case, Judge Pearson wrote:

It is manifest, however, from what we have already said, that a written contract provision disclaiming control is not determinative on the question of control. The relationship of the parties, as amplified by the operating manual, the nature of the undertaking itself, and the amount of control actually exercised in performance of the undertaking, are the determinative factors.

We, therefore, rule that the 'Dealer Lease' and 'Sales Agreement' cannot be used by Chevron as an escape from liability to a third person as a matter of law. These agreements govern the rights and duties of Chevron and Sharp in their business operations. See, Lommori v. Milner Hotels, 63 N.M. 342, 319 P.2d 949 (1957).

B. There was an Issue of Fact over Chevron's Right of Control.

The facts most favorable to plaintiff show the following:

Plaintiff was the owner of a Toyota. He entrusted the Toyota to defendant Sharp for maintenance and repairs. Defendant Buss was an employee of Sharp. In connection with the regular service station, Sharp operated a 'Four Wheel Drive Center' in which he specialized in repairing four wheel drive vehicles. But Sharp considered himself to be just a service station. His jeep had painted on its side, 'Four Wheel Drive Center, Lee Sharp Chevron, Albuquerque, New Mexico.' He had calling cards advertising 'Lee Sharp Chevron' and 'Four Wheel Drive Equipment.' He had one telephone number for both operations and one set of books and accounts.

Chevron personnel cautioned Sharp about keeping the place clean, but never questioned Sharp about the 'Four Wheel Drive Center' operation. A reasonable inference can be drawn that Chevron knew about this operation. But Chevron never protested, nor did Chevron prohibit Sharp from using the premises for maintenance and repair of four wheel drive vehicles for public patrons, nor did Chevron contend it was a violation of the 'Dealer Lease' agreement. Chevron ratified the acts of Sharp. Grandi v. LeSage, 74 N.M. 799, 399 P.2d 285 (1965); Terry v. Humphreys, 27 N.M. 564, 203 P. 539 (1922).

Prior to authorizing Chevron and Sharp to repair his Toyota, Sutton relied on statements made to him that Chevron had more skillful repairmen, was superior, and specialized in servicing and repair work on vehicles of his kind, the Toyota; that Sharp and Buss were agents and employees of Chevron....