Union Oil Co. of California v. Service Oil Co., Inc.

• Decision Date: 25 June 1985
• Docket Number: No. 84-5448,84-5448
• Citation: 766 F.2d 224
• Parties: 1986-1 Trade Cases 66,983 UNION OIL COMPANY OF CALIFORNIA, Plaintiff-Appellee, v. SERVICE OIL COMPANY, INC., and Hugh E. Mays, Sr., Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 224

766 F.2d 224

1986-1 Trade Cases 66,983

UNION OIL COMPANY OF CALIFORNIA, Plaintiff-Appellee, v. SERVICE OIL COMPANY, INC., and Hugh E. Mays, Sr.,

Defendants-Appellants.

No. 84-5448.

United States Court of Appeals, Sixth Circuit.

Argued May 1, 1985.

Decided June 25, 1985.

Robert H. Watson, Jr. (argued), Watson & Emert, Knoxville, Tenn., for defendants-appellants.

Ward S. Whelchel, Zwick Law Offices, William H. Skelton, R. Louis Crossley, Jr. (argued), Knoxville, Tenn., for plaintiff-appellee.

Before ENGEL and MARTIN, Circuit Judges, and TIMBERS, Senior Circuit Judge. ^*

BOYCE F. MARTIN, Jr., Circuit Judge.

Service Oil Company and its president, Hugh E. Mays, Sr., appeal the summary judgment and order of dismissal entered against them in this action to recover under a jobber sales agreement and a guaranty. We affirm in part and reverse in part.

Service Oil Company is a distributor of gasoline products located in Knoxville, Tennessee. On August 1, 1975, Service entered into a jobber sales agreement with Union Oil whereby Service would buy products from Union Oil and then resell the products to local service stations. Previously, on April 11, 1975, Hugh E. Mays, Sr. had signed a guaranty agreement under which he agreed to be personally liable for all extensions of credit by Union to Service.

In 1978, Union decided to withdraw from the Knoxville retail gasoline market and sold its company-owned service stations to Service. In connection with this sale, Union and Service entered into a new jobber sales agreement on February 12, 1978. On March 7, 1978, Union and Service signed a document cancelling the 1975 jobber sales agreement (the 1978 cancellation). No new guaranty was signed at that time, and Union on several occasions has asked Mays to sign a new guaranty.

Under the 1978 jobber sales agreement, Union continued to supply petroleum products to Service. Service began to fall behind in its payments to Union in the summer of 1983, and Union terminated the jobber sales agreement on December 19, 1983. As of February 10, 1984, Service owed Union $354,387.45 under the 1978 jobber sales agreement.

Union filed the present action on November 14, 1983 claiming that Service was liable for the unpaid amount under the 1978 jobber sales agreement and that Mays was liable as guarantor under the 1975 guaranty agreement. Mays defended the complaint on the ground that the guaranty had been terminated by the 1978 cancellation. Service argued that the jobber sales agreement was illegal under federal antitrust laws. Service also filed a counterclaim alleging violations of the antitrust laws by Union.

The district court granted Union summary judgment on its main claim on February 24, 1984. The district court found that the 1975 guaranty stated that it "shall remain in full force and effect until same is revoked in the manner" provided in the guaranty. Under the guaranty, Mays could only terminate it upon written notice to Union at its office in Birmingham, Alabama and by paying the amount of money then owed under the contract. Because Mays had not complied with these provisions, the district court held that the guaranty was still in effect and enforceable. The court rejected Mays' affidavit that stated that Union representatives had told him that the 1978 cancellation also terminated the guaranty as "self-serving parole evidence" that was insufficient to present a material issue of fact. With respect to Service's antitrust defense, the district court stated that "[w]hether Service Oil has paid for goods received and whether plaintiff violated state and federal statutes in the selling of these goods are wholly separate issues," citing Bruce's Juices, Inc. v. American Can Co., 330 U.S. 743, 67 S.Ct. 1015, 91 L.Ed. 1219 (1947). ¹ The district court therefore granted summary judgment against both defendants for the amount of the debt.

Service and Mays appealed the grant of summary judgment to this Court. We dismissed the case for lack of jurisdiction on the ground that there was no final judgment because the defendants' counterclaim was still pending and the district court had not granted a partial final judgment as allowed by Federal Rule of Civil Procedure 54(b). Union Oil Company of California v. Service Oil Co., No. 84-5185 (6th Cir. April 20, 1984).

Following this Court's decision, the district court considered a motion by the defendants pursuant to Federal Rule of Civil Procedure 60(b) to be relieved from the summary judgment because of newly discovered evidence. The newly discovered evidence was an affidavit by Charles Venable, Union's representative during the negotiation of the 1978 jobber sales agreement, which stated that Venable had informed Mays that the guaranty was terminated by the 1978 cancellation and that he was instructed by Union to inform Mays of such a cancellation. The district court on May 2, 1984 refused to grant the motion under Rule 60(b) because the defendants had failed to show that despite their due diligence as required by the rule, they were unable to discover the evidence before the hearing on summary judgment. In the same order, the court dismissed the defendants' antitrust counterclaim without prejudice because it added needless complexity to the main claim. This appeal ensued.

The defendants present three issues on appeal. First, Mays argues that his affidavit created a material issue of fact as to the enforceability of the guaranty so that summary judgment was improvidently granted against him. Second, Mays argues that the district court abused its discretion in not relieving him from the judgment so he could present the Venable affidavit as evidence. Finally, both defendants argue that the district court abused its discretion in dismissing their antitrust counterclaim.

In support of his first argument, Mays relies on the following language in the 1978 cancellation agreement:

[T]he undersigned parties hereby mutually agree that [the jobber sales] agreement, and any amendments thereto, shall be and the same hereby are cancelled and terminated.... (emphasis added).

Mays argues that the guaranty was an amendment to the 1975 jobber sales agreement and that this language cancelled the guaranty. He maintains that his affidavit presented a factual question as to whether the parties intended the word "amendments" to include the guaranty and that his testimony would have been admissible parol evidence to establish what the parties meant by "amendments."

We do not find this argument convincing. Under Tennessee law, parol evidence is not admissible to interpret a contract when there is no ambiguity on the face of the contract. Cartwright v. Giacosa, 216 Tenn. 18, 390 S.W.2d 204, 206 (1965); McMillin v. Great Southern Corp., 480 S.W.2d 152, 155 (Tenn.Ct.App.1972). We believe there is no ambiguity with the word "amendments" so that it could include the 1975 guaranty. We come to that conclusion for two reasons.

First, the word amendment connotes a modification that postdates an earlier contract. In this case, the guaranty, which Mays would have us consider as an amendment, predated the jobber sales agreement by over three months. Second, even if the guaranty had been subsequent to the jobber sales agreement, the two contracts were not even between the same parties. The jobber sales agreement was between Union and Service, and the guaranty was between Union and Mays. It is implausible that a contract between two parties could "amend" an earlier contract between different parties. We therefore conclude that the word "amendments" is unambiguous on its face, at least with respect to the guaranty, and that Mays' parol evidence would not have been admissible evidence to interpret the 1978 cancellation agreement. As there was no material issue of fact as to the enforceability of the guaranty, summary judgment was properly granted to Union against Mays.

Mays next argues that the district court erred in not relieving him of the judgment under Rule 60(b) so that he could present new evidence. Mays argues that his and his son's affidavits, which stated that...