APCO Oil Corp. v. Stephens

Steele Hays, Judge. For a number of years, APCO Oil Corporation has owned an automobile service station at DeQueen, Arkansas, for the retail sale of gasoline and petroleum products. In 1970, their operator terminated his lease, so APCO approached Harvey B. Stephens about taking over the station. Stephens agreed to do so and the parties entered into a “Service Station Consignee Agreement,” dated December 29, 1970. Stephens bought certain unspecified merchandise, stock and equipment from the withdrawing operator. On August 25, 1971, the parties executed a “Motor Fuel Consignment Agreement” and on September 1, 1971, a “Consignee Service Station Lease.” These instruments comprised the written contracts between the parties. All agreements were signed by Harvey B. Stephens as a lessee-consignee and by P. J. Merchant on behalf of APCO Oil Corporation and were witnessed by Ben F. Harrison, APCO Representative. A provision in the lease provided that after October 30, 1971, the lease would continue from month to month and that either party could terminate by giving the other written notice thereof ten days or more prior to the date such termination would become effective. The Service Station Consignee Agreement and the Consignee Service Station Lease contained provisions that the entire agreements were contained in the written contracts and that no obligation, agreements or understandings would be implied, unless expressly set forth therein. At the time. Stephens took over the service station from the previous operator, the station was being used by Jefferson Bus Lines as a bus station and was also providing a telephone answering service for the DX Propane distributor. Both of these services provided additional income to the service station operator and continued after Stephens took over. APCO was aware of these outside business activities and had no objection to them, though APCO received no direct benefit. At some time prior to January, 1978, APCO began negotiating with Kerr-McGee Refining Corporation for the sale by APCO of a number of service stations in Arkansas and Oklahoma, including the station at DeQueen. In contemplation of the consummation of that sale, on January 13, 1978, APCO gave written notice to Stephens of termination of the lease and Motor Fuel Consignment Agreement to take effect on February 15, 1978. The notice was received by Stephens on January 17, 1978. Stephens called APCO to request additional time to relocate his operation and was told that Bill Gary and Richard Morava, APCO representatives, would come to talk to him. Stephens also talked to Kerr-McGee about continuing in the station as a Kerr-McGee operator. Stephens was contacted by Morava and Gary and by representatives of Kerr-McGee, but no specific understanding was reached with either. It appears that on February 17, 1978, a Kerr-McGee distributor from Poteau, Oklahoma, came to DeQueen to discuss with Kerr-McGee representatives the possibility of operating the station as a Kerr-McGee outlet. Negotiations between the distributor and Kerr-McGee did not materialize and the Kerr-McGee distributor informed Stephens that Kerr-McGee wanted too high a price and that he was not interested. On the same day Kerr-McGee representatives locked the gasoline pumps, effectively terminating Stephens’ operation. As a consequence of the closing of the station, Jefferson Bus Lines and the DX Propane distributor moved to other locations. On March 22, 1978, APCO filed suit to eject Stephens from the station. Stephens responded with a counter-claim, alleging that: (1) APCO had not returned a contingency deposit of $2,000.00 due him; (2) that APCO had forced him out of business with no means of disposing of the stock of goods and fixtures due to the “short notice” given him on February 17, 1978; (3) that he was entitled to be paid for certain improvements to the station; and (4) that he had lost his contract with Jefferson Bus Lines due to the “hasty manner” that APCO took over the station. Stephens sought damages of $100,000.00. After a request for admissions, written interrogatories and discovery depositions, APCO moved for summary judgment, which was denied. The suit was tried on the issues raised in the counter-claim and over objections from APCO, Stephens was permitted to testify that Ben Harrison had told him APCO would purchase his stock and equipment if someone else took over the station. At the conclusion of the evidence, the trial court directed a verdict for Stephens for the $2,000.00 contingency deposit (which was not disputed) and directed a verdict for APCO on the allegation of the counterclaim for the cost of improving the real property. The trial court denied APCO’s motion for a directed verdict relative to the loss of the Jefferson Bus Line and the answering service and, further, denied APCO’s motion for a directed verdict on Stephens’ claim for recovery of the value of his inventory of stock, merchandise and equipment. APCO’s motion was based on the fact that Stephens’ had not alleged an oral reformation of the written contract in his counter-claim and there was insufficient evidence of oral reformation. On its own initiative, the court treated the counter-claim as amended to conform to the proof, namely, that the written contract was reformed by the oral agreement by APCO to purchase Stehens’ inventory. The jury returned a verdict in the sum of $7,515.00. APCO moved for judgment notwithstanding the verdict, which the court denied and APCO has appealed, contending that it was error for the court to permit Stephens to testify about oral agreements allegedly entered into with APCO representative, Ben Harrison, prior to the signing of the first contract on December 29, 1970. APCO contends that under the express provisions of the written contracts, any oral agreements were merged into the written contracts and parol evidence is inadmissible to contradict, vary or enlarge the terms of an unambiguous, written contract. Further, APCO contends there was not evidence that Harrison had any authority to bind APCO. We think appellant’s position is well taken. The law in Arkansas and elsewhere is that before the terms of a written contract can be altered or reformed by oral agreement the evidence thereof must be clear, unequivocal and decisive. Realty Investment Company v. Higgins, 192 Ark. 423, 91 S.W. 2d 1030 (1936); Davidson v. Peyton, 190 Ark. 573, 79 S.W. 2d 734 (1935); Barton Mansfield Company v. Wells, 183 Ark. 174, 35 S.W. 2d 337 (1931). The rule is that any oral agreements between the parties prior to the written agreement become merged in the subsequent written agreement and parol evidence intended to vary the terms of the writing is incompetent and inadmissible. Wright v. Marshall, 182 Ark. 890, 33 S.W. 2d 43 (1930); Beck v. Neal, 228 Ark. 186, 306 S.W. 2d 875 (1957). It is clear beyond question that the testimony in this case with respect to the repurchase of the inventory falls significantly below anything that could aptly be termed “clear, unequivocal and decisive.” More than that, evidence that would hold APCO legally responsible for the loss of the Jefferson Bus Lines contract and the DX Propane answering service is non-existent. Appellee’s counter-claim makes no mention of the answering service and no motion to amend the pleadings to conform to the proof was made. Nor does the counterclaim state any actionable cause relative to the Jefferson Bus Lines, only that this business was lost to appellee because of the “hasty manner” in which the premises were taken. However, it is clear that APCO gave Stephens sufficient notice of termination under the agreement and breached no legal duty owing to the appellee, either contractual or tortuous, in connection with the sale of its property at DeQueen to Kerr-McGee Refining Corporation. Appellee concedes in its brief that APCO had a right under its contracts to terminate the lease with Stephens and that it gave the required notice, but submits that APCO, through its agents, either withdrew the notice to terminate or encouraged appellee not to remove the properties or relocate the business. We are unable to find evidence on which either argument will stand and appellee has cited nothing in its argument on this point except testimony by Stephens that he called APCO to ask for more time to relocate and was told that Gary and Morava would contact him. These two men did contact him, though not until the night before Kerr-McGee locked the pumps, but only to say that APCO had sold to Kerr-McGee, though he was told, he says, by Richard Morava that “The way it looks right now, you’ll just continue to operate” as Kerr-McGee. Morava’s estimate of that likelihood appears reasonable, as it was not until the following day that the distributor from Poteau rejected Kerr-McGee’s terms. But aside from that, Stephen’s testimony falls short of providing any verbal withdrawal of the notice to terminate or anything else of substance upon which Stephens had a right to rely. The court clearly should have granted the motion for directed verdict on the basis of the evidence. Turning to the inventory, here, too, the evidence fails to meet requirements of the law; see, Beck v. Neal, Supra. A number of factors substantiate this conclusion: (a) appellee’s testimony, rather than being unequivocal and decisive as the law requires, is more nearly the reverse (record, page 225): Q. Let me back up. Ben Harrison assured you that if you bought this stock and bought further stock, if you had to get out of there, APCO or somebody would buy your stock? A. I had mentioned, you know, to Ben, I said, “Hey, what if you all decide, you know, in two months that you don’t want me in here, or I don’t even want to be in here, am I going to be stuck, you know, with this?” And he said, “No, this is our policy, you know, we do this with all stations, that we don’t try. . .” Q. . . .let me ask you right here, at the final determination here, whichever one that was, did they finally buy your stock? A. No, sir. This was the extent of Stephens’ testimony on this issue on direct examination, obviously wholly inadequate to create a duty of any kind, even a verbal contract, and certainly nothing in derogation of a written contract. On cross examination, appellee came nearer to meeting the requirements (record, page 242): Q. I believe you also testified about the time that you had these negotiations with Mr. Harrison that you bought some equipment and inventory from the operator who was there before you took it over, is that correct? A. Yes, sir. Q. Did you buy that direct from the operator? A. I bought it from Ben. I paid Ben the money, and Ben paid the. . .1 guess gave it to the operator, it did belong to the operator, yes, sir. And at page 243: Q. Did he tell you that APCO would buy it, or did he tell you that the next operator would buy it like you did? A. He said that APCO would buy it, yes, sir. Q. Why would he tell you that APCO would buy it from you, when APCO didn’t buy it from the man that you were taking over from? A. I don’t know, sir, he was probably referring to that he would see that it got bought but, you know, I took it that he meant APCO. Giing such testimony all the credence possible, it cannot measure up to the high standards required by the language of the law: clear, unquivocal and decisive. We are impressed, too, with the fact that appellee’s counter claim makes no mention of any oral reformation or modification, although the pleading expressly deals with the inventory by alleging that Stephens was left with a stock of goods that he had no means of disposing of due to the short notice given on February 17, 1978. While the court cured this issue on its own, we think if appellee had been convinced of the merit of this part of his claim, it would not have been overlooked in the counter-claim. Finally, it is noteworthy that although present and available (having been subpoenaed by appellee) Ben Harrison was not called to testify. The only inference to bé drawn from that is that Harrison’s testimony would not corroborate the appellee. National Life Co. v. Bennecke, 195 Ark. 1088, 115 S.W. 2d 855 (1938); U.S. Bond & Mortgage Co. v. Reddick, 199 Ark. 82, 133 S.W. 2d 23 (1939). We need not deal with the argument of appellant that evidence was lacking as to any authority by Harrison to bind APCO, . except to observe that the burden of proof was on the appellee to prove that Harrison had either the express or the implied authority to bind APCO by oral agreements, and there was no pleading and no proof relative to his authority. Taylor v. Connell, 233 Ark. 440, 234 S.W. 2d 4 (1961); Southern Hotel Company v. Zimmerman, 84 Ark. 373, 105 S.W. 873 (1907). Reversed and dismissed. Penix, J., dissents.