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Beemer v. Solar Oil Co.

Decided: July 12, 1967.

LAWRENCE BEEMER AND ROSE BEEMER, PLAINTIFFS-RESPONDENTS,
v.
SOLAR OIL COMPANY SUSSEX, A PARTNERSHIP AMONG SATTENIG KURKJIAN [LEE] AND EDWARD G. WEISS, TRUSTEE FOR MYRON H. KURKJIAN, JR., AND MYRON H. KURKJIAN, JR., PARTNERS, SOLAR OIL SUSSEX, INC., A CORPORATION, MYRON J. KURKJIAN, JR., INDIVIDUALLY AND AS PRESIDENT AND MANAGING DIRECTOR OF SOLAR OIL SUSSEX, INC., DEFENDANTS-APPELLANTS



Goldmann, Kilkenny and Collester. The opinion of the court was delivered by Goldmann, S.j.a.d.

Goldmann

Defendants Myron H. Kurkjian, Jr. and Solar Oil Sussex, Inc. appeal from a Chancery Division judgment, entered on the pleadings, cancelling and discharging of record as illegal and void under the Unfair Motor Fuel Practices Act (L. 1953, c. 413; N.J.S.A. 56:6-19 et seq.) the lease, sublease and a related agreement covering the Beemer gasoline service station on Route 15, Sparta, Sussex County.

The issue is whether the trial judge properly decided, on the pleadings alone, that an exclusive requirements contract between a service station operator and his distributor violated the "little Clayton Act" provision of the Unfair Motor Fuels Practices Act, N.J.S.A. 56:6-22(b), where the complaint merely recited and interpreted the contract, the answer denied

plaintiffs' interpretation, and the court did not have the benefit of any allegations or proof as to the line of commerce, the relevant market, and whether the competition foreclosed constituted a substantial share of that market. Without such information there could not be a proper decision, and we therefore reverse and remand the matter for a full trial.

I

The facts, insofar as set out in the pleadings and attached exhibits, are not in dispute. Prior to 1957 a partnership known as Solar Oil Company Sussex operated a petroleum marketing and distribution business in the Sussex County, N.J. area. The partnership's operations included the sale of gasoline, oil and related products through service stations, most of which were owned and operated by individual dealers. The partnership consisted of Sattenig Kurkjian Lee and Edward G. Weiss, trustee for Myron H. Kurkjian, Jr. under a deed of trust executed by Myron's father in 1945. Plaintiff Lawrence Beemer was then employed as a service station attendant by one of the partnership's dealers on Route 15 in Sparta. He had expressed to the partnership his desire to own and operate a place of his own, and to that end discussed with its representative the selection of a proper site for the construction of a service station. Ultimately Beemer and his wife acquired a parcel on Route 15, raising part of the purchase price by a personal loan. They then borrowed $9,000 from the partnership to build the service station, giving back a mortgage on the premises to be paid at the rate of 1 cents for every gallon of gasoline sold, the minimum monthly payment being fixed at $100.

As part of the transaction the Beemers on August 9, 1955 leased the premises to the partnership for a term of 15 years at an annual rental of $600; the partnership, in turn, subleased to Beemer alone for a term of 14 years and 11 months at the same rental. The sublease provided that Beemer was not to assign the lease or sublet any portion

of the premises without the partnership's written consent. Beemer represented that there was no existing contract with any company other than the partnership for the sale or distribution of gasoline or other petroleum products from the premises. The sublease also provided that the premises were to be used as a gasoline and automobile service station, Beemer to have the privilege, at the partnership's sufferance, to do minor repair work as long as it did not interfere with the sale of petroleum products.

The lease was recorded but the sublease was not. Since the annual rental called for under these agreements was the same and the parties desired to avoid paying each other the rent due, they executed a further instrument on August 9, 1955 whereby they agreed that neither would be required to pay to the other the rents reserved. The partnership proceeded to furnish and install at its own expense gasoline pumps, underground fuel storage tanks and other equipment for the distribution of gasoline and related petroleum products. Some two years after the execution of the lease and sublease plaintiffs paid off the mortgage and secured from the partnership a subordination of its lease to the lien of a new mortgage whose proceeds were used to pay off the original mortgage.

Defendant Solar Oil Sussex, Inc. was formed in 1957 and succeeded to ownership of all of the assets of the partnership, Solar Oil Company Sussex. Beemer has operated the Sparta service station since 1955.

In the summer of 1965 one Morris Zell offered plaintiffs $67,000 for the service station property and business, but the recorded 15-year lease of August 9, 1955 allegedly prevented consummation of the sale. Plaintiffs accordingly had their attorneys write Myron J. Kurkjian, Jr., president of the Solar company, on November 23, 1965, stating that the "pretended lease" was standing in the way of the sale and demanding its immediate cancellation. Defendants' attorneys having advised that Solar was unwilling to accede to

the demand, plaintiffs instituted the present Chancery Division action.

The stress of the complaint was upon the fact that the sale of the service station property and business to Zell was being defeated by the lease plaintiffs had given the partnership. An attack was leveled against Edward G. Weiss, now deceased, who was a member of the partnership prior to the incorporation of Solar by reason of his being a trustee for Kurkjian, Jr. It was alleged that as attorney Weiss prepared the three instruments executed on August 9, 1955; that he had not fully explained their purport to plaintiffs nor told them he was a partner in Solar Oil Company Sussex; that the lease and sublease put plaintiffs in "long-term economic bondage" and were grossly unfair and, finally, that Weiss in fact represented conflicting interests at the time. The second line of attack adopted by plaintiffs in their complaint was that the Unfair Motor Fuels Practices Act of 1953 made the exclusive requirements contract between Beemer and the partnership unlawful and therefore void. Since Solar Oil Sussex, Inc. refused to cancel the 15-year lease, plaintiffs demanded judgment cancelling the August 9, 1955 leases and related agreement, directing their discharge of record as void and of no effect, and awarding compensatory damages of $67,000 by reason of the loss of the Zell sale, together with punitive damages and interest.

Solar's answer raised, among other affirmative defenses, laches, estoppel and good faith refusal to accede to plaintiffs' demand for cancellation. The company, as successor to the partnership, also counterclaimed, demanding judgment declaring the lease and sublease valid and decreeing their specific performance.

Plaintiffs answered the counterclaim and then moved for judgment on the pleadings, alleging that they raised no material issue of fact or legal defense, nor did the counterclaim set forth a legal claim upon which relief could be granted. In the alternative, plaintiffs moved for summary judgment upon their demand for cancellation.

At the argument on the motion plaintiffs' counsel stated there was not "a single legitimate economic advantage" for Solar in the operation. Zell, he said, could not close the service station deal because if he did so he would only be buying a lawsuit. Counsel admitted that Zell wanted to get rid of the Sunoco gasoline and petroleum products for which Solar was distributor and to substitute another line. He contended that the lease and sublease worked an economic hardship and violated the policy of the Unfair Motor Fuels Practices Act. An additional argument made (but not raised in the pleadings) was that the leasing arrangements constituted an unlawful restraint upon the alienation and use of property.

In the course of defense counsel's answering argument, the trial judge asked, "Don't you think though that this turns not upon the factual situation * * * it really turns upon the statute?" Counsel replied, "I think that's true * * *." When the judge later inquired of the attorneys whether they did not ...


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