Stern Oil Co. v. Brown
2012 S.D. 56
| S.D. | 2012Background
- Brown owned and remodeled two Exxon/Mobil branded convenience stores in North Sioux City, SD, and entered into separate Motor Fuel Supply Agreements (MFSAs) with Stern Oil in Oct. 2005; MFSAs set maximum annual volumes and required Brown to purchase at least 75% of those volumes.
- Stern Oil supplied fuel and issued daily price sheets; prices included taxes/fees and Stern Oil’s markups, with prices subject to change at Stern Oil’s discretion.
- Brown also executed Repayment Improvement Agreements (BIPs) to refurbish stores, with a Repayment Amount triggered by Brown’s breach.
- Stern Oil sued for breach after Brown notified he would stop purchasing fuel; Brown counterclaimed for fraudulent inducement claiming a verbal five-cent per gallon profit guarantee.
- Circuit court granted Stern Oil summary judgment on liability; damages trial awarded Stern Oil eight years of lost profits (~$925,317) with additional fees; Brown appeals.
- Opinion reverses and remands for new trial on both fraudulent inducement and breach of contract claims.]
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the fraudulent inducement claim barred by parol evidence rule as a matter of law? | Brown. The verbal five-cent guarantee is admissible under the fraud exception to the parol rule. | Stern Oil. The parol rule bars prior negotiations; the written MFSAs supersede extrinsic terms. | No; evidence falls within the fraud exception and summary judgment preclusion was improper. |
| Are the MFSAs enforceable open-price-term contracts under SDCL 57A-2-305? | Brown. The price term is open and undefined, so contracts may be unenforceable. | Stern Oil. Open price term contracts are permissible if intended by the parties and price fixed in good faith. | Material factual disputes exist on intent and price-fixation, requiring reversal of summary judgment. |
| Did the circuit court err by granting summary judgment on liability without resolving disputed facts about price fixing in good faith? | Brown. Good-faith pricing and intent to contract are unresolved facts. | Stern Oil. Open price term issues are governed by statute and factual disputes exist. | Yes; summary judgment on liability improper due to disputed facts about open price term and good faith pricing. |
| Should the case be remanded for a trial to resolve genuine issues of material fact? | Brown. Summary judgment was premature; issues remain for trial. | Stern Oil. Liability should have been resolved earlier; factual disputes preclude recovery. | Yes; reverse and remand for a new trial on both claims. |
Key Cases Cited
- Sabbagh v. Professional & Bus. Men’s Life Ins. Co., 79 S.D. 615 (SD 1962) (fraud rescission exception to parol evidence rule applies to UCC contracts)
- Ehresmann v. Muth, 757 N.W.2d 402 (SD 2008) (fraud/deceit generally questions of fact)
- Weitzel v. Sioux Valley Heart Partners, 714 N.W.2d 884 (SD 2006) (questions of intent/summary judgment avoidance)
- LaMore Restaurant Group, LLC v. Akers, 748 N.W.2d 756 (SD 2008) (open price term analysis under UCC/South Dakota law)
- Muhlbauer v. Estate of Olson, 801 N.W.2d 446 (SD 2011) (summary judgment standard; necessity of legal questions being resolved)
- Discover Bank v. Stanley, 757 N.W.2d 756 (SD 2008) (summary judgment scope in contract disputes)
- Robinson v. Ewalt, 808 N.W.2d 123 (SD 2012) (summary judgment evidentiary standards; genuine issue for trial)