Frontier Refining Company v. Kunkel's, Inc.

407 P.2d 880 (1965)

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Nature of the Case

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Facts

Frontier (P) was a refiner and distributor or petroleum products. Kunkel (D) become interested in taking over a filling station and truck stop in Cheyenne, Wyoming. P owned the stop, which was under lease to Griffitt. The lease to Griffitt was to be terminated, and the zone manager of P was willing to talk with Fairfield to see if there was money available for D to take over the stop. D approached Fairfield and Beach to obtain a loan. Fairfield declined, and there was some conversation about the formation of a corporation. Fairfield told D that if he and Beach were to come into a transaction, it would have to be on a corporate level. D was not to open the business unless it was incorporated and when it was both Fairfield and Beach would purchase the equipment from Griffitt and take stock in the corporation. Each party was to get 1/3^rd ownership. Fairfield visited the facility. The zone manager claimed he talked with Fairfield, but Fairfield denied this. The zone manager did advise D that the business was to be incorporated and would be financed by Fairfield and Beach. A personal financial statement of D was submitted but not of Fairfield nor Beach. P entered into a sublease with D/DBA as Kunkel’s Inc. as the sublessee. Other agreements were entered into under the same format except one just referenced D as an individual, a chattel mortgage. D took over the operation of the station and Fairfield, and Beach had no idea what was being done. P then discovered that gas sales were not being paid for and debts of over $5,000 has accrued. Evidence also showed that Fairfield and Beach had put over $11,000 into the venture to purchase inventory and equipment from Griffitt. Fairfield later testified that he was not aware of D’s failure to incorporate. Fairfield also denied testimony from the zone manager that he said he would make good on the debt. P sued D as a partnership with Fairfield and Beach as members. P alleged that Ds had an oral agreement to operate the station. Fairfield and Beach denied this. The trial court found that Kunkel’s Inc. was not a partnership. The court found for Fairfield and Beach and P appealed.