Nogales Service Center v. Atlantic Richfield Company

613 P.2d 293 (1980)

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Nature of the Case

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Facts

Cafone and McKenzie were produce brokers in Nogales, Arizona. They decided that Nogales needed a facility to sell fuel to the great number of trucks which came to Nogales transporting produce to the U.S. and Canada. They looked for a supplier that would loan them money for the construction of the facility. They finally got to ARCO (D) which was also looking for a truck stop in the area. They organized a corporation called NSC (P) and entered into an agreement with D for the construction of the facility. The total cost was to be $508,000 with D lending P $300,000 of that to help finance construction. Construction was started in 1969 and finished in 1970. The facility did not include the motel and restaurant as was originally to be included in the construction. This was because the funds D lent P were not put in escrow and some were spent on a cantaloupe crop that failed therefore the restaurant was not constructed. P and D also entered into a products agreement that was to be effective for 15 years subject to a termination agreement after the 10th year. That agreement called for the sale of fuel at prices set by D, subject to change by D at any time without notice. The agreement also required P to purchase at least 50% of its fuel from D. NSC was not doing well right from the beginning, as the price of fuel was not competitive with that in Tuscon. Cafone's brother in law, Terpenning, bought out McKenzie and assumed liability for the $300,000. P them met with D's manager of truck stop marketing in L.A. The problem of competitive pricing was discussed, and according to P, P and D entered into an oral agreement. The deal was that if NSC constructed the motel and restaurant D would lend P $100,000, give P a 1 cent per gallon across the board discount on all diesel fuel and that D would keep P competitive. In reliance on this promise, Terpenning bought out Cafone, borrowed money and used his own funds to construct the motel and restaurant. D approved the loan for the $100,000 but the 1 cent per gallon price cut in diesel was disapproved. Terpenning and NSC defaulted on the original note and the $100,000 note. D then foreclosed and prevailed. This present suit was a counterclaim by P against D that was tried after foreclosure. D claimed that Tucker never made the deal with P and that if such an agreement was made, that it was outside the authority of Tucker and that the statute of frauds barred any action on the alleged oral contract. Instructions were given that were not objected to and instructions offered by P were refused. D won the verdict and P appealed.