# FILED

December 30, 1999 Cecil Crowson, Jr. Appellate Court Cle rk 

## IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

FRED MARSHALL, ) ) Plaintiff/Ap

pellant, ) Rutherford Circuit ) No. 32618 VS. ) ) Appeal No. JACKSON & JONES OILS, INC., ) M1997-00104-COA -R3-CV ) Defendant/Appellee. )

APPEAL FROM THE CIRCUIT COURT FOR RUTHERFORD COUNTY

AT MURFREESBORO, TENNESSEE THE HONORABLE J. S. DANIEL, JUDGE

For the Plaintiff/Appellant : For the Defendant/Appe llee : Frank M. Fly Allen Shoffner Murfreesboro, Tennessee Shelbyville, Tennessee



## AFFIRMED IN PART; VACATED IN PART;

AND REMANDED

WILLIAM C. KOCH, JR., JUDGE

### -2- 

## O P I N I O N

This ap peal i nvolves a contract disp ute betwe en a service station ow ner and h is gasolinesupp lier. The ow ner filed sui t against t

he supplier i

n the Circuit Court

for Rutherford Co unty alleging that the supplier’s breach of theretail price prov isions of their contract forced him out of busin ess. The su pplier coun terclaimed for th e unpaid cost of gasoline. The trial court , sitti ng without a jury,found that the supplier had not

breached the agreement and that the suppl ier had not proved t

hat it was ent

itl ed to paym ent for unp aid g asoline. Both the owner and the suppli er have appealed. The owner as serts that the trial court miscons trued the term s of the supp ly contract; whil e the supplier

argues that t

he trial court erred by dismissing its cou nterclaim. We h ave determined th at the trial court misconstrued

the contract and, therefore, vacate the judgment for the su pplier on the owne r’s breach of contract clai m . We have also determined t hat the trial court corr

ectly dismiss ed the supplier’s counterclaim. A ccord ingly, we vacate the judgment in par t and remand the case for the assessme nt of damages a gainst the supplier.

I.

Fred Marshall operates a Handy Market on the corner of Bradyvi lle Road and Minerva Drive in Mu rfreesboro. In 1989, fearing competi tion from other conveni ence store chains, he purchased a service statio n at the sam e intersection in order to p revent the site from being acquired by a competi tor. In August 1989,he sig ned a ten-year “consi gnment supply agreem ent” with Jackson & Jones Oils, Inc. In return for M r. Marshall’s agreement that Jackson & Jones would be his exclusive source for gas oline, dies el fuel, and ot her petroleumproducts, Jacks on & Jones agre ed to furnish him with t he necessary above-gr

ound equipment and gasoline needed to operate his business.

The agreem ent, as its name indicated, w as a true con signmen t. Mr. Ma rshall did not purchase petroleum products f rom Jackson & Jones and then resell them to the public. Rather, Jackson & Jones retaine d ownership of the

fuel deliver

ed to Mr. Marshall’s s ervice station until it was sold through either the self-s ervice or ful

l-service pumps. The agreement provided that the part

ies would be compensated by spli tting the pr

oceeds from the sale of

the petroleumproducts. For se lf-service gasoline, t

he parties spl

it theprofits equa lly. For fullservicegasoline, Mr. Marshal l received a l arger share of the proceeds “as compensation for laborcost in pumping the product and provi ding full ser

vice.” The agreement requ ired Mr. Marsha ll to file a weekly report of the number of gallons of fuel sold f

rom each pump for the preceding week and to pay Jacks on & Jones a “remittance pri ce” for each gallon sold.1 [Remittance price] = [Retail pump price] [Marshall’s share of gross margin].

2 [Gross margin] = [Retail pump price] [Transfer cost].

3 [Transfer cost] = [Wholesa

le cost of fuel] + [Transportation costs] + [state & federal taxes].

4 Mr. Marshall expl

ained how the con

signment agreeme

nt worked in prac

tice as follows: If I priced the pump, self-service 119.9 or a one cent spot, that mea

ns Kwik Sakwoul d be at 118. Now, to clarify what the price would be, Jackson & Jones would call me and tell me what their cost would be, what the act ual cost would be for the gasoline, I’d take that actual cost from Jackson & Jones to me, minus 119.9 pump pric e, and let’s say the actual cost was $1.10 per gallon, so that would leave 9.9 cents gross profit for

gasoline in that particular p rice product. An

d you would divide that by two, which w ould be 50 percen

t, that would be my

gross margin prof

it an d th at would also be Jackson & Jones gross margin profit above whatever they already charg

ed me for cost.


### -3- The consignment supply agreement de fined the “remit

tance price” as the

ret ail pump price minus M r. Marsha ll ’ s share o f the “gr oss m argin.” 1 The “gross margin” was the amount that the ret

ail pump price of t

he fuel had been marked up by mutual agreement over t he “ transfer cost” of the fuel. 2 The “tran sfer cost” of th e fuel was the cost of the fuel to Jackson & Jones plus the transportation costs plus the applicable st ate and federal taxes. 3

The agreement did n ot set a specific retail pump price for the fuel sold at Mr. Marshall’s service station. Instead, it provided that the pum p price for any given sa les report period would be the amount set “by mutual agreem ent” betw een Mr . Marsha ll and Jackson & Jones. During the negot iations leading up to the agre ement, John Keith Jackson of Jackson & Jones prepared a proposal suggest

ing that the pump price f or self-ser

vice fuel at Mr. Marshall’s st

ore should be one cent per gallon higher than the pump price of the unbranded gasoline be ing sold at the Kw ik Sak con venience store neares t to Mr. Marsha ll’s station. This concept was incorpor ated into paragr

aph eight of the parties’ agreement which provided, in part, that

“[t]he above computati on [the computation of

Mr. Marshall’s shar

e of the gross margin] a pplies to pro duct sold thr ough O perator’s self-s ervice ope ration and is based on bein g brand ed and giving a one c ent spo t to any u nbrand ed ma rketers in the area .” 4

The pricing mechanism in t he consignmentsupply agreement worked profi tably for both Mr. M arshall a nd Jack son & Jones u ntil the G ulf W ar. In September 1990, Jackson & Jones began dictati

ng to Mr. Marshall what the retail pump price of the fuel would be r ather than arriving at a price by mutual agreement. In Mr. Marshall’s words:

It turned around an d there was no l onger a m utual agree ment. [Jackson & Jon es] woul d cal l meeach Frida y morn ing to tell me what the pump prices will be and the self- service will be on the street,and that was it irregardle ss of what the competit ion was doing. I would re late to [Jackso n & Jon es] th at Kwik S ak is

### -4- over there selling g asoline for 1 01.9, do yo u want m e to go to $109.9? Do you realize what it’s going to do to business? Despite Mr. M arshall’s repe ated objectio ns, Jackson & Jone s continued to instruct him to increase the price of his self-service fu el until it was eight cents per

gallon higher t

han the price of the se

lf-service fuel at the

nearest Kwik Sak. Jackson & Jonesblamed these price increases on the increase d cost its supp lier was cha rging for fue l. When Mr. M arshall inquired why the pump price of the fuel being sold at hi s station was no longer being set at
one cent per gallon hi

gher than the

comparable fuel being s old at the Kwik Sak, Mr. Jacks on informed him that as f

ar as Jackson & Jones was concerned, the pump price no longer had any relation t

o the pump price at Kwik Sak.

Mr. Marshall notif

ied Jackson & Jones in October 1992 that its

refusal to price th e fuel competitively was f orcing him out of

busine ss. Mr. Marshal l closed his sta tion two months later. By tha

t time, the

price of self

-service gasoline at Mr. Marshal l’s service station
was nine cents per gal

lon higher than t

he self-ser

vice gasoline at

the nearby Kwik Sak . Mr. Marshall’s sales of fuel had dwindled to less than one-hal f of their 1990 l

evels, and he had losta significa

nt amount of his repai

r business. As he put

it, “Theprice [of gasoline] got so high that I wouldn’t do no business and basically Jackson & Jones priced me out of business and I had to close up t

he books.”

Mr. Marshall sued Jacks on & J ones in the Circui t Court for Ruther

ford County, allegingthat the unilate ral dictation of th e retail price of self -service gasol

ine breached the consignmentsupply ag reemen t and had fo rced him out of business. Jackson & Jones denied that it had br

eached the agreement and count erclaimed for $5, 637.60 plus late char ges and interest for the fuel

they claimed M r. Marsha ll had neve r paid for. Fo llowing a b ench trial, the trial cour

t (1) determined t

hat the consignment supply agreement permitt ed Jackson & Jones to set the pr

ice of the fuel

sold at Mr. Marsha ll’s station based solely on the wholesa le cost of fuel, t

he transportat

ion costs, and state and fed eral taxes and (2) dismissed the provision

linking the p ump pr ice of the fue l to a one-ce nt spot ove r unbrand ed mark eters in the area as “poorl

y drafted.” Accordi

ngly, the tr

ial court det

ermined that Jackson & Jones had not b reached the agreement. The trial court also dismissed J ackson & Jones ’ s counte rclaim for failur e of pro of. Both parties h ave ap pealed

.
II. M R . M ARSHALL ’ S B REACH OF C ONTRACT C LAIM

### -5- Mr. Marshall assert

s that the t

rial court

misconstrued paragr

aph ei ght of the consignmentsupply agreement. Speci fically,he argues that t he trial cour

t erred by dismissing as “unreasonable” t he provision in t

he agreement linking t

he retail pump price of fuel sold at Mr. Marshall ’s service st ation with the r

etail pri ce of fuel at ot

her nearby unbranded marketers. We agree that the trial court erred by fa

iling to gi

ve effe ct to this provision.

A.

The purpose of inter

preting a written contr

act is to as certain and to gi ve effect to t

he contracting

parties’ intentio ns. See Bob Pearsall Motors, Inc . v. Regal Chrysl

er-Plymouth, Inc. , 521 S.W.2d 578, 580 (Tenn . 1975); Gredig v. Tenn essee Farmers Mut. Ins. Co. , 891 S.W.2d 909, 912 (Tenn. Ct. App. 1994). In the case of written contracts, these intentions are reflected in the contra ct itself. Thus, the search for th e contracting parties’ intent sh ould focus on (1) the fou r corne rs of the c ontract, see Whitehaven Comm unity Baptist Church v. Holloway , 973 S.W.2d 592, 596 (Ten n. 1998); Hall v. Jeffers , 767 S.W.2d 654, 657-58 (Te nn. Ct. Ap p. 1988 ), (2) the c ircum stances in whic h the co ntract w as ma de. See Pen sk e Truck Leasing Co. v. Huddlest on , 795 S.W.2d 669, 671 (Tenn. 1990); Pinson & Assocs. Ins. Agenc y, Inc. v. Krea l, 800 S.W .2d 486, 48 7 (Tenn. C t. App. 199 0), and (3) th e partie s ’ actions in carr y ing out the con tract. See Hamblen County v. Ci ty of

Morristown , 656 S.W.2d 33 1, 335 (Te nn. 1983 ); Ballard v. North Am. Lif e & Cas. Co. , 667 S.W.2d 79, 84 (Tenn. Ct. App . 1983).

In the absence of f

raud or mistake, courts should construe contract s as written. See Frank Rudy Heirs Assocs. v. Shol odge, Inc. , 967 S.W.2d 8 10, 814 (Tenn. C t. App. 1997); Whal ey v. Underwood , 922 S.W.2d 1 10, 112 (Tenn. C t. App. 1995). The c ourt s shoul d accord contrac tual term s their na tural and ordina ry me aning, see Evco C orp. v. Ross , 528 S.W.2d 20, 23 (Tenn. 1975), and shoul d construe them

in the conte xt of the entire contract. See Wilson v. Moore , 929 S.W.2d 367, 373 (Tenn. C t. App. 199 6); Rainey v . Stansell , 836 S.W.2d 117, 119 (Tenn. Ct. App. 1992). The court s should also avoid strained const ructions that create a mbig uities w here no ne exis t. See Hillsboro Plaza Enters. v. Moon , 860 S.W.2d 45, 47-48 (Tenn . Ct. App. 1993).

The courts may not make a new contract for pa rties who have spoken for themselves,
see Petty v. Sloan , 197 Tenn. 630 , 640, 277 S.W .2d 355, 359 (195 5), and may no t re liev e parties of the contract

ual obligati

ons simply because thes e obligations later prove t

o be burdens ome or unw ise. See Atkins v. Kirkpatri ck , 823 S.W.2d 547, 553 (Tenn. Ct. App. 1991). Thus, when called upon to interpr et a contract, the courts

may not favor either

party.5 See nn. 1 - 3.

6 The calculation for determining Mr. Marshall’s share of the “gross margin” was included in paragraph eight

of the agreement. The “transfer cost” was to be determined by Jackson & Jones, butwas based on the wholesale cos t of the fuel which was established by Jackson & Jones’s supplier, the transportation cost which was established by Jackson &Jones, and the state and federal taxes which were established by law.

7 This case calls to mind an observa tio n by an English court, anthologized by Professor Williston in his treatise: “It is a poplar belief, e

specially preva

lent amongst lawye

rs, that the efficient businessman requires that obl igations incurre

d inbusiness should be expressed in writing in simple, intelligible

and unambiguous language. It is a belief encoura ged by the sayings of business men themselves. But inpractice nothing appears to be fu rther from the tr

uth. Business men ha

bitually adventurelarge sums of money oncontracts which, for the purpose of defining legal obligations, are a mere jumble of words. They trust to luck or the good faith of the opposite party, with the (continued...) 

### -6- See Heyer-Jordan & Assocs., Inc v. Jordan , 801 S .W.2d 8 14, 82 1 (Tenn . Ct . A pp. 1990). Howeve r, when a contract contai ns ambiguous provisions , those provisions will be construe d against the party re sponsi ble for d rafting th em. See Hanover Ins. Co. v. Haney , 221 Tenn. 148, 153-54, 4 25 S.W .2d 590, 59 2-93 (196 8); Burks v. Belz-Wilson Proper ties , 958 S.W.2d 773, 77 7 (Ten n. Ct. A pp. 199 7).

B.
Paragraph eight of the ag re ement contains the financial terms of the parties’ contractual

relationship. It cont

ains three

formulae 5 for determining how the pr oceeds from the sale of the gasol

ine should be dist

ributed to Mr. Marshal

l and Jackson& Jones. All the variables in the se f

ormu lae, except for the “retail pump price” of the gasoline, were established either in the ag reemen t itself or by ot her objective, verifiable standards. 6 The retail pump price is t

he only variable i

n these formulae tha

t the agreement requires to be set by the parties

“by mutual agreement and to b e “based on . . . gi ving a one cent spot t

o any unbranded marketers in t he area.”

As the trial

court construed t

he agr ee ment, the re tail pump price was essentially dictated by the price Jacks on & J ones’s sup plier was ch arging for th e fuel. The c ontract, however, does not say that . As evidencedby the language about t he one cent spot over ar ea unbranded marketers, the contract makes pump prici ng of fuel for any gi

ven reportingweek compe titively driven, not sim ply driven ju st by wha t we norm ally think of a s wholesa le cost.

Mr. Jackson te stified that M r. Marsha ll had to pay Jackson & Jones "based on his cost as computed by the cost to the stat ion plus whatever [Mr. Marshall’s mark-up] might have been . . .." While that may be how Mr. Jackson desired the ar rangement to work, the cont ract does not say that. 7 Paragraph sevenof the agreement merely r equired Mr. Marshall t

o pay7 (...continued)

comfortable assurance that any adverse result of litigation may be attributed to the hairsplitting of lawyers and the uncertainty of the law.” 4 Samuel Williston, Treatise on the L aw o f Contracts

§ 600A (Walter H. Jaeger ed., 3d ed. 1961).

8 Mr. Marshall testified that he anticipated that the service and repair business waswhere the real money would be made. 

### -7- Jackson & Jones a "rem ittance pri ce" on each gallon of gasoline sold. As defined in the contract, the remittance pri ce wa s nothing more than Jackson & Jones’s half of the gross margin, which could have been any figur e. Contrary to Mr. Jac kson’s assertion, nowhere does the agreement req uire Mr. Marsha ll to pay Jackson & Jones some w holesale cost figure for the gasoline . Under the agreem ent, Mr. M arshall did no t buy the fue l wholesa le and then
r esell it retai

l, and the tr

ial court er

red in basing i

ts construct

ion of the contr

act on that notion.

Mr. Marsha ll was kno wle dgeabl e about selli ng gasoline at r

etail. When he enter

ed into the agreement with Jacks on & Jones, he wanted to be abl e to price his gasoline compe titively to attract customers who would also pay him to ser vice and rep air t heir vehicles. 8 Mr. Jackson responded to Mr. Marshal l’s desir e for competiti

ve pricing by proposing a way to price self -service gasoline that

would make it competitive within one cent per gallon with gas oline for sal e at a nearb y self-se rvice co nvenie nce sto re. Mr. Jackson’s competitive

pricing propos al was ultimately i ncorporated int

o paragraph eight of

the consignment agreement draf ted by Jackson & Jones and accepted by Mr. Marshall. When
we review the entir

e record in context

, including t

he parties’ original course of dealings and Mr. Marsha ll’s later protests, w e agree w ith Mr. M arshall that the mutual agreement on pricing was intended to be pegged on maintaining a closely competiti ve price, ide ally a one cent sp ot, over his nea rby un brande d com petition

.

In our view, thetrial court gav e too little weight to the competi tive prici ng provision in paragraph eight . In view of the plain meaning of the langua ge of that

provision, as well
as the history of how it was included in the agreement and the parties’ course of dealing aft er the agreement was signed, we agree wit h Mr. Marshall that Jackson & Jones breache d th e consignmentagreement when it began unilaterally i mposing an uncompetitive and ulti mately destructive pricing st

ructure on Mr. Marshall after August 1990.

III. J ACKSON & J ONES ’ S C OUNTERCLAIM FOR U NPAID F UEL

### -8- Jackson & Jones contends that the trial court erred in dismiss ing as unpr oven its countercla im for fuel delive red to Mr. Marshall’s ser vice station that hadnot been paid for. Jackson & Jones’s evidence to suppor t this count

erclaim consist

ed of a delivery i

nvoice devoid of any dollar

fig ure and t he t est imon y of it s pr esi dent tha t Mr. Mars hall owed “t

o my knowledge . . . around $1 0,456.” W hen prom pted by his lawyer to b e more sp ecific concerning the elements of t he $10,456 figure,the p resident st ated that some unspeci

fied
amoun ts were for a “servic e charge” and a “carryi ng charge.” Jackson

& Jones presented

no evidence showing specific amounts of fuel deliver

ed to Mr. Marshall’s s ervice station on any particular

date and n ever prov ided a m eans for eithe r the trial court o r this court to understandthe differe

nce betwee n the $5 ,6 37.60 alleged i ts counterclaim and the “around $10,456 testified to by its p resident.

It is elem ental that a pa rty asserting a lawsuit claim must estab lish the claim b y satisfactory proof convincing to th e fact-finder. See Hamilton v. Zimmerman , 37 Tenn. (5 Sneed) 39, 44 (1857). To carr y the burden of proof,

a party m ay em ploy either di rect evidence from witnesses with personal knowledge or circumstantial evidence from pers ons who know a nd can testify to related facts th at reasonab ly tend to establishthe desired facts. See Marq uet v. Ae tna Life Ins. Co. , 128 Tenn . 213 , 225 , 159S.W. 7 33, 7 36 (1 913) . As Jackson & Jones Oil points out, while courts ordi

narily will

accept a witness'

unimpeached, uncontradicted t

estimony as true, see Frank v. Wright , 140 Tenn. 535, 541, 205 S.W. 434, 435 (1918 ), that testim ony m ust still ind uce som e certain ty in the f act-find er’s mi nd. See Standard Oil Co. v. Roach , 19 Tenn. App . 661, 666, 94 S.W .2d 63, 66 (1935).

The vague and co nclusory testimony of Jackson & Jone s’s presiden t, procured o nly by leading direct

examination and wh olly uncorroborated wit h any business recor

ds, failed to induce conviction in the tri al court’s mind as to what am ount, if any, Mr. Marshall might have owed Jackso n & Jones for fue l. Having reviewed the re cord , we agree with the t rial court that Jackson

& Jone s failed to prov e their coun terclaim by a convincing prepondera nce of the evidence.

IV.

We reverse the dismissal of M r. Marshall's complaint and affirm the dis missal of Jackson & Jones cou nterclaim. We rem and this case to the trial court to determ ine Mr. Ma rsha ll's damages for Jackson & Jones’s br each of the consignment supply a greement and

### -9-

for whatever other proceedings may be required. We tax the costs of thi s appeal to Jackson & Jones Oils, Inc. for which execution, if necessary,

may issue.

____________________________ WILLIAM C. KOCH, JR ., J UDGE

CONCUR:

_________________________________ HENRY F. T ODD, PRESIDING JUDGE, M.S.

_________________________________ BEN H. CANT RELL, J UDGE