Opinion ID: 488084
Heading Depth: 2
Heading Rank: 1

Heading: Cal Gas/Petrosol Transactions

Text: 13 The District Court granted summary judgment to Petrosol in the Cal Gas/Petrosol transactions. It rejected Cal Gas' contention that these transactions were governed by Ohio Rev.Code Ann. Sec. 1302.53(B) and instead found that the parties had a contrary agreement within the meaning of section 1302.53(D), which placed the risk of loss on Cal Gas. 14 In reaching this conclusion, the District Court relied on Paragraph 3 of the Purchase Acknowledgments, which stated: 15 Deliveries shall be made as, when and where specified on the reverse hereof. Title to products delivered shall pass to Buyer upon completion of loading thereof into tank trucks furnished by Buyer, upon delivery thereof in a tank car to carrier, upon arrival thereof in a tank truck furnished by Seller alongside unloading facilities at destination, or as specified on the reverse hereof, as the case may be. 16 See Joint Appendix at 17 & 21. The District Court found that, in accordance with this paragraph, title did not pass to [Petrosol] until 'completion of loading' into [Petrosol's] truck, tank car, or P.T.O., F.O.B. in Painesville, Ohio, at any time from November 5, 1982, through March 31, 1983. Joint Appendix at 246. The District Court found these terms consistent with industry custom and practice, Joint Appendix at 246, and concluded that since the propane was never loaded into either party's trucks or cars, Cal Gas had retained the risk of loss as to the propane lost at Lake Underground in February, 1983. The Court specifically rejected Cal Gas' argument that its dealings with Petrosol were governed by section 1302.53(B). Rather, the District Court found that the presence of the term on the front of the second Purchase Acknowledgment stating HOW DELIVERED Truck, tank car or P.T.O. indicated that the parties intended that the propane be moved for delivery to occur, and that section 1302.53(D) thus controlled the transactions. 17 We disagree. Rather, we find that Paragraph 3 did not constitute a contrary agreement reallocating the risk of loss between the parties within the meaning of section 1302.53(D). Paragraph 3 refers only to passage of title and does not mention passage of risk of loss. As the Supreme Court of Ohio has noted, passage of title is irrelevant to passage of risk of loss: 18 No longer is the question of title of any importance in determining whether a buyer or a seller bears the risk of loss. It is true that the person with title will also (and incidentally) often bear the risk that the goods may be destroyed or lost; but the seller may have title and the buyer the risk, or the seller may have the risk and the buyer the title. In short, title is not a relevant consideration in deciding whether the risk has shifted to the buyer. 19 Hughes v. Al Green, Inc., 65 Ohio St.2d 110, 114, 418 N.E.2d 1355, 1357 (1981) (emphasis omitted) (quoting Nordstrom, Sales Sec. 130, at p. 393). See also Ohio Rev.Code Ann. Sec. 1302.42 (Anderson 1979) ([T]he rights, obligations, and remedies of the seller, the buyer, purchasers, or other third parties appl[y] irrespective of title to the goods except where otherwise specifically provided.) Thus, Paragraph 3 cannot be said to alter the risk of loss as between Cal Gas and Petrosol. 20 Nor do we find that any of the other terms and provisions of the Purchase Acknowledgments constituted a contrary agreement within the meaning of the UCC. Both Purchase Acknowledgments indicated that the delivery point was Lake Underground Storage, Painesville, Ohio, that the price was $0.5700 USF 3 /USG 4 F.O.B. Painesville, and that the time of delivery ran through March 31, 1983. The first Purchase Acknowledgment stated N/A after the caption how delivered. Truck, tankcar or P.T.O. followed the how delivered caption on the second Purchase Acknowledgment. The first form noted that [s]torage through March 31, 1983 is included at no additional cost. 21 We do not believe that the presence of the how delivered term on the face of the second Purchase Acknowledgment indicated that the parties intended the propane to be moved for delivery to occur. First, the term appears only on the second Purchase Acknowledgment, and not on the first. Second, the delivery point was stated on both forms to be Lake Underground Storage, Painesville, Ohio. Thus, the propane was already at its delivery point when Cal Gas and Petrosol entered into their transactions. Most importantly, however, Petrosol immediately (on the same day) resold the propane to Commonwealth with an agreement that it would provide storage at Lake Underground until March 31, 1983. Clearly, Cal Gas and Petrosol contemplated that, as between them, the propane would not be moved. 22 Section 1302.53(B) addresses goods in the hands of a bailee which are to be delivered without being moved. Cal Gas contends that the transactions between it and Petrosol are covered by this section. Under section 1302.53(B)(3), risk of loss as to such goods passes to the buyer when the buyer receives a non-negotiable document of title or other written direction to deliver, as provided in section 1302.47(D)(2). This latter section states that where goods are held by a bailee and are to be delivered without being moved, tender to the buyer of a non-negotiable document of title or of a written direction to the bailee to deliver is sufficient tender unless the buyer seasonably objects.... Ohio Rev.Code Ann. Sec. 1302.47(D)(2) (Anderson 1979). 23 We agree with Cal Gas that this propane was in the hands of a bailee and, as between Cal Gas and Petrosol, was to be delivered without being moved. The facts reveal that Petrosol resold the propane to Commonwealth on the same day that it purchased the propane from Cal Gas. Moreover, Petrosol's Sales Acknowledgments to Commonwealth indicated that the delivery point was Painesville, Ohio (the location of Lake Underground), and that [s]torage through March 31, 1981 [was] included at no charge. Clearly, then, Petrosol had no intent to move the propane before it was resold to Commonwealth. 24 The transactions between Cal Gas and Petrosol thus were governed by section 1302.53(B). The risk of loss passed to Petrosol, the buyer, upon Cal Gas' tender and Petrosol's receipt of a written direction to deliver. Ohio Rev.Code Ann. Sec. 1302.53(B)(3). Cal Gas contends that it fulfilled this requirement when it sent Confirmations of Distribution to both Petrosol and Lake Underground. 25 We need not concern ourselves with whether these documents were sufficient to fulfill the requirements of section 1302.47(D)(2), since Petrosol clearly accepted Cal Gas' tender of delivery. Petrosol immediately resold the propane to Commonwealth, an act which is so inconsistent with the seller's ownership as to constitute acceptance within the meaning of Ohio Rev.Code Ann. Sec. 1302.64(A)(3) (Anderson 1979). Official Comment 4 to this section states that any action taken by the buyer, which is inconsistent with his claim that he has rejected the goods, constitutes an acceptance. See also In re Pennsylvania Tire Co., 26 B.R. 663, 676 (N.D.Ohio 1982) (applying Ohio law) (A contract buyer has performed an act inconsistent with a seller's ownership of specific goods by offering to resell those goods; such an act constitutes an acceptance of goods.). Having accepted the propane, Petrosol was no longer permitted to reject it. See Ohio Rev.Code Ann. Sec. 1302.65(B) (Anderson 1979) (Acceptance of goods by the buyer precludes rejection of the goods accepted....). Moreover, Petrosol was not entitled to revoke its acceptance under these circumstances. Ohio Rev.Code Ann. Sec. 1302.66(B) (Anderson 1979) states: Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. (Emphasis added.) Even assuming that Petrosol had valid grounds for revoking its acceptance as provided in Ohio Rev.Code Ann. Sec. 1302.66, the destruction of the propane by the cavern's collapse was a substantial change in the propane's condition which was not caused by a defect in the propane itself and which would preclude such revocation. 26 We thus find that, as between Cal Gas and Petrosol, the propane was held by a bailee to be delivered without being moved and that the risk of loss passed to Petrosol in accordance with section 1302.53(B)(3). Therefore, we REVERSE the District Court's grant of summary judgment to Petrol and REMAND the case with directions to enter summary judgment in favor of Cal Gas instead. 5