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11/09/83 RICHARD FRANKARD AND JANICE M. FRANKARD v.

November 9, 1983

RICHARD FRANKARD AND JANICE M. FRANKARD, PLAINTIFFS-APPELLANTS,
v.
AMOCO OIL COMPANY, F/K/A THE AMERICAN OIL COMPANY, A MARYLAND CORPORATION, DEFENDANT-RESPONDENT



Appeal from a judgment and an order of the circuit court for Ozaukee county: Walter J. Swietlik, Judge.

Scott, C.j., Brown, P.j., and Voss, J.

The opinion of the court was delivered by: Brown

Richard and Janice Frankard, owners of a service station in Mequon, appeal from a directed verdict holding that there was no credible evidence to support their claim for economic duress against their franchisor, Amoco Oil Company. The trial court noted that a threat made to another is an insufficient ground for recovery if the threatening party has a legal right to do what it has threatened to do. Because the trial court could find no evidence disputing Amoco's claim that it had a legal right to threaten cancellation of a lease, it directed verdict for Amoco. We do not agree with the trial court's finding and reverse that part. We affirm other issues of lesser importance.

The Frankards built a car wash and service station on their land. On September 9, 1971, they signed a lease and leaseback agreement with Amoco. The lease agreement rented the Frankard property to Amoco. Amoco agreed to pay rent of one and three-quarters cents (1.75 cent) per gallon of gasoline it delivered to the property. For each gallon over 300,000 gallons, Amoco agreed to pay two cents (2 cent) to the Frankards.

The leaseback gave the Frankards the right to operate the service station for Amoco. They agreed to subrent the property and equipment from Amoco for an additional one-half of a cent (.5 cent) per gallon of gasoline that Amoco delivered to the station. The leaseback authorized the Frankards to use the Amoco trademark.

The terms of both the lease and the leaseback were for one year beginning October 1, 1971. They both provided for automatic renewal of not more than fourteen one-year periods. The lease required Amoco to give a thirty-day notice to the Frankards for nonrenewal. The leaseback required the Frankards to give a thirty-day notice to Amoco for nonrenewal.

The lease agreement, leasing the Frankards' premises to Amoco, was changed twice, each time resulting in lower rental payments to the Frankards. These changes are the subject of the lawsuit.

First, in 1978, Amoco adjusted its rental payments downward by one-quarter of a cent (.25 cent) per gallon. Although the Frankards signed an agreement consenting to the change, they later claimed they were fraudulently induced to sign because Amoco promised to provide a mansard roof for the station if the Frankards agreed to the rent reduction. *fn1 Amoco did not build the mansard roof. Later, the Frankards had a gabled roof constructed at their own expense.

Second, in 1979, Amoco adjusted the rent downward another one-half of a cent (.5 cent) per gallon. On this occasion, an Amoco representative visiting the service station told the Frankards that the October 1, 1979 lease renewal would be contingent upon their agreement to a further rent reduction. At one point in the Discussion, the representative said that if the Frankards did not agree, Amoco would "cut them off." The Frankards signed. It is important to note that the Amoco representative's visit occurred less than ninety days from the renewal date. The Frankards claim the representative's threat to cancel was wrongful and that they signed the agreement under the duress of the threat.

As damages for the 1978 fraud cause of action, the Frankards demanded: (1) $20,000, this sum representing the difference between the gabled roof actually built and the mansard roof allegedly promised by Amoco, and (2) the difference between the 1977 rent and the lower 1978 rent. This claim was based on the grounds that they would not have signed the 1978 contract but for Amoco's fraudulent inducement. As to the first claim, the trial court granted summary judgment to Amoco, reasoning that uncontroverted evidence showed the Frankards intended to put on a new roof anyway and, in fact, did build a new roof without relying on Amoco's promise. As to the second claim, the trial court granted a directed verdict for Amoco, finding that the evidence was insufficient for jury consideration.

The trial court also directed verdict for Amoco on the alleged 1979 economic duress claim holding there was no credible evidence of a wrongful threat. We will discuss this issue first.

To receive compensation for economic duress, the alleging party must show that he or she has been the victim of a wrongful or unlawful act or threat. Wurtz v. Fleischman, 97 Wis. 2d 100, 109, 293 N.W.2d 155, 160 (1980). A threat is an insufficient ground for recovery if the person has a legal right to perform the threat. Id. at 110, 293 N.W.2d at 160. The Frankards argue that Amoco's representative had no right to threaten cancellation. They make this claim, in part, because the Petroleum Marketing Practices Act, 15 U.S.C. §§ 2801-06 (1982), prohibits cancellation of leases between petroleum franchisors and franchisees unless a ninety-day notice is first given. The Frankards conclude that since the threat to cancel took place less than ninety days from the renewal date, it was made without legal force. Therefore, the Frankards claim the case should have gone to the jury to decide whether they were coerced into signing the agreement because of this wrongful threat.

The trial court, during the motion for directed verdict, gave short shrift to the PMPA notification requirement. It held that the Act applied only to franchise agreements where the refiner-distributor agrees to lend its trademark and provide its petroleum to service station operators -- the leaseback in this case. The trial court reasoned that Amoco threatened to cancel only the property rental agreement -- the lease agreement here. The trial court concluded that this was merely a landlord-tenant dispute, unconnected with franchise law such as the PMPA.

Amoco's appellate brief was written in support of the trial court's analysis. At oral argument, however, Amoco also argued that the PMPA should not be read to require a notice of cancellation at least ninety days before the non-renewal date but rather at any time, regardless of the renewal date. *fn2 Thus, Amoco argued that non-renewal is effective ninety days after notice is given, regardless of the starting date of the contractual year. By illustration, a notice of cancellation in late July becomes effective in ...


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