Shell Oil Co. v. Parker

Barnes, J., delivered the opinion of the Court. The appellant, Shell Oil Company, defendant below (Shell), challenges a judgment entered upon a jury’s verdict for $1.00 nominal damages and for $75,000.00 punitive damages in the Circuit Court for Queen Anne’s County (Turner, J.), contending that the appellees, Milton and Frank Parker, plaintiffs below, (1) failed to give timely written notice of their claim within the terms of the written contract between Shell and the Parkers; (2) the action was barred by the three year Statute of Limitations; (3) the jury should not have been allowed to consider punitive damages in the absence of actual or compensatory damages; and, (4) the jury should not have been allowed to consider punitive damages in the absence of legally sufficient evidence of actual malice on the part of Shell. We have concluded that the third contention of Shell is correct and we will reverse the judgment in regard to punitive damages and affirm the $1.00 award of nominal damages, without finding it necessary to consider the legal sufficiency of the evidence in regard to actual malice. The basic facts are not in dispute and covered a period of several years.

The Parkers (who are brothers) in 1947 or 1948 had purchased land on Maryland Route 3 (then Route 301) approximately four miles south of Glen Burnie, Anne Arundel County, known as 4300 Belle ⁶³³ Grove Road, where they erected a machine shop. A salesman representing Shell induced them to expand their business to include a service station for the sale of Shell products. The Parkers agreed and installed gasoline tanks and pumps. A Dealer Sales Contract (the Contract) was executed on July 27, 1954 by Shell and the Parkers and is the only written evidence of the relationship between the parties.

The primary period of duration in the Contract was for five years, i.e., from October 15, 1954, through October 14, 1959, with a provision for automatic renewal from year to year thereafter. There was a provision for termination by the Parkers at the end of the primary period or at the end of any subsequent contract year by giving 30 days’ notice of termination at the end of any term. Shell had a similar right of termination at the end of the first or any subsequent contract year. Shell exercised this right in 1968 and there is nothing in the record to indicate that the Contract was not terminated in accordance with its provisions.

The Contract also contained the usual type of provisions that Shell would sell its products which the Parkers as “Dealer” would order during the Contract with certain stated minimum and maximum numbers of gallons of the respective Shell products during each contract year. The Contract in Paragraph 6 provided: “6. CLAIMS. Shell shall have no liability to Dealer for any defect in quality or shortage in quantity of products delivered hereunder, unless Dealer gives Shell notice of Dealer’s claim within five (5) days after delivery of the products in question, and Shell is given reasonable opportunity to inspect such products.

Shell shall have no liability to Dealer for any other claim, and Dealer shall have no liability to Shell for any claim (except for indebtedness or relating to equipment), arising directly or indirectly out of or in connection with this Contract or any ⁶³⁴ gales or deliveries of petroleum products by Shell to Dealer hereunder or otherwise, unless the claimant gives the other party notice of the claim within ninety (90) days after the date of the sale, delivery or other transaction or occurrence giving rise to the claim. Every notice of claim shall set forth fully the facts on which the claim is based.” For several years, the relationship was satisfactory to both Shell and the Parkers. About 1960 or 1961, the highway was dualized and Route 301 was changed to Route 3. Shell about that time installed additional pumps on the premises of the Parkers, who, at a considerable expense to them, built additional driveways so that traffic on both sides of the highway could enter the Parkers’ station.

Not long after the new driveways were installed, a gasoline station selling Shell products was opened on the southbound section of Route 3 approximately two blocks north of the Parker station. The Parkers were forced within seven or eight months to close down their southbound operation because of lack of business. Shell, in 1961 or 1962, opened another service station approximately four miles south of the Parker station. In 1962 or 1963, Shell erected a sign, approximately 15 feet wide and 25 feet high “from the ground up” which read: “LAST SHELL BEFORE INTERSTATE (695) (83) (95) DEL.

TURNPIKE (95) N.J. TURNPIKE (nTPj) FILL UP HERE.......FREE INFO.” This message to the public was false. The station of the Parkers was, in fact, the last Shell station before the highways mentioned on the sign. James H. Crouse, who was the second lessee from Shell of the station having the sign, informed Lowry, Shell’s District Manager, that ⁶³⁵ the sign was misleading. Lowry replied that he would not “call that [the Parker station] a Shell station.” The Parkers, from time to time, complained of the sign to salesmen of Shell and once to Shell’s engineer; but nothing was done about it.

Milton Parker testified that the income from the station generally declined after the sign was erected, credit card sales fell off immediately and those sales remained low until the Contract was terminated. Mr. Crouse also testified that at a breakfast meeting with James E. Gerlock, also a District Manager for Shell, some months before the termination of the Parker contract, Gerlock told Crouse that he was going “to kick Parker out.” When Crouse observed that the “Parkers are honest [and] hard working * * * and they deserve to live,” Gerlock replied that the Parkers “don’t represent the Shell image as we would like to have it presented” and further stated that Frank Parker was a “nut.” Ger-lock also stated that he would “get the [Shell] sign off the [Parkers’] wall if it’s the last thing I do.” Over a 15-year period, Milton Parker had never missed a meeting of Shell dealers; but during the last few years prior to termination of the Contract, the Parkers were not notified of meetings and Shell salesmen stopped calling at the Parker station. The Parkers were not able to reach the Shell supervisory personnel by telephone and their telephone calls were not returned. Shell painted a portion of the building on the Parkers’ station but left the painting job unfinished, claiming that Shell had run out of money to finish the work.

Shell terminated the Contract in October 1968. On November 20, 1968, the Parkers filed their declaration in this case in the Circuit Court for Anne Arundel County, claiming that Shell had erected the false sign “for the specific purpose of diverting business from the ‘independently owned’ service station” of the Parkers “to the ‘company owned’ service station” of Shell and that this action was part of an intentional and malicious ⁶³⁶ plan to divert such business as alleged and in carrying out that plan, Shell had employed “illegal, deceitful, and fraudulent means.” The Parkers claimed compensatory damages of $10,000.00 and punitive damages of $200,-000.00. Shell pleaded the general issue plea, i.e. that it did not commit the wrongs alleged, and a special plea of the three year Statute of Limitations. On February 5, 1971, the action was removed to the Circuit Court for Queen Anne’s County for trial.

The trial was held on June 24 and 25, 1971, the only testimony at the trial being that offered by the Parkers and their witnesses, Shell offering no evidence even though Gerlock and other employees were present in court. The jury found a verdict in favor of the Parkers for “the nominal one dollar and for the punitive $75,000.00.” Judgment was duly entered on the verdict. The trial court later declined to grant Shell’s motion for judgment n.o.v. or, in the alternative, for a new trial and this timely appeal to this Court by Shell followed. So far as the judgment for “the nominal one dollar” is concerned, we are of the opinion that there was sufficient evidence to submit to the jury on the violations of the technical rights of the Parkers by Shell.

These rights were continuing in nature and were not barred by the three year Statute of Limitations for the continuing violation during the three year period prior to the filing of the action. See Consolidated Public Utilities of Westminster v. Baile, 152 Md. 371 , 136 A. 825 (1927). Nor were the violations barred by any failure of the Parkers to give notice under Paragraph 6 of the Contract inasmuch as the claim sued upon by the Parkers was a tort not arising out of or in connection with the Contract within the meaning of Paragraph 6 of the Contract which deals with shortages, defects in quality, or late deliveries of the Shell products mentioned in the Contract. Paragraph 6 does not purport to require the 90-day notice for independent torts of Shell and, indeed, such an attempted exoneration of Shell from its own malicious and illegal conduct may well be against public policy and ⁶³⁷ void.

See 17 Am. Jur. 2d Contracts § 188, at 556-57. See also The United States Telegraph Co. v. Gildersleve, 29 Md. 232 (1868). Then, too, violations of the technical rights of the Parkers continued and the filing of the declaration was obviously sufficient written notice to Shell of such violations during the preceding 90-day period.

We shall accordingly affirm the judgment for the nominal $1.00. Appellants further claim that the jury should not have been permitted to consider punitive damages in the absence of “actual” or compensatory damages. In the Roman and Civil Law, punitive or exemplary damages seem to have been unknown. Fay v. Parker, 53 N. H. 342 (1872); 1 Sedgwick on Damages § 355, at 701 (9th ed. 1912).

The term apparently originated with Lord Camden in the case of Huckle v. Money, 2 Wils. K. B. 205, 95 Eng. Rep. 768 (1763). In the earliest cases in which punitive damages were allowed, the plaintiffs suffered no substantial harm; or at least no physical or financial harm appeared.

Restatement, Torts, § 908, at 554, 555 (1939). For a thorough review of the development of the doctrine of punitive damages, see 1 Sedgwick, supra, §§ 347-55, at 687-701. See also Note, Punitive Tort Damages in New England, 41 Boston U. L. Rev. 389 (1961); Note, Exemplary Damages in the Law of Torts, 70 Harv. L. Rev. 517 (1957).

Despite the stirring denunciations of the doctrine of punitive damages, especially during the middle and late 19th century, the great majority of states retain the doctrine in full force. Several state codes expressly allow punitive damages, 1 and many explicitly authorize them in certain actions. 2 A review of the Maryland cases in this area indicates that the question of whether an award of nominal technical damages will support a granting of punitive dam ⁶³⁸ ages has never been squarely decided although there is strong dicta to the contrary. In B & B Refrigeration & Air Conditioning Service Co., Inc. v. Stander, 263 Md. 577, 582 , 284 A. 2d 244, 247 (1971), Judge McWilliams stated for the Court that “[i]t is settled that, in cases like the case at bar, punitive damages are not recoverable in the absence of proof of actual loss,” 3 (Emphasis supplied.) citing Kneas v. Hecht Co., 257 Md. 121 , 262 A. 2d 518 (1970) and Delisi v. Garnett, 257 Md. 4 , 261 A. 2d 784 (1970). However, in that case, the jury in effect nullified its compensatory damages verdict, thus leaving the plaintiff-appellee suffering no damage whatsoever and not entitled to punitive damages.

A shoplifting incident, resulting in an action for false imprisonment and false arrest, came to its conclusion before this Court in Kneas v. Hecht Co., supra, 257 Md. 121 , 262 A. 2d 518 (1970). After an award by the jury below for both compensatory and punitive damages, the trial judge in that case granted a judgment n.o.v. with respect to the punitive damages, finding no evidence of malice, and granted a motion for a new trial with respect to the compensatory damages 'unless plaintiff-appellant agreed to a remittitur in the amount of $5,000. Plaintiff accepted the reduction and subsequently appealed to this Court, seeking review of the trial judge’s action in granting judgment n.o.v., or in the alternative a new trial (if his ruling was reversed by this Court) on the issue of punitive damages. We held that, since there was but one cause of action and one verdict, the plaintiffs, by accepting the reduction in compensatory damages, waived their right to appeal on the punitive damage issue, Judge Digges, observing for the Court, that “[i]t is well settled that in order to support an award for punitive damages compensatory, or actual damages ⁶³⁹ must first be found.

Heinze v. Murphy, 180 Md. 423, 429 , 24 A. 2d 917 (1942). Thus punitive damages are clearly dependent and can hardly be decided in a vacuum * * * .” [257 Md. at 125, 262 A. 2d at 521 .] In Delisi v. Garnett, supra, 257 Md. 4 , 261 A. 2d 784 (1970), plaintiffs below appealed from a directed verdict in favor of appellees in an action for damages for wrongful attachment. We affirmed, holding that there was no evidence of malice on the part of defendants. In conclusion, the Court noted: “Although the point was neither briefed npr argued on appeal, the lower court also rested its granting of the motion for a directed verdict on the Delisis’ failure to prove actual damage.

Proof of damage is an essential element of an action for malicious use of process. Owens v. Graetzel, 149 Md. 689, 695 , 132 A. 265 (1926). In the absence of proof of actual loss, punitive damages are not generally recoverable. Heinze v. Murphy, 180 Md. 423 , 24 A. 2d 917 (1942); Schloss v. Silverman, 172 Md. 632 , 192 A. 343 (1937).” (257 Md. at 9, 261 A. 2d at 787 ) In Gorman v. Sabo, 210 Md. 155 , 122 A. 2d 475 (1956), this Court was called upon to settle what hopefully was the final round in a dispute among neighbors.

Plaintiffappellee (Sabo) in that case recovered a verdict of $3,500 compensatory and punitive damages in recompense for defendants’ annoying predilection for blaring their radio (a course of conduct allegedly conceived to point out to plaintiffs the benefits of living elsewhere) much to the discomfort of the Sabos. Testimony was produced