G. J. Creel and Sons, Inc., Plaintiff-appellee, v. Edward Danay Adams, Helen T. Adams, Defendants-appellants, 927 F.2d 595 (4th Cir. 1991)

The plaintiff seeks a declaratory judgment establishing the existence and status of the "franchise agreement" between the plaintiff and the defendants under the Petroleum Marketing Practices Act ("PMPA"). The subject of this action is a "franchise agreement" with contract of sale executed in October 1970 between the Gulf Oil Company ("Gulf") as "Seller" and the defendant Helen T. Adams for the purchase and resale of oil products at a Gulfbrand service station leased from the plaintiff located at Myrtle Beach, South Carolina. In September 1980, Gulf Oil assigned to the plaintiff all of its rights and obligations under the contract of sale and the "franchise agreement" unto Helen T. Adams. This contract of sale and franchise agreement between Helen T. Adams and Gulf Oil contained a provision against assignability "except with the written consent of Seller."

It is alleged that the defendant Helen T. Adams was reputed to have thereafter assigned her interests under the contract of sale and the franchise agreement to her son and co-defendant, Edward Danay Adams, without the knowledge or consent of the plaintiff. The plaintiff's position, as stated in its complaint, is that such assignment violated the non-assignability of the franchise agreement between the plaintiff and the defendant Helen T. Adams. Jurisdiction was predicated on 28 U.S.C. § 1331 as a suit arising under the Petroleum Marketing Practices Act (PMPA).

The defendants denied generally the allegations of the complaint, and alleged that the defendant Edward Danay Adams had acquired the status of a franchisee of the plaintiff by the course of dealings between such defendant or, as a matter of law, by reason of the assignment of Helen T. Adams. The defendants also set forth a counterclaim for breach of contract and price discrimination on the part of the plaintiff in violation of the South Carolina Unfair Trade Practices Act, Sections 39-5-10 to 39-5-560, South Carolina Code. The plaintiff, by reply, denied the allegations in the defendants' counterclaim.

After joinder of issues, depositions of the parties and of other witnesses were taken. On the basis of such depositions, supplemented by several affidavits, the plaintiff moved for summary judgment. After a full hearing on the motion, the district court filed its opinion. In its findings of facts as set forth in its opinion, the district court found that the undisputed record¹  established: (1) that the original franchise agreement and sale contract between Gulf and the defendant Helen T. Adams as executed in 1970 included a prohibition against assignment without the written consent of the Seller (Gulf); (2) that Gulf assigned in 1980 its rights, interests and obligations under the original agreement between Gulf and the defendant Helen T. Adams to the plaintiff; (3) that Helen T. Adams and the plaintiff promptly agreed to continue their relationship with the assignee Creel on the same terms and conditions as had been provided under the original franchise agreement and contract of sale between Gulf and the defendant Helen T. Adams, thereby adopting as a part of this agreement the non-assignability provision in the original contract between Helen T. Adams and Gulf; (4) that thereafter the defendant Helen T. Adams assigned her title and interest in the franchise agreement and contract of sale to her son, the defendant Edward Danay Adams; and (5) that the plaintiff had no knowledge of and did not consent in writing to the transfer.

On the basis of those findings of fact, the district court concluded as a matter of law that: (1) under the terms of the PMPA, " [a] failure by the franchisee to comply with any provision of the franchise, which is both reasonable and of material significance to the franchise relationship," is a proper ground for terminating the franchise agreement, 15 U.S.C. §§ 2802(b) (2) (A) and (C); (2) that the assignability of franchises under the PMPA is a matter left to state law (in this case, the law of South Carolina), Prestin v. Mobil Oil Co., 741 F.2d 268 (9th Cir. 1984) (citing 15 U.S.C. § 2806(b)); (3) that under South Carolina law, an assignment of a franchise in violation of a non-assignability clause in the franchise agreement is void; (4) that considering both the South Carolina law on assignability of franchises and the federal PMPA's language thereof, the prohibition on assignment in this case was not void since because the provision was both reasonable and of material significance; (5) that, a prohibition on assignment without the consent of the seller is a proper ground for termination of the franchise agreement here; and (6) the resolution of defendant's claim under the South Carolina Fair Trade Act may be better made by the state court rather than in a federal action. See United Mine Workers v. Gibbs, 383 U.S. 715 (1966); National Research Bureau, Inc. v. Bartholomew, 482 F.2d 386 (3d Cir. 1973); Waste Systems, Inc. v. Clean Land Air Water Corp., 683 F.2d 927 (5th Cir. 1982).

The district court accordingly granted the plaintiff's motion for summary judgment on its declaratory judgment action but dismissed the counterclaim of the defendants under the State Fair Trade Act without prejudice. We affirm the decision on the district court's opinion, the factual findings of which are soundly supported by the record and whose conclusions of law represent a correct exposition of the controlling federal statute and, to such extent as pertinent, the state law as applicable to the established facts in this case relating to the federal claim herein.

AFFIRMED