United States District Court, Northern District of Illinois, E. D
May 7, 1982
JAMES C. O'BYRNE, ET AL., PLAINTIFFS,
CHEKER OIL COMPANY, ET AL., DEFENDANTS
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
This action was brought by one present and four former
lessees of gasoline service stations from Cheker Oil Company
("Cheker"). Summary judgment has already been granted to
Cheker*fn1 and to Marathon Oil Company ("Marathon"),*fn2 50%
owner of outstanding Cheker stock, on plaintiffs' antitrust
and related claims.
Cheker has now moved for summary judgment on its
counterclaims against plaintiffs James O'Byrne ("O'Byrne") and
William A. Erwin ("Erwin") for lease rentals and against
O'Byrne for gasoline sold to him. For the reasons stated in
this memorandum opinion and order, summary judgment is granted
on Cheker's rental claims but not as to the gasoline sales.
Both the O'Byrne lease (on a Mount Prospect, Illinois
station) and the Erwin lease (on an Addison, Illinois station)
were dated January 17, 1976. They contained identical terms,
including a monthly rental of $2,200 payable in advance. In
the interest of simplicity this opinion will focus on the
history of the O'Byrne-Cheker relationship (for though the
specific time periods and the numbers involved differ as to
Erwin, the legal principles they bring into play are
O'Byrne used the Mount Prospect premises in February 1976
and then continuously from May 1, 1976 to January 31, 1977 and
from September 1, 1978 through February 12, 1979, paying no
rent to Cheker for those periods. Cheker claims back rent of
$31,994.38. Its like claim against Erwin (covering different
periods) aggregates $17,489.62.
Cheker also sues O'Byrne for $6,330.52 for gasoline sold and
delivered to O'Byrne for resale to his customers. No
comparable claim is asserted against Erwin.
O'Byrne and Erwin rest their opposition to the rental claims
primarily on the argument that the lease terms violated
regulations promulgated by the Federal Energy Administration
("FEA") pursuant to the Emergency Petroleum Allocation Act of
1973 (the "Act"), 15 U.S.C. § 751-56. That violation is said
to render the leases void as against public policy and thus
unenforceable under Illinois law.*fn3
Analysis of that contention requires some pre-lease factual
background. O'Byrne was a Cheker dealer from May 1972 to
January 25, 1979. In 1973 (the critical date for purposes of
the Act) O'Byrne's lease called for a rent equal to the
(1) $.02 per gallon of gasoline sold during the
month (payable on a daily basis); and
(2) $3,000 (payable, to the extent it exceeded
the gallonage figure, on the first day of the
Despite the lease terms requiring payment of at least the
"minimum monthly rental" ($3,000 as to O'Byrne and $2,400 as
to Erwin), the dealers claim that Cheker did not enforce that
provision until March 1974. Because this is a motion for
summary judgment and O'Byrne and Erwin are the parties moved
against, this opinion assumes Cheker did not in fact enforce
the minimum monthly rentals during 1973.*fn4
Two aspects of the 1976 lease rental provisions differ from
those just outlined:
(1) Instead of the dual rental provision, each
1976 lease called for a flat $2,200 per month
(less in each instance than the prior "minimum
(2) Rent was made payable in advance on the
first day of each month.
Those changes may be viewed as altering both the rent and the
credit terms (because of the changed payment schedule) as
between Cheker and its lessees (who were also purchasers of
Effect of the Act and FEA Regulations
As gasoline purchasers as well as service station lessees,
O'Byrne and Erwin invoke two FEA regulations under the Act, 10
C.F.R. §§ 210.62(a) and (c):
(a) Suppliers will deal with purchasers of an
allocated product according to normal business
practices in effect during the base period . . .
and no supplier may modify any normal business
practice so as to result in the circumvention of
any provisions of this chapter . . . [E]xcept as
authorized by the Federal Reserve Board, no
supplier may require or impose more stringent
credit terms or payment schedules on purchasers
than those in effect for that class of
purchaser . . . on May 15, 1973. . . .
(c) Any practice which constitutes a means to
obtain a price higher than is permitted by the
regulations in this chapter or to impose terms or
conditions not customarily imposed upon the sale
of an allocated product is a violation of these
Section 210.62(c) may be dealt with swiftly. No evidence
whatever has been tendered indicating that the lease changes
were means for Cheker to obtain prices for its gasoline
"higher than is permitted by the regulations in this
Section 210.62(c) prohibits not all price
increases but only those that go beyond the ceiling set by the
regulations. On that score the record is wholly silent.
O'Byrne and Erwin have not met their burden to come forward
with some factual basis for their affirmative defense to avoid
Section 210.62(a), however, could arguably be brought into
play by the change from rent payable in daily installments to
rent payable in full in advance:
(1) Such a change could well be viewed as a
variance of "an ordinary business practice" in
effect on May 15, 1973. See Blaylock v. Cheker Oil
Co., 547 F.2d 962, 963-64 (6th Cir. 1976); Vold v.
Marathon Oil Co., 407 F. Supp. 1011, 1016 (W.D.Ky.
1975); Guyer v. Cities Service Co., 381 F. Supp. 7,
13 (E.D.Wis. 1974).
(2) As already indicated, the change might be
deemed to have established "more stringent credit
terms" within the meaning of the regulation.
See generally Marathon Oil Co. v. Federal Energy
Administration, 547 F.2d 1140, 1147 (Em. App.
1976); Federal Energy Office Ruling 1974-10 (April
This opinion will then assume arguendo that the timing of rent
payments under the 1976 lease infringes Section
Even on that assumption, the notion that O'Byrne and Erwin
would thereby escape all liability for rent is offensive to
justice and (as important for current purposes) Illinois law.
Both require that the dealers compensate Cheker for the
reasonable rental value of the land they used from 1976 to (in
O'Byrne's case) early 1979. Chesnutt v. Schwartz, 293 Ill. App. 414,
422, 12 N.E.2d 912, 915 (1st Dist. 1938). Such a recovery
ex contractu is sanctioned in Illinois "where the contract is
merely malum prohibitum and the illegality does not arise from
any elements of moral turpitude." I.L.P. Contracts § 194 at 353
(1955), citing Chesnutt.
This case is on all fours with Chesnutt. If there is some
limited element of illegality in changing from a daily rental
to a month's rent in advance (a kind of minimal effect in terms
of extending credit), it has no element of "moral turpitude."
Violation of regulations like Section 210.62(a) is "malum
prohibitum" (and not malum in se) in the classic sense. See W.
LaFave & A. Scott, Criminal Law § 6 at 31 n. 50 (1972).*fn8
O'Byrne and Erwin are therefore liable on Cheker's
counterclaim. Even on the assumption most favorable to them,
that liability is measured by the reasonable rental value of
the premises. On the record that must be the arms-length
rental established by the parties in the 1976 leases.*fn9
Thus the rent under the leases is payable whatever view is
taken of the FEA regulations. Summary judgment for back rent
is therefore appropriate against O'Byrne in the amount of
$31,994.38 and Erwin in the amount of $15,289.62.
O'Byrne's Gasoline Sales
On Cheker's other claims — stemming from gasoline sold at
O'Byrne's station between December 28, 1978 and January 25,
1979 — a key factual dispute bars summary judgment. O'Byrne's
affidavit asserts the amount of gasoline actually sold by
O'Byrne, as measured by the gas pump meters, determined his
obligation to Cheker. Cheker says O'Byrne owed the difference
between (1) the total gallonage delivered to O'Byrne December
28 plus the total gallons in his storage tanks on that date and
(2) the total gallons in the tanks January 26.
Cheker claims the "stick readings" taken by Cheker on
December 28 and January 26 show that a total of 10,283 gallons
were not reported on O'Byrne's meters. O'Byrne claims he "paid
Cheker for all gasoline sales made at his station" between the
relevant dates. Whether the parties had agreed that the meters
readings could be overcome by the stick readings, and whether
in any event O'Byrne paid for all gas he sold, are issues of
fact that cannot be resolved by summary judgment.
As to the claims for back rent under the 1976 lease, there
are no genuine issues of material fact and Cheker is entitled
to a judgment as a matter of law. Cheker is granted summary
judgment against O'Byrne for $31,994.38 and against Erwin for
$15,289.62. Cheker's motion for summary judgment as to
O'Byrne's liability for gasoline sold by him is denied.