Octane Service Station

Octane Service Station

On March 15, Julio Trevino signed a lease agreement to operate a gasoline service station that was owned by the Octane Oil Company (hereinafter, simply “Octane”). Trevino had contacted the regional sales manager of Octane in response to an advertisement that solicited applicants “with $25,000 to invest” to lease and operate a newly erected Octane gasoline service station. Trevino had been able to accumulate approximately $32,000 for investment purposes as a result of $25,000 inheritance and savings on the salary of $865 per week he earned as manager of a service station operated as a separate department of a J.C. Penny store. Most of this $32,000 was held in government bonds.

The regional sales manager for octane was impressed with Trevino’s personal and financial qualifications, and after several interviews, a lease agreement was signed. During one of these meetings the sales manager informed Trevino that the new station would be ready for occupancy on May 1 at a total investment cost of $300,000. Of this amount, $100,000 had already been paid for land, and a total of $200,000 would be spent for a building that would be “good for about 40 years.” In discussing profit potential, the sales manager pointed out that Octane’s national advertising program and the consumer appeal generated by the attractive station “will be worth at least $30,000 a year to you in consumer goodwill.”

The lease agreement stipulated that Trevino pay a rental of $1,250 per month for the station plus $0.04 for each gallon of gasoline delivered to the station by Octane.1 A separate agreement was also signed whereby Octane agreed to sell and Trevino agreed to buy certain minimum quantities of gasoline and other automotive products for the service station operation.

As both an evidence of good faith and as a pre-payment on certain obligations that he would shortly incur to Octane, Trevino was required to deposit $20,000 with Octane at the time the lease was signed....