Title: Frank Shop Inc. v. Crown Central Petroleum

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  Carrico, C.J., Lacy, Keenan, Koontz, Kinser and 
Lemons, JJ., and Compton, S.J. 
 
FRANK SHOP, INC. 
 
v.  Record No. 000216 
OPINION BY JUSTICE DONALD W. LEMONS 
 
 
 
January 12, 2001 
CROWN CENTRAL PETROLEUM CORPORATION 
 
FROM THE CIRCUIT COURT OF HENRICO COUNTY 
George F. Tidey, Judge 
 
 
In this appeal involving the Virginia Petroleum Products 
Franchise Act, Code §§ 59.1-21.8 through –21.18.1 (“the Act”), 
we consider whether a gasoline service station presently owned 
by Crown Central Petroleum Corporation (“Crown”), located less 
than one and one-half miles from a station owned by Exxon 
U.S.A. and leased by Frank Shop, Inc. (“Frank Shop”), is 
protected by the “grandfather clause” of the Act, Code § 59.1-
21.16:2(E).  Because we hold that the trial court erred in the 
admission of certain documentary evidence and that the 
exclusion of such evidence results in a failure of proof 
concerning Crown’s entitlement to protection under the 
“grandfather clause,” we will reverse the judgment of the 
trial court and remand for further proceedings. 
I.  Facts and Proceedings 
 
On March 16, 1999, Frank Shop filed a bill of complaint 
against Crown seeking injunctive relief and damages pursuant 
to the Act.  Specifically, Frank Shop contended that Crown was 
a refiner and operated a service station less than one and 
one-half miles from Frank Shop’s service station in violation 
of Code § 59.1-21.16:2. 
 
At trial, the evidence revealed that Frank Shop owns and 
operates a “Retail outlet,” as that term is defined by Code 
§ 59.1-21.10.  Frank Melton (“Melton”), president of Frank 
Shop, testified that Frank Shop had leased this retail outlet 
from Exxon and conducted its business pursuant to a franchise 
agreement with Exxon for over 11 years. 
 
On July 1, 1979, the real property known as 6715 Staples 
Mill Road in Henrico County (“Property”), was owned by Charm 
Stations, Inc.  The trial court received into evidence a copy 
of a form filed by Eastates Petroleum Company, Inc. 
(“Eastates”), on August 23, 1979, with the Virginia Department 
of Agriculture and Consumer Services (“VDACS”) “in accordance 
with the requirements of Section 59.1-21.16:2 of the Code of 
Virginia and the Rules and Regulations for the Enforcement of 
the Virginia Petroleum Products Franchise Act” indicating that 
Eastates was the “Producer/Refiner Operator” of the retail 
outlet on the Property.  Later, on April 30, 1991, the 
Property was purchased by Fast Fare, Inc., a wholly-owned 
subsidiary or affiliate of Crown.  On October 5, 1998, Crown 
began construction of a “Retail outlet,” as that term is 
defined by Code § 59.1-21.10, on the Property.  In February of 
1999, Crown began selling petroleum products to the general 
 
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public at this location.  Crown admitted that its retail 
outlet is located directly across the street from and less 
than one and one-half miles from Frank Shop’s location. 
 
The trial court held that the Property was protected by 
the “grandfather clause” in Code § 59.1-21.16:2(E) and entered 
judgment in favor of Crown.  On appeal, Frank Shop maintains 
that the trial court erred in the admission of certain 
documents and that the evidence was insufficient to sustain 
the judgment in favor of Crown. 
II.  Divorcement Clause and Grandfather Clause 
 
Code § 59.1-21.16:2(A), referred to as the “divorcement 
clause,” “prohibits a producer or refiner of petroleum 
products from operating a retail gasoline outlet within one 
and one-half miles of a retail outlet operated by a franchised 
dealer.”  Beach Robo, Inc. v. Crown Cent. Petroleum Corp., 236 
Va. 131, 132, 372 S.E.2d 144, 145 (1988).  However, Code 
§ 59.1-21.16:2(E), referred to as the “grandfather clause,” 
states that the “provisions of this section shall not be 
applicable to retail outlets operated by producers or refiners 
on July 1, 1979.” 
 
The parties agree that one of the issues on appeal 
concerns the meaning of the word “operated” in the 
“grandfather clause.”  Frank Shop maintains that the term must 
be interpreted by utilizing the language of a different 
 
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section of the Act, namely Code § 59.1-21.10.  This section 
defines “[o]peration of a retail outlet” as “the ownership or 
option to buy a properly zoned parcel of property for which a 
permit to build a retail outlet has been granted.”  Utilizing 
its interpretation, Frank Shop contends that Crown has not 
proved that, on July 1, 1979, a producer or refiner owned or 
had an option to purchase the Property; consequently, a retail 
outlet was not “operated” on the Property on July 1, 1979 and 
the “grandfather clause” does not apply.  Crown maintains that 
our prior opinions and the opinions of the Attorney General do 
not require ownership or an option to purchase the premises as 
a definitive factor in the interpretation of the word, 
“operated,” in the “grandfather clause.”  Irrespective of the 
definition of “operated,” Frank Shop maintains that, in order 
to benefit from the “grandfather clause,” a producer or 
refiner must have been the operator on July 1, 1979.  Our 
resolution of the evidentiary issues presented on appeal makes 
it unnecessary to address the definition of “operated” in the  
“grandfather clause.” 
III.  Admission and Sufficiency of Evidence 
 
Over Frank Shop’s objection, the trial court received 
into evidence a form filed by Eastates on August 23, 1979 with 
the Virginia Department of Agriculture and Consumer Services 
(“Exhibit 1”), and a portion of a Form 10-K for the year ended 
 
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September 30, 1979, filed by Ashland Oil, Inc. with the 
Securities and Exchange Commission (“Exhibit 2”).  Assuming 
without deciding that Eastates “operated” a retail outlet on 
the premises on July 1, 1979, in order to obtain the 
protection of the “grandfather clause,” Crown bore the burden 
of proof to show that Eastates was a producer or refiner as 
defined in the Act.1  A review of the record indicates that 
these two exhibits constitute the only evidence offered by 
Crown to prove that Eastates was a producer or refiner. 
A.  Exhibit 1 
 
At trial, Crown offered Exhibit 1 into evidence as a 
government record under Code § 8.01-390.  Frank Shop objected 
on the grounds that it had not been properly authenticated, it 
was hearsay, and that it was not a government or public 
record.  Crown responded that the document was properly 
authenticated and counsel stated, “I can give you four reasons 
why it comes under the hearsay exception.”  Without awaiting a 
statement of the four reasons or a response to the objection 
concerning authentication, the trial court stated, “Well, let 
me just help you out.  I’m going to allow it.”  On appeal, 
Crown argues that Exhibit 1 was properly authenticated and 
admissible either under the government records exception 
                     
1 Code § 59.1-21.10 defines “Refiner” as “any person 
engaged in the refining of crude oil to produce motor fuel and 
 
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pursuant to Code § 8.01-390 or under the business records 
exception to the hearsay rule. 
Government Records Exception 
 
Code § 8.01-390(A),2 as it existed when this matter was 
heard in the trial court, stated: 
 
Copies of records of this Commonwealth, of 
another state, of the United States, of another 
country, or any political subdivision or agency 
of the same, other than those located in a 
clerk’s office of a court, shall be received as 
prima facie evidence provided that such copies 
are authenticated to be true copies both by the 
custodian thereof and by the person to whom the 
custodian reports. 
 
 
This Code section embodies what is often referred to as 
the government records exception to the hearsay rule.  
Pursuant to this statutory exception to the hearsay rule, 
 
records and reports prepared by public 
officials pursuant to a duty imposed by 
statute, or required by the nature of their 
offices, are admissible as proof of the facts 
stated therein.  Although a record or report 
may qualify as a public document, the hearsay 
objection is overcome only if the document 
relates facts or events within the personal 
knowledge and observation of the recording 
official to which he could testify should he be 
called as a witness. 
 
                                                                
includes any affiliate of such person.” 
2 The 2000 amendment to this section substituted “either 
by the custodian thereof or by” for “both by the custodian 
thereof and” and added “if they are different” to the end of 
that sentence. 
 
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Taylor v. Maritime Overseas Corp., 224 Va. 562, 565, 299 
S.E.2d 340, 341 (1983)(citations and internal quotations 
omitted). 
 
It is abundantly clear that Exhibit 1 was not prepared by 
a public official and does not reflect facts or events within 
the personal knowledge and observation of the recording 
official.  Exhibit 1 was prepared by a representative of 
Eastates and filed with the Virginia Department of Agriculture 
and Consumer Services.  Accordingly, Exhibit 1 was not 
admissible under Code § 8.01-390. 
Business Records Exception 
 
On appeal, Crown maintains that Exhibit 1 was nonetheless 
admissible under the business records exception to the hearsay 
rule, sometimes called the “modern Shopbook Rule.”  We have 
previously noted: 
 
Under the modern Shopbook Rule, adopted in 
Virginia, verified regular entries may be 
admitted into evidence without requiring proof 
from the regular observers or record keepers, 
generally limiting admission of such evidence to 
facts or events within the personal knowledge of 
the recorder.  However this principle does not 
necessarily exclude all entries made by persons 
without personal knowledge of the facts recorded; 
in many cases, practical necessity requires the 
admission of written factual evidence that has a 
circumstantial guarantee of trustworthiness. 
 
 
The trustworthiness or reliability of the records 
is guaranteed by the regularity of their 
preparation and the fact that the records are 
relied upon in the transaction of business by the 
 
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person or entities for which they are kept.  
Admission of such evidence is conditioned, 
therefore, on proof that the document comes from 
the proper custodian and that it is a record kept 
in the ordinary course of business made 
contemporaneously with the event by persons 
having the duty to keep a true record.  This 
approach necessarily requires that a 
determination as to admissibility be made on the 
facts of each case. 
 
Kettler & Scott, Inc. v. Earth Technology Companies, Inc., 248 
Va. 450, 457, 449 S.E.2d 782, 785-86 (1994) (citations and 
internal quotations omitted). 
 
Affidavits from the government custodian of this record 
established that Exhibit 1 was a “true and correct copy of 
documents held by the Office of Product and Industry 
Standards.”  Because the document was not generated by the 
Office of Product and Industry Standards or any entity that 
could be described as its affiliate, the document is not a 
business record of the Office of Product and Industry 
Standards.  As we stated in Ford Motor Company v. Phelps, 239 
Va. 272, 276, 389 S.E.2d 454, 457 (1990), “the rule deals with 
records made, and not merely kept, in the regular course of 
business.” 
 
The trial court erred in admitting Exhibit 1 into 
evidence.  It is not an official record subject to exception 
from the hearsay rule under Code § 8.01-390, nor is it a 
 
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business record of the Office of Product and Industry 
Standards. 
B. Exhibit 2 
 
At trial, Crown offered a portion of a Form 10-K into 
evidence as Exhibit 2 and simultaneously tendered to the trial 
court the entire Form 10-K.  With respect to the entire Form 
10-K, apparently filed by Ashland Oil, Inc. with the 
Securities and Exchange Commission in 1979, counsel stated, 
“I’m not submitting this as evidence, but for your Honor’s — 
the Court’s convenience.”  Crown asserted that Exhibit 2 was a 
business record, a public record, and an ancient document, and 
thus admissible under one or more of these exceptions from 
exclusion under the hearsay rule.  Frank Shop objected to 
Exhibit 2 on the grounds that it was not an ancient document 
or a public record, and it was not properly authenticated. 
 
Analysis of authentication and admissibility of Exhibit 2 
is unnecessary because, even if properly admitted, it fails to 
support the proposition for which it was offered.  Although 
Exhibit 2 confirms that Eastates was a subsidiary of Ashland 
Oil during the period of the filing, the brief excerpts from 
the form admitted into evidence as Exhibit 2 do not even 
suggest, much less prove, that Ashland Oil or Eastates was a 
producer or refiner as defined under the Act. 
 
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In this case, the only evidence before the trial court of 
Eastates’ status as a producer or refiner on July 1, 1979 was 
Exhibit 1, which was admitted in error, and Exhibit 2 which 
fails in its evidentiary purpose.  The evidence was therefore 
insufficient to sustain Crown’s burden of proof that its 
predecessor, Eastates, qualified under the “grandfather 
clause” for exclusion from the “divorcement clause.” 
IV.  Conclusion 
 
There is no controversy over whether Frank Shop sustained 
its burden of proof by establishing that Crown operates a 
gasoline service station at a location less than one and one-
half miles from Frank Shop’s location in violation of the 
“divorcement clause” of the Act.  We hold that Crown failed to 
prove that it was entitled to protection under the 
“grandfather clause” of the Act.  In its bill of complaint, 
Frank Shop requested (1) a temporary and permanent injunction; 
(2) liquidated damages of $2500; (3) such provable damages as 
may be established by the evidence and interest thereon; (4) 
reasonable attorneys’ fees; (5) costs incurred; and, (6) “such 
other and further relief as is determined to be appropriate.”  
We will reverse the judgment of the trial court and remand for 
determination of the relief to which Frank Shop may be 
entitled. 
Reversed and remanded. 
 
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