Beach Robo, Inc. v. Crown Cent. Petroleum Corp., 880047

• Decision Date: 23 September 1988
• Docket Number: No. 880047,880047
• Citation: 236 Va. 131,372 S.E.2d 144
• Court: Virginia Supreme Court
• Parties: BEACH ROBO, INC., et al. v. CROWN CENTRAL PETROLEUM CORPORATION. Record

Page 144

372 S.E.2d 144

236 Va. 131

BEACH ROBO, INC., et al. v. CROWN CENTRAL PETROLEUM CORPORATION.

Record No. 880047.

Supreme Court of Virginia.

Sept. 23, 1988.

Carlton F. Bennett (Beverly A. Yeskolski; Bennett & Bennis, P.C., Virginia Beach, on briefs), for appellants.

F. Bradford Stillman (McGuire, Woods, Battle & Boothe, Norfolk, on brief), for appellee.

Virginia Gasoline & Automotive Repair Association, Inc. (Richard M. Bing, Pearce & Bing, Richmond, on brief), amicus curiae, for appellants.

Present: All the Justices.

STEPHENSON, Justice.

The United States Court of Appeals for the Fourth Circuit entered an order of certification requesting that we exercise our certification jurisdiction, Va.Const. art. VI, § 1; Rule 5:42, and answer three questions of law involving the interpretation and application of the Virginia Petroleum Products Franchise Act (the Act), Code §§ 59.1-21.8 through -21.18:1. By order entered January 27, 1988, we accepted the questions for consideration.

The Act, inter alia, 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. Code § 59.1-21.16:2(A). The Act's "grandfather" clause states, however, that the prohibition "shall not be applicable to retail outlets operated by producers or refiners on July 1, 1979." Code § 59.1-21.16:2(D).

The first certified question is stated as follows:

Whether the grandfather clause of [the Act] exempts a retail gasoline outlet that was operated by a producer or refiner on July 1, 1979 and subsequently operated by a company that is not a producer or refiner under the Act.

Because we answer the first question in the affirmative, answers to the second and third question are unnecessary.

Beach Robo, Inc. (Beach Robo) brought this chancery suit in the Circuit Court of the City of Virginia Beach, seeking to enjoin Crown Central Petroleum Corporation (Crown) from opening a retail gasoline outlet, allegedly in violation of the Act. The suit was removed to the United States District Court for the Eastern District of Virginia, based upon diversity jurisdiction, 28 U.S.C. § 1446. Following removal, Hilltop Shell, Inc. (Hilltop) was permitted to intervene as an additional party plaintiff.

The district court, upon stipulated facts, ruled that Crown's retail outlet was exempted from application of the Act by the grandfather clause and entered judgment in Crown's favor. Beach Robo and Hilltop appealed to the Court of Appeals for the Fourth Circuit, and the order of certification followed. ¹

The essential facts are undisputed. Beach Robo owns and operates a gasoline station located at 2430 Virginia Beach Boulevard in the City of Virginia Beach (the City). Beach Robo has operated at that location under a franchise agreement continuously since 1977. Hilltop, also a franchisee, has operated a gasoline station at 1928 Laskin Road in the City since 1969.

Crown is a "producer or refiner" of gasoline as defined by the Act. After investing heavily in renovations, Crown was prepared to open a retail gasoline outlet at 2428 Virginia Beach Boulevard on March 31, 1987. Crown's location is less than one and one-half miles from the stations operated by Beach Robo and Hilltop. Crown leases its station from Eastates Petroleum Company, Inc. (Eastates).

On July 1, 1979, Ashland Oil, Inc. (Ashland) was a producer or refiner of petroleum products as defined by the Act. Payless Stations, Inc. (Payless) and Eastates also are producers or refiners under the Act and are wholly-owned subsidiaries of Ashland.

From July 11, 1969, to July 1, 1979, Ashland owned and, through Payless, operated a retail gasoline outlet at the site now leased to Crown. From July 1, 1979, to August 15, 1984, Ashland, through Eastates, continued to operate a retail outlet at the site.

From August 15, 1984, to February 1, 1985, Jarrell Oil Company (Jarrell), under a lease from Eastates (Ashland), operated a retail outlet at the site. Jarrell was not a producer or refiner of petroleum products, but was a "dealer" as defined by the Act. Apparently, because Jarrell went into bankruptcy, the lease reverted to Eastates (Ashland) in February 1985. Thereafter, on or about May 1, 1985, Eastates (Ashland) leased the property to Crown, but the property has not been open for gasoline retail sales since February 1985. ²

Beach Robo and Hilltop contend in this Court, as they did in the district court, that the grandfather clause does not exempt a particular location from the Act's prohibition. Rather, they assert, the clause applies to the operators of the outlets and the exemption is nontransferable. Beach Robo and Hilltop further...