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.
6
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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