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Shell Oil Company, Inc. v. Brazee

Supreme Court of Arizona

January 17, 1938

SHELL OIL COMPANY, INCORPORATED, a Corporation, Appellant,

APPEAL from a judgment of the Superior Court of the County of Maricopa. M. T. Phelps, Judge. Judgment affirmed.

Messrs. Fennemore, Craig, Allen & Bledsoe, for Appellant.

Messrs. Struckmeyer & Flynn, for Appellee.


Page 46

[51 Ariz. 144] LOCKWOOD, J.

This is an appeal by Shell Oil Company, Incorporated, a corporation, hereinafter called defendant, from a judgment in favor of Robert H. Brazee, hereinafter called plaintiff. The record discloses the following situation: Defendant is a corporation engaged in the wholesale production and distribution of petroleum products. In the spring of 1934 [51 Ariz. 145] it entered into a written contract with plaintiff covering a certain service station operated by the latter, which contained the following provisions:

"2.... Should the Company be delayed or prevented in the performance of any of its covenants hereunder by act of God, accident, fire, earthquake, insurrection, Governmental action, strike, total or partial failure of transportation facilities or supplies, or by any cause whatsoever beyond its reasonable control, whether of a similar or dissimilar class, the performance of such covenant, may be suspended while the Company is so prevented or delayed without liability on the part of the Company on account thereof, but the agent in such event shall be entitled to obtain from other sources such gasoline as may be required for sale through said pumps during such period, no such gasoline to be sold, however, except in containers or through pumps conspicuously marked to indicate such gasoline to be of other manufacture than the Company's." (Italics ours.)

"3.... Except as hereinafter provided, gasoline consigned by the Company to the Agent shall be sold by the Agent only at retail prices authorized by the Company from time to time and the Agent shall not advertise or offer any gasoline consignment by the Company to the Agent for sale at any prices except such as are authorized by the Company. The Agent shall not offer, pay or allow any rebates, credits, discounts, premiums, or resort to any other device whereby the net selling price of gasoline consigned by the Company to the Agent shall be lower than that authorized by the Company."

At the same time the parties entered into an oral contract identical in its terms, but covering a second station. Both of these contracts were made after the passage of the National Recovery Act (48 Stat. 195), and the promulgation of the Code of Fair Competition for the Petroleum Industry, and were obviously made with the contemplation that they would be subject to such act and Code. The Code provided as follows:

[51 Ariz. 146] "All retailers and others who sell consumers shall conspicuously post at the place from which delivery is made, and at places there readily accessible during business hours to the public one price at which each brand, grade or quality of naphtha, gasoline, motor fuel, lubricating oil, grease, kerosene and heating oil are sold. All retailers and others who sell consumers, unless prevented therefrom by applicable law, shall separately post in the same manner all tax they are required to pay or collect because of the sale of naphtha, gasoline, motor fuel, lubricating oil, greases, kerosene and heating oil. All prices posted shall remain in effect for at least twenty-four (24) hours after they are posted."

Plaintiff had for a long time, both before and after the contracts between himself and defendant, persistently and openly violated the provisions of the Code above quoted. His conduct was investigated by the Regional Planning and Co-ordination Committee having charge of the enforcement of the Code, and on the 22d of May, 1934, defendant was notified that, if it supplied petroleum products to any violator of the Code, it

Page 47

would be considered to be particeps criminis and subject to prosecution. Defendant notified plaintiff of the situation and that it would be compelled to cease delivery to him of gasoline in accordance with its contract, to which he replied that he was running his own business and would not change his conduct. On May 25th defendant notified plaintiff that it would not deliver him any more gasoline so long as he continued to violate the Code, but, as soon as he ceased such violation, it would gladly deliver him all the gasoline he wanted; that it still considered the contract in force and would live up to its obligation the thereunder whenever plaintiff ceased his violations of the Code as aforesaid.

Plaintiff on May 29th filed his complaint, with two causes of action, setting up the contracts, the failure [51 Ariz. 147] of defendant to deliver him gasoline, his inability to obtain it from any other wholesaler, and that he was damaged to the extent of $2,700, $1,200 at one of his stations, and $1,500 at the other. The prayer of the complaint was that the defendant be restrained from failing to deliver gasoline to plaintiff, in accordance with its contract, and for the damage above alleged. A temporary injunction was granted, as requested by plaintiff, and defendant answered, admitting the contract, but alleging that plaintiff had violated the provisions of the Petroleum Code, and that defendant had been informed by the proper authorities that, if it continued to supply plaintiff with gasoline, it would be considered as a violator of such Code; that the contract provided that, should it be prevented from performing it by reason of governmental action, delivery of gasoline might be suspended, and it should not be liable on account thereof, and that it was at all times willing to supply gasoline under the contract if, as, and when plaintiff would cease violating the Code, and that it did resume such supply upon the 8th day of June, and had continued it ever since. Defendant also ...

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