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Texas Co. v. Gaetano

Decided: January 11, 1962.

THE TEXAS COMPANY, A DELAWARE CORPORATION, PLAINTIFF-RESPONDENT,
v.
MARCO DI GAETANO, T/A MARCO'S SERVICE STATION, ETC., DEFENDANT-APPELLANT



Conford, Freund and Labrecque. The opinion of the court was delivered by Conford, S.j.a.d.

Conford

[71 NJSuper Page 417] Defendant appeals from an order dated December 21, 1960 denying his motion to vacate a final judgment entered in the Chancery Division January 20, 1958 which enjoined his violation of a price resale schedule maintained by plaintiff for the retailing of its gasoline products pursuant to the New Jersey fair-trade statute. R.S. 56:4-3 et seq. , as amended (originally enacted by L. 1935, c. 58). Defendant's basic position is that to permit the injunction to continue to operate against him is to tolerate a violation of the important federal public policy against restraint of trade codified by the Sherman Act, encompassing price-fixing agreements within its condemnation. United States v. Socony-Vacuum Oil Co. , 310 U.S. 150, 60 S. Ct. 811, 84 L. Ed. 1129 (1940). It is argued that plaintiff's imposition of fair-trade upon retailers of its products is not saved from invalidity by the Miller-Tydings amendment of the Sherman Act, 15 U.S.C.A. § 1 (1958), adopted in 1937, and the McGuire amendment of the Federal Trade Commission Act, 15 U.S.C.A. § 45(a) (1958), adopted in 1952, permitting state fair-trading legislation, because plaintiff is in contravention of the express condition thereof that the parties to the resale price arrangement not be in competition with each other. The contention is that such competition exists here between plaintiff and defendant in respect of sales to industrial and commercial users of gasoline, thereby barring the right to injunctive relief under the interpretation of the controlling federal legislation in Esso Standard Oil Company v. Secatore's, Inc. , 246 F.2d 17 (1 Cir. 1957), cert. denied 355 U.S. 834, 78 S. Ct. 54, 2 L. Ed. 2 d 46 (1957).

The trial judge denied relief, taking the position that the same defense had been passed upon when final judgment was entered January 20, 1958; that "nothing new" was presented to warrant interfering with the judgment; and that the application, which was filed October 28, 1960, came too late. On the present appeal plaintiff defends the action of the trial court not only on the grounds thus relied upon, but also on the basis of the position that the Secatore's case is not here applicable, particularly in view of an intervening modification of its resale price schedule under which sales by retailers to industrial and commercial consumers were exempted. An additional argument -- that the controversy is now moot because of a termination of the lease of the defendant's business premises between the parties as of July 31, 1961 -- will be considered separately at the conclusion of this opinion.

Defendant and his wife leased their Trenton gas station property to plaintiff in 1951 for a term of five years, with an option to renew for an additional term of five years. By agreement, defendant remained in possession of the property as dealer in plaintiff's petroleum products. The lease renewal option was exercised by plaintiff in 1956. On May 11, 1956 plaintiff adopted a resale price-fixing policy for the distribution in New Jersey of its gasoline products marketed under the trade-marks "Texaco," "Sky-Chief" and "Fire-Chief." Pursuant thereto, it entered into a fair-trade agreement with one retailer and gave notice thereof to all others in the State, including defendant, with the resultant obligation on all to comply with the resale prices agreed upon, by virtue of the "non-signer" provision of the New Jersey statute, R.S. 56:4-6, as amended by L. 1938, c. 165, sustained as constitutional in Lionel Corp. v. Grayson-Robinson Stores , 15 N.J. 191 (1954). Defendant concededly sold below the stipulated resale prices, and on August 1, 1957 plaintiff filed its complaint against him in the Superior Court, Chancery Division, in the form of a conventional equity suit for an injunction, reciting in detailed particulars

the facts aforementioned, that plaintiff was "without adequate remedy at law," and demanding judgment "that temporary restraint and interlocutory injunction be issued until final hearing" and that "permanent injunction" might issue thereafter against defendant's selling plaintiff's products at prices below its stipulated minimum retail prices and using plaintiff's vending equipment for dispensing "Texaco" products below such prices. The complaint was verified by affidavits of persons who had purchased gasoline from defendant at less than the stipulated resale prices.

On August 7, 1957 an order was entered by a Chancery Division judge temporarily restraining defendant from selling gasoline below plaintiff's stipulated minimum prices or using its branded equipment for that purpose, and requiring him to show cause August 13, 1957 why an order should not be made continuing such restraints "pending final determination and judgment" in the action. On the return date an order was entered by another judge, with the endorsed consent of an attorney for defendant, continuing the restraints until the further order of the court. On November 6, 1957 defendant filed a motion to dissolve or modify the restraint on the ground that plaintiff was "in direct competition" with defendant for commercial accounts, in violation of the "Sherman Anti Trust Act and the Miller-Tydings Amendment thereto in accordance with the decision in Esso Standard Oil v. Secatores, 246 F.2d No. 1, p. 17." This motion was supported by affidavits dated November 6, 1957 of defendant and his son, William Di Gaetano, who was in his employ, stating that plaintiff was "in direct competition" with defendant and other dealers for commercial accounts, mentioning six specific companies in Mercer County, and that plaintiff had salesmen soliciting commercial and industrial accounts "in competition with defendant." Defendant deposed that he sold to commercial and industrial accounts and that plaintiff had "on several occasions in direct competition with [him] weaned away commercial accounts that purchased the plaintiff's products directly from [him]." Plaintiff responded

with affidavits of J. J. Finn, its district representative of sales, and Claude E. Wilson, a salesman in its central New Jersey area. Finn conceded plaintiff sold to commercial consumer accounts but said the nature of the transactions was different from that of a service station account in that a service station sells to consumers in small quantities while the commercial accounts were themselves consumers to whom plaintiff delivered in bulk; that plaintiff's policy was not to solicit or serve such commercial accounts unless they purchased at least 5,000 gallons per month, except where their purchase of other of plaintiff's petroleum products made the account profitable. Plaintiff at that time had only five commercial accounts in Mercer County. The Wilson affidavit described defendant's facilities and specified the amount of his 1957 purchases of gasoline by monthly totals. Other affidavits offered by plaintiff tended to negative competition with defendant.

On December 2, 1957, after argument, a third judge of the Chancery Division signed an order denying the motion to dissolve the restraint and continuing the interlocutory injunction in effect. There was no opinion or other indication of record by the judge of the reasons for his action.

On or about December 18, 1957 plaintiff gave notice of an application for entry of an order "entering the default of the defendant for failure to file an answer, answering affidavit or other motion"; and requesting that the action be tried on the pleadings and affidavits and that final judgment be entered thereon for the relief demanded in the complaint. The motion was supported by an affidavit of one of plaintiff's attorneys stating that defendant had been orally directed by the judge who entered the August 13, 1957 restraint to file an answer by September 3, 1957; and by an affidavit of another of plaintiff's attorneys reciting the previous proceedings in the cause, stating that "no answer, answering affidavits or other motion has been filed by the defendant," and averring that the action had been instituted and conducted "pursuant to R.R. 4:85 (Actions

On Order To Show Cause In Lieu of Summons)." Final judgment was entered January 20, 1958, after signature by a fourth judge. This recited that "due notice of the application for the entry of a judgment by default, for the failure of the defendant to answer or otherwise defend" had been served on defendant and that no appearance had been made on his behalf. Defendant was thereupon permanently enjoined from selling plaintiff's gasoline at less than plaintiff's established minimum retail prices and from using plaintiff's equipment or trademarks in connection with any such prohibited sales.

The 1960 motion to vacate was prosecuted for defendant by new counsel, and heard by a judge who had not previously signed any order in the matter. It asked that if the court were not satisfied with the supporting affidavits submitted, defendant be granted leave to take depositions. Affidavits by defendant and his son presented essentially the same ground for relief from the injunction as had been urged on the motion to dissolve the restraint in the prior proceedings, i.e. , competition by plaintiff with defendant for commercial and industrial consumers. However, what was described as newly discovered evidence was also submitted. The first such item was a notice issued by plaintiff September 3, 1958 amending its New Jersey fair trade price schedule. This exempted therefrom "sales made by Retailer to * * * commercial or industrial concerns or institutional establishments." It was stated in the notice that the "primary purpose" of the exemption was to enable the retailers to meet competition which dealers had informed the company they were faced with from dealers in other brands selling at "lower prices" to buses, trucks, tractors and other commercial vehicles. Retail sales to individually owned passenger vehicles used for pleasure remained subject to stipulated minimum retail prices. From this defendant argued, in effect, that since plaintiff thereby recognized that its retail dealers were conducting a trade in

commercial consumer accounts from their stations, its own factually established solicitation of such business was deliberate and substantial competitive activity with such dealers within the scope and effect of the Secatore's case. Implicit in defendant's argument, too, is the position that by the exempting notice plaintiff signified the formalization of its own open drive for commercial and industrial business, plaintiff assuming (but, as defendant argues, without legal justification) that the exemption would enable it to save the fair trade retail price schedules in reference to sales to passenger cars while competing with its retailers for commercial and industrial business.

Additionally, defendant submitted an affidavit by one Howard Hart, a short-haul truck operator, conducting his business out of Trenton, who for years had purchased gasoline from defendant. He deposed that one Heard, an industrial salesman for plaintiff, had solicited him in December 1957 and February 1958, saying he understood he was a customer of defendant's, and offering to sell him "Fire Chief" gasoline at 21.4 cents per gallon although the fair trade price at the time was 25.9 cents. As further evidence of his position, defendant read to the court at the hearing of the motion depositions taken from Heard, the salesman referred to above, given in similar injunction proceedings brought by plaintiff against another of its dealers. Therein Heard candidly admitted the company was soliciting commercial and industrial users in the Trenton area and basing its prices for that kind of business "on the competitive situation in the field." Heard testified he called on Hart in December 1957 and February 1958 and offered him gasoline at "consumer tank wagon prices," which then were 21.4 cents per gallon. Hart told him at the time he was then buying gasoline from defendant.

Plaintiff offered no answering affidavits on the motion to vacate, resting its defensive position on legal grounds and the facts then of record.

I.

It may be observed preliminarily that if the substantive issue were not one affected by a strong element of public policy we might well not be inclined under the existing circumstances to find a mistaken exercise of discretion by the trial court in declining to interfere with the injunction. In proceedings for relief from a final judgment under R.R. 4:62-2, the determination ordinarily rests in the sound discretion of the trial court, controlled by established principles of fairness and equity. Shammas v. Shammas , 9 N.J. 321, 328 (1952); Hodgson v. Applegate , 31 N.J. 29, 37 (1959). Essentially, the legal ground of attack upon the injunction now pressed was the same as on defendant's motion to vacate the preliminary restraint. Then, as now, the Secatore's case was relied upon; then, as now, plaintiff's competition with defendant for commercial and industrial consumer business constituted the factual and legal underpinning for the defendant's defensive posture. Moreover, defendant did nothing about the injunction, either by way of appeal or otherwise, until it instituted the present proceeding, some 33 months later. Viewed as a litigation of purely private scope and impact, defendant's equitable situation vis-a-vis the plaintiff, appraised in the light of policy considerations militating for ...


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