Shell Oil Co. v. Hanchett

TYLER, P. J.

Action by the Shell Oil Company to recover the sum of $3,294.57 on an unpaid balance for petroleum products sold and delivered for the use of the Green Top Cabs, Ltd. The question involved in the ease is whether the cab company alone is liable or whether defendant Hanchett is also liable by reason of certain contracts entered into between the parties. The action is against Hanchett alone, the cab company not being a party. Judgment went in favor of defendant and plaintiff appeals.

The facts show that in February, 1930, defendant Hanchett, who was then manager of a corporation known as the Red Top Cab Company, was organizing a new taxicab business in San Francisco. With this purpose in view he had taken over the Sequoia Garage situated in said city as headquarters for his operations. The new corporation which was being formed was to be known as the Green Top Cabs, Ltd. Before this corporation came into existence, one of plaintiff’s salesmen called on Hanchett with a view to obtaining a contract with him for the gasoline and other petroleum products to be used in his business. He ascertained from defendant that he was unwilling to pay a price in excess of twelve cents a gallon for gasoline. At this time plaintiff had a gentlemen’s agreement with the other major oil companies not to sell gasoline at less than a certain price, and the amount offered by defendant was below that figure. Plaintiff was particularly anxious to obtain the business but, on account of its gentleman’s agreement with the other companies, it

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refused to enter into a written contract, but one of the officers of plaintiff corporation, assured defendant that the price would be twelve cents and no more. In order to conceal from competitors the real terms of the transaction, a contract that plaintiff had with the Sequoia Garage was assigned to defendant, the assignment, however, being a mere subterfuge, it being understood that plaintiff was to hold the same in its files as a record of its good faith with the other oil companies in living up to the gentleman’s agreement. No deliveries under this assignment are involved in this controversy. Contemporaneously with the execution of the assignment, an oral contract was made between the parties to the effect that defendant was to obtain his gasoline at the favored price of twelve cents a gallon. Deliveries under this contract began to be made and the products were billed to defendant Hanchett personally. The new corporation was subsequently formed and Hanchett insisted that thereafter the billings be against such corporation and not himself personally. This course was thereafter followed by plaintiff. Some time later a gasoline war broke out among the oil companies and as gasoline could be bought at retail from the dealers at a price less than defendant was paying under his contract he demanded and, after considerable discussion, was given a rebate. Thereafter upon the insistence of defendant a written contract was entered into by plaintiff and defendant which expressly provided that defendant personally was to purchase from plaintiff, and to pay for, the total gasoline requirements of his business for a period of three years at twelve cents per gallon. The products sued for were delivered after this written contract was in effect. About this time the Red Top Cab Company, by whom defendant was formerly employed, obtained a restraining order against Hanchett doing business under his newly formed corporation upon the ground that his act in so doing was in violation of his employment agreement with such company. This litigation resulted in the physical properties of the Green Top Cabs, Ltd., being sold and the company was forced out of business and went into bankruptcy. The present action was then brought against Hanchett for the products sold to this bankrupt concern.