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GULF OIL CORPORATION v. FALLER (05/23/60)

May 23, 1960

GULF OIL CORPORATION
v.
FALLER, APPELLANT.



Appeal, No. 10, March T., 1960, from decree of Court of Common Pleas of Washington County, No. 5439, in equity, in case of Gulf Oil Corporation v. Albert G. Faller et ux. Decree affirmed.

COUNSEL

Paul N. Barna, with him Barna and Barna, for appellants.

David McNeil Olds, with him Joseph I. Marshall, Harold E. Fergus, and Reed, Smith, Shaw & McClay, and Davidson & Fergus, for appellee.

Before Jones, C.j., Bell, Musmanno, Jones, Cohen, Bok and Eagen, JJ.

Author: Cohen

[ 399 Pa. Page 608]

OPINION BY MR. JUSTICE COHEN.

This is an appeal from the decree of the Court of Common Pleas of Washington County in an action for specific performance of an option to purchase real estate contained in a lease.

On November 1, 1940, appellants leased land in the Borough of Donora to the Gulf Oil Corporation, appellee, "for the purpose of the sale and storage thereon of gasoline, petroleum and petroleum products, and at lessee's option for the conduct of any lawful business thereon." The lease was for a term of 10 years with

[ 399 Pa. Page 609]

    the right of two five-year renewals, and contained an option giving Gulf the right to purchase the land according to a formula which generated a price of $30,000.40 at the time Gulf exercised the option. The lease provided that the appellants as lessors were to build a gasoline service station on the premises at their expense, and that the necessary funds were to be borrowed from a bank to which the appellants were to give a promissory note. In paragraph 17 of the lease it was provided that this promissory note was to be secured by the assignment of rentals under the lease to the bank, and that in the event that the lease was cancelled or terminated for any reason, including presumably condemnation, Gulf would purchase the note from the bank and pay off the remaining balance. The lease elsewhere provided that if the demised premises were taken by condemnation proceedings "all or any part of the consideration paid therefor, shall upon Lessee's demand, be paid to the Lessee, and Lessee in turn shall cause the same to be applied to the payment in whole or in part of the note referred to in Paragraph 17 of this lease agreement, and any balance not so applied shall be returned to Lessors provided that if Lessors are indebted to lessee such balance shall be applied to payment of such indebtedness and any excess returned to lessors."

In May, 1957, the Parking Authority of the Borough of Donora informed Gulf of its intention to use the premises in question for parking facilities, and offered Gulf $5,000 for its interest in the lease. Unsatisfied with this offer, and fearing that under the clause giving the appellants the excess condemnation damages over the amount then owing on the note Gulf might receive nothing for the value of its remaining leasehold term, the corporation duly exercised its option to purchase the premises so as to enable itself to sell the fee

[ 399 Pa. Page 610]

    to the Authority. Because the condemnation value was apparently much greater than the option price (Gulf turned down a subsequent offer of $55,000 for the purchase of the fee interest after it exercised its option), the appellants refused to deliver the deed conveying the property. The appellee instituted this suit for specific performance of the option in August, 1957; in September, 1958, the Parking Authority filed its condemnation bond. Subsequently, the lower court decreed that appellee was entitled to specific performance, but because of the intervening condemnation ordered as more appropriate relief that appellee was entitled to the damages resulting from the appropriation by the ...


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