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GALE INDUSTRIES v. BRISTOL FARMERS MARKET & AUCTION CO. (10/03/68)

decided: October 3, 1968.

GALE INDUSTRIES, INC., APPELLANT,
v.
BRISTOL FARMERS MARKET & AUCTION CO.



Appeal from decree of Court of Common Pleas of Bucks County, March T., 1965, No. 956, in case of Gale Industries, Inc. v. Bristol Farmers Market & Auction Co.

COUNSEL

A. John May, with him Edmund V. Ludwig, and Duane, Morris & Heckscher, and Barnes, Biester & Ludwig, for appellant.

Michael H. Egnal, with him Milton S. Lazaroff, and Egnal & Simons, for appellee.

Bell, C. J., Musmanno, Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Eagen. Mr. Justice Jones concurs in the result. Concurring Opinion by Mr. Justice Roberts.

Author: Eagen

[ 431 Pa. Page 467]

This is an appeal from a decree entered in the court below dismissing appellant's amended complaint in equity which asked that appellee be enjoined from the exercise of any and all rights and remedies recited in the hereinafter referred to lease and that appellant be declared released from any further obligation under the lease. More specifically, appellant seeks to enjoin appellee from accelerating the rent due for the balance of the term of the lease and from confessing judgment thereon.

The facts recited in the complaint are involved and complicated, but we must state them in some detail. By Lease Agreement dated December 30, 1958, Bristol Farmers Market and Auction Company, the appellee, leased premises in Bristol Township, Bucks County, to Gale Industries, Inc., the appellant, and Penrose Industries Corporation, then known as Consolidated Sun Ray, Inc. The lease provided that the lessees would be jointly and severally liable thereunder and that they would remain liable and not be released therefrom in the event of its assignment.

On February 1, 1959, the appellant and Penrose Industries Corporation (hereinafter Penrose) assigned their rights under the lease to their jointly owned subsidiary, Bargain City, U.S.A., Inc. (hereinafter Bargain City). In 1960, the appellant sold its stock in Bargain City which then came under the sole control of Penrose.

Robert Woldow and Mark Woldow and their family at all times owned at least 50% of the appellee corporation and exclusively owned and controlled Garden State Market and Auction Co. (hereinafter Garden State), which owned store premises in Westville, New Jersey. In 1959 the Westville store was leased by Garden State to Penrose and Wilbur Rogers, Inc., a

[ 431 Pa. Page 468]

    wholly owned subsidiary of appellant which terminated business operations in 1962. In 1960 the lessees assigned their rights in that lease to Bargain City. In October 1962 Bargain City filed a petition under Chapter XI of the Bankruptcy Act and a plan of arrangement was approved in April 1963. In April 1963 Bargain City, which was without sufficient funds to continue its business operations, subleased nine discount department stores which it formerly had operated, to subsidiaries of Atlantic Thrift Centers, Inc. (hereinafter Atlantic). Among the discount stores sublet were the stores located at the Bristol premises and the Westville premises. As of 1965, the annual rent paid by Atlantic for the Bristol premises, together with annual payments of other subtenants was $30,000.00 a year less than the original tenants' rental obligation. There was an annual deficiency of $60,000.00 for the Westville premises.

Since April 1963, Bargain City has been unable to meet its obligations under the leases, and appellee has requested appellant and Penrose, as original lessees of the Bristol premises, to pay the rental deficiencies. Garden State has requested that Penrose, the remaining original lessee of the Westville premises, pay the rental deficiencies for that property. In 1964, Penrose became financially unable to pay the rental deficiencies and in 1965 the United States District Court appointed a conservator for Penrose. Since Bargain City could not meet the rental deficiencies, appellee distrained against the furniture, fixtures and equipment in the Bristol premises used by Atlantic and a similar distraint was made by Garden State on the Westville premises.

The complaint avers that, subsequent to the institution of the distraint proceedings, Mr. Woldow, representing appellee and Garden State, and Mr. Sylk,

[ 431 Pa. Page 469]

Chairman and Controlling Stockholder of both Penrose and Bargain City, and the officers of Atlantic, the sublessee, met to discuss increases in rentals paid by Atlantic for the Bristol premises and the Westville Store; and that appellant was not permitted to participate in the discussions. The complaint then avers: "The negotiations between Atlantic Thrift Centers, Inc. and Sylk, representing Penrose and Bargain City, and Woldow representing Garden State Market and Auction Co. and Defendant-Landlord culminated in certain agreements made in March 1965, with respect to the Westville Store pursuant to which the rights and obligations of Garden State Market and Auction Co. and Penrose and William Sylk and Atlantic Thrift Centers, Inc. were changed as follows:

(a) The rental payments to be paid by Atlantic Thrift Centers, Inc. was increased from $60,000 to $100,000 per year throughout the approximately ten year balance of the lease term.

(b) Garden State granted to Atlantic Thrift Centers a covenant of quiet enjoyment throughout the ten year balance of the lease term.

(c) Garden State agreed to allow a credit to Bargain City in the amount of $23,900 annually, from and after March 1965, to be applied against rent deficiencies for which Bargain City and Penrose would otherwise be liable in each year throughout the approximately ten year balance of the lease term.

Concurrent with the changes made in the lease terms at Westville, Atlantic Thrift Centers, Inc. and Bargain City and Defendant-Landlord changed the sublease agreement of April 1963 pursuant to which Atlantic Thrift ...


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