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ROBERT G. WITMER v. EXXON CORPORATION (11/22/78)

decided: November 22, 1978.

ROBERT G. WITMER, APPELLANT, WALTER B. SLINGERLAND, APPELLANT, LARRY MILLER, APPELLANT, ALEXANDER LAUER, APPELLANT, JOHN W. RINTZ, APPELLANT, FRANCIS J. FRITZ, APPELLANT, JOHN J. KUNKEL, APPELLANT,
v.
EXXON CORPORATION, APPELLEE



No. 729 October Term, 1978, No. 730 October Term, 1978, No. 731 October Term, 1978, No. 732 October Term, 1978, No. 733 October Term, 1978, No. 734 October Term, 1978, No. 735 October Term, 1978, Appeals from the Orders dated January 3, 1978 of the Court of Common Pleas of Montgomery County, Civil Action, Equity at Nos. 77-8950, 77-9497, 77-11727, 77-12077, 77-12239, 77-12688 and 77-13138 respectively.

COUNSEL

Martin J. Resnick, Philadelphia, with him Norman P. Zarwin, Philadelphia, for appellants.

Kell M. Damsgaard, Philadelphia, for appellee.

Price, Hester and Hoffman, JJ. Price, J., files a concurring statement.

Author: Hoffman

[ 260 Pa. Super. Page 541]

These are seven similar cases brought by various service station franchisees against their common franchisor, Exxon Corporation (Exxon) to enjoin Exxon from collecting increases in service station rentals, to compel Exxon to return all collected rent increases, and to negotiate in good faith

[ 260 Pa. Super. Page 542]

    with the franchisees (appellants) to set mutually agreeable rentals. In each case, the lower court sustained Exxon's demurrer, and dismissed appellant's complaints. It is from these orders that appellants now appeal. We affirm.

The facts of each of the seven cases, here consolidated on appeal, are substantially similar, but are set forth here separately for the sake of clarity. Because the cases come to us upon a dismissal of the actions, all well-pleaded facts revealed in the complaints and exhibits properly attached thereto must be taken as true.

Appellant Robert G. Witmer is the lessee of an Exxon service station at Route 222 & Tuckerton Road in Temple, under a one-year lease which expired on March 5, 1977. The lease had set the rental payments for the station at 1.65 cents per gallon of gasoline sold, and was frozen by the federal government under the authority of the Economic Stabilization Act of 1970. This lease contains a "rental reopener" clause*fn1 which provides that Exxon may, once

[ 260 Pa. Super. Page 543]

    during the term of the lease, and upon sixty days notice, increase the station rental, but not by more than one cent per gallon. If the lessee objects to a proposed rent increase, then he may terminate his obligations under the lease without liability.

On July 29, 1976, about seven months after rent controls on the service stations were abolished, Exxon wrote to Witmer, giving notice of its intent to increase his rent under the rental reopener clause, in stages to 3.83 and 4.03 cents per gallon.*fn2 In its letter, Exxon characterized these increases as the reestablishment of fair market rentals, now that rents were no longer controlled. Exxon later submitted to Witmer a new lease for 1977-78, calling for a station rent increase to 4.3 cents per gallon during the term. Witmer refused to execute this lease, but did not vacate the premises. On April 14, 1977, Exxon wrote to Witmer stating that he would be treated as a holdover tenant for a new one-year term*fn3 under the provisions of the former lease. By letter on April 26, 1977, Exxon notified Witmer that his rental during the holdover term would be increased to the aforementioned 4.3 cents per gallon, pursuant to the "extensions and renewals" clause of the lease,*fn4 which gives Exxon the right to

[ 260 Pa. Super. Page 544]

    increase the rental when the lease is extended or renewed by operation of law for any reason. If the lessee objects and the parties cannot reach a mutually agreeable rental, then the rent is determined by a predetermined formula set forth in the clause, the only variable being the market value of the lessor's property, as determined by an independent appraiser named by the lessee who is acceptable to Exxon. By this letter, Exxon also brought to Witmer's attention these appraisal rights. However, Witmer never invoked these rights, and Exxon began to collect rent of 4.3 cents per gallon of gasoline sold to Witmer.

Appellant Walter B. Slingerland is the lessee of an Exxon service station at 9451 Academy Road, Philadelphia. He was operating under a one-year lease ending March 1, 1977, with a rental of 1.75 cents per gallon. Also on July 29, 1976, Exxon notified Slingerland of staged rental increases of 2.21 and 2.41 cents per gallon under the rental reopener clause,

[ 260 Pa. Super. Page 545]

    again citing the abolition of rent controls as the reason for the increase. For the new 1977-78 term, Exxon submitted a lease with a rental of 2.91 cents per gallon. Slingerland did not execute this lease, and on March 3, 1977, Exxon wrote to him stating that because he remained in possession after the end of his term, he would be treated as a holdover tenant bound under the former lease for a new term of one year. Exxon notified Slingerland that it would collect a rental of 2.91 cents per gallon during the holdover term pursuant to the extensions and renewals clause. Again, Slingerland did not exercise his appraisal rights, and Exxon began to collect the increased rent.

Appellant Larry Miller is the lessee of an Exxon service station at 3919 North Front Street, Harrisburg. He was operating under a one-year lease ending May 18, 1977, at a rental of 1.8 cents per gallon. On June 29, 1976, "when the ink on the lease was hardly dry," Exxon gave notice that because rent controls had been ended, a rental increase under the rental reopener clause to 2.58 and 2.78 cents per gallon would become effective in September 1, and December 1, 1976, respectively.*fn5 Exxon submitted a new lease for the term 1977-78 with a rental of 3.28 cents per gallon. Miller declined to execute this lease and remained in possession; on May 20, 1977, Exxon informed him that he would be treated as a holdover tenant for one year under the terms of his prior lease. On May 31, 1977, Exxon gave notice that it would collect a rental of 3.28 cents per gallon during this term pursuant to the extensions and renewals clause of the lease. Miller did not exercise his appraisal rights under the lease, and Exxon began to collect the increased rent.

Appellant Francis J. Fritz is the lessee of an Exxon service station at 7720 York Road in Baltimore, Maryland. He operated the premises under a one-year lease ending May 31, 1977, at a rental of 1.85 cents per gallon. On September

[ 260 Pa. Super. Page 54630]

, 1976, Exxon gave notice under the rental reopener clause to increase the rent of the station to 2.08 and 2.28 cents per gallon. Exxon proposed a lease for the new 1977-78 term with a rental of 2.51 cents per gallon. When Fritz declined to execute this lease, he was informed by Exxon on June 6, 1977, that he would be treated as a holdover for one year under the terms of the old lease. One week later, Exxon notified Fritz that his rent for the holdover term would be increased to 2.51 cents per gallon under the extensions and renewals clause of the lease. Although this letter advised Fritz of his appraisal rights, he never exercised them, and Exxon began to collect this rent on its gasoline sales to Fritz.

Appellant Alexander Lauer is the lessee of an Exxon service station at Route 202 & Swamp Road in Doylestown. He operated the premises under a three-year lease ending May 16, 1977, at a rental of 1.78 cents per gallon. There is no rental reopener clause in Lauer's lease. In June and July, 1976, Exxon notified Lauer that with the ending of controls on service stations rentals, his rent would be increased in the future. True enough, a few weeks before the expiration of the existing lease, Exxon submitted a new lease for one year at a rental of 2.25 cents per gallon. As Lauer refused to execute the lease, Exxon notified him on May 24, 1977, that he would be treated as a holdover tenant for a one-year term under the terms of the prior lease. On June 3, 1977, Exxon gave Lauer notice that his rent for the holdover term would be increased to 2.25 cents per gallon, effective August 1, 1977, pursuant to the extensions and renewals clause in the lease, and advised him of his appraisal rights thereunder. However, Lauer did not exercise these rights and Exxon began to collect the increased rental on its gasoline sales immediately.*fn6

Appellant John W. Rintz is the lessee of an Exxon service station at 700 East Chestnut Street in Lancaster. He operated his station under ...


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