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EXXON CORPORATION v. ROBERT J. WILSON (09/24/81)

SUPREME COURT OF PENNSYLVANIA


decided: September 24, 1981.

EXXON CORPORATION, APPELLEE,
v.
ROBERT J. WILSON, APPELLANT

No. 132 January Term, 1979, Appeal from the Judgment dated November 22, 1978 of the Superior Court at No. 318 Oct. Term, 1978, affirming Order dated November 4, 1977 of the Court of Common Pleas of Montgomery County at No. 77-05391.

COUNSEL

Norman P. Zarwin, Martin J. Resnick, Philadelphia, for appellant.

E. Barclay Cale, Jr., Kell M. Damsgaard, John M. Phelan, Kell M. Damsgaard, Philadelphia, for appellee at Nos. 131 and 132.

William A. DeStefano, Philadelphia, for appellee at 80-3-566.

Roberts, Nix, Larsen, Flaherty, Kauffman and Wilkinson, JJ. O'Brien, C. J., did not participate in the consideration or decision of this case.

Author: Kauffman

[ 495 Pa. Page 554]

OPINION

The issue presented by this appeal is whether a lessor oil company is entitled to regain possession of its gasoline service station from a lessee dealer who refuses to vacate

[ 495 Pa. Page 555]

    the premises at the expiration of his lease term despite failure of the parties, after extensive negotiations, to agree upon a new lease. Appellant, Robert J. Wilson, seeks to open a judgment in ejectment confessed against him by appellee, Exxon Corporation ("Exxon"), after he refused to vacate a leased gasoline service station at the end of the lease term. In his timely petition to open the judgment filed in the Court of Common Pleas of Montgomery County, appellant contended that Exxon had failed to negotiate a renewal lease in good faith and that termination therefore was in violation of Section 3(c)(1) of the Pennsylvania Gasoline Petroleum Products and Motor Vehicle Accessories Act ("Gasoline Act")*fn1 and in breach of fiduciary duties allegedly owed to him by Exxon. After depositions were taken and argument held, the court en banc entered an order refusing to open judgment. The Superior Court affirmed, 260 Pa. Super. 560, 394 A.2d 1288; we granted allocatur, consolidated this case for argument with Witmer v. Exxon Corp., et al., 495 Pa. 540, 434 A.2d 1222 (1981), and now affirm.*fn2

The last retail service station lease executed by Exxon and appellant, which expired on February 6, 1976, provided for a monthly rental of 1.7 cents per gallon of gasoline sold, up to 60,000 gallons, and one-half cent on each gallon over 60,000, with a minimum monthly rental of $1,050. Because of the Economic Stabilization Act of 1970, however, the rentals under the lease were modified to provide for payment of 1.5

[ 495 Pa. Page 556]

    cents per gallon up to 60,000 gallons and one-half cent per gallon over 60,000, with a minimum rental of $810.00 per month.*fn3 Near the end of the lease term, Exxon submitted a proposed new lease to appellant which, while otherwise virtually identical to the old lease, contained a "rental reopener" clause authorizing Exxon to increase the service station rental by no more than one cent per gallon once during the term of the lease.*fn4 Anticipating the expiration of federal rent controls during the next term, appellant rejected Exxon's proposal, but did not vacate the premises.

Despite an express provision in appellant's lease that neither party had any obligation to renew or extend at the

[ 495 Pa. Page 557]

    end of its term, Exxon chose not to commence ejectment proceedings, but instead advised appellant by letter that it would consider his existing lease renewed by operation of law for one additional year until February 6, 1977.*fn5 The lease as so renewed provided that if, after good faith negotiations, the parties were unable to agree upon the rental for any renewal period, it would be set by the use of a formula based on the market value of the property (as determined by an independent appraiser to be chosen by the lessee and acceptable to Exxon), property taxes, and Exxon's costs of maintenance and repair.*fn6 During the renewal term, Exxon

[ 495 Pa. Page 558]

    notified appellant that federal controls had been lifted, and proposed rental increases under the extensions and renewals clause in stages to 1.69 and 1.89 cents per gallon of gasoline delivered, characterizing them as steps in a gradual return to fair market rentals after nearly three years of artificial market depression. Appellant made no counter proposal and refused to exercise his appraisal rights under the clause. Accordingly, the proposed increases became effective fifteen days after notice.

Approximately three months before the end of the renewal term, Exxon and appellant, who had retained counsel, commenced negotiations for a new lease. During the course of the extensive negotiations, Exxon not only agreed to eliminate the rental reopener clause it had proposed, but also offered to adjust its last rental proposal if appellant could demonstrate that it was disproportionate to the value of the premises or that it would impose a financial hardship.*fn7 Although he rejected Exxon's rental proposals as "outrageous," appellant refused to produce any of his financial records to substantiate his position. Because the parties failed to agree to terms for a new lease, Exxon, by letter dated February 24, 1977, gave notice to appellant to vacate the premises as of March 26, 1977. Despite the notice and despite the fact that it had found another prospective tenant who agreed to pay the rental proposed to and rejected by appellant, Exxon communicated its willingness to execute a new lease with appellant under any of its outstanding proposals and continued making new proposals until the very end.

On March 24, 1977, Exxon made a final attempt to achieve a compromise, offering a flat rental of $18,000 per year plus 0.8 cents per gallon purchased over 66,666 gallons per

[ 495 Pa. Page 559]

    month.*fn8 Appellant rejected this proposal, but refused to vacate the premises. Exxon thereafter obtained the confessed judgment here at issue on March 28, 1977.

We conclude that appellant's petition to open the confessed judgment was correctly denied because the undisputed factual record leads inexorably to the finding that Exxon did not seek to terminate its relationship with appellant, but rather bargained with him in an honest and serious effort to reach a commercially reasonable accommodation.*fn9 By submitting no less than five different proposals, all of which were rejected by appellant, Exxon conscientiously and unambiguously sought to retain him as its lessee. That the rent increases proposed were reasonable with respect to the economics of operating the service station is reflected, inter alia, by the fact that Exxon produced another tenant who would accept the terms appellant had refused and by the fact that appellant rejected Exxon's invitation to demonstrate either that the proposed rental would cause financial hardship or that it would be disproportionate to the value of the premises.*fn10 To the very end, Exxon made every effort to keep open the possibility that appellant would accept its lease proposals, even after having given notice to vacate. Indeed, Exxon ultimately made a compromise proposal which would have permitted appellant to operate the service station at a lower rental than already had been offered by another.

[ 495 Pa. Page 560]

To successfully challenge a confessed judgment, a petitioner must assert a meritorious defense. Wenger v. Ziegler, 424 Pa. 268, 226 A.2d 653 (1967). By establishing nothing more than the inability of two counseled parties to reach a new lease agreement after extensive good faith negotiations, appellant has not even come close. We refuse to permit the courts of this Commonwealth to intervene whenever negotiations between an oil company and a gasoline service station operator fail to produce mutually acceptable terms for a commercial lease.

Appellant next argues that the judgment should be opened under Pa.R.C.P. 2959(c) because the lower court should have submitted the issue of whether Exxon bargained in good faith to a jury.*fn11 We disagree. The undisputed factual record conclusively demonstrates that Exxon acted in good faith throughout the negotiations, and no reasonable jury could have reached any other conclusion. Consequently the trial court correctly resolved the issue as a matter of law. See Fehr v. Campbell, 288 Pa. 549, 137 A. 113 (1927).

Accordingly, the order of the Superior Court is affirmed.


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