Babcock v. Smith
| Decision Date | 26 March 1970 |
| Docket Number | 5 Div. 887 |
| Citation | 234 So.2d 573,285 Ala. 557 |
| Parties | C. D. BABCOCK and W. J. Gordy v. Paul SMITH and Mary E. Smith. |
| Court | Alabama Supreme Court |
Robert S. Lamar, Jr., Ball & Ball, Montgomery, for appellants.
Alton, Curlee & Leavell, Montgomery, for appellees.
This case involves the right of the appellants to foreclose a mortgage, and the construction of two leases, on the mortgaged real property, cross-delivered between the parties. The facts are substantially as follows:
On August 31, 1962, the appellees and the appellants contemporaneously executed and delivered to each other, as the particular transaction required, the following instruments in writing, namely:
1. The appellants lent the appellees $15,000 and took in return their promissory note and mortgage on real property. The principal and interest thereunder are payable in one hundred and twenty consecutive monthly installments of $166.65 each, commencing on the 4th day of October, 1962, and continuing on the 4th day of each month thereafter until paid in full. A subsequent provision is that the mortgagors, being engaged in the operation of a motor vehicle gasoline service station and purchasing their petroleum products from the mortgagees, may pay one and one-half cents per gallon of gasoline in addition to its regular cost, and thereafter, on the 30th day of December and 30th day of June of each year, supplement these amounts so as to equal the amounts due under the mortgage for the preceding six month period.
2. The appellees executed and delivered their written lease, hereafter called the prime lease, demising and leasing to the appellants so much of the mortgaged premises as is necessary for the operation of a gasoline filling station for a monthly rental of $166.65. The lease is for a term of ten years, commencing on the 4th day of September, 1962, and ending on the 3rd day of September, 1972. In this lease, the appellees license, consent and permit the appellants, as lessees, to maintain and operate a gasoline filling station on the premises and grant them 30 days after termination of the lease to remove their improvements and equipment therefrom. The appellees, as lessors, agree to pay all taxes and assessments against the premises, the building, and their equipment. The appellants are responsible for the taxes on their equipment. The appellees further agree not to compete with the appellants in the gasoline filling station business and to make all repairs to and maintain the service station, with the exception of the service station equipment placed thereon by the appellants. While the lease to maintain and operate a gasoline filling station on the demised premises would ordinarily carry with it the right of possession to the premises, King v. Reynolds, 67 Ala. 229, the appellants did not go into possession, but with the appellees' permission, painted the building a different color, painted over the gasoline pumps and changed the emblems to Phillips Sixty-Six.
3. The appellants executed and delivered to the appellees a Dealer Lease and Agreement for Purchase and Sale of Petroleum Products, hereafter called the lease-back, whereby, for the same monthly rental of $166.65, the appellants who are referred to as 'Seller,' lease back to the appellees, called the 'Dealer,' the same real property described in the mortgage for ten years, commencing on the 4th day of September, 1962, and ending on the 3rd day of September, 1972. The Dealer, appellees, continued in actual possession of the real property including the gasoline filling station, never at any time having parted with possession or with the operation of the filling station. Pertinent provisions of this lease-back are that it covers the operation of a motor vehicle filling station on the leased premises, with the Dealer agreeing to purchase all petroleum products sold there from the Seller. The Dealer retains possession of the leased premises, but failing to operate the filling station or to purchase all petroleum products from the Seller, agrees to surrender the same to the Seller upon demand, and the Seller may then use and occupy the premises or sub-let for the purposes for which the lease was made, agreeing to pay the $166.65 per month as rental in accordance with the prime lease from the appellees. The Seller agrees to place gasoline pumps and storage tanks on the premises for the sale and dispensing of petroleum products purchased from the Seller. The Seller agrees to keep an adequate supply of petroleum products in the storage tanks or other places of storage on the premises, provided the Seller will not be liable for failure to furnish petroleum products where such is due to the Seller's inability to obtain the same from its source of supply. The Seller agrees to sell at the established major dealer tank wagon prices which the Dealer agrees to pay for in cash upon receipt of said petroleum products. The Dealer, as the owner of the premises, consents to the installation and maintenance of this equipment and assures the Seller the right to remove it from said premises. This instrument further provides that the Seller is interested only in the increased volume of wholesale sales of petroleum products and securing payment of its sale price to the Dealer. Neither the Dealer nor his employees are to be deemed or to be construed to be employed by or agents of the Seller and the Dealer is not to permit any of their employees to represent themselves as agents or employees of the Seller. The Dealer is required to carry his own insurance and pay taxes and governmental assessments against the leased premises and the Seller is required to pay all taxes and assessments against the pumps, tanks and equipment, provided, however, so long as the Dealer is in possession of the premises he is required to take out all licenses for the operation of the business in his own name and to pay all license fees and privileges, occupation, sales, income, social security or excise taxes of any character whatsoever. The dealer is required to keep the plumbing and gasoline pumps protected and not to damage, deface, alter or change or remove any fixture signs or trademarks.
The appellants and appellees operated under these three instruments with the appellees paying one and one-half cents per gallon on their gasoline purchases in addition to cost, as well as other payments from time to time, all of which were credited on their mortgage indebtedness to the appellants. The monthly rental due by the appellants under the prime lease was set-off by the rental due by the appellees under the lease-back. The appellants sold the appellees Phillips Sixty-Six gasoline and petroleum products under a dealership or distributorship arrangement with that petroleum company, until August 28, 1965, when the appellants lost their Phillips Sixty-Six franchise. When this occurred, the appellants requested the appellees to accept Sinclair products in the place of Phillips Sixty-Six. They agreed, but refused to sign any dealership agreement or any other type of agreement with Sinclair. Sinclair sold their petroleum products to the appellees, collecting one and one-half cents per gallon of gasoline in addition to cost which it remitted to the appellants for the account of the appellees' mortgage debt. Sinclair changed the pumps and emblems on the appellees' premises to their own kind and repainted the building. These changes were made without objection by the appellees.
Under a contract of sale with Sinclair, made on the 28th of August, 1965, the appellants sold them all of their trade fixtures and personal property, including that on the premises of the appellees, they agreed to exercise their best efforts to secure the execution of a Dealer Agreement between Sinclair and the appellees, they sold, transferred and conveyed to Sinclair their business good will, they agreed not to engage in a competing business for five years, for which Sinclair agreed to pay the appellants $1000 and one cent a gallon on all gasoline sold and delivered by Sinclair to any of seven Open Dealer Accounts, listed in the contract, which includes that of the appellees, for three years, but not to exceed $6,270, including the $1000, and finally, the appellants gave Sinclair the option and privilege to cancel and rescind the contract of sale upon certain contingencies. Appellants' lease-back to the appellees was not sold, transferred or assigned by them under this contract to Sinclair.
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