Friday, November 29, 2013

The College Block v. Atlantic Richfield Co. case brief

The College Block v. Atlantic Richfield Co. case brief summary
254 Cal. Rptr. 179 (Ct. App. 1988)


CASE SYNOPSIS
Appellant company challenged the judgment of the Superior Court of Los Angeles County (California) which held that there was an implied covenant of operation in a case concerning a real property dispute.

CASE FACTS
Respondent property owner signed a 20-year lease with appellant company in which appellant agreed to build and operate a gasoline service station on the property. Prior to the expiration of the lease, appellant closed the station and when it ceased operations, it paid respondent for the months remaining on the lease. Appellant contended that it was responsible only for the minimum monthly rental because the lease did not contain an express covenant requiring it to operate the station. Respondent brought suit alleging that appellant was also responsible for additional sums respondent would have received had the station remained in business. Appellant contended that the trial court erred in concluding that the lease contained an implied covenant of continued operation.

DISCUSSION

  • On appeal, the court held that the trial court erred by ruling that there was an implied covenant of continued operation in the lease prior to receiving evidence on this factual issue. 
  • The parties should have been given an opportunity to submit evidence as to the facts and circumstances surrounding the contract to determine if, at the time the contract was entered, the guaranteed rent was substantial.

CONCLUSION
The court reversed the judgment of the trial court that held that an implied covenant of continued operation existed in a commercial lease. The court stated that it was only proper for the parties to present evidence on this factual issue. The court remanded with directions. The parties were to bear their own costs on appeal.

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