John C. CUNNINGHAM, Jr., and Lydia Cunningham, his wife, Defendants Below, Appellants,
ESSO STANDARD OIL COMPANY, a corporation of the State of Delaware, Plaintiff, Below, Appellee.
Action for specific performance of option contract for purchase of a gasoline service station. The Court of Chancery, New Castle County, 114 A.2d 380, rendered judgment decreeing specific performance, and defendants appealed. The Supreme Court, Southerland, C. J., held that specifically enforcing option contract did not exceed limits of judicial discretion, though value of service station had greatly increased.
[35 Del.Ch. 372] C. Edward Duffy and Stephen E. Hamilton, Jr., Wilmington (J. Pearce Cann, Wilmington, on the brief), for appellants.
Morris Cohen (of Cohen & Cohen), Wilmington (Thomas Herlihy, Jr., Wilmington, on the brief), for appellee.
SOUTHERLAND, C. J., and WOLCOTT and BRAMHALL, JJ., sitting.
SOUTHERLAND, Chief Justice.
The question in this case is whether the Vice Chancellor should have refused to decree specific performance on the ground that the circumstances of the cases made it inequitable to do so.
The facts are these:
At the time of the execution of the contract in 1940 John C. Cunningham, Jr., was operating a service station in Newark, under a rental agreement with Sinclair Refining Company. His business experience prior to this operation had been slight. He had done well with the rented station. He was approached by a Mr. Spath [35 Del.Ch. 373] on behalf of Esso Standard Oil Company. Esso needed a gasoline service station in Newark as an outlet for its products. Spath suggested to Cunningham that it was ridiculous of Cunningham to pay rent when he could acquire his own service station and build up an equity in it. Cunningham was interested. Spath secured an option to buy certain land for $8,500. This option he assigned to Cunningham. Cunningham paid $2,000 toward the purchase price, and a $6,500 mortgage provided the balance of the purchase price. Cunningham needed further financial assistance to build the station. A mortgage of $13,000 was obtained, and the prior mortgage was paid off.
To finance the $13,000 mortgage, and to carry on the contemplated operation of the service station, the following arrangement was entered into. On August 8, 1940 Cunningham leased the land to Esso for ten years, with an option to renew the lease for five successive one-year periods. The rental was $128 a month-the amount necessary to amortize the mortgage. The rental payments from Esso were assigned to the mortgagee as additional security for the loan. Esso then re-leased (or sublet) the property to Cunningham at the same rental. This sublease, however, was for one year only with a provision for renewal from year to year unless terminated by either party.
Cunningham's testimony indicates that without this financial aid he would have been unable to buy the property. $The station was built and Cunningham operated it from February 21, 1941, when it was opened, until December 1942, when he went into the military service. In 1945 Cunningham resumed operation of the station as sublessee. In 1949 he sublet the station to a third party at a yearly rental of $4,500, which he is now receiving.
The first lease, from Cunningham to Esso, contains the option that is the subject of the dispute. Esso was granted the right to purchase the land and personal property for $20,000 at any time during the original term of the lease or any renewal thereof of giving appropriate notice in writing. On March 1, 1954, Esso gave the required [35 Del.Ch. 374] notice of its election to purchase. Cunningham refused to convey, and suit followed.
Cunningham's general defense to the suit was that it would be inequitable under the circumstances to grant specific performance. Several contentions in support of this defense were ...