424 F2d 254 Moorcones v. Shell Oil Company

424 F.2d 254

Mary H. MOORCONES, Tom F. Moorcones, and Anthony P.
Moorcones, Appellants,

No. 13501.

United States Court of Appeals, Fourth Circuit.

Argued Jan. 8, 1970.
Decided April 7, 1970.

Bernard S. Cohen, Alexandria, Va. (Cohen, Hirschkop, Hall & Jackson, Alexandria, Va., on brief), for appellants.

W. W. Koontz, Alexandria, Va. (Boothe, Dudley, Koontz, Blankingship & Stump, Alexandria, Va., on brief), for appellee.

Before SOBELOFF, CRAVEN and BUTZNER, Circuit Judges.


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This appeal involves interpretation of a complicated 'primary lease-financing-leaseback' agreement between the appellants and Shell Oil Company. Pursuant to the agreement, money was lent to the appellants by Shell to build a service station, and Shell obtained a long-term lease so that only its products would be distributed from the station.


The appellants claim that the agreement was merely in the nature of a financing arrangement, entered into to secure the loan. Therefore, it is said, if the loan should be paid off, it would be a constructive fraud to allow the long-term lease to Shell to remain in effect. Shell, on the other hand, argues that the purpose of the agreement was to create a new service station through which to distribute its products. One method of guaranteeing a site for the sale of its products in a given area is through a long-term lease, and the agreement in question was not merely a financing arrangement to secure the loan, but primarily a long-term lease to secure this outlet.


The District Judge held that the appellants' claim of a constructive fraud was lacking in evidentiary support and, for the reasons stated in his opinion, we agree. Accordingly, the order of the District Court is