Mary H. Moorcones, Tom F. Moorcones, and Anthony P. Moorcones, Appellants, v. Shell Oil Company, Appellee, 424 F.2d 254 (4th Cir. 1970)

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

Affirmed.