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

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US Court of Appeals for the Fourth Circuit - 424 F.2d 254 (4th Cir. 1970) Argued January 8, 1970Decided 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.


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