Service Oil Co. v. White

Service Oil Company, Inc. (Service Oil) (plaintiff) is in the business of leasing service stations and then subleasing them to service station operators. Service Oil began negotiating a lease with Howard I. White, Jr. (defendant), who built and owned a vacant service station. Service Oil visited the station for inspection and noted that the total distance between the rear of the station and the property line was 100 feet. It also found that the station pumps were located 15 feet from the property line. Service Oil agreed to lease the property and an agreement was drawn up. The lease described the premises, including the 100 foot distance noted by Service Oil, and restricted Service Oil’s use of the property to its use and occupation as a gas station. White had his attorney look over the provisions before approving it. The parties signed the lease on March 21, 1973 and Service Oil found an operator to sublease the station beginning June 1. In preparation for its opening, Service Oil hired a contractor to install a canopy on the premises. The city, however, refused to issue a permit for a canopy. Upon investigation, Service Oil learned that White had previously conveyed the front ten feet of the leased property to the city. It also learned that, due to the conveyance, the pumps were only five feet away from the property line. At the time, city ordinances required the pumps to be at least ten feet away. Service Oil expended $3,335.73 to move the pumps in compliance with the city ordinances. Service Oil made a demand on White for reimbursement. When White refused, Service Oil brought suit. After trial, the court found that the provision of the lease restricting the station’s use as a gas station constituted an implied guarantee that the premises was suited for use as a gas station. It also found that White knew or should have known that Service Oil could not operate the station legally without the front ten feet of the station, and that White’s reckless misrepresentations were actionable for damages. The court then held in favor of Service Oil and granted a $3,957.35 judgment for actual damages and $1,500.00 judgment for punitive damages.