Source: http://pa.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19820812_0000067.WPA.htm/qx
Timestamp: 2018-03-23 16:54:46
Document Index: 103867023

Matched Legal Cases: ['§ 6104', '§ 187', '§ 395', '§ 3', '§ 187', '§ 24', '§ 36']

HOWARD JOHNSON COMPANY, Defendant
Boykin subsequently completed construction of the motel and operated it as a franchise of Howard Johnson's. He later assigned his rights under the lease to U.S. Realty Investments. On January 20, 1981, U.S. Realty assigned the lease to the Howard Johnson Company.
Plaintiff then filed the instant action seeking a declaratory judgment that the lease is void and unenforceable. Jurisdiction is based upon diversity of citizenship and an amount in controversy in excess of $10,000 presently before the Court is a Motion to Dismiss and/or Motion for Summary Judgment filed by defendant Howard Johnson Company. For the reasons which follow, we will grant summary judgment in favor of Howard Johnson's.
20 PA. CONS. STAT. ANN. § 6104(b) (Purdon 1975). The purpose of the rule is to preserve the alienability of property by prohibiting the creation of remote future interests. In re Estate of Mather, 189 A.2d 586, 410 Pa. 361 (1963).
Options to renew leases, however, are valid and need not comply with the rule against perpetuities, according to the great weight of American authority. Lonergan v. Connecticut Food Store, Inc., 168 Conn. 122, 357 A.2d 910 (1975); Ehrhart v. Spencer, 175 Kan. 227, 263 P.2d 246 (1953) (perpetual renewal); Williams v. J.M. High Co., 200 Ga. 230, 36 S.E.2d 667 (1946) (perpetual right to extend lease); Todd v. Manufacturers' Light & Heat Co., 90 W.Va. 40, 110 S.E. 446 (1922) (perpetual renewal); Becker v. Submarine Oil Co., 55 Cal. App. 698, 204 P. 245 (1921) (ten-year lease, option to renew perpetually); Duryea v. Hendrickson, 175 A.D. 188, 161 N.Y.S. 999 (1916); 5 R. POWELLL & P. ROHAN, POWELL ON REAL PROPERTY P 771 (1981); W. BURBY, REAL PROPERTY § 187 (1965); RESTATEMENT OF PROPERTY § 395 (1944); I AMERICAN LAW OF PROPERTY § 3.87 (1952); Abbot, Leases and the Rule Against Perpetuities, 27 YALE L.J. 878, 883-85 (1918). Options to purchase conferred upon lessees likewise are treated as exceptions to the rule against perpetuities because of their social utility. Wing, Inc. v. Arnold, 107 So.2d 765 (Fla.App. 1958); Keogh v. Peck, 316 Ill. 318, 147 N.E. 266 (1925); Hollander v. Central Metal & Supply Co., 109 Md. 131, 71 A. 442 (1908); Hoover v. Ford's Prairie Coal Co., 145 Wash. 295, 259 P. 1079 (1927); Roemer v. Sinclair Refining Co., 151 Colo. 401, 380 P.2d 56 (1963); 5 R. POWELL & P. ROHAN, supra, at P 771[2]; W. BURBY, supra, at § 187; I AMERICAN LAW OF PROPERTY supra, at § 24.57; Leach, Perpetuities in a Nutshell, 51 HARV. L. REV. 638, 661 (1938); Abbot, supra, at 886-88, 891. Cf. Southeastern Pennsylvania Transportation Authority v. Philadelphia Transportation Co., 426 Pa. 377, 233 A.2d 15 (1967), cert. denied, 390 U.S. 1011, 88 S. Ct. 1259, 20 L. Ed. 2d 161 (1968). (Perpetual option of city to purchase assets of a transportation company does not violate the rule against perpetuities in view of considerations of public concern and welfare, which outweigh the dangers from fettering the free use of property.) Contra First Huntington National Bank v. Gideon-Broh Realty Co., 139 W.Va. 130, 79 S.E.2d 675 (1954), but now changed by statute, W. VA. CODE § 36-1-24 (1966).
Plaintiff asserts that the lease is void because of its restrictive covenants which prohibit her from maintaining competitive businesses or erecting structures higher than twenty feet on her remaining acreage. Although not favored in the law, restrictive covenants which limit the use of property are enforceable where outmoded restrictions are not placed upon the property and the intentions of the parties are clearly expressed. Rieck v. Virginia Manor Co., 251 Pa. Super. 59, 380 A.2d 375 (1977); See also McCandless v. Burn, 377 Pa. 18, 104 A.2d 123 (1954); Satterthwait v. Gibbs, 288 Pa. 428, 135 A. 862 (1927). Under the circumstances present here, the restrictive covenants are thus enforceable.
Plaintiff further contends that the lease is unconscionable because it provides for perpetual annual rent payments of $12,000. We note at the outset that unconscionability is a question of law for the court. Provided no genuine issue of material fact exists, a court may conclude on a motion for summary judgment that a contract is enforceable despite an allegation of unconscionability. Stanley A. Klopp, Inc. v. John Deere Co., 510 F. Supp. 807, 810 (E.D.Pa. 1981), aff'd mem., 676 F.2d 688 (3d Cir. 1982).
Unconscionability is the doctrine under which courts may deny enforcement of unfair or oppressive contracts because of "procedural" abuses arising out of the contract formation process, or "substantive" abuses relating to the terms of the contract. Procedural abuses include deceptive practices and refusal to bargain over the terms of the contract, while substantive abuses include terms which violate the reasonable expectations of the parties or involve gross disparities in price. See Spanogle, Analyzing Unconscionability Problems, 117 U. PA. L. REV. 931 (1969). Plaintiff here does not raise as an issue of fact that the lease terms are unconscionable because of abuses in the bargaining process. Rather, she contends that the insufficiency of the annual rent alone makes the lease unconscionable.
In support of this argument, plaintiff points out that she negotiated the lease on the basis that the property was worth $200,000. She agreed to an annual rent of $12,000 in order to receive a return on her property which would be equivalent to the 6% rate of interest prevailing in 1960. Because of the dramatic increase in interest rates, plaintiff submits that the lease is now unconscionable by giving her an unreasonably low return on her property. The annual payments, however, are not so grossly insufficient as to make the lease unconscionable. In the last twenty-two years, plaintiff has received, including ...