College Block v. Atlantic Richfield Co.

In this matter the trial court held as a matter of law that in the parties’ lease there was an implied covenant of continued operation. We find that although the parties intended the lessee to continually operate a gasoline service station for the entire leasehold period, the trial court acted prematurely and a further factual determination must be made before the covenant is implied.

Statement of Case and Facts

In 1965, respondent, The College Block (College Block) owned a parcel of undeveloped real property. College Block signed a 20-year lease with appellant Atlantic Richfield Company (ARCO) in which ARCO agreed to build and operate a gasoline service station on the property. Other provisions of the lease allowed ARCO to build, maintain and replace any buildings ARCO desired in operating a station, obligated ARCO to pay all applicable taxes, prohibited College Block from operating a gasoline station on other properties it owned or controlled, limited ARCO’s use of the property to that of a service station, and allowed ARCO the right to cancel the lease if it could not obtain permits required in running a station. Pursuant to the lease, ARCO constructed and then…