Lawletter No. 164

Court says dealer couldn't withhold rent

A recent ruling by a Maryland federal court in the case of Daras v. Star Enterprise, (DC Md., No. HAR 91-480) 63 BNA Antitrust & Trade Reg. Rptr. 665 illustrates the dangers of refusing to pay station rent, regardless of the dealer's grounds for doing so.

Facts: Thomas S. Daras leased and operated a Texaco station in Oxon Hill, Maryland. Star Enterprises bought the station from Texaco. Daras filed antitrust claims against Star, and failed to continue to pay his rent.

Star filed a separate eviction lawsuit against Daras, citing his failure to pay rent. Daras defended on the grounds that Star's antitrust violations and breach of the contract excused his failure to pay rent. The dealer also claimed that Star's refusal to approve two prospective purchasers of the franchise similarly excused the failure to pay.

Ruling: The court ruled against the dealer and in favor of Star, holding that:

(1) Alleged antitrust violations and contract breaches have nothing to do with the dealer's failure to pay rent on time.

(2) There is also no legal basis to support the contention that Star's failure to approve the prospective buyers excused his failure to pay rent.

Recommended procedures: We suggest the following in this area:

(1) Rent: Never withhold rental payments without first obtaining legal advice. Even if you have a valid claim against an oil company for damages, you must still pay rent in most situations. Otherwise, you risk franchise termination.