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UNIVERSAL FILM EXCHANGES v. VIKING THEATRE CORPORATION (03/22/60)

March 22, 1960

UNIVERSAL FILM EXCHANGES, INC.
v.
VIKING THEATRE CORPORATION, APPELLANT.



Appeal, No. 340, Jan. T., 1959, from judgment of Court of Common Pleas No. 2 of Philadelphia County, June T., 1956, No. 5379, in case of Universal Film Exchanges, Inc. v. Viking Theatre Corporation. Judgment affirmed; reargument refused June 14, 1960.

COUNSEL

Harold E. Kohn, with him Aaron M. Fine, and Dilworth, Paxson, Kalish, Kohn & Dilks, for appellant.

Arlin M. Adams, with him Bancroft D. Haviland, Josephine H. Klein, William A. Schnader, and Schnader, Harrison, Segal & Lewis, for appellee.

Before Jones, C. J., Bell, Musmanno, Jones, Cohen and Mcbride, JJ.

The opinion of the court below, by HAGAN, P.J., is as follows:

This is an action in assumpsit which was tried before the writer of this opinion sitting without a jury, and which resulted in a finding in favor of plaintiff in the sum of $14,437.99, with interest of $2,719.14. Exceptions to the finding of the court were filed by defendant; and these exceptions are now before the court en banc.

The exceptions of defendant are directed to the rulings of the Trial Judge, and particularly to his rulings in respect to the issues arising from the pleadings and the exclusion of evidence on the ground of irrelevancy to the issues. Therefore, as a fitting prologue to this opinion, we shall analyze the pleadings and the issues which arise therefrom. The Complaint averred that plaintiff is engaged in the business of distributing and licensing motion picture films for exhibition at theaters; that defendant is the operator of the Viking Theatre in the City of Philadelphia; that on or about September 7, 1955, plaintiff, and defendant entered into a written contract (set forth as Exhibit A), by the terms of which plaintiff licensed or rented to defendant a motion picture film entitled "There's Always Tomorrow"; that on about September 7, 1955, plaintiff and defendant entered into a separate written contract (set forth as Exhibit B), by the terms of which plaintiff licensed or rented to defendant a motion picture film entitled "Never Say Goodbye"; that the contract rental of the film "There's Always Tomorrow" provided for the payment of a guaranteed sum of $17,500.00, with certain adjustments between the parties as to the gross receipts from the film, and the payment of certain advertising costs by plaintiff; that the contracted rental of the film "Never Say Goodbye" provided for the payment of a guaranteed sum of $22,500.00, with certain adjustments between the parties as to the gross receipts from the film and the payment of certain advertising costs by the plaintiff; that defendant exhibited both films, and therefore, in accordance with the written contracts, the minimum guaranteed film rentals of $17,500.00 and $22,500.00 became due and owing to plaintiff by defendant; that defendant paid plaintiff the sum of $6,922.74 on account of the film rental due for "There's Always Tomorrow", and that defendant made no payment to plaintiff on account of the film rental due for "Never Say Goodbye", leaving an unpaid balance on the rental of the two films of $33,077.26; and that by reason of advertising allowances defendant became entitled to a credit against the film rentals in the sum of $18,639.27, leaving a balance due and owing by defendants to plaintiff in the sum of $14,437.99, which was the principal sum for which suit was brought.

Defendant filed an Answer, containing New Matter and a Counterclaim. The Answer denied that the written contracts for the licensing of the films "There's Always Tomorrow" and "Never Say Goodbye" set forth the true agreement between the parties, and averred, to the contrary, that the true agreement between the parties was as set forth under the headings of New Matter and Counterclaim. The Answer admitted that an advertising allowance of $18,629.37 was due to defendant by plaintiff, but it denied that any balance was due and owing to the plaintiff by defendant, for the reasons set forth in the New Matter and Counterclaim.

Defendant's New Matter averred that defendant sought to license from plaintiff a film entitled "All That Heaven Allows", which plaintiff refused to license except on condition that defendant also license from plaintiff three other films, entitled "The Second Greatest Sex", "There's Always Tomorrow" and "Never Say Goodbye"; that defendant was forced to license all four films, although it only desired to license "All That Heaven Allows", because defendant required that film in order to continue its business operations; that plaintiff's conduct in forcing defendant to license four films in order to receive the one it desired was unlawful in that (a) it violated a certain decree entered on February 8, 1950, in a case brought by the United States of America in the District Court for the Southern District of New York, and (b) it was part of a conspiracy with other distributors in violation of the antitrust laws of the United States; and that, as a result of said illegality, the plaintiff was barred from making any recovery against defendant in this present action.

Defendant's Counterclaim repeated the averment of the allegedly illegal "tie-in" of films as set forth in defendant's New Matter; and it also averred, in paragraph 22, that at the time of the alleged agreement for the licensing of the four films plaintiff, in order to induce defendant to license all four films, agreed to the following: "(a) That despite the written guarantee contained in each individual license, if the defendant sustained a loss on all four pictures as a group, the plaintiff would waive the written guarantees and instead would reimburse the defendant for all losses; (b) That the defendant would receive thereafter a license for a motion picture distributed by the plaintiff entitled 'Away All Boats'; (c) That the picture 'The Second Gratest Sex' would be available for exhibition at the defendant's theatre on November 16, 1955." Defendant further averred that plaintiff, acting through its authorized agent, one Pete Dana, repeated the alleged promise set forth in paragraph 22(a) of the Counterclaim as quoted above; and that this promise was repeated "to induce defendant to continue with the arrangement." Defendant averred that it had sustained a loss on all four films in the amount of the Counterclaim. Defendant further averred that there were other breaches by plaintiff of the terms set forth in paragraph 22 of the Counterclaim, for which defendant counterclaimed for damages. Finally, the Counterclaim averred that on or about March 21, 1956, plaintiff, through its authorized agent, promised defendant a minimum of $15,000.00 to cover the losses allegedly sustained by defendant.

Plaintiff filed a Reply to defendant's New Matter and Counterclaim, denying all of the factual averments contained therein.

From the foregoing analysis of the pleadings it will be seen that the Complaint sets forth two written contracts, and an averment that they were fully performed by plaintiff. The Answer does not deny, and therefore admits, the execution of the two contracts, and that they were performed; but the Answer denies that defendant is indebted to plaintiff because of certain other circumstances pleaded under the headings of New Matter and Counterclaim. We must, therefore, examine the averments in defendant's New Matter and Counterclaim to determine what, if any, legal defenses are set forth therein to the otherwise valid claim of plaintiff.

From an examination of defendant's New Matter, it will be seen that it contains the factual averment that the two written contracts sued upon by plaintiff (one relating to the film "There's Always Tomorrow" and the other relating to the film "Never Say Goodbye") do not represent the actual agreement of the parties; but that, in fact, the licensing of these two films was part of a "tie-in" arrangement which included three other films. Defendant's legal position in support of this factual averment is that the contracts are illegal and unenforceable for two reasons. The first of these is set forth in a statement in paragraph 16 that the alleged "tie-in" agreement was "in violation of a decree entered against the plaintiff on February 8, 1950, in the United States District Court for the Southern District of New York, in the case of United States v. Paramount, et al." No copy of the Federal Court decree was attached to defendant's pleadings; it was not offered in evidence at the trial, nor was there any evidence introduced or any offer of proof made with respect to the decree. Furthermore, none of defendant's exceptions to the Trial Judge's findings were directed toward any action of the court with respect to the Federal Court decree, and defendant's brief in support of its exceptions advanced no argument based upon the decree or any alleged violation thereof by plaintiff. We must therefore conclude that defendant has abandoned any defense predicated upon the alleged violation by plaintiff of a decree of a Federal Court. Finally, let it be said that if defendant at trial had offered to 00 prove a violation by plaintiff of a decree of a Federal Court, the offer would have been properly rejected, on the ground that this court has no power to enforce a decree of a Federal Court: See S. Jarvis Adams Company v. Knapp, 213 Pa. 567, and Buswell v. Buswell, 377 Pa. 487.

The second alleged ground of illegality is that plaintiff's conduct was part of a conspiracy in violation of the Federal Anti-trust laws. This defense was set forth in paragraphs 18 and 19 of defendant's New Matter; but at the trial this defense was abandoned by the withdrawal by defendant of these paragraphs. The withdrawal by defendant of the anti-trust defense was undoubtedly motivated by the decision of the United States Supreme Court in the very recent case of Kelly v. Kosuga, 358 U.S. 516, 79 S. Ct. 429, which held, in a case factually very similar to this, that the defense of illegality under the Federal Anti-trust act may not be asserted as a defense to an action under an executed contract entered into under state law.

It will be seen, therefore, that defendant's New Matter averred no facts which would legally constitute a defense to plaintiff's Complaint. We will next examine the averments of defendant's Counterclaim to determine what, if any, legal issues arose therefrom.

The Counterclaim first averred that the two separate contracts upon which plaintiff sued (one covering "There's Always Tomorrow" and the other "Never Say Goodbye") did not, in fact, represent the actual agreement between the parties. To the contrary it was averred that the two films sued upon by plaintiff were actually a part of an oral agreement entered into at the same time the two written contracts were executed. As a part of this oral agreement, defendant averred that the plaintiff agreed: (1) To license two other films to defendant; (2) that, notwithstanding the guaranteed minimum rentals stipulated in the contracts for the films "There's Always Tomorrow" and "Never Say Goodbye", plaintiff agreed to reimburse defendant for any loss sustained by defendant in connection with these two films and the films "The Second Greatest Sex" and "All That Heaven Allows" - considering these four films as a unit in computing the loss; (3) that plaintiff would, in the future, license to defendant a fifth film, "Away All Boats"; and (4) that one of the four films covered in the alleged oral agreement, to wit: "The Second Greatest Sex", would ...


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