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UNIT VENDING CORPORATION v. TOBIN ENTERPRISES (03/22/61)

THE SUPERIOR COURT OF PENNSYLVANIA


March 22, 1961

UNIT VENDING CORPORATION, APPELLANT,
v.
TOBIN ENTERPRISES, INC.

Appeals, Nos. 329, 335, and 336, Oct. T., 1960, from orders of Municipal Court of Philadelphia County, Nov. T., 1959, No. 1492, and Oct. T., 1959, No. 879, in cases of Unit Vending Corporation v. Tobin Enterprises, Inc., and Same v. Eugene Ciardullo et al. Orders affirmed; reargument refused May 7, 1961.

COUNSEL

Melvin L. Fuhrman, with him Fuhrman and Furman, for appellant.

Allen J. Levin, and Folz, Bard, Kamsler, Goodis & Greenfield, for appellee, submitted a brief.

Jerome A. O'Neill, for appellees.

Before Rhodes, P.j., Gunther, Wright, Woodside, Ervin, Watkins, and Montgomery, JJ.

Author: Ervin

[ 194 Pa. Super. Page 472]

OPINION BY ERVIN, J.

These three appeals were taken from the action of the court below in opening two amicably confessed judgments "so that evidence may be offered to ascertain the actual damages suffered by the plaintiff." As to both judgments the court below said: "Thus the plaintiff may be unjustly enriched by assessing damages

[ 194 Pa. Super. Page 473]

    in accordance with the formula contained in the agreement. We believe that this formula cannot be sustained as liquidated damages and is in effect a penalty."

If the amount of damages assessed is subsequently adjudged unreasonable in the light of either anticipated or actual harm, the contractual provision will be voided as a penalty: Restatement, Contracts, § 339; 12A PS § 2-718.

The present appeals involve an interpretation of two written contracts containing authorization to enter judgments upon breach or imminent breach of the contracts. For an understanding of the matter both contracts must be carefully studied. The two contracts are the same except as to clauses 1 and 9. The full contract as to appeal No. 329 is printed in footnote 1.*fn1

[ 194 Pa. Super. Page 474]

Only paragraphs 1 and 9 of the contract as to appeals

[ 194 Pa. Super. Page 475]

Nos. 335 and 336 are printed in footnote 2.*fn2

[ 194 Pa. Super. Page 476]

As to appeal No. 329 it is clear that the amount assessed as damages is in fact a penalty. The agreement as drawn in this case represents a clever attempt to secure both the penny and the cake for the appellant-plaintiff.

Paragraph 1 of this agreement provides for the making of a "loan" of $500.00 by the operator to the proprietor but then immediately provides for a repayment of this loan by the installment method. The $500.00 was supposed to be consideration paid by the operator to the proprietor for the exclusive right to sell cigarettes through vending machines at proprietor's place of business for a period of six years.

Paragraph 9(a) provides that upon the termination of the agreement the balance of the loan is to be repaid. Thus the total so-called consideration originally paid by the operator must be repaid to it.

Paragraph 9(b) provides that upon breach or imminent breach of the contract the operator may terminate the agreement and in addition to the balance of the loan may demand from proprietor "a sum equal

[ 194 Pa. Super. Page 477]

    to the average monthly profit received by OPERATOR hereunder prior to the breach, multiplied by the number of months remaining in the unexpired original or renewal term."

Paragraph 10 gives to the operator the right to amicably confess judgment against the proprietor for both amounts.

Even though no sale of the cigarette vending machine was ever contemplated under this agreement, it would be unjust to permit the operator to terminate the agreement and take back its vending machine and also collect damages including (1) the entire consideration of $500.00 originally loaned by it to proprietor and (2) the entire loss of future profits which it would have received if the agreement had been fully carried out.

There was no abuse of discretion in the opening of judgment in appeal No. 329.

Appeals Nos. 335 and 336 are concerned with a contract which in paragraph 1 provided for the payment of $200.00 by the operator to the proprietor for which the operator was given the exclusive right to sell cigarettes through vending machines at proprietor's place of business for a term of five years. While this agreement did not require proprietor to repay this sum of money, it did in paragraph 9 give to the operator, in the event of a breach or imminent breach, the right to terminate the agreement and collect from the proprietor (a) the full consideration paid therein (the $200.00) or (b) a sum equal to the average monthly profit received by operator thereunder prior to the breach, multiplied by the number of months remaining in the unexpired original or renewal term. The operator in assessing damages elected to collect (b) only.

Operator also removed the cigarette vending machine, as he had a right to do under § 4 of the contract. The transaction did not contemplate a sale of the vending

[ 194 Pa. Super. Page 478]

    machine and the title and right to possession "at all times" remained in the operator.

The damages as assessed gave to operator the maximum amount which could be awarded by a jury if the defendants offered no evidence in mitigation of damages. As stated by the court below, "It is possible that the machine removed from the premises of the defendants was relocated in another establishment and that any loss suffered by the plaintiff may have been less than the sum set forth in the assessment of damages."

The attorney for the defendant in an amicable action may not give the plaintiff more than he would be entitled to by an adverse proceeding: Grakelow v. Kidder, 95 Pa. Superior Ct. 250. In the instant case the confession of judgment deprived the defendants of rights which they would have in an adversary proceeding.

Where the lessor of real estate terminates the lease and enters into possession he cannot have possession of the premises and also judgment for rent for the unexpired period of the lease: Markeim-Chalmers-Ludington, Inc. v. Mead, 140 Pa. Superior Ct. 490, 14 A.2d 152. See also Charlson's Furniture Co. v. Heigley, 161 Pa. Superior Ct. 24, 53 A.2d 878.

The operator should not be compensated for any profits that it might have been able to obtain by placing the machine in another location. It had the duty to minimize its damages by so doing if this were possible.

We agree with the court below "that justice and equity require the opening of the judgment so that evidence may be offered to ascertain the actual damages suffered by plaintiff." We can see no abuse of discretion by the court below.

Disposition

Orders affirmed.


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