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JOHN SHEHADI v. NORTHEASTERN NATIONAL BANK PENNSYLVANIA (10/07/77)

decided: October 7, 1977.

JOHN SHEHADI, T/A SHEHADI BROTHERS
v.
NORTHEASTERN NATIONAL BANK OF PENNSYLVANIA, APPELLANT



COUNSEL

C. H. Welles, IV, Welles & McGrath, Scranton, for appellant.

Albert B. Mackarey, Scranton, for appellee.

Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Jones, former C. J., did not participate in the decision of this case.

Author: Manderino

[ 474 Pa. Page 233]

OPINION OF THE COURT

The appellee, John Shehadi, trading as Shehadi Brothers, sued the appellant, Northeastern National Bank of Pennsylvania, hereinafter the Bank, in assumpsit. In substance, Shehadi alleged that the Bank wrongfully appropriated the sum of Nine Hundred Seventy-five dollars and sixty-three cents ($975.63) from an account the parties had established as a "loss reserve" account pursuant to an arrangement whereby the Bank would buy installment contracts from Shehadi.

More particularly, the Bank and Shehadi, an appliance dealer, entered into an agreement whereby the Bank agreed

[ 474 Pa. Page 234]

    to purchase Shehadi's installment contracts. The terms on which the contracts were purchased were set forth in an agreement, executed by both parties, entitled "Non-Recourse Plan."

The Non-Recourse Plan, which was in the form of a "letter agreement" provided that Shehadi would sell installment sales contracts to the Bank for an agreed-upon price and further provided that the Bank was to establish a "loss reserve" on its books by crediting thereto "all charges in excess of 6.5% discount" made on [installment] contracts purchased from Shehadi. The Plan further provided that the reserve fund was to be charged with "the unpaid balances, less any unearned finance charge, of delinquent installment sales contracts" purchased from Shehadi.

A portion of any balance remaining in the loss reserve fund was to be refunded to Shehadi at the end of each year and the entire balance was payable to Shehadi upon termination of the Plan.

While party to the Plan, Shehadi made an installment sale to one John Grochal, and entered into an installment contract with Grochal on a form provided by the Bank. The form contained two clauses for assigning the installment contract to the ...


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