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FEDERAL LEASING CORP. v. ROUTE 202 CORP.

October 14, 1981

FEDERAL LEASING CORPORATION
v.
ROUTE 202 CORPORATION, INC., Individually, and Filippo Lionti and Carmela Lionti, Individually, jointly, severally or in the alternative



The opinion of the court was delivered by: BRODERICK

MEMORANDUM

Plaintiff, Federal Leasing Corporation F.L.C.") brought this action against defendants Route 202 Corporation ("Rt. 202") and Filippo and Carmela Lionti, alleging that Rt. 202 had defaulted under the terms of a five year lease covering restaurant equipment entered into by F.L.C. and Rt. 202, the obligations under the lease having been guaranteed by Filippo and Carmela. Defendants stopped making the monthly payments required by the terms of the lease in August 1978. Plaintiffs in this action seek judgment for the balance of the payments and the additional amounts due under the terms of the lease.

 Defendants claim that they are illiterate and did not understand the documents they signed or the extent of their personal liability. Defendants also claim that they understood that they were entering into a contract to purchase the restaurant equipment and that they were not aware that the documents provided for a lease of the equipment. In addition, defendants filed a counterclaim alleging a novation of the contract reducing the monthly payments, alleging a violation of the Truth in Lending Laws, alleging that the contract was usurious and asking damages in excess of $ 10,000.

 The action was tried without a jury for two days commencing on September 21, 1981. On the basis of the evidence presented at trial, the Court has determined that it must enter judgment for the plaintiff and against the defendants in the amount of $ 60,727.06 and for the plaintiff on the counterclaims.

 Filippo Lionti, a stonemason and the owner of a construction company, first came to the United States from Italy in 1962. His wife, Carmela, and daughter, Gina, also arrived here that same year. Although Filippo and Carmela were unable to read and write the English language, by the early 1970's they had acquired two houses in Delaware and a tract of land in Chadds Ford, Pennsylvania. By mid-1976 they had begun the construction of a restaurant on the Chadds Ford site. The construction was funded by a $ 200,000 loan from the First Mortgage Company of Pennsylvania and secured by mortgages on the Chadds Ford Property and the houses in Delaware.

 Filippo and Carmela relied heavily on their daughter, Gina, who attended school in this country, to handle their business affairs. Gina, who is now 29 years of age, can read and write English and demonstrated her ability to do so when on the witness stand she read selected portions of the lease. With her assistance, Filippo and Carmela have been able to complete many financial transactions, such as loans, mortgages and real estate settlements.

 In June or July of 1976, Filippo and Carmela contacted Joseph Caldwell of Design by Caldwell to design a kitchen for the restaurant in Chadds Ford. Caldwell submitted a total price of $ 67,500 which included a charge of $ 37,500 for the kitchen equipment. Filippo and Carmela wished to finance the equipment costs and Caldwell called in F.L.C., an equipment leasing company in East Orange, New Jersey.

 In early August 1976, Mr. Leon Godfrey, a vice-president of F.L.C. met Filippo at the Chadds Ford construction site. Godfrey was introduced to Gina by Filippo and was told that Gina would provide the necessary financial information about Filippo, Carmela and Rt. 202, the corporation organized by the Liontis to own and operate the restaurant.

 In the course of his initial contacts with Filippo and Gina, Mr. Godfrey explained that F.L.C. would require a personal guarantee from Filippo and Carmela secured by second mortgages on the houses they owned in Delaware.

 On September 14, 1976, Mr. Godfrey met with Mr. Caldwell, Filippo, Carmela and Gina at the Lionti's home. During the course of the meeting, which lasted approximately 45 minutes, various documents, including the lease, a personal guarantee and mortgages on the houses in Delaware, were explained by Mr. Godfrey to Filippo and Carmela. Gina then spoke to her parents in Italian and they then signed all the documents.

 In the course of the ensuing week, F.L.C. discovered that some of the documents had not been executed in the correct name of the Lionti's corporation and Mr. Godfrey returned to the Lionti's home on September 28, 1976 and had the corrected documents signed by Filippo and Carmela. At that time, F.L.C. had purchased the restaurant equipment from Caldwell and the equipment was delivered to the restaurant.

 Under the terms of the lease Rt. 202 was obligated to make sixty payments in the amount of $ 993.75 a month; $ 937.50 was the monthly rental, and $ 56.25 was sales tax. The defendants were fairly current in their payments for approximately one year but then began to fall behind. Plaintiffs, in an effort to bring up the arrearages, began to accept weekly payments.

 In July 1978, Filippo and Carmela were notified by letter that plaintiffs would no longer tolerate the default. Subsequent to the letter, Mr. Godfrey attempted to remove the equipment from the restaurant but was turned away.


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