In re Packer Ave. Associates

• Decision Date: 08 November 1979
• Docket Number: Bankruptcy No. 77-1201WK.
• Citation: 1 BR 286
• Parties: In re PACKER AVENUE ASSOCIATES, Bankrupt. Paul P. GIORDANO, Trustee, Plaintiff, v. Jay JOHNSTONE, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

1 B.R. 286 (1979)

In re PACKER AVENUE ASSOCIATES, Bankrupt.

Paul P. GIORDANO, Trustee, Plaintiff, v. Jay JOHNSTONE, Defendant.

Bankruptcy No. 77-1201WK.

United States Bankruptcy Court, E.D. Pennsylvania.

November 8, 1979.

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COPYRIGHT MATERIAL OMITTED

Timothy J. Gorbey, Chester, Pa., for Bankrupt.

Alan S. Fellheimer, Vito F. Canuso, Jr., Richard Max Bockol, Philadelphia, Pa., for Trustee.

Benjamin F. Levy, Philadelphia, Pa., for Jay Johnstone, defendant.

OPINION

WILLIAM A. KING, Jr., Bankruptcy Judge.

Presently before the Court is an adversary proceeding brought pursuant to Rule 701(1) of the Rules of Bankruptcy Procedure. Trustee for the Bankrupt's Estate seeks payment for goods and services rendered by the Bankrupt, Packer Avenue Associates, to the Defendant, Jay Johnstone.

On July 25, 1977, The Packer Avenue Associates in accordance with Bankruptcy Rule 12-6, filed a Petition for a Real Property Arrangement Under Chapter XII of the Bankruptcy Act. Subsequently, on October 21, 1977, the Packer Avenue Associates were adjudicated bankrupt by this Court.

On May 1, 1978, the Trustee for The Packer Avenue Associates instituted this adversary proceeding seeking the payment for goods and services in the amount of $5,598.35 rendered by the bankrupt's hotel, The Philadelphia Hilton Hotel, to the Defendant, Jay Johnstone (hereinafter referred to as "Johnstone") while he was lodged at the hotel during the 1977 baseball season.¹ On June 6, 1978, Johnstone filed an answer and counterclaim, alleging that he had entered into an oral employment contract with Armand Ceritano, ("Ceritano") on behalf of The Philadelphia Hilton Hotel ("Hotel"). Under the alleged employment contract which was to run throughout the 1977 professional baseball season, Johnstone would perform public relation functions for the Hotel in exchange for a $200.00 per week salary plus free room and board at the Hotel. A hearing was held on this matter, and it was concluded that Johnstone performed all of his obligations under the alleged contract, including the making of taped television commercials promoting the Hotel, video tape interviews for use within the Hotel, mingling with the guests of the Hotel generally, and attempting to obtain other sports teams to use the Hotel when in Philadelphia as well as other general public relation functions. It was further determined at the hearing that Johnstone has not been paid any part of his salary under the alleged employment contract in question. Johnstone asked for relief in the form of a judgment in the amount of his unpaid salary under the alleged contract and a determination that the claim of the Trustee for the Bankrupt's Estate for goods and services was not valid.

ISSUES PRESENTED:

It is not disputed by the parties that Johnstone received the aforementioned goods and services without payment. Therefore, the following three (3) issues must be decided by this Court.²

(1) Whether there was a valid employment contract between Johnstone and Ceritano, and if so, what were the terms thereof?

(2) Whether Ceritano had the authority, either real or apparent, as the principal owner or as agent, for the Hotel, to bind it to employment contracts which he entered into on its behalf?

(3) If a valid employment contract binding the Hotel was entered into by Johnstone and Ceritano, was the contract accepted or rejected by the Trustee under the Chapter XII Real Property Arrangement Proceeding?

DISCUSSION

A contract had been defined as a promise enforceable at law directly or indirectly. It imports a legally enforceable obligation directly assumed by or imposed on the contractor, to do something. Corbin on Contracts, § 3 (1961). Zanes v. Lehigh Valley Transit Company, 41 F.2d 552 (E.D.Pa. 1930), aff'd. 46 F.2d 848 (3rd Cir. 1931), cert. denied 284 U.S. 619, 52 S.Ct. 8, 76 L.Ed. 528 (1931). There are certain requisites in order for a contract to be enforceable at law. The parties to the contract must clearly express their intention to enter into such an agreement. Irma Hosiery Company v. House Indemnity Company, 276 F.2d 212 (3rd Cir. 1960), Fenestra, Incorporated v. John McShain, Incorporated, 433 Pa. 137, 248 A.2d 835 (1969). There must also be a communicated offer and an unconditional acceptance by the parties of the terms contained in the offer. Fahringer v. Strine's Estate, 420 Pa. 48, 216 A.2d 82 (1966). Hedden v. Lupinsky, 405 Pa. 609, 176 A.2d 406 (1960), Matter of ABC—Federal Oil and Burner Company, 182 F.Supp. 928 (E.D.Pa. 1960), aff'd. 290 F.2d 886 (3rd Cir. 1961). Finally, valid consideration must be given by both parties, either by an act, or forbearance or a return promise which is bargained for and given in exchange for that promise. Thomas v. R.J. Reynolds Tobacco Company, 350 Pa. 262, 28 A.2d 61 (1944). A promise unsupported by consideration is nudum pactum and unenforceable at law. Stelmack v. Glen Alden Coal Company, 339 Pa. 410, 14 A.2d 127 (1940).

In the present Case, the testimony is clear and uncontroverted that Johnstone entered into a binding agreement with Ceritano during February of 1977. Johnstone and Ceritano expressly agreed that Johnstone would perform public relation duties for the Hotel in exchange for a salary of $200.00 per week and free room and board there.³ The agreement was oral and was not reduced to writing. However, under Pennsylvania law, a definite oral contract is effective when the offer is orally accepted. The terms of the agreement are to be construed from the words and conduct of the parties. Main Line Theatres, Inc. v. Paramount Film Distributing Corp., 189 F.Supp. 314 (E.D.Pa.1960), aff'd. 298 F.2d 801 (1962) cert. denied 370 U.S. 939, 82 S.Ct. 1585, 8 L.Ed.2d 807 (1962). However, even if the testimony did not disclose an express contract between Ceritano and Johnstone, an implied contract would have been formed. An implied contract results from the conduct of the parties where the conduct occurs under circumstances which according to the ordinary course of dealing and common understanding of men, show that there was a mutual intention to enter into a contract. Westinghouse Electric Company v. Murphy, 425 Pa. 166, 228 A.2d 656 (1967); Thomas v. R.J. Reynolds Tobacco Company, supra; Reitmeyer v. Coxe Brothers and Company, Inc., 264 Pa. 372, 107 A. 739 (1919).

The conduct of Johnstone in performing general public relations at the Hotel and the absence of any billing for these services when coupled with the fact that Johnstone was accorded free room and board without being billed, forces this Court to conclude that a valid contract existed between the parties.

Having determined that a valid contract was entered into by Johnstone and Ceritano, the next question to be resolved is whether Ceritano had the authority to enter into employment contracts on behalf of the Hotel either as an owner or agent.

Ceritano was a stockholder in one of the corporations that formed the partnership that held title to the Hotel and thus, had an ownership interest. He held no official position in the management structure of the Hotel. If Ceritano was a principal owner of the Hotel, he would have had the authority to bind the Hotel to employment contracts he entered into for the provision of services at the Hotel. However, even if Ceritano did not have the authority to bind the Hotel as its principal owner, he might be considered an agent for the owner of the Hotel. Ceritano maintained an office at the Philadelphia Hilton and, in effect, operated the Hotel. He gave orders to the employees of the Hotel who followed them. Indeed, the testimony of the Hotel's Controller, Robert D. Villecco, indicated that everyone in the Hotel took their orders from Ceritano and considered him their boss.⁴

In essence, Ceritano had actual control over the management of the Philadelphia Hilton and was acknowledged as such by the employees of the Hotel. Further, testimony revealed that Ceritano had bound the Hotel to other contracts, including a contract well in excess of $250,000.00 for a television advertising campaign.⁵

Agency is the relationship which results from the manifestation of consent by one person to another that the other person shall act on his behalf and be subject to his control, and consent by the other party to so act. Smalich v. Westfall, 440 Pa. 409, 269 A.2d 476 (1970), Chalupiak v. Stahlman, 368 Pa. 83, 81 A.2d 577 (1951). The liability of a principal to third parties for the act of an agent must rest on one of the following:

1) express authority, or that which is directly granted;

2) implied authority to do all that is proper, usual and necessary to the exercise of the authority actually granted;

3) apparent authority, as where the principal hold one out as agent by words or conduct; and

4) agency by estoppel.

Reifsnyder et al. v. Dougherty, 301 Pa. 328, 152 A. 98 (1930), Hartley v. United Mine Workers of America, Rubena Local Union No. 6321, 381 Pa. 430, 113 A.2d 239 (1955).

In the present Case, there is no agency based on express authority for Ceritano to act on behalf of any principal. Apparent authority is defined as that authority which is not actually granted by the principal to the agent, but which the principal either

1) knowingly permits the agent to exercise; or

2) holds him out as possessing.

Revere Press, Inc. v. Blumberg, 431 Pa. 370, 246 A.2d 407 (1968); Jennings v. Pittsburg Mercantile Company, 414 Pa. 641, 202 A.2d 51 (1964).

The test for apparent authority in Pennsylvania has been defined by the Pennsylvania Supreme Court as follows:

If the principal puts one into, or knowingly permits him to occupy a position in which, according to the ordinary experience and habits of mankind, it is usual for the occupant to have authority of a particular kind, anyone having occasion to deal with one in that position is justified in inferring that the person in question possesses such authority, unless the contrary is then made known. Blair v.

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