Stamatiades v. Merit Music Service, Inc.

• Decision Date: 27 July 1956
• Docket Number: No. 179,179
• Parties: John STAMATIADES et ux., Ind. and T/A Superior Restaurant, v. MERIT MUSIC SERVICE, Inc.
• Court: Maryland Court of Appeals

Page 597

210 Md. 597

124 A.2d 829

John STAMATIADES et ux., Ind. and T/A Superior Restaurant, v. MERIT MUSIC SERVICE, Inc.

No. 179.

Court of Appeals of Maryland.

July 27, 1956.

William W. Cahill, Jr., Baltimore (Weinberg & Green, Baltimore, on the brief), for appellants.

Henry R. Wolfe, Baltimore, for appellee.

Before BRUNE, C. J., and DELAPLAINE, COLLINS, HENDERSON and HAMMOND, JJ.

BRUNE, Chief Judge.

This is an appeal from a decree of the Circuit Court of Baltimore City, enjoining the defendants, appellants here, from placing, or permitting any person or persons other than the plaintiff, appellee here, Merit Music Service, Inc., to place or locate any coin-operated amusement, music or vending machines in the premises in which the defendants conduct a restaurant or similar business until September 17, 1959.

The plaintiff (sometimes referred to below as 'Music Service') owns and leases coin-operated equipment, such as the machines covered by the injunction, to the owners and operators of restaurants and other places patronized by the public. The defedants (sometimes referred to below as 'Proprietors') operate a restaurant at the premises known as No. 219 W. Franklin Street, in Baltimore. In September, 1954, the Proprietors wished to enlarge their restaurant and for that purpose leased additional space in an adjoining building. They were in need of funds to make the alterations necessary for the enlargement and for other expenses in connection therewith. They had had coin-operated amusement devices on the original premises for some sever or eight years previously, which were furnished by someone other than Music Service.

On September 17, 1954, following various negotiations, Music Service lent the Proprietors $3,000 and on that day the parties ¹ entered into a written leasing agreement. This agreement recited that 'in consideration of a loan of Three (3) Thousand dollars no cents ($3,000) loaned by Operator [Music Service] to Proprietor[s], the parties hereto agree as follows:'. Then followed six numbered paragraphs. By paragraph 1.a Music Service agreed to install in the main room of the Proprietors' premises three coin-operated devices, one of which was designated as a Console Amusement Machine another as a Pinball Amusement Machine, and the third as a Coin-operated Music Box. Music Service also agreed by paragraph 1.b that upon written notification from the Proprietors that any of the equipment was not functioning in a normal manner, it would put such equipment in proper operating condition within a reasonable time thereafter.

The Proprietors agreed, among other things, to keep the equipment in continuous operation during business hours during the term of the lease or any renewal thereof, not to install and operate on the premises, and not to permit any other party to do so, any electrical, manual or mechanical coin-operated equipment, machines or phonographs other than those furnished by Music Service; and they further agreed 'by reason of the aforementioned consideration passing to him [them]' that a decree might be passed in a suit brought for such purpose enjoining them 'from violating this covenant.' The agreement also provided that the rental for the equipment should be 50% of all monies paid by the public for the use of the equipment, payable each and every week (with a somewhat different provision as to cigarette machines, none of which are involved in this case). By paragraph 4 of the agreement the Proprietors further agreed and guaranteed that Music Service's share of the revenues should be not less than $70 per week each and every week, and that if the proceeds to Music Service should fall below that amount Music Service should have the right to terminate the agreement. The leasing agreement was to be effective for a period of five years from its date, with provision for renewals for like periods thereafter, subject to the right of either party to terminate the lease by written notice given sixty days prior to the expiration of the first term or of any renewal term thereafter.

Paragraph 2 of the leasing agreement, upon which the appellants place their greatest reliance, reads in part as follows (the term 'Operator' as therein used referring to Music Service and the term 'Proprietor' referring to the defendants):

'2. The Proprietor agrees:

'c. Should there be any necessity in the sole discretion of the Operator for the equipment to be replaced or for the number of machines to be decreased, the Proprietor agrees to permit the Operator to change or to decrease the number of machines, but at no time shall Operator increase machines without Proprietor's consent.'

There was a dispute between the parties immediately prior to the execution of the agreement of September 17, 1954, as to whether or not the Proprietors were to receive what is spoken of as a 'gratuity' of $1,000 from Music Service in connection with the installation of the latter's machines. Music Service refused to agree to any 'gratuity' and the leasing agreement was executed on the basis of there being a loan of $3,000, not a loan of $2,000 and a gratuity of $1,000. The appellants also executed a chattel mortgage which the appellee has neither released nor recorded. It is not now in issue and the appellants have abandoned any further claim of a 'gratuity'.

A few weeks after the agreement of September 17th had been entered into, Mr. Silverberg, President of Music Service, found that his Company's machines had been disconnected and were no longer in use, and either then or thereafter machines furnished by the same competitor whose machines had previously been installed in the Proprietors' restaurant were again installed there. The Proprietors paid off the $3,000 loan at the bank from which Music Service had itself borrowed the money with which to make the loan to the Proprietors. This payment was made without the prior knowledge of Music Service. The Proprietors ordered Music Service's machines removed from the restaurant, and Music Service did remove them. After some negotiations between the parties failed this suit was instituted.

The appellants contend that the injunction which was issued was a negative form of specific performance, and they claim that it was improperly issued because of the lack of mutuality of remedy under the agreement, because there was an adequate remedy at law, and because of Music Service's power to terminate the agreement.

We shall take up first the appellants' contention with regard to the adequacy of the plaintiff's remedy at law and second the effect of its right to terminate the agreement if receipts were less than $70 a week.

The appellants' contention based upon the alleged adequacy of the appellee's remedy at law is answered by Hendler Creamery Co. v. Lillich, 152 Md. 190, 136 A. 631, 60 A.L.R. 207, in which an injunction was sought restraining the defendant from selling any ice cream products other than the plaintiff's. The Court said, at pages 203-204 of 152 Md., at pages 635-636 of 136 A.:

'The only remaining question is whether the contract, being valid, is enforceable in a court of equity. Of this we have no doubt. The damages which might be sought to be recovered in a court of law would be practically impossible of ascertainment, because of the difficulty of determining in advance the quantity of the commodities which will be used, and, further, the impossibility of determining in sums of money the damage which would result to the appellant by losing the advertisement of its own goods, and having that of a competitor's substituted at the appellee's place of business.'

An additional answer to this contention is that the appellants have neither shown their ability to respond in damages nor offered a bond with satisfactory sureties so to respond. Code 1951, Article 16, § 101; Foster-Porter Enterprises v. De Mare, 198 Md. 20, 81 A.2d 325.

Their contention that the existence of a right on the part of Music Service to terminate the agreement if receipts from its machines in the Proprietors' restaurant were less than $70 a week bars specific performance is also untenable. The appellants say that there was no allegation in the amended bill, nor was there any testimony at the trial, to the effect that Music Service's share of the receipts exceeded $70 per week. It would seem that the burden of establishing such a fact as to the period before the appellants' repudiation of the contract, if material at all, rested upon them, and they have not met it. As to the period after they disconnected Music Service's machines and ordered them removed, they can derive no benefit from their own repudiation of the agreement. The contract does not purport to give them the option either to perform or to pay damages. Armstrong v. Stiffler, 189 Md. 630, 56 A.2d 808; Linz v. Schuck, 106 Md. 220, 67 A. 286, 11 L.R.A.,N.S., 789. Indeed, the only liquidated damages clause in the agreement is applicable only in case of the sale or transfer of the Proprietors' business.

The appellants' violation of a material term of the contract, such as their refusal to keep the appellee's equipment in operation, gives the appellee a right of termination quite independent of any default provisions of the contract, but such a right of termination does not of itself bar the appellee's right to insist upon specific performance. See Foster-Porter Enterprises v. De Mare, supra. The appellee's additional right to terminate the agreement because of the inadequacy of receipts is a cumulative remedy, and the existence of such a remedy does not bar specific enforcement of the contract. Armstrong v. Stiffler, supra. See also, Restatement, Contracts, Sec. 376, and Corbin, Contracts, Vol. 5, Sec. 1202.

The appellants' principal contention is based upon the qualification of Clause 1.a of the agreement, under which Music Service agrees to furnish machines, by the provisions of Clause 2.c quoted above, under which Music Service has...