Wedner v. Fidelity Sec. Systems, Inc.

• Decision Date: 14 June 1973
• Citation: 307 A.2d 429,228 Pa.Super. 67
• Parties: Charles WEDNER, doing business as Wedner Furs, Appellant, v. FIDELITY SECURITY SYSTEMS, INC.
• Court: Pennsylvania Superior Court

Page 429

307 A.2d 429

228 Pa.Super. 67

Charles WEDNER, doing business as Wedner Furs, Appellant, v. FIDELITY SECURITY SYSTEMS, INC.

Superior Court of Pennsylvania.

June 14, 1973.

Application for Allocation Denied Oct. 25, 1973.

John E. Evans, Jr., Evans, Ivory & Evans, Pittsburgh, for appellant.

David H. Trushel, Wayman, Irvin, Trushel & McAuley, Pittsburgh, for appellee.

Before WRIGHT, Presiding Judge, and WATKINS, JACOBS, HOFFMAN, SPAULDING, CERCONE and PACKEL, JJ.

PER CURIAM.

The six Judges who heard this appeal being equally divided, the judgment is affirmed.

WATKINS, J., files an opinion in support of affirmance in which JACOBS and SPAULDING, JJ., join.

CERCONE, J., files an opinion in support of reversal in which WRIGHT, President Judge and HOFFMAN, J., join.

WATKINS, Judge, in support of affirmance.

This is an appeal from the judgment of the Court of Common Pleas of Allegheny County entered after a non-jury trial on a burglar alarm system contract, in the amount of $312.00 in favor of Charles Wedner, doing business as Wedner Furs, the appellant, and against Fidelity Security Systems, Inc., the appellee.

This action involved a contract for a burglar alarm system. There was a burglary involving the loss of $46,180.00 in furs. It was first tried by Judge Silvestri without a jury and a nonsuit resulted. The nonsuit was removed and a new trial granted. It was then tried by Judge McLean without a jury and although he found the contract had been negligently breach, the appellant was only entitled to liquidated damages in the amount of $312.00 by the terms of the contract. Exceptions were filed and the Court En Banc by a majority vote dismissed the exceptions. This appeal followed.

The appellant suffered a loss of $46,180.00 due to the appellee's wrongful failure to perform under a burglary protection service contract, but because of a contract provision he was allowed recovery of only $312.00. The contract provided that the appellee, FEPS, was not to be liable for any loss or damages to the goods of the appellant and then continued: 'If there shall, notwithstanding the above provisions at any time arise any liability on the part of FEPS by virtue of this agreement, whether due to the negligence of FEPS or otherwise, such liability is and shall be limited to a sum equal in amount to the yearly service charge hereunder, which sum shall be paid and received by the Subscriber as liquidated damages.' The appellant contends that this is an unreasonable forecast of the probable damages resulting from a breach of the contract.

The court below treated the matter as one of liquidated damages and said:

'In his decision the trial judge pointed out, and the parties agree, that there is a well settled general principle that courts will not give effect to a provision in a contract which is a penalty, but will give effect to a provision in a contract which is deemed a liquidated damages provision. The trial judge further noted that deciding which is which can be difficult. In the absence of any Pennsylvania cases making the determination in the context of a contract for burglary alarm protection, the trial judge determined that the instant provision was one for liquidated damages, rather than a penalty, on the reasoning and analysis of A. G. Schepps v. American District Telegraph Company of Texas, 286 S.W.2d 684 (Texas Court of Appeals) (1956); Better Food Markets v. American Dist. Tel. Co., 40 Cal.2d 179, (253) 353 P.2d 10 (1953); Atkinson v. Pacific Fire Extinguisher Company, 40 Cal.2d 192, 253 P.2d 18 (1953).'

However, although he ably supported his judgment on the theory of liquidated damages, he did not have to decide the matter on the premise alone.

Much reliance is placed upon the Restatement of Contracts § 339, but the appellant disregards Comment, which provides:

'An agreement limiting the amount of damages recoverable for breach is not an agreement to pay either liquidated damages or a penalty. Except in the case of certain public service contracts, the contracting parties can by agreement limit their liability in damages to a specified amount, either at the time of making their principal contract, or subsequently thereto. Such a contract, or subsequent thereto, does not purport to make an estimate of the harm caused by a breach; nor is its purpose to operate in terrorem to induce performance.'

It can hardly be contended that the words 'liability is and shall be limited' to the yearly service charge of $312 are anything but a limitation of liability and not really a liquidated damage clause. Surely, if the loss to the customer was $150, the expressed mutual assent was that recovery should be $150 and not $312.

The fact that the words 'liquidated damages' were used in the contract has little bearing on the nature of the provision. It is well settled that in determining whether a particular clause calls for liquidated damages or for a penalty, the name given to the clause by the parties 'is but of slight weight, and the controlling elements are the intention of the parties and the special circumstances of the case.' Laughlin v. Baltalden, Inc., 191 Pa.Super. 611, 617, 159 A.2d 26, 29 (1960). The same principle applies here. Nor can it be argued that the use of these words automatically creates an ambiguity to be resolved against the appellee as the drafter of the instrument. The meaning of the words is clear--the fixed limit of liability was $312. We are, therefore, not dealing with a liquidated damage problem.

The real question is whether any reason exists why the limitation on liability should not be given effect. There is no doubt as to its legality as between ordinary business men. 'The Validity of a contractual provision which exculpates a person from liability for his own acts of negligence is well settled if the contract is between persons relating entirely to their own private affairs.' Dilks v. Flohr Chevrolet 411 Pa. 425, 433, 192 A.2d 682, 687 (1963). That was the common law rule and is illustrated by Bechtold v. Murray Ohio Mfg. Co., 321 Pa. 423, 428--429, 184 A. 49, 51 (1936), where the court stated:

'It is not suggested that the transaction is affected by fraud or mistake. The parties agree that they said what they meant. Both parties and their counsel participated in stating the terms of the contract. The seller says that it was performed, but, if it has not done so in the respect complained of, the buyer has agreed that he shall have no right to recover damages.'

In accord is the Restatement of Contracts §§ 574, 575. It is also the rule with respect to the sale of goods under the Uniform Commercial Code, 12A P.S. § 2--719(3), which provides:

'Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.'

The common law exception as to public utilities, Turek v. Pennsylvania R.R. Co., 361 Pa. 512, 64 A.2d 779 (1949), has been expanded to some extent by Thomas v. First Nat. Bank of Scranton, 376 Pa. 181, 185--186, 101 A.2d 910, 912 (1954), where the court concluded:

'Banks, like common carriers, utility companies, etc., perform an important public service. The United States Government and the Commonwealth respectively stipulate how banks under their respective jurisdictions shall be incorporated and organized. All banks are examined and supervised by government or state officers with extreme particularity. The United States insures deposits in banks up to a stipulated amount. If a person desires to deposit money in a bank, necessarily, he is relegated to a governmental or state regulated banking institution. The situation of a depositor is quite analogous to that of a passenger on a public carrier who is required to accept such means of transportation and to purchase a ticket in the nature of a contract. This Court has consistently decided that it is against public policy to permit a common carrier to limit its liability for its own negligence: (Citations).'

In this case, however, we have a private arrangement between two firms without the attendant state regulation that exists with banks and public utilities. The appellant had a choice as to how to protect his property, and whether or not he should obtain insurance. Although protection against burglary is becoming increasingly important, we believe that it has not yet reached the level of necessity comparable to that of banking and other public services.

Nor do we consider this a case of an unconscionable provision, assuming that unconscionability is applicable by adoption of the prevailing rule with respect to the sale of goods. Even under the foregoing reference to the Uniform Commercial Code the limitation of liability under the facts of the case is prima facie conscionable. Furthermore, there is this significant fact pointed out in the opinion of the trial judge:

'In our case both plaintiff and defendant are experienced, established business persons. Additionally, plaintiff had for some 20 years prior to the instant contract had a similar...