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Silco Automatic Vending Co. v. Howells

Decided: June 21, 1968.

SILCO AUTOMATIC VENDING CO., INC., A NEW JERSEY CORPORATION, PLAINTIFF,
v.
NELLIE HOWELLS, ET AL., DEFENDANTS



Matthews, J.s.c.

Matthews

[102 NJSuper Page 244] Plaintiff sues defendant Al's Cozy Inn, Inc. for breach of contract, seeking damages, and defendant Rose and Harry James, Inc. for the establishment of a constructive trust resulting from defendants' alleged violation of N.J.S. 12 A:6-101 et seq. Defendant Howells has been joined as an agent of defendant Al's Cozy Inn, Inc., and

damages for the aforementioned breach of contract are sought against her in the event this court should hold that the contract in question was entered into by defendant Howells without corporate authority.

Plaintiff conducts a business which includes the extensive management and rental of various coin-operated machines, including cigarette vending, music and game machines. Plaintiff's operating procedure involves what is described as an exclusive lease from a customer of space in the customer's place of business (usually a tavern or restaurant) in which the particular machine is located. As "rent" for the use of such space, the proceeds of the machine are divided between plaintiff and his lessor at an agreed rate. Plaintiff states that its business depends on the number of locations in which machines are placed, the volume of business therein, and the length of time for which it has the exclusive right to have its machine located in any particular place; the greater the length of time such right exists, the greater stability and profit the plaintiff can rely on. Plaintiff's usual form of lease provides for a five-year term. Apparently it is the practice in the vending machine business, for the purpose of encouraging continued or more active operation of the business, to make loans to the various lessors and often to pay "bonuses" to said lessors, for the purpose of encouraging continued contractual relations.

During the period with which we are here concerned, defendant Al's Cozy Inn, Inc. operated a tavern business at 507 So. 17th Street, Newark. On or about July 19, 1965 defendant Nellie Howells, an agent for defendant Al's Cozy Inn, Inc., entered into a written agreement with plaintiff in which Al's Cozy Inn, Inc. agreed to lease space to plaintiff for the location of a cigarette vending machine in its place of business at the aforementioned location, for a period of five years. In return for the letting, plaintiff agreed to pay said defendant a commission on each pack of cigarettes sold through the machine. Thereafter, plaintiff installed a cigarette vending machine on defendant's premises, supplied cigarettes

therefor, and at fixed periods paid Al's Cozy Inn, Inc., through defendant Nellie Howells, the agreed commission rate, and otherwise performed terms of its contract.

On or about August 23, 1965, in consideration of a loan of $350 by plaintiff to Al's Cozy Inn, Inc., the parties entered into a further written contract under which Al's Cozy Inn, Inc. agreed to lease space to plaintiff for the location of a music machine in its aforementioned place of business for a period of five years. Under this latter agreement plaintiff agreed to pay a commission to Al's Cozy Inn, Inc. based upon the use of the machine. Thereafter, plaintiff installed a music machine on the premises, supplied records therefor, and at stated intervals paid Al's Cozy Inn, Inc. the agreed commission rate, and otherwise performed the terms of its contract. The loan has been completely repaid.

Al's Cozy Inn, Inc. is a New Jersey corporation organized during 1958. It operated a tavern and held a liquor license from September 1958 to August 12, 1966, on which date the business and license were sold to co-defendant Rose and Harry James, Inc. During its existence Al's Cozy Inn, Inc. never owned any real estate, it operated its business at 507 South 17th Street, Newark, under a month-to-month tenancy granted by a landlord who is not a party to this action.

Testimony taken during the trial establishes that plaintiff, upon learning that Rose and Harry James, Inc. had contracted to buy the tavern business from Al's Cozy Inn, Inc., sought on several occasions to induce the principals of Rose and Harry James, Inc. to enter into leases for cigarette and amusement machines. Apparently, some negotiations were carried on, but plaintiff was unable to satisfy the new buyers and consequently Rose and Harry James, Inc. entered into cigarette and music leases with a competitor of plaintiff.

At the closing of the sale of the tavern business Rose and Harry James, Inc. received a bill of sale for various chattels included in the sale. Attached to the bill of sale was a form of affidavit which contained provision for a list of creditors, designed to satisfy the requirements of N.J.S. 12 A:6-104.

In the space in which creditors would be listed, Al's Cozy Inn, Inc. ...


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