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C.I.C. Corp. v. Ragtime Inc.

April 01, 1999


Before Judges Pressler, Kleiner and Steinberg.

The opinion of the court was delivered by: Pressler, P.j.a.d.


Argued March 23, 1999

On appeal from the Superior Court of New Jersey, Law Division, Union County.

Plaintiff C.I.C. Corp., a New Jersey corporation, appeals from a judgment entered upon a jury verdict awarding it damages of one dollar on its contract claim against defendants, Ragtime, Inc., and Donald Tabatneck. It also appeals from the subsequent order of the trial court denying its motion for a new trial on damages. We find plain error in the court's instructions to the jury respecting damages and accordingly reverse and remand for a new damages trial.

Plaintiff is in the vending machine business. Pursuant to written contracts with owners of various types of retail establishments, it places a variety of coin-operated machines, which it owns, on their premises, including cigarette machines, jukeboxes and game machines. If the machine sells a product, plaintiff keeps the machine stocked. It also services the machines on an on-call basis. The coins are removed by its collectors on a bi-weekly basis and the revenue is shared between plaintiff and the owner of the premises in accordance with the terms of their agreement. Defendant Donald Tabatneck is the proprietor of a so-called go-go bar in West Paterson owned by his corporation, 821 McBride Avenue Corporation, and operated under the trade name Ragtime. He had had plaintiff's coin-operated machines on his premises since the late 1970s or early 1980s under a series of consecutive contracts.

The controversy between the parties arose out of the five-year contract executed by them on October 13, 1994. The agreement covered a cigarette machine, a jukebox, a pool table, and a pinball machine, which had been on the premises for some time. *fn1 Pursuant to the terms of the agreement, and at defendant's request, plaintiff also loaned defendant $3,500 by way of an advance on his portion of the future revenues at ten percent interest. In the following month, defendant repaid the loan and the four machines were removed. The parties sharply disputed the circumstances and import of these events. According to plaintiff's office manager, Kathleen Strojny, who had dealt with defendant both in the negotiation of the contract and thereafter, defendant had telephoned her to advise that he wished to repay the loan. He also advised her that he was having trouble with the municipality over his operation of the go-go bar and was planning to renovate his establishment for conversion to a family restaurant. He therefore requested that the machines be temporarily removed during the renovations, to be returned when they were completed. She agreed. According to defendant, he was dissatisfied with plaintiff's servicing of the machines, and when he so advised Strojny, she agreed to rescind the contract and remove the machines provided he forthwith repaid the $3,500 loan. He further asserted that he never intended to and in fact did not change the go-go bar use of the premises and admitted that after the breach, he had purchased and installed at the bar his own cigarette vending machine, a coin-operated pool table, and a jukebox to "back-up" his new compact disc player.

The jury, by its answers to special interrogatories, found that defendant had breached the contract necessarily, therefore, rejecting his version of these events. That jury finding is more than amply supported by the record and is not challenged on appeal. The problem here is only as to damages. Strojny explained plaintiff's computerized record-keeping system and its printouts by which she was able to determine the average net monthly revenue earned by plaintiff from each of the four machines that it had placed in defendant's premises during the twelve-month period preceding the breach. Its net average monthly revenue from the cigarette machine, based on an average monthly sale of 242 packs, was $254. The arrangement with respect to the jukebox was a flat $15 weekly rental sum paid by defendant to plaintiff or, roughly, a monthly net revenue of $60. The monthly revenue from the pinball machine and the pool table was shared between the parties, and plaintiff's average total net for the two machines totaled $386. Strojny therefore calculated plaintiff's net lost monthly revenue over the life of the contract at $700. Over the course of the 59 months of the term remaining on the lease at the time of the breach, the total loss of net revenue was, therefore, $41,000. That was the sum plaintiff sought to recover.

Defendant did not dispute Strojny's calculations respecting the revenue earned by the four machines during the year prior to the breach. The thrust of his defense to the damages claim was his assertion that plaintiff was required to mitigate damages and had failed to do so. And therein lies the error that tainted this damages verdict. In sum, as a matter of law, plaintiff was not required to mitigate.

We consider that legal issue in the context of this record. First, defendant, on his cross-examination of Strojny, attempted to elicit from her information as to what had happened to the four machines after they were removed from his premises. All she could say is that they had been taken to plaintiff's warehouse and that another customer would, in the normal course of business, have been sought for them. She was unable to say, beyond speculation, if these machines had ever been placed with another customer and, if so, how long it had taken to do so. The mitigation issue was next referred to by the court in overruling defendant's objection to the admission into evidence of Strojny's computer printout respecting the average monthly revenue earned by each machine in the year preceding the breach. Although permitting its admission, the court noted that:

"It can be argued that there were very effective arguments made against it, for example, that the equipment was used by somebody else within a few months and the plaintiff *fn2 hasn't been able to say, you know, what happened to the equipment and whether it was used by another company or not."

Evidently, then, the Judge was of the view that mitigation was an applicable doctrine here, and plaintiff did not take exception to these comments, perhaps because he had prevailed on the evidence issue that provoked those comments.

The mitigation issue was again referred to in both summations. Defendant's attorney told the jury that he believed the Judge would instruct it on mitigation of damages and then referred to Strojny's testimony respecting her lack of knowledge as to the Disposition of the equipment after its removal from defendant's premises. He concluded these remarks with this argument:

"Because they want $41,400 from Mr. Tabatneck, if you find he breached his contract, and it didn't work- - - -didn't go as Mr. Tabatneck said. They want you to give them 41,000- - - -what is it again? Four hundred dollars. But they don't tell you whether they made earnings and what earnings they made on those machines when they took them out of there or when it all started. They're going to ask you to take a shot in the dark. That's what they're asking you. Pick a number, pick 41,400, pick any ...

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