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Supreme Security Systems Inc. v. Aaron Medical Transportation

October 23, 2009


On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Bergen County, Docket No. DC-27443-07.

Per curiam.


Submitted September 1, 2009

Before Judges Messano and Alvarez.

Plaintiff Supreme Security Systems, Inc. commenced a breach of contract action in 2007 against defendant Aaron Medical Transportation, Inc. Plaintiff amended its complaint in 2008 to name Joseph Thomas, the business owner, individually. The claim was for $12,027.78 in damages and $587.71 in interest, totaling $12,615.49. After a bench trial, the trial judge entered a $200 judgment in favor of plaintiff, which it now appeals. For the reasons that follow, we reverse and remand for a new trial.

Plaintiff is an installer and service provider of closed-circuit-television security systems. The parties' written contract, dated May 31, 2006, provided that plaintiff would lease certain equipment and supply "maintenance services" to defendants, contingent upon a one-time installation charge of $2200 and monthly charges of $188 payable over five years. The security surveillance system would operate on the business premises and off-site, via a monitor situated in defendant's home. Defendants paid $700 when the agreement was signed, the balance of $1500 to be due upon "substantial completion of installation."

On June 22, 2006, the agreement was amended to include a different monitor. The cost of installation was accordingly increased by $300, and the monthly payments increased by $14. On July 18, 2006, the parties again agreed to a further change of equipment, although no adjustment was made to the contract price. Final modifications were made on July 20, 2006, adding a second monitor to the system. The installation charge was increased by another $300 and another $14 was added to the monthly fee.

It was not until September 15, 2006, that the system was operational. Thomas testified that the equipment in his home, intended to monitor the business premises from that remote location, however, never "lasted" for longer than a minute at a time without disconnecting. In his words, "[t]he remote access never got fixed."

In January 2007, defendants paid plaintiff $1158. That same month, as anticipated by the parties from the inception of the contract, defendants moved to a new business location. Prior to the move, Thomas notified plaintiff of the date by which the equipment had to be taken out, as the building was going to be demolished. Thomas assumed the system would be reinstalled at his new address as per the agreement and actually signed a new agreement to that effect. That document was never signed by plaintiff. Plaintiff removed the equipment from the old site but, according to Thomas, then advised him that it could not guarantee that the system would work in the new location.

Plaintiff's bookkeeper testified to the contrary, that defendants were notified that no reinstallation would take place unless past due balances were paid. Because there were not paid, they did not reinstall the equipment. Plaintiff instead billed defendants for the balance due of all installation fees, sales taxes, and five years' worth of monthly charges, a total of $12,027.78. The liquidated damages paragraph of the agreement provided that:

14. Default of Subscriber. In the event of any default by Subscriber, without limiting the rights of Company under this Agreement or at law or equity, Company shall be entitled to retain all payments received and Subscriber shall immediately pay to Company

(a) all payments then due and payable, (b) all charges for labor, material and equipment incurred by Company and (c) eighty percent (80%) of all payments which would be due hereunder for the unexpired term as liquidated damages and not as a penalty; and Company shall have no further obligation to perform under this Agreement. In addition, if any suit or alternative dispute resolution proceeding is instituted and Company is the substantially prevailing party by judgment, award, finding or settlement, Subscriber shall pay directly or reimburse Company for all of its costs and expenses including, without limitation or example, consultants' and professionals' fees and costs including, without limitation or example, reasonable attorneys' fees and costs.

After Thomas refused to pay, the complaint and counterclaim followed.

At trial, Thomas testified that he understood the contract meant that the equipment would belong to him outright at the end of the five-year term, and that it was a lease-purchase agreement. He acknowledged reading the liquidated damages provision of the contract. Defendants nonetheless took the position that plaintiff ...

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