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HomeMy WebLinkAbout2004-691 Civil GIUSSEPPE BARONE and : IN THE COURT OF COMMON PLEAS OF LUIGI AMBROSINO, : CUMBERLAND COUNTY, PENNSYLVANIA PLAINTIFFS : : V. : : VINCENZO PUGLIESE, : DEFENDANT : 04-691 CIVIL TERM IN RE: THE PIZZA CASE OPINION AND INTERIM ORDER OF COURT Bayley, J., July 13, 2009:-- Plaintiffs, Giusseppe Barone and Luigi Ambrosino owned and operated a Brother’s Pizza restaurant in a mall at 265 Cumberland Parkway, Lower Allen Township, Cumberland County. They sold that business and all its assets to defendant, Vincenzo Pugliese. A written Business Purchase Agreement included a 1 license to use the business trade name “Brother’s Pizza.” It also contained the following: RESTRICTIVE COVENANT. Sellers hereby agree that for a period Sellers will not compete with Buyer through the of six (6) years, operation and/or ownership of a pizza shop within a radius of three (3) miles of the business location at 265 Cumberland Parkway, Mechanicsburg, Cumberland County, Pennsylvania. (Emphasis added.) Pursuant to the Business Purchase Agreement, the price was $150,000; $5,000 down and $145,000, including interest, payable in $2,000 equal monthly installments. Pugliese also signed the Promissory Note in which he further agreed to pay Barone __________ 1 Giusseppe Barone, who has owned over ten pizza restaurants, started using the 04-691 CIVIL TERM and Ambrosino another $100,000 for the business in equal monthly installments of $2,000. Barone testified that the total sale price of the restaurant was $250,000, and that Pugliese, who wanted to pay some of it “on the side,” suggested the $100,000 promissory note. Vincenzo Pugliese started operating the Brother’s Pizza and made the first payments under the Business Purchase Agreement and Promissory Note in February, 2 2000. Mainly through his son Aldo Pugliese, he operated the Brother’s Pizza until he sold it in 2006 for $115,000. On October 25, 2001, Giusseppe Barone and Luigi Ambrosino, signing as partners, executed a lease of a shell building with Lancaster Development Company for the purpose of operating a Brother’s Pizza in the Rossmoyne Retail Center. The lease was for a term ending on May 31, 2012. The fit out of the restaurant was completed in late January, 2003. When it opened on February 4, 2003, Barone and Ambrosino assigned the lease, with the consent of Lancaster Development Company, to Giusseppe’s son, Giovanni Barone. This Brother’s Pizza in the Rossmoyne Retail Center is 2.47 miles from the Brother’s Pizza at 265 Cumberland Parkway. Brother’s Pizza name in 1979. 2 All payments made under the Business Purchase Agreement were by check. All payments made under the Promissory Note where in cash which Giusseppe Barone collected each month. Barone’s accountant, who prepared his tax returns, testified that Barone never informed him that he was receiving $2,000 cash a month from the sale of the restaurant pursuant to a $100,000 promissory note, so those amounts were not reported in Barone’s tax returns. -2- 04-691 CIVIL TERM Giusseppe Barone located all of the equipment and fixtures for the Rossmoyne restaurant. He paid $40,000 to $45,000 and Luigi Ambrosino paid $35,000 to buy the equipment and fixtures and pay a contractor to construct the interior of the restaurant. He and Ambrosino helped in the actual construction. Ambrosino helped create the revenue. When the restaurant opened, Giusseppe’s son Giovanni did preparation work in the morning then went to another business he operated in Enola. Giusseppe and Luigi worked in the restaurant for the rest of most days for sixteen months. During this period Giusseppe would write checks on the Brother’s Pizza restaurant account to pay 3 for the food, supplies and rent. In June, 2004, Giovanni found a partner and formed a corporation, Pizza, Inc. He and his partner thereafter operated the restaurant. On January 26, 2007, the corporation sold the business and assigned the lease to CJ’s Santos, Inc. for $160,000. Defendant stopped making payments on the promissory note in September, 2002. He stopped making payments under the Business Purchase Agreement in February, 2003. Of the total purchase price of $250,000, defendant paid $145,000; $81,000 under the Business Purchase Agreement and $64,000 under the promissory note. Plaintiffs filed this suit to recover the balance of $105,000; $69,000 remaining under the Business Purchase Agreement and $36,000 under the promissory note. Defendant filed an answer with new matter alleging that plaintiffs breached the __________ 3 Giovanni testified that he started working more time at the Rossmoyne restaurant in the beginning of 2004. -3- 04-691 CIVIL TERM restrictive covenant in the Business Purchase Agreement. He filed a counterclaim seeking damages for the breach of that covenant. Giusseppe Barone testified that when defendant found out about the Brother’s Pizza in Rossmoyne he was upset. Giusseppe explained to him that the restaurant was his son’s and that he was just trying to help him. After defendant stopped making the $2,000 cash payments under the promissory note he talked to him again in an effort to solve the problem. Giusseppe testified, which testimony was supported by Luigi Ambrosino, that defendant suggested they settle any issue involving a violation of the restrictive covenant by Barone and Ambrosino waiving the remaining $36,000 owed under the promissory note. In November, 2002, there was a handshake agreement to that effect. This court is free to accept all, part of or none of a witness’s testimony. We do not find that testimony credible. The defense presented evidence was that it was Giovanni Barone’s idea to open a Brother’s Pizza in the Rossmoyne shopping center. Bradley Swidler, a commercial realtor, negotiated the lease with the Lancaster Development Company. Because Giovanni did not have adequate finances, Giusseppe Barone and Luigi Ambrosino 4 executed the lease as partners. Because Giovanni did not have the money to fit out and equip the restaurant, Giovanni and Luigi paid those costs. Giovanni relied on the experience of his father to get the Brother’s Pizza up and running. Giusseppe and __________ 4 Giovanni and Swidler both testified that they had no knowledge of the restrictive covenant applicable to Giusseppe Barone and Luigi Ambrosino when they sold the -4- 04-691 CIVIL TERM Luigi then worked at the restaurant. Giovanni operated the restaurant as a sole 5 proprietorship for which he filed individual tax returns in 2003 and 2004. Giusseppe and Luigi testified that they did nothing more than provide financing and the backing for Giovanni to open the Rossmoyne restaurant, and they worked there after it opened. They and Giovanni testified that subsequent to the forming of the corporation in June, 2004, Luigi was paid $50,000 as a return on his $35,000 investment, and Giovanni was paid the $40,000 to $45,000 that he invested in the restaurant. We believe the testimony of Giusseppe and Luigi that it was their intent to set up Giovanni in a Brother’s Pizza business in the Rossmoyne shopping center. However, the business could not have been started and operated without their involvement. On October 21, 2001, they signed the lease for the building as partners and thereafter paid for all of the equipment and fixtures and the fit out of the interior of the building. Giovanni had no financial investment in the restaurant when Giusseppe and Luigi assigned the lease to him when it opened on February 4, 2003. Giusseppe and Luigi then worked in the restaurant full-time and Giovanni used the business account to pay the operating expenses. Giovanni worked there a limited amount of time from February, 2003 into 2004. Although he testified he worked there more in 2004, the involvement of Giusseppe and Luigi did not end until Giovanni found a partner and Brother’s Pizza at 265 Cumberland Parkway. 5 The gross receipts he reported on a Schedule C in 2003 were $145,606. The gross receipts he reported on a Schedule C in 2004 before he and a partner formed a corporation that started operating the business in June, were $75,410. -5- 04-691 CIVIL TERM formed a corporation to operate the business in June, 2004. Based on all of the evidence, we find that until June, 2004, it was Giusseppe and Luigi who operated the Brother’s Pizza in the Rossmoyne Retail Center. This was in violation of the restrictive covenant that prevented them from competing with Vincenzo Pugliese through the operation and/or ownership of a pizza shop for six years within a radius of three miles of the Brother’s Pizza at 265 Cumberland Parkway. But for the conduct of Giusseppe Barone and Luigi Ambrosino, the restaurant would not have existed in June, 2004 for Giovanni Barone and his corporate partner to operate. Based on all of the evidence we find that the Brother’s Pizza at Rossmoyne Retail Center competed with the Brother’s Pizza at 265 Cumberland Parkway. In Lambakis v. Exar, 340 Pa. Super. 483 (1985), a case involving a violation of a non- competition agreement in the sale of a pizza business, the Superior Court of Pennsylvania noted that the buyer is entitled to avoid liability under the contract with the seller to the extent of the injury caused by such a violation. As to damages in a case involving a breach of a non-compete agreement, the Superior Court stated in Judge Technical Services, Inc. v. Clancy, 813 A.2d 879 (Pa. Super. 2002): The general rule in this Commonwealth is that the plaintiff bears the burden of proof as to damages. The determination of damages is a factual question to be decided by the fact-finder. The fact-finder must assess the testimony, by weighing the evidence and determining its credibility, and by accepting or rejecting the estimates of the damages given by the witnesses. Although the fact-finder may not render a verdict based on sheer conjecture or guesswork, it may use a measure of speculation in estimating damages. The fact-finder may make a -6- 04-691 CIVIL TERM just and reasonable estimate of the damage based on relevant data, and in such circumstances may act on probable, inferential, as well as direct and positive proof. Penn Elec. Supply Co., Inc. v. Billows Elec. Supply Co., Inc., 364 Pa.Super. 544, 528 A.2d 643, 644 (1987) (internal citations omitted). Also, [A] defendant whose wrongful conduct has rendered difficult the ascertainment of the precise damages suffered by the plaintiff, is not entitled to complain that they cannot be measured with the same exactness and precision as would otherwise be possible. In Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555,563, 51 S.Ct. 248, 250, 75 L.Ed. 544, [548-49 (1931),] the court said: It would be a perversion of fundamental principles of justice to deny all relief to the injured person, and thereby relieve the wrongdoer from making any amend for his acts. In such case, while the damages may not be determined by mere speculation or guess, it will be enough if the evidence show the extent of the damages as a matter of just and reasonable inference, although the result be only approximate. The wrongdoer is not entitled to complain that they cannot be measured with the exactness and precision that would be possible if the case, which he alone is responsible for making, were otherwise. The risk of the uncertainty should be thrown upon the wrongdoer instead of upon the injured party. The precise amount cannot be ascertained by a fixed rule, but must be matter of opinion and probable estimate. And the adoption of any arbitrary rule in such a case, which will relieve the wrongdoer from any part of the damages, and throw the loss upon the injured party, would be little less than legalized robbery. Comm. Trust Co. of Pittsburgh v. Hackmeister Lind Co., 320 Pa. 233, 239-40, 181 A. 787, 790 (1935) (internal quotations and some citations omitted). sub judice, In the case we believe that lost profits is a proper measure of damages for defendant for plaintiffs’ breach of the non-competition covenant in the 6 Business Purchase Agreement for 265 Cumberland Parkway. There is sufficient __________ 6 Ebright Abatement of the purchase price is another way to measure damages. See v. Shutter, 254 Pa. Super. 509 (1978). However, we have not found a case applying -7- 04-691 CIVIL TERM evidence whereby we find that the breach of the non-competition agreement caused a significant decline in the profits from the restaurant at 265 Cumberland Parkway. While these damages cannot be measured exactly, the evidence in the record supports a reasonable conclusion that they amount to $50,000. The Business Purchase Agreement provides: Attorneys’ Fees. In the event that either party breaches this Agreement or any of the obligations or undertakings which form a part of this Agreement, the breaching party shall be obligated to reimburse the non-breaching party for reasonable attorney’s fees and court costs incurred as a result of such breach. Defendant is entitled to attorney fees under this provision. A further hearing will be conducted to present evidence as to such fees after which a verdict will be entered, consistent with this opinion, to include attorney fees. INTERIM ORDER OF COURT IT IS ORDERED AND NOW, this day of July, 2009, that an additional hearing shall be conducted at 8:45 a.m., Thursday, July 23, 2009, in Courtroom Number 2, Cumberland County Courthouse, Carlisle, Pennsylvania. By the Court, Edgar B. Bayley, J. abatement where the agreement between the parties did not put a specific value on the restrictive covenant which is the situation in the present case. -8- 04-691 CIVIL TERM Robert E. Kelly, Jr., Esquire Lee S. Cohen, Esquire 300 North Second Street th 10 Floor Harrisburg, PA 17101 For Plaintiffs Alan R. Boynton, Jr., Esquire 100 Pine Street P.O. Box 1166 Harrisburg, PA 17108-1166 For Defendant :sal -9- GIUSSEPPE BARONE and : IN THE COURT OF COMMON PLEAS OF LUIGI AMBROSINO, : CUMBERLAND COUNTY, PENNSYLVANIA PLAINTIFFS : : V. : : VINCENZO PUGLIESE, : DEFENDANT : 04-691 CIVIL TERM IN RE: THE PIZZA CASE INTERIM ORDER OF COURT IT IS ORDERED AND NOW, this day of July, 2009, that an additional hearing shall be conducted at 8:45 a.m., Thursday, July 23, 2009, in Courtroom Number 2, Cumberland County Courthouse, Carlisle, Pennsylvania. By the Court, Edgar B. Bayley, J. Robert E. Kelly, Jr., Esquire Lee S. Cohen, Esquire 300 North Second Street th 10 Floor Harrisburg, PA 17101 For Plaintiffs Alan R. Boynton, Jr., Esquire 100 Pine Street P.O. Box 1166 Harrisburg, PA 17108-1166 For Defendant :sal 04-691 CIVIL TERM -2-