Court Opinion

ID: 9541491
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:25:57.342364+00
Date Added: 2024-06-11T15:02:59.264300
License: Public Domain

MONTGOMERY, Judge,
dissenting:
The instant case arises from an action instituted by the Plaintiff-Appellant to recover damages for goods lost in a burglary at her residence. The Defendant-Appellee was the seller and installer of a burglar alarm system at the residence, which system did not function during the burglary. The Defendant was successful in the lower court in its assertion of the claim that the Plaintiff was restricted in her right of recovery by virtue of a clause in a contract between the parties which limited Defendant’s liability to the repair or replacement of the security system. The Plaintiff has appealed.1 I strongly believe that the lower court erred in *367permitting the Defendant to place reliance upon the limitation of liability clause, as I believe it to be a clearly unconscionable contract provision, thereby providing no valid support for the Defendant’s position.
The relevant factual background should be briefly stated. In September, 1975, the Defendant proposed to install a security alarm system in the Plaintiff’s residence. The Defendant’s proffered written proposal was accepted by the Plaintiff, and thus became the contract between the parties. It contained the following provision:
The liability of Property Protection, Inc. is limited to repair or replacement of security alarm equipment and does not include loss or damage to possessions, persons or property.
Approximately one and one-half months after the system was installed, a burglary occurred at Plaintiff’s residence, and property allegedly valued at approximately $36,000.00 was stolen. The alarm system did not operate during the burglary. While Defendant claims it fulfilled its duty under contract and satisfied its liability to Plaintiff by repairing or replacing the alarm equipment which malfunctioned, the Plaintiff claims she is entitled to damages equal to the amount of her property loss. On this appeal, the Plaintiff asserts three separate arguments to support her claim for damages. Contrary to the conclusion reached by the majority of this Court, I find substantial merit in the contention that the clause limiting Defendant’s liability is unconscionable, under the facts of this case.
As noted in the Majority Opinion, our Court was faced with a similar situation in Wedner v. Fidelity Security Systems, Inc., 228 Pa. Superior Ct. 67, 307 A.2d 429 (1973). That case involved an action brought by a plaintiff to *368recover damages suffered in the circumstances where a burglar alarm system failed, and a large property loss occurred from a resulting burglary. In Wedner, the lower court found that the plaintiff was only entitled to recover a minimal amount as a result of a limitation of liability clause in the sales contract with the defendant. An evenly divided Superior Court affirmed the lower court decision, and allocatur was thereafter denied by the Supreme Court. Although I will later discuss the Wedner case, in this Opinion, it is clear that the affirmance by an evenly divided Superior Court, and the denial of allocatur by the Supreme Court, create the result that the Wedner decision established no binding appellate precedent with regard to the issues presented.2
Other than the aforementioned Wedner case, there are apparently no prior appellate decisions in the Commonwealth of Pennsylvania involving a factual situation similar to that presented in the instant case. Thus, in resolving the unconscionability issue presented, we must refer to applicable statutory provisions governing the transaction between the parties. I find pertinent several provisions of the Uniform Commercial Code, which has been adopted in our law since 1953. Act of April 6, 1953, P.L. 3, § 1-101, et seq., effective July 1, 1954, reenacted October 2, 1959, P.L. 1023, § 1, et seq., effective January 1, 1960, 12A P.S. § 1-101 et seq. (hereinafter referred to as the “UCC”).
UCC § 2-302 (12A P.S. § 2-302) is the section which deals with unconscionable contracts or clauses in connection with sales transactions. It provides:
(1) If the Court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the *369contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.
This Section appears to permit the exercise of broad discretion by a court in the determination of whether a clause may be unconscionable in the circumstances of any particular case.
The clause upon which the Defendant-Appellee relies in the instant case is clearly a limitation of damages clause.3 In the consideration of a limitation of damages clause, we must also make reference to §§ 2-718 and 2-719 of the UCC. (12A P.S. §§ 2-718 and 2-719). § 2-718, which has the title “Liquidation or Limitation of Damages”, provides in pertinent part:
Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty, (emphasis added)
The title of § 2-719 of the UCC is “Contractual Modification or Limitation of Remedy”. It states:
(1) Subject to the provisions of subsections (2) and (3) of this section and of the preceding section on liquidation and limitation of damages,
*370(a) the agreement may provide for remedies in addition to or in substitution for those provided in this Article and may limit or alter the measure of damages recoverable under this Article, as by limiting the buyer’s remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts; and
(b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.
(2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this Act.
(3) 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.
In reviewing the unconscionability claim raised by the Plaintiff-Appellant in this case, it is also helpful to make reference to the Comments to various sections of the Code. While such Comments do not have the weight of legislation, and thus, are not binding, the Pennsylvania courts have given substantial weight to them as evidencing the intended application of the various UCC provisions. See In re Bristol Associates, Inc., 505 F.2d 1056 (3rd Cir. 1974). The drafters of the UCC, in commenting on the subsection of UCC § 2-718, stated above, said: “A term fixing unreasonably large liquidated damages is expressly made void as a penalty. An unreasonably small amount would be subject to similar criticism and might be stricken under the section on unconscionable contracts or clauses.” (Emphasis added) The comments to § 2-719 state:
“. . . parties are left free to shape their remedies to their particular requirements and reasonable agreements limiting or modifying remedies are to be given effect.
“However, it is of the very essence of a sales contract that at least minimum adequate remedies be available. *371If the parties intend to conclude a contract for sale within this Article, they must accept the legal consequences that there be at least a fair quantum of remedy for breach of the obligations or duties outlined in the contract. Thus any clause purporting to modify or limit the remedial provisions of this Article in an unconscionable manner is subject to deletion and in that event the remedies made available by this Article are applicable as if the stricken clause had never existed. Similarly, under subsection (2), where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this Article.” (emphasis added)
A further Commentary to the UCC is set forth at 12A P.S. XXXIII, et seq. At pages XLI and XLII, the Commentary deals with the subject of unconscionability. Inter alia, in discussing §§ 2-719, this Commentary states:
“The provision reflects a fundamental policy of the Code which limits freedom of contract on the basis of the larger public interest in decency and in the protection from oppression which might spring from disproportionate bargaining power or other potential sources of abuse.”
In the instant case, the facts show a sales contract lacking minimally acceptable adequate remedies for the buyer. The Appellant’s deposition, which is part of the record, indicates that she was a 50 year old divorced woman, who lived alone at the time she entered the sales agreement. She was clearly not a commercial customer. The burglar alarm system she purchased was the first she had ever owned and had been installed for only a month and a half prior to the occurrence of the burglary. She relied upon the DefendantAppellee to suggest the type of alarm system she should purchase. The agreement she signed was prepared by the Defendant-Appellee and the clause in issue was not conspicuous in the contract.4
*372I strongly feel that our Court should hold the purported limitation of damages clause, under these facts, to be unconscionable under Pennsylvania law, as outlined above. The limited damages available to the buyer were certainly not “reasonable in the light of the anticipated or actual harm caused by”5 the failure of the system. Certainly, a buyer in the circumstances of the Appellant in the instant case is not treated fairly if she suffers a huge property loss occasioned by the failure of the system, yet is limited to a demand for the repair or replacement of the alarm equipment which has malfunctioned.
Former President Judge Watkins authored the Opinion in Support of Affirmance in Wedner•, supra, holding the clause in issue in that case not to be unconscionable. In doing so, he specifically found “significant” the facts that both the plaintiff and defendant were “experienced, established business persons”, and that the Plaintiff had 20 years of prior experience with theft protection contracts involving similar limitation of liability clauses. See 307 A.2d at 432. Of course, in the instant case we are not dealing with a commercial purchaser who can be deemed to have had either bargaining power or the commercial astuteness which Judge Watkins found to be significant on the part of the buyer in the Wedner case. Such a difference, cannot be ignored.
The Majority’s analysis of the position of those supporting reversal in Wedner is both puzzling and incorrect. Any fair reaching of Judge (now President Judge) Cercone’s Opinion, joined by former President Judge Wright and Judge Hoffman, makes it plain that it cannot be squared with the decision reached by the Majority in this case. I find invalid the reasoning which suggests that the views expressed in President Judge Cercone’s Opinion are not directly contrary to the conclusions of the Majority here which uphold the limitation of liability clause. Further, the Majority ignores *373the fact that the Plaintiff in Wedner was a commercial customer, who had years of experience with security and alarm services, and the contracts under which they were provided. Of course, because of such factors, the circumstances of the instant case are more compelling than Wedner for holding the limitation clause invalid. In attempting to find a distinction, the Majority contends that the clause in issue here is not “illusory”. I could be disagree more, and believe that the Appellant, who allegedly lost thousands of dollars worth of personal property, will certainly conclude that her sole remedy—the right to have the alarm repaired—can only be described as “illusory”.
I would not necessarily hold that any limitation of damages clause would be found to be unconscionable with respect to a contract for the sale of a burglar alarm system to a noncommercial customer. In fact, a different conclusion might have been appropriate in the instant case if the clause limiting liability was conspicuous, if it was clear that the customer bargained for and clearly understood the significant waiver of rights which was part of the contract, or even if the limitation on liability was not so harsh in limiting the customer to the mere replacement or repair of the defective equipment. However, such factors are not evident here, and on the record presented, I believe the Majority has seriously erred in failing to hold that the limitation of liability clause is unconscionable.
I would remand for a new trial, at which the Plaintiff would be afforded an opportunity to prove her cause, and if successful, to obtain such remedies as may be provided in the UCC and other existing law. The Defendant would be afforded a full opportunity to defend such action, but not place reliance upon the unconscionable limitation of liability clause.6

. It is well settled that no precedent is established in an affirmance by an evenly divided appellate court. Commonwealth ex rel. Vesneski v. Reid, 265 Pa. 328, 108 A. 829 (1920); Commonwealth v. Heller, 147 Pa.Superior Ct. 68, 24 A.2d 460 (1942); City of New Castle v. Berger’s Heirs, 74 Pa.Superior Ct. 548 (1920). Also, the refusal of allocatur by the Supreme Court creates no precedent in support of which the rule of stare decisis can be invoked. See Dougherty v. Proctor & Schwartz, 317 Pa. 363, 176 A. 439 (1935).

. I reach the conclusion that this is a limitation of damages clause because of the particular wording of the clause. I also note that both the Opinion in Support of Affirmance and the Opinion in Support of Reversal in Wedner v. Fidelity Security Systems, Inc., supra, arrived at the same conclusion with regard to a highly similar clause which was in issue in that case.

. Under UCC § 1-201(10) the word “conspicuous” is defined, inter alia to require a writing on a form to be in a larger or contrasting *372type or color. The words in issue in the instant case were clearly not “conspicuous” in the contract, within the UCC meaning of that term.

. See UCC § 2-718.

. I do not disagree with the conclusions reached by the Majority with regard to the lack of grounds for reversal in the remaining claims of the Appellant, but not necessarily on the same rationale as expressed by the Majority.