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Penske Truck Leasing Co. v. Chemetco

January 19, 2000

PENSKE TRUCK LEASING CO., L.P., PLAINTIFF-APPELLEE,
v.
CHEMETCO, INC., DEFENDANT-APPELLANT. CHEMETCO, INC., THIRD-PARTY PLAINTIFF,
v.
UNITED FREIGHT EXPRESS, INC., THIRD-PARTY DEFENDANT.



Appeal from the Circuit Court of Madison County. No. 97-L-139 Honorable Randall A. Bono, Judge, presiding.

The opinion of the court was delivered by: Presiding Justice Goldenhersh

Defendant and third-party plaintiff, Chemetco, Inc., appeals from a judgment of the circuit court of Madison County in favor of plaintiff, Penske Truck Leasing, Co., L.P., in the amount of $200,478.15, consisting of $53,514.76 for a lease-payment delinquency, $88,216 for liquidated damages, $32,598.07 for interest, and $26,149.32 for attorney fees. Third-party defendant, United Freight Express (UFE), was out of business at the time of trial and did not participate. Likewise, it takes no part in this appeal. The issues we are asked to address are (1) whether the liquidated-damages clause of the contract is an unenforceable penalty provision and (2) whether the trial court erred in computing the damages owed to plaintiff. We affirm in part, reverse in part, and remand with directions.

BACKGROUND

The instant case involves a default on a vehicle lease service agreement (agreement). On May 3, 1995, plaintiff and UFE entered into the agreement for a term of 36 months, covering four trucks identified as Units 141580, 141581, 141582, and 141583. Additional vehicles could be added pursuant to paragraph three of the lease agreement. Defendant's role was to guarantee performance and payment of the lease by UFE. Plaintiff would not agree to lease the vehicles to UFE without defendant's guarantee.

The lease began on July 1, 1995. In 1996, UFE defaulted on the lease by failing to make lease payments as agreed upon by the parties. Plaintiff sent defendant and UFE a default notice on September 13, 1996. In this notice, plaintiff terminated the lease agreement, demanded immediate payment of $56,132.76, which was the amount then due, and demanded that UFE purchase the trucks within five days. Plaintiff calculated the purchase price of all four vehicles as follows:

"Schedule A Value per vehicle $45,241.00

Less Depreciation

Purchase Price Due Penske per vehicle 39,120.60

Total Purchase Price, all vehicles $156,482.40" (Emphasis in original.)

Plaintiff declared $212,615.16 as the total amount due as of September 13, 1996, and announced that unless such sum was paid within five days, it would "pursue remedies available *** under the terms and conditions of the Agreement."

The contract provisions in issue read as follows: "15. DEFAULT AND REMEDIES. (A) If (i) CUSTOMER shall fail or refuse to pay any charges under this lease when due, or (ii) CUSTOMER shall fail or refuse to perform any other term of this lease for five (5) days after written notice thereof is sent to CUSTOMER by PENSKE TRUCK LEASING, or (iii) CUSTOMER or any guarantor of CUSTOMER's obligations shall become insolvent or make a bulk transfer of its assets to make an assignment for the benefit of creditors, or (iv) CUSTOMER or any guarantor of CUSTOMER's obligations shall file or suffer the filing against it of a petition under the Bankruptcy Code or under any other insolvency law or law providing for the relief of debtors, or (v) if any representation or warranty made by CUSTOMER herein or in any document furnished by CUSTOMER or guarantor of CUSTOMER's obligations shall prove to be incorrect in any material respect, then in any of such events PENSKE TRUCK LEASING shall be entitled to pursue the remedies specified in the following paragraph. Upon the happening of one of the preceding Events of Default, PENSKE TRUCK LEASING may, with or without terminating this lease, with or without demand or notice to CUSTOMER, and with or without any court order or process of law, take immediate possession of, and remove, any and all Vehicles covered by this lease wherever located, and/or retain and refuse to deliver, and/or re[]deliver to CUSTOMER, the Vehicle(s), without PENSKE TRUCK LEASING being liable to CUSTOMER for damages caused by such taking of possession. Whether or not it shall have exercised its right to take possession of the Vehicles upon the happening of any Event of Default, PENSKE TRUCK LEASING may, with or without terminating this lease as to one (1) or more Vehicles, require CUSTOMER[,] upon five (5) days' written notice to CUSTOMER, to, at PENSKE TRUCK LEASING's option, either purchase the Vehicle(s) or make the alternative payment in accordance with Article 16[] and[,] in addition, pay to PENSKE TRUCK LEASING the total of the lease charges and any guaranteed mileage charges for all such Vehicles up to the date upon which CUSTOMER could have terminated this lease by exercise of its rights under Article 16, together with the sum of all charges due and unpaid to the date of PENSKE TRUCK LEASING's notice to CUSTOMER under this paragraph.

In the event that CUSTOMER shall fail to purchase the Vehicle (or, at PENSKE TRUCK LEASING's option, make the alternative payment)[] and pay all other sums provided in the preceding paragraph, PENSKE TRUCK LEASING may sell the Vehicle(s) at one (1) or more public or private sales, with or without notice to CUSTOMER, and with or without having the Vehicle(s) at the sale. The proceeds of the sale, less PENSKE TRUCK LEASING's expenses of retaking, storage, repair, and resale, shall be applied to payment of any obligations due to PENSKE TRUCK LEASING by CUSTOMER under this Lease or otherwise. CUSTOMER shall remain liable for the balance due PENSKE TRUCK LEASING under the preceding paragraph and for any deficiency in the balance of any sums due PENSKE TRUCK LEASING under any other lease or indebtedness. If PENSKE TRUCK LEASING is unable to sell the Vehicle upon terms and within a period of time satisfactory to it *** or if it shall elect not to sell the vehicle, then PENSKE TRUCK LEASING may retain the Vehicle, crediting CUSTOMER with the then Net Fair Market Value of the Vehicle (defined as the highest appraisal of Fair Market Value (wholesale) received by PENSKE TRUCK LEASING from two (2) or more independent vehicle dealers, less all expenses and costs incurred by it). The Net Fair Market Value of the Vehicle shall be applied to CUSTOMER's obligations to PENSKE TRUCK LEASING[,] and CUSTOMER shall remain liable for any sums due to PENSKE TRUCK LEASING under this lease or otherwise. All amounts to be retained by PENSKE TRUCK LEASING and any balance to be paid by CUSTOMER under this lease shall not be construed as a penalty, but as liquidated damages for the breach of this lease, and as PENSKE TRUCK LEASING's reasonable return for the use of the Vehicles and for their depreciation.

In addition, PENSKE TRUCK LEASING may proceed by appropriate court action to enforce the terms of this lease or to recover damages for the breach of any of its terms.

In the event PENSKE TRUCK LEASING takes possession of or retains any Vehicle and there shall, at the time of taking or retention, be in, upon[,] or attached to the Vehicle any property or things of a value belonging to CUSTOMER or in CUSTOMER's custody or control, PENSKE TRUCK LEASING is authorized to take possession of such items and either hold the items for CUSTOMER or ...


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