Copper State Leasing Co. v. Blacker Appliance & Furniture Co.

Decision Date31 August 1988
Docket NumberNo. 20785,20785
Citation770 P.2d 88
CourtUtah Supreme Court
PartiesCOPPER STATE LEASING COMPANY, a Utah corporation, Plaintiff and Appellant, v. BLACKER APPLIANCE & FURNITURE COMPANY, an Idaho corporation; Kyle Blacker, James Blacker, and T.C. Blacker, individually; Blacker Furniture Company, a Utah corporation; and Gary Blacker, Fred Blacker, and Rick Blacker, individually, Defendants, Appellees, and Third-Party Plaintiffs, v. John GRAY and Edward Graven, Third-Party Defendants.

This appeal follows disposition of two cases consolidated by the district court. In each case, Copper State was the plaintiff. The defendants in one case were Blacker Appliance & Furniture Company ("Blacker Appliance"), an Idaho corporation, and Kyle Blacker, James Blacker, and T.C. Blacker ("the Idaho Blackers"). The defendants in the other case were Blacker Furniture Company ("Blacker Furniture"), a Utah corporation, and Gary Blacker, Fred Blacker, and Rick Blacker ("the Utah Blackers").

In 1981, all of the Blacker individuals had discussions with Leslie John Gray ("Gray") and Edward G. Graven ("Graven") about investments in a commodity arbitrage program. The Blackers gave Gray and Graven $300,000 for investment in the program, but the funds were placed, with the Gray and Graven procured loan application forms from Copper State. The Blackers filled out the forms and provided corporate tax returns and financial statements for the two Blacker corporations and personal financial statements for the Blacker individuals. Gray and Graven delivered the documents to Copper State and discussed the details of the proposed transactions with representatives of Copper State.

Blackers' approval, in an interim diamond investment. Gray and Graven told the Blackers that all investors in the program were required to own computers and suggested financing their computer purchases through Copper State. Gray and Graven further said that they or their companies would make payments on any loans or leases obtained to purchase the computers.

In June 1981, Copper State and Blacker Furniture executed a commercial lease agreement provided by Copper State to lease a computer. The Utah Blackers executed personal guarantee agreements, guaranteeing performances of the lease. In August 1981, Copper State, Blacker Appliance, and the Idaho Blackers executed a similar commercial lease agreement and personal guarantees.

A request was made through Gray and Graven, ostensibly for the Blackers, that Copper State immediately disburse the purchase price for the computers to the computer vendor, Cowboy Computers, which would, in turn, pay the funds to Data General, the computer manufacturer. On June 22, 1981, Gary Blacker, for Blacker Furniture, executed a form entitled "Acceptance of Equipment and Approval for Payment of Invoices" ("Acceptance"), which had the following added language typed in: "Please disburse money to Cowboy Computers prior to delivery. We understand that this will initiate the lease and payments will start July 20, 1981. We take full responsibility for delivery of the equipment." The date of July 20, 1981, was crossed out, substituted with September 25, 1981, and initialed by Gary Blacker.

Similarly, Blacker Appliance executed an Acceptance on August 20, 1981, with the following added language: "Disburse money to Cowboy Computers prior to delivery of computer. We understand that this will initiate the lease and payments which will start one month from date of funding."

Copper State received the two Acceptances and invoices from Cowboy Computer for two computers. Copper State disbursed $84,000 to Cowboy Computers on August 28, 1981, representing $42,000 per computer. Gray and Graven, however, never forwarded the money to Data Computers but invested in diamonds. The money was lost and never recovered. The computers were never delivered to Blacker Furniture or Blacker Appliance, and those companies did not make payments on the leases.

When payments under the two leases were not made, Copper State sued Blacker Furniture, Blacker Appliance, and the Blacker individuals for payments due under the leases and for damages incurred because of defendants' alleged misrepresentations. Claims by both Copper State and defendants against Gray and Graven were ultimately dismissed because they had filed bankruptcy petitions.

On appeal, Copper State claims that the trial court erred in (1) granting defendants summary judgment on Copper State's claims for payments under the leases; and (2) finding for defendants on Copper State's claim for misrepresentation.

I. SUMMARY JUDGMENT

Copper State avers that disputed issues of material fact precluded the trial court's grant of summary judgment for defendants and that defendants were not entitled to summary judgment as a matter of law. In reviewing a summary judgment, we analyze the facts and inferences in a light most favorable to the losing party. Summary judgment is proper only where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Utah R.Civ.P. 56(c); Frisbee v. K & K Constr. Co., 676 P.2d 387, 389 (Utah 1984). If our review discloses genuine issues of material fact, we will reverse and The undisputed facts indicate that defendants executed the two lease agreements and personal guarantees, agreeing in each to pay Copper State thirty-six monthly payments of $1,574.56 for lease of a computer. They thereafter executed the Acceptances. Copper State paid $84,000 to Cowboy Computers for the purchase of the two computers. The $84,000 was not used to purchase the computers, but Gray and Graven diverted the money into an investment scheme which failed. Defendants never received possession of the computers and did not make payments under the leases. Although factual disputes exist relating to Copper State's claim of misrepresentation, the facts material to interpretation and performance of the leases are not disputed. Thus, because there are no genuine issues of material fact, we now turn to whether defendants were entitled to summary judgment as a matter of law.

remand. Atlas Corp. v. Clovis Nat'l Bank, 737 P.2d 225, 229 (Utah 1987).

In assessing whether summary judgment was appropriate as a matter of law, we must address two issues: (1) the terms of the contracts between the parties; and (2) whether the trial court correctly ruled as a matter of law that the lease agreements were unenforceable due to failure of consideration.

Contract interpretation "may be either a question of law, determined by the words of the agreement, or a question of fact, determined by extrinsic evidence of intent." Kimball v. Campbell, 699 P.2d 714, 716 (Utah 1985). In addition, "[i]f a trial court interprets a contract as a matter of law, we accord its construction no particular weight, reviewing its action under a correctness standard." Id. However, if the contract is ambiguous and the trial court makes findings of fact, this Court's review is strictly limited. Id.

In the present case, we must first determine, as a matter of law, if the typed-in words on the Acceptances modified the parties' contract. If the language of the modified contract is not ambiguous, we can then interpret, as a matter of law, the contract, including defining the consideration therein. Having identified the consideration, the undisputed facts should reveal whether or not there was a failure of consideration.

We first examine whether the typed-in words on the Acceptances modified the lease agreements. If parties agree to a modification of their contract, "the terms [of the modification] govern the rights and obligations of the parties under the contract, and any pre-modification contractual rights which conflict with the terms of the contract as modified must be deemed waived or excused." Rapp v. Mountain States Tel. & Tel. Co., 606 P.2d 1189, 1191 (Utah 1980). Further, "[b]reach of the contract, to the extent that it occurred at all, may not now be assigned to acts or omissions excused by such modifications." Id. at 1192. If a printed form is modified by inserted words in writing or otherwise, the inserted words "take precedence over the printed matter." Bank of Ephraim v. Davis, 559 P.2d 538, 540 (Utah 1977).

The leases in this case provided that Copper State would purchase the computer equipment from the supplier and that the lessees, Blacker Furniture and Blacker Appliance, would arrange for delivery of the equipment. Paragraph 8 of the leases states, "Upon the execution of this lease and the delivery of an item of Equipment, Lessee shall be obligated to perform in accordance with the terms hereof, including the payment of rent prescribed herein" (emphasis added). Therefore, under the lease agreements alone, payment by Blacker Furniture and Blacker Appliance was contingent upon delivery of the computer equipment. In addition, the pristine version of the Acceptances stated that the equipment had been received and was acceptable and requested that the lessor pay the supplier. The Acceptances further stated that the form must be signed before the supplier would be paid.

However, both Acceptances contained typed-in changes. Blacker Furniture's Acceptance stated: "Please disburse money to Cowboy Computers prior to delivery. We understand that this will initiate the lease and payments will start [September Defendants caused the additional language to be typed onto the Acceptances and signed the altered Acceptances. The printed...

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