All-States Leasing Co. v. Bass

Decision Date06 August 1975
Docket NumberNo. 11353,ALL-STATES,11353
Citation96 Idaho 873,538 P.2d 1177
Parties, 91 A.L.R.3d 863, 17 UCC Rep.Serv. 933 LEASING COMPANY, Plaintiff-Appellant, v. Noah BASS, dba Bass Phillips '66' Station, Defendant-Respondent.
CourtIdaho Supreme Court

Roger D. Cox, of Cox, Fanning & McNamara, Idaho Falls, for plaintiff-appellant.

Paul T. Baird, of Clemons, Cosho, Humphrey & Samuelson, Boise, for defendant-respondent.

McQUADE, Chief Justice.

Plaintiff-appellant All-States Leasing Company (hereinafter appellant or lessor) brought this action for money allegedly due from defendant-respondent Noah Bass, doing business as Bass Phillips '66' Station in Boise (hereinafter respondent or lessee). The money due is in the form of rent under a lease of personal property which appellant claimed respondent breach. Appellant further sought to recover costs and attorney fees. The trial court, sitting without a jury, denied appellant's claim and entered judgment for the respondent. From this judgment appellant brings this appeal. We reverse and remand for a disposition of the cause in conformity with the views expressed in this opinion.

The facts of this dispute may be summarized as follows. Sometime prior to July 2, 1969, respondent answered an advertisement in a trade journal for a 'Budg-O-Matic Car Wash System.' On July 2, 1969, respondent was contacted in person at his place of business by two salesmen. These salesmen were employed by Auto Laundry Manufacturing Company, of Seattle, Washington, engaged in the manufacture of Budg-O-Matic Car Wash Systems. After talking with the two salesmen respondent decided that he wanted the car wash system for use in his business. At the suggestion of the salesmen, a lease arrangement was negotiated, whereby the car washing equipment was to be leased to respondent by appellant rather than purchased outright. The trial court found that although Auto Laundry Manufacturing Co. had done business with appellant for several months prior to the transaction in issue, whereby on several occasions, numbering approximately 40, appellant would purchase a Budg-O-Matic Car Wash System from the manufacturer, Auto Laundry Manufacturing Co., and lease it to the service stations for use as a coin-operated car washer, no agency relationship existed between the two.

At the conclusion of the negotiations the salesmen provided two forms for respondent to sign. One was a lease application form, the other a lease arrangement form. The former set forth pertinent information as to respondent's business and described the equipment to be leased. The latter set forth the terms of the lease agreement. Both were business forms of appellant and bore the name of All-States Leasing Company conspicuously on their face.

Under the terms of the lease agreement, respondent agreed to lease the car wash system from appellant for a term of 36 months, making monthly payments of $129.79. One of the terms provided that respondent would assume all risk of loss and damage to the equipment. Respondent was also responsible for property taxes on the equipment during the term of the lease. Respondent was given the option of renewing the lease at the expiration of its term. However title at all times was to remain in the name of the lessor. No disclaimers of any warranties appeared in the lease.

At the time respondent signed both of these lease forms, he executed a check in favor of Auto Laundry Manufacturing Co. for $189.00. This reflected part of a down payment of approximately $389.00 to which respondent agreed. The remaining $200.00 still owing on the down payment was to be paid at the time the system was installed. Respondent testified that he had at all times thought he was dealing with one company with regard to the negotiations for the lease, and the execution of all documents surrounding the lease. Although he acknowledged that he had been aware of the name of Auto Laundry Manufacturing Company, as well as appellant's name, he assumed both were merely two divisions of one company.

On July 23, 1969, a delivery man from the state of Washington delivered the car wash system to respondent. Respondent was requested to and did sign a compldetion certificate acknowledging that the car wash system was delivered to the correct location in proper condition, and was in full compliance with the terms and specifications of the lease agreement. At the same time respondent wrote a check payable to appellant in the amount of $200.00, which was still owing on the down payment under the terms of the lease.

A short time after the car wash was installed, respondent received a correspondence from appellant pertaining to the lease agreement which he had signed on July 2, 1969. Enclosed with this correspondence was a new lease agreement which appellant explained had been prepared to correct a $.10 error in the agreed upon monthly payment. Respondent testified that he checked the computations, signed the new lease agreement form but did not bother to read the new lease agreement carefully before returning it to appellant because he was not aware that this new agreement contained any terms different from the first agreement. This revised lease agreement contained in paragraph 4 a disclaimer of all warranties with respect to the leased property. Appellant acknowledged receipt of the new lease agreement in a letter sent to respondent on August 25, 1969. The trial court found that at some point prior to this letter of August 25, 1969, appellant purchased the Budg-O-Matic Car Wash System from Auto Laundry Manufacturing Co., and then in turn leased it to respondent.

Respondent made two monthly payments on the lease with the last monthly payment being made in October, 1969, but thereafter refused to make additional payments. In November and again in December of 1969, respondent wrote to appellant requesting that it take the Budg-O-Matic unit back. In the November letter respondent informed appellant that the car wash machine wasn't producing enough revenue to make its payments, and that he told the salesmen from appellant's organization that if it didn't make its payments and show a profit, he would not keep it. In the December letter, respondent reaffirmed his wish that appellant remove the car wash system and for the first time referred to the system's inability to function without freezing up in the cold weather. Appellant responded to these letters in a correspondence dated, December 10, 1969, whereupon it informed respondent that 'The dealer who sold this unit to you originally is presently out of town and will return sometime next week, at which time we will contact him for help in disposing of your unit.' Respondent testified that he was never contacted by anyone after receiving this letter, nor did anyone pick up the machine as of the date of trial.

On October 12, 1970, appellant brought this action against the respondent for rentals due under the lease agreement after respondent refused to make further payments. Respondent in his answer to the complaint contended that the lease was null and void because of alleged misrepresentations concerning the quality and expected performance of the car wash system made on the part of the two salesmen, who solicited his business. Respondent maintained that these two salesmen were agents and representatives of appellant. Respondent also asserted in his answer that the lease was of no force and effect because the leased equipment was defective, thereby breaching the implied warranties of fitness and merchantability which accompanied the delivery of the equipment. Respondent counterclaimed for compensatory and punitive damages which he alleged he suffered as a result of appellant's action.

The trial court rejected appellant's claim for damages resulting from the alleged breach by respondent of the lease agreement. It found that the car washing unit leased by appellant to respondent was defective in design and manufacture; was not as represented nor up to the standards as represented so that the defects were sufficient to entitle respondent to relief as against the manufacturer, Auto Laundry Manufacturing Co. However, it did not find that the representations made by the agents of the manufacturer were binding upon appellant so as to hold it liable under an express warranty theory. Rather it held appellant liable as a lessor under a theory of breach of implied warranties in the nature of fitness. The Court therefore rescinded the lease agreement, relieving respondent of further liability under the lease. It did, however, allow appellant to retain the past rentals paid to it as the value of the use of the defective equipment while in respondent's possession, and ordered that the equipment be returned to appellant. Respondent's counterclaim for damages was denied. The appellant appeals from the trial court's judgment.

Appellant contends that it is unsettled in Idaho whether the lease of personal property has the same legal effect with respect to implied warranties as does a sale of goods. Appellant concedes that there is authority in other jurisdictions to that effect, but maintains that even if this be the rule of law in this state, the trial court committed reversible error when it concluded that under the facts of this case there existed either an implied warranty of fitness for a particular purpose or an implied warranty of merchantability. In the alternative, appellant argues that any warranties which may have been applicable were effectively disclaimed by it.

Before answering appellant's contentions, we must first determine whether the trial court was correct in applying warranty doctrine to a lease transaction. In Transamerica Leasing Corporation v. Van's Realty Co., 1 this Court left open the question whether or not the provisions of the Uniform Sales Act dealing with implied warranties which were then in force in this state, should be applied to lease transactions as well as to sales. In the...

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