Capitol City Leasing Corp. v. Hill

• Decision Date: 28 September 1981
• Docket Number: 81-C-0585,Nos. 81-C-0538,s. 81-C-0538
• Citation: 404 So.2d 935
• Parties: CAPITOL CITY LEASING CORPORATION v. Sidney D. HILL d/b/a Hill Logging Contractor, et al.
• Court: Louisiana Supreme Court

Page 935

404 So.2d 935

CAPITOL CITY LEASING CORPORATION v. Sidney D. HILL d/b/a Hill Logging Contractor, et al.

Nos. 81-C-0538, 81-C-0585.

Supreme Court of Louisiana.

Sept. 28, 1981.

Michael W. Lee of Burgess & Lee, Livingston, for defendant-applicant in 81-C-0538, and defendant-respondent in 81-C-0585.

Andrew Jack Bennett, Jr. of Bennett & McLaughlin, Baton Rouge, for plaintiff-respondent in 81-C-0538, and defendant-respondent in 81-C-0585.

Michael R. Connelly of Rogers & Connelly, Baton Rouge, for plaintiff-applicant in 81-C-0585, and plaintiff-respondent in 81-C-0538.

BLANCHE, Justice.

We granted writs, 399 So.2d 597 and 399 So.2d 603, to review the decision of the court of appeal, 394 So.2d 1264. We fully agree with and adopt that court's factual findings relative to the issues on appeal as follows:

On December 7, 1976, Sidney Hill leased two used Bombardier log skidders from Capitol City Leasing Corporation for a 24-month term with a rental of $836.80 per month for each skidder. Hill had previously obtained the skidders from Minton Equipment Company, Inc. for a trial period. Unable to obtain the proper financing to purchase the equipment himself, Hill contacted Capitol City in an attempt to arrange financing. V. W. Williamson, Capitol City's vice president, agreed to purchase the two skidders from Minton Equipment. Hill, in turn, agreed to lease the skidders from Capitol City for the above quoted rent. Capitol City paid Minton $16,905.00 for each skidder. There was no option to purchase under the lease.

Each lease agreement contains a waiver of warranty on the back page which reads as follows:

"WARRANTIES. Lessor will request the supplier to authorize Lessee to enforce in its own name all warranties, agreements or representations, if any, which may be made by the supplier to the Lessee or Lessor, but Lessor itself makes no express or implied warranties as to any matter whatsoever, including, without limitation, the condition of equipment, its merchantability or its fitness for any particular purpose. No defect or unfitness of the equipment shall relieve Lessee of the obligation to pay rent or of any other obligation under this lease."

On the front page of each lease agreement, printed in block letters, is the phrase: "THE TERMS AND CONDITIONS SET FORTH ON THE REVERSE SIDE OF THIS PAGE ARE A PART OF THIS LEASE."

During the negotiation for the lease of the skidders the lessor made clear to the lessee, and all parties so testified, that the lessor would not warrant the used skidders in any manner. However, the lessor verbally told the lessee that all warranty rights would flow from the seller of the equipment to the lessee. The testimony at trial indicates that there was an express warranty running from the seller to the lessee for a thirty-day period following confection of the leases. There was no waiver of the seller's implied warranty of fitness. La. C.C. art. 2476.

Almost from the time he began using the skidders, Hill experienced numerous problems with them. Although both skidders had been rebuilt by Minton prior to their sale to Capitol and lease to Hill, the machines experienced steering problems, wench problems, problems with the chain coming off of the wench pulley, problems with the universal joint in the drive shaft breaking, and numerous other problems rendering the skidders unfit for the logging business. Minton Equipment made a number of repairs to the machines during the 30-day express warranty period and continued to make repairs thereafter amounting to the sum of $2,250.69, which Minton is presently seeking against Hill.

Around March or April of 1977, Hill asked Capitol City if it would take the equipment back, but Capitol City refused. Williamson, vice president of Capitol City, testified that he had bought the equipment strictly for Hill's use and that he had no use for two used log skidders. Williamson said he agreed, however, for Hill to take the equipment back to Minton with the understanding that the rental payments would remain due and owing under the lease contract. Having become frustrated with the constant breakdown of the machines, Hill had Minton Equipment take the machines to its yard in Alexandria, Louisiana in the late spring of 1977, with the understanding that Minton would attempt to sell the skidders.

Capitol City filed suit to accelerate the rentals under the lease in June, 1977. Some 15 months later, while the suit was pending, Capitol City obtained the two skidders from Minton and sold them at a public auction on August 20, 1978. It received $8,000 for each skidder for a total of $16,000. Hill was not notified of the sale of the skidders until after the sale.

In addition to the clause of the contract assigning all warranties of the equipment to Hill, an additional clause must also be considered in granting relief. That clause reads as follows:

"DEFAULT Upon any default, Lessor shall have the right, at its option, but shall not be obligated, to do any one or more of the following: ... (4) Lessor may sell at private sale any and all of the equipment for cash or on credit and then file an ordinary proceeding to recover from Lessee all of the costs of taking possession, storing, repairing, and selling of the equipment plus an amount representing liquidated damages in the sum of the rental payments thereafter accruing under the terms of the lease until the termination of the lease, had the Lessee not defaulted on the lease obligation, less the net proceeds of such sale."

The trial court rendered judgment in favor of the lessee, Sidney D. Hill d/b/a S. D. Hill Logging Contractor (Hill), and against the lessor, Capitol City Leasing Corporation (Capitol), cancelling both lease agreements and restoring to Hill a sum which represented the rentals paid on the two log skidders. Hill was also awarded attorney's fees. Judgment was rendered in favor of Capitol and against the seller of the skidders, Minton. That judgment rescinded the sale of the skidders and ordered the return of the purchase price. Minton was ordered to reimburse the lessor for all the sums the lessor paid to Hill plus a sum representing costs of sale and repair and attorney's fees. Minton was given a credit in the amount for which the skidders had sold at public auction. The demands of the lessor, Capitol, and the seller, Minton, against the lessee were dismissed, as were the demands of the lessee against the seller.

The court of appeal reversed in part and amended in part the decision of the trial court. The appellate court granted judgment in favor of Capitol City Leasing Corporation against Sidney Hill and Robbie C. Hill, the lessee's guarantor, in the amount of $35,145.60, which represented the rentals due and owing under the lease, together with legal interest from date of judicial demand. That award was subject to a credit of $16,000, the amount received for the skidders at the auction. There was also judgment in favor of Capitol against Sidney Hill and Robbie Hill for $5,110.18, which represented the cost of sale and preparation for sale, together with legal interest from date of judicial demand, plus the sum of $3,829.12 for attorney's fees, which represented 20 percent of the accrued rentals due and owing by the lessee. The court then ordered judgment in favor of Sidney Hill and Robbie Hill against Minton Equipment Company for all amounts the Hills had been cast to pay unto Capitol, plus $3,000 in attorney's fees and costs.

We agree with the appellate court's finding that Capitol validly assigned all its warranty rights against the seller to Hill. An assignment of warranty rights is not prohibited by the Civil Code. Civil Code art. 2541 provides that a buyer may bring an action for a reduction in price. However, this must be read in light of C.C. art. 11, which allows individuals freedom...