Chemical Bank v. Rinden Professional Ass'n

• Decision Date: 01 July 1985
• Docket Number: No. 84-098,84-098
• Parties: , 41 UCC Rep.Serv. 1035 CHEMICAL BANK v. RINDEN PROFESSIONAL ASSOCIATION.
• Court: New Hampshire Supreme Court

Page 706

498 A.2d 706

126 N.H. 688, 41 UCC Rep.Serv. 1035

CHEMICAL BANK v. RINDEN PROFESSIONAL ASSOCIATION.

No. 84-098.

Supreme Court of New Hampshire.

July 1, 1985.

Shaines, Madrigan & McEachern P.A., Portsmouth (Gregory D. Robbins on brief and orally), for plaintiff.

Rinden Professional Association, Concord (Paul A. Rinden on brief and orally), for defendant.

DOUGLAS, Justice.

This case presents the issue whether the defendant, Rinden Professional Association (Rinden), validly waived its defenses against the plaintiff-assignee, Chemical Bank, upon the assignment of its lease-purchase agreement. We hold that the waiver was valid and affirm the judgment in favor of plaintiff.

On April 25, 1974, Rinden, a law firm in Concord, entered into a lease-purchase agreement with Intertel Communications Corporation (Intertel) for an office phone system for the defendant's place of business. Under the contract, Rinden was to pay Intertel $158.00 per month for 96 months. At the end of this period, Rinden had the option to purchase the equipment for $1.00.

Shortly thereafter, Rinden received a document executed by Intertel, which gave notice of an assignment to Chemical Bank of the right to receive payments from Rinden as provided for in the lease-purchase agreement. Also contained in the notice was a so-called "hell or high water" clause, the purpose of which was to waive as to the assignee any defenses Rinden might have against Intertel. The clause specifically stated that such defenses could still be raised against the assignor, Intertel. The waiver of defenses clause was required by Chemical Bank as a precondition of its purchase from Intertel of Rinden's contract. After reading it, John Satterfield, office manager of Rinden, signed the document on June 11, 1974.

After receiving the document signed by Satterfield on behalf of Rinden, Chemical Bank paid Intertel the sum of $8,804.39 and received from Intertel an assignment of the right to payment under the lease. Contractual duties, such as maintenance of the phone system, were not delegated, but remained with Intertel. Around June 18, 1974, Rinden received a letter from Chemical Bank informing it that the assignment had been completed and that Rinden was now obliged to make its payments to Chemical Bank.

Rinden made payments to Chemical Bank for nearly three years, until the phone system began to malfunction seriously in 1977. It notified Intertel of the problems and ceased payments. Rinden eventually replaced the phone system with that of another company.

Rinden refused to pay Chemical Bank, and litigation ensued. Intertel was made a third-party defendant by Rinden, but Intertel went into bankruptcy in 1979.

In October 1978, Chemical Bank filed a motion for summary judgment based on the waiver clause. This motion was denied by the Superior Court (DiClerico, J.) on September 1, 1979, on the ground that there was a single question of fact to be resolved; namely, whether or not Chemical Bank was an assignee for value, in good faith, and without notice of a claim or defense. In December 1979, Chemical Bank filed a request that the court schedule a hearing limited to that issue.

Rinden then filed a motion for summary judgment, which on the recommendation of the Master (Walter L. Murphy, Esq.) on May 11, 1981, was denied by the Superior Court (Temple, J.). The defendant then requested both a hearing on a second motion for summary judgment and postponement of the scheduled hearing on the merits.

The defendant's requests were granted, and a hearing was held on the defendant's motion. The Master (Charles T. Gallagher, Esq.) recommended that the motion be denied and that the plaintiff be awarded $568.00 in attorney's fees, pursuant to Superior Court Rule 59, for the time and cost expended in defending against the motion. These recommendations were approved by the Superior Court (Nadeau, J.) on October 28, 1982.

A hearing on the merits was held on November 21, 1983. The Master (Robert Carignan, Esq.) found that the June 11, 1974, document from Intertel to Rinden contained a valid notice of assignment and waiver of defenses and that Chemical Bank is a holder in due course entitled to collect the balance of its payments from Rinden. This report was approved by Superior Court (Cann, J.) on January 30, 1984. The master let stand the previous award of attorney's fees. The defendant appeals the decision, claiming error in the finding that the waiver of defenses clause is enforceable and in the award of $568.00 in attorneys' fees.

We begin by noting that we will not overturn a master's findings and rulings "unless they are unsupported by the evidence or are erroneous as a matter of law." Summit Electric, Inc. v. Pepin Brothers Const., Inc., 121 N.H. 203, 206, 427 A.2d 505, 507 (1981). In applying this standard, we will interpret Massachusetts law as provided in the lease-purchase agreement between Rinden and Intertel.

This case is governed by the Uniform Commercial Code (UCC) as enacted in Massachusetts. See Mass.Gen.Laws Ann. chapter 106. The version of the provision of article 9 of the UCC applicable to this case, Mass.Gen.Laws Ann. ch. 106 § 9-206(1), is entitled "Agreement Not to Assert Defenses Against Assignee; Modification of Sales Warrantees Where Security Agreement Exists" and reads:

"Subject to any statute or decision which establishes a different rule for buyers of consumer goods, an agreement by a buyer that he will not assert against an assignee any claim or defense which he may have against the seller is enforceable by an assignee who takes his assignment for value, in good faith and without notice of a claim or defense, except as to defenses of a type which may be asserted against a holder in due course of a negotiable instrument under the Article on Commercial Paper (Article 3). A buyer who as part of one transaction signs both a negotiable instrument and a security agreement makes such an agreement."

For the reasons set out below, we hold that this provision governs the instant case and that its requirements for a valid waiver of defenses and claims against an assignee have been met.

Article 9 of the UCC applies in this case because the lease-purchase contract between Rinden and Intertel was a secured transaction under the Code. Under the terms of the contract, Rinden was to pay $158.00 per month for 96 months. At the end of that time, Rinden had the option to purchase the equipment for $1.00. A security interest is created where, upon compliance with the terms of the lease, the lessee has the option to purchase the goods for nominal consideration. Mass.Gen.Laws Ann. ch. 106 § 1-201(37)(b); see also Mass.Gen.Laws Ann. ch. 106 § 9-206(1) (Supp.1983).

Under Mass.Gen.Laws Ann. ch. 106 § 9-206(1), warranties contained in a commercial sales contract may be modified so that a buyer agrees not to assert defenses against an assignee of the contract. Credit Alliance Corp. v. David O. Crump Sand and Fill, 470 F.Supp. 489, 491 (S.D.N.Y.1979). The requirements of a valid waiver are that there was an agreement by a buyer, who is not a consumer, to waive defenses against an assignee and that the assignment was made for value, in good faith, and without notice of a claim or defense. Additionally, under the terms of the contract in issue here, modification of it could only be by a "like signed agreement." We find that these requirements were met so that the defendant validly waived his defenses against Chemical Bank.

The master found that Rinden agreed to the waiver of defenses clause, and the evidence supports this view. An agreement is defined as "the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance...." Mass.Gen.Laws Ann. ch. 106 § 1-201(3).

Rinden argues that the June 11, 1974, letter from Intertel was only a notice of assignment by which Intertel merely notified the defendant that it was exercising its right to assign its payment rights to Chemical Bank. While the document served this function, it also stated in clear language and in regular sized print, in a section comprising approximately half of the document, that Rinden would be unable to assert defenses against the assignee but would still have recourse against Intertel. Moreover, the language of the document was that of a contract. "As Lessee, you hereby acknowledge that Intertel ... has the right of assigning the ... Lease and in consideration of the Assignee having advanced funds to the Lessor to finance the equipment ... agree as follows...." (Emphasis added.)

This document was signed by John Satterfield, an authorized representative of Rinden. Although not conclusive of an agreement, a signature "is indeed strong evidence that [the signer] is thereby expressing his unconditional assent." A. Corbin, Corbin on Contracts § 31, at 117 (1963). The last sentence in the document, immediately preceding the signature of Kenneth Barron, president of Intertel, states: "please acknowledge your receipt and understanding of the above by signing and returning one copy of this document." The signature line for the defendant is preceded by the following acknowledgment:

"I hereby acknowledge and verify the contents of this document and also certify that the above mentioned equipment has been installed and accepted."

In his deposition, Mr. Satterfield stated that he had read the document before signing it. All of these circumstances support the master's finding that Rinden agreed to the waiver of defenses clause.

The defendant does not claim that it is a consumer so as to make Mass.Gen.Laws Ann. ch. 106 § 9-206(1) inapplicable on that account. The defendant is a professional association, a law firm, not in need of special protections often provided for unwary consumers. See, e.g., Mass.Gen.Laws Ann. ch. 106 § 2-719; Mass.Gen.Laws Ann. ch. 255 § 12c; Mass.Gen.Laws Ann. ch. 93A; see...