Hartland Computer Leasing Corp., Inc. v. Insurance Man, Inc., 54392

• Decision Date: 23 May 1989
• Docket Number: No. 54392,54392
• Parties: HARTLAND COMPUTER LEASING CORPORATION, INC., Appellant, v. The INSURANCE MAN, INC., Thomas J. Saulsberry and Jo Ann Reese, Respondents.
• Court: Missouri Court of Appeals

Page 525

770 S.W.2d 525

HARTLAND COMPUTER LEASING CORPORATION, INC., Appellant, v. The INSURANCE MAN, INC., Thomas J. Saulsberry and Jo Ann

Reese, Respondents.

No. 54392.

Missouri Court of Appeals,

Eastern District,

Division Five.

May 23, 1989.

Sean Patrick O'Gorman, St. Louis, for appellant.

Thomas C. Saulsberry, Northwoods, pro se.

Jo Ann Reese, St. Louis, pro se.

CARL R. GAERTNER, Judge.

Appellant initiated this action in an Associate Judge Division of the Circuit Court of the City of St. Louis after respondents allegedly defaulted on an equipment lease by failing to make monthly payments for the computer equipment they leased from appellant. The trial court, without issuing findings of fact or conclusions of law, summarily denied the petition for breach of the lease after apparently concluding that the lease was a contract of adhesion. We reverse and remand.

Respondent The Insurance Man, Inc., (Insurance Man) as lessee contracted with appellant as lessor for certain computer equipment. Respondent Thomas Saulsberry is the sole owner of Insurance Man. Saulsberry and respondent Jo Ann Reese signed the lease individually as guarantors. Under the terms of the lease, Insurance Man was to select computer equipment carried by vendor Multitask, Inc., which appellant would purchase and in turn lease to respondent. Insurance Man was to make monthly payments of $229.16 to lease the equipment for a term of 36 months beginning July 1, 1986. The lease required an initial payment for the first and last months. On the front of the lease under the caption "Terms and Conditions of Lease" appeared the following provisions: 1) as between lessor and lessee the lessor makes no express or implied warranties of the condition, merchantability or fitness for any particular purpose and that the equipment was "as is", and 2) regardless of the condition or operability of the equipment lessee was to make the monthly payments to lessor and should make all claims solely against vendor. The back of the lease contained default provisions, specifically that in the event of nonpayment of any installment of rent lessor was entitled to terminate the lease, sell or rerent the equipment and recover damages for the balance due under the lease, less the amount recovered by the selling or rerenting. It also provided that lessor was entitled to recover from lessee costs and attorney fees incurred in enforcing the lease.

Thomas Saulsberry testified that the equipment worked for a short time, but malfunctioned during an electrical storm. Upon contacting lessor's agent, James Hogan, Saulsberry was told to take the equipment to the vendor. He did so and repairs were made under the vendor's warranty which was expressly assigned by the purchaser-lessor to the lessee under the terms of the lease. A second malfunction (apparently caused by a blown internal fuse) occurred approximately 20 days later. Saulsberry again contacted Hogan and was again told that the vendor was responsible for maintenance. Saulsberry, however, told Hogan to pick up the equipment and ceased making the monthly payments. The equipment sat idle for six months. When continued efforts to obtain payment of the monthly rental were unsuccessful, Hogan did take possession of the equipment. He later advised Saulsberry the equipment had been repaired and offered to return it. Saulsberry's response to this offer was that he did not want the machine. He directed Hogan to sell it and then they would make arrangements to settle the difference.

This litigation ensued with appellant seeking damages for breach of the lease. Respondents appeared unrepresented by counsel ¹. From the summary of the evidence set forth above it is obvious there exists no dispute over the execution or the terms of the lease and the guarantee. Respondents' sole defense is, in effect, a claimed breach of the implied warranty of merchantability. ² Although the parties did not request findings of fact or conclusions of law, the trial court stated at the conclusion of the evidence, "I am not sure what the law of these adhesion contracts are as to this kind of a relationship where one party is the beneficiary of the lease and the other party bears all the liabilities for it not functioning ... I would have a very difficult time in good conscience to ... award all the money that you are asking for."

Apparently the trial court concluded that, because he found it to be a contract of adhesion he was free to disregard appellant's clear and unambiguous express disclaimer of all warranties. This conclusion, under the circumstances of this case, is a misapplication of the law and requires reversal. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).

In Missouri, an adhesion contract, as opposed to a negotiated contract, has been described as a form contract created and imposed by a stronger party upon a weaker party on a "take this or nothing basis," the terms of which unexpectedly or unconscionably limit the obligations of the drafting party. Robin v. Blue Cross Hospital Service, Inc., 637 S.W.2d 695, 697 (Mo. banc 1982). Some writers view any pre-printed standardized form with filled-in blank spaces to be a contract of adhesion insofar as the pre-printed provisions are concerned. Thus, in Corbin On Contracts, § 559A at 660 (Supp.1989), it is said "the bulk of contracts signed in this country, if not every major Western nation, are adhesion contracts...." See also Estrin Construction Co., Inc. v. Aetna Casualty and Surety Co., 612 S.W.2d 413, 418, n. 3 (Mo.App.1981). Such form contracts are a natural concomitant of our mass production-mass consumer society. Id. Therefore, a rule automatically invalidating adhesion contracts would be completely unworkable. Corbin, supra § 559A at 660. Accordingly, courts do not view adhesion contracts as inherently sinister and automatically unenforceable. Rather, as with all contracts, the courts seek to enforce the reasonable expectations of the parties garnered not only from the words of a standardized form imposed by its proponent, but from the totality of the circumstances surrounding the transaction. Robin, supra, 637 S.W.2d at 697; Estrin, supra, 612 S.W.2d at 413; Spychalski v. MFA Life Ins. Co., 620 S.W.2d 388, 392-93 (Mo.App.1981). Only such provisions of the standardized form which fail to comport with such reasonable expectations and which are unexpected and unconscionably unfair are held to be unenforceable....