I. O. A. Leasing Corp. v. Merle Thomas Corp.

• Decision Date: 05 January 1971
• Docket Number: No. 128,128
• Parties: I. O. A. LEASING CORPORATION v. MERLE THOMAS CORPORATION.
• Court: Maryland Court of Appeals

Page 243

260 Md. 243

272 A.2d 1

I. O. A. LEASING CORPORATION v. MERLE THOMAS CORPORATION.

No. 128.

Court of Appeals of Maryland.

Jan. 5, 1971.

Harold Smith, Washington, D. C., for appellant.

Benton L. Becker, Kensington, for appellee.

Argued before HAMMOND, C. J., and BARNES, FINAN, SINGLEY and SMITH, JJ.

FINAN, Judge.

We must decide in this case whether or not the trial judge was correct in his denial of the appellant's motion for judgment n. o. v. or, in the alternative, for a new trial. The facts are complicated and lengthy, involving, as they do, a computer leasing contract, so for the benefit of those with little perseverance we state at the outset that we affirm the lower court. The facts which they jury had to consider were as follows:

On April 13, 1967, the appellant (I.O.A.), a computer leasing company, entered into a contract with the appellee Merle Thomas Corporation (M.T.C.), a company in the business of renting time on its computers to individual customers. Under the terms of the contract, I.O.A. was to lease to M.T.C. an IBM 1401 computer system consisting of a central processing unit and eight auxiliary pieces of equipment. There were no warranties as to the condition of the computer in the contract, and no statement that time was to be of the essence. The contract did state that the monthly rental would be 20% less than the price charged by IBM for the same system, and that M.T.C. would not be required to pay any overtime charges for use of the system. Normal IBM maintenance was to be paid by I.O.A., and the overtime or 'second shift' maintenance charges were to be paid by M.T.C. I.O.A. was to pay the shipping charges for delivery of the system to M.T.C. and also the charges for having the system installed; however, the contract was silent as to which party was actually responsible for installation.

The total monthly rental for the system was $6,448.00, of that sum $3,088.00 was payment for the central processing unit, and $3,360.00 for the eight auxiliary pieces of equipment. Rental payments were to commence on May 15, 1967, 'subject to the date of delivery.' I.O.A. had purchased the 1401 central processing unit from a bank in Worcester, Massachusetts for $72,000.00 and undertook to make the delivery on May 15, 1967.

There was a delay caused by a trucking strike, and the central processing unit was not delivered to M.T.C. until May 30, 1967. Notwithstanding the fact that the system in question was under an IBM maintenance contract, the physical condition of the central processing unit which was delivered left much to be desired, and was described by various witnesses as 'filthy,' 'dirty,' 'greasy,' 'grimy,' 'a mess,' and 'full of dents.' In spite of their reservations about the condition of the unit and its ability to perform, the individuals responsible at M.T.C. accepted delivery of it because they apparently had no other available source from which to get this particular computer system.

It is not clear from the contract who was responsible for getting IBM to install the system, and it is not clear from the record who actually made the initial attempts at having the machine installed in early June of 1967, but the attempts were unsuccessful. A meeting between the parties and their attorneys was held in New York City on June 19, 1967, in an effort to resolve the problems which had arisen. What is clear from the record is that after this meeting, I.O.A. was the party which in fact was attempting to get the unit installed with the same unimpressive results as were produced by the earlier efforts. In any event, M.T.C. allocated time for installation of the unit on four or five occasions between early June 1967 and June 27, 1967, and nobody ever appeared to do the work. ¹ This, coupled with the appearance of the unit, and late and partial delivery, was causing great annoyance to Mr. Merle Thomas (the President of M.T.C.). On June 27, 1967, I.O.A. telephoned and asked M.T.C. to allocate time on the next day (June 28th) instead of June 29th as had previously been planned. This was apparently the proverbial straw which broke, in this case, the appellee's back. Because of the inconvenience which would result to its customers and the short time element involved, M.T.C. decided that it could not make such a change and terminated the contract, thereby leaving I.O.A. with one used data processing unit worth approximately $72,000.00 which appeared to be everybody's 'ugly duckling.' ² Thus began the parties' journey to this Court.

On September 15, 1967, M.T.C. filed suit in the Circuit Court for Montgomery County. After preliminary motions were disposed of I.O.A. filed an answer and counterclaim on June 19, 1968. On December 8, 1969, a jury trial was commenced and at the close of all the evidence I.O.A. moved for a directed verdict. Its motion was denied and the jury awarded M.T.C. a verdict of $21,561.00 on December 9, 1969. On December 12, 1969, the appellant filed a motion for judgment n. o. v. or for a new trial in the alternative. This motion was denied at a hearing on January 16, 1970, and a remittitur of the verdict to an amount of $17,961.55 was granted and agreed to by the appellee. From a denial of its motion for judgment n. o. v. or for a new trial, I.O.A. brings this appeal.

Appellant's primary contention is that as a matter of law, M.T.C. could not, with impunity, cancel the contract without ever having had the computer installed to see hwether or not it would work, and that any evidence as to the delivery or condition of the computer was not relevant. Appellant argues that there was an implied condition precedent which required M.T.C. to 'plug in' or 'hook up' the unit. In appellant's view of the case, the issue is 'whether or not the machine would perform,' and it compares the case at bar to an automobile lease, and hypothesizes a situation wherein the lessee receives a dirty and dented automobile and rescinds the rental contract without ever having tried to start the car. The analogy is appealing in its simplicity, but not quite accurate. Had the lessee of the automobile in the hypothetical situation received a car which was not only dirty and dented, but also without gasoline, wheels, doors, or windows, the analogy would have been more complete. In such a case it could hardly be said that, as a matter of law, he would have to turn the key in the ignition before he could consider the contract to be at an end.

Appellant's argument not only assumes that M.T.C. was responsible for the installation of the system (which issue was hotly contested throughout the trial and the resolution of which was left for the determination of the jury), but also ignores the fact that there must first have been a delivery 'under the terms of the contract,' as noted by Judge Miller in his instructions to the jury. Judge Miller elaborated on that phrase by instructing that the appellant had to show that it 'delivered the goods that were intended to be delivered by the parties when they entered into the contract or lease agreement,' and that the jury might consider, relative to the question of delivery, the reasonableness of the time of the delivery, and the 'condition of the equipment.' He continued that if the jury found that there was...