Leasetec Corp. v. Orient Systems, Inc.

• Decision Date: 30 November 1999
• Docket Number: No. 98-6781-CIV.,98-6781-CIV.
• Citation: 85 F.Supp.2d 1310
• Parties: LEASETEC CORPORATION, Plaintiff, v. ORIENT SYSTEMS, INC., Isabellam, Orlando a/k/a Belle Orlando, Leibstone Associates, Inc. a/k/a William Leibstone Associates, Inc., William Leibstone, Montenapoleone, Inc., Marcel Zakka, Defendants.
• Court: U.S. District Court — Southern District of Florida

85 F.Supp.2d 1310

LEASETEC CORPORATION, Plaintiff, v. ORIENT SYSTEMS, INC., Isabellam, Orlando a/k/a Belle Orlando, Leibstone Associates, Inc. a/k/a William Leibstone Associates, Inc., William Leibstone, Montenapoleone, Inc., Marcel Zakka, Defendants.

No. 98-6781-CIV.

United States District Court, S.D. Florida, Fort Lauderdale Division.

November 30, 1999.

Charles Howard Lichtman, Genovese Lichtman Joblove & Battista, Miami, for Leasetec Corporation.

Robert Charles Stone, Boca Raton, FL, for William Leibstone.

Jerry B. Katzen, Katzen & Katzen, Boca Raton, FL, for Robert J. Goral.

James Harrell Greason, Miami, FL, for Bobby L. Mack, North Dade Community Dev. Corp.

Robert Nelson Pelier, Coral Gables, FL, for Montenapoleone, Inc., Marcel Zakka.

Keith Andrew Goldbaum, Friedman, Rosenwasser & Goldbaum, Boca Raton, FL, for Mister Blister Packaging Co., Inc., Louis N. Demas, Patricia J. Demas.

MEMORANDUM OPINION AND FINAL JUDGMENT

DIMITROULEAS, District Judge.

This cause came before the Court for non-jury trial on November 18 and 22, 1999. The Court having heard the evidence, judging the demeanor of the witnesses, hearing argument of counsel and otherwise being duly advised in the premises, does hereby make the following findings of fact and conclusions of law.

STATEMENT OF THE CASE

In this action, Plaintiff, Leasetec Corporation ("Leasetec"), an equipment lease finance company, is seeking to recover monies expended for leases it financed resulting from a fraudulent scheme entered into between Orient Systems, Inc. ("Orient") and defendants Leibstone Associates, Inc. ("Leibstone Associates") and Montenapoleone, Inc. ("Montenapoleone") and their principals, sometimes hereafter collectively referred to as the Lessee Defendants.¹

Leasetec asserts that Orient and the Lessee Defendants fraudulently induced Leasetec to enter into lease agreements with each of them by: (i) making false misrepresentations regarding the actual highly inflated cost of the equipment being acquired by the Lessee Defendants through Orient and paid for by Leasetec, (ii) misrepresenting to Leasetec by their execution of a Delivery and Acceptance Certificate that they had received in good working order the computers allegedly being leased, when in fact, they had not, and (iii) as to Leibstone Associates, not disclosing to Leasetec that $60,000 in the funds Leasetec was providing (above the actual value of the equipment) were being kick-backed and split between Leibstone Associates and Orient.

After the leases and their related documents were signed, including personal guarantees of the corporate principals, Leasetec paid Orient for the equipment. The Lessee Defendants then defaulted under their respective leases. Thereafter, Leasetec made demand upon the Lessee Defendants who acknowledged their lease defaults, but claim they were excused from performing under the leases because they never received the computers or, as in the case of Leibstone, its under the table money from Orient. This lawsuit followed these revelations and proceeded to trial on claims of breach of lease agreement, breach of guaranty and fraud as to both sets of defendants. Leibstone Associates asserted affirmative defenses of unconscionability and lack of consideration. Montenapoleone pled no affirmative defenses but through argument at trial, asked the Court to allow it to adopt the defenses of Leibstone Associates.

FINDINGS OF FACT

(i) As to Leibstone Associates and Leibstone.

On or about March 23, 1998, Leasetec and Leibstone Associates entered into a lease with Leasetec ("Leibstone Lease" — Plaintiff's Exhibit 1) whereby Leasetec agreed to lease to Leibstone Associates certain computer equipment ("Leibstone Equipment"). Pursuant to the Leibstone Lease, Leibstone Associates was to pay Leasetec the combined monthly rental (under two different schedules [signed at separate times] of $2,622.36 for the lease term of 36 months). As part of this transaction, Leibstone Associates also represented to Leasetec, through the submission of detailed System Schedules, that the purchase price for the specifically identified Leibstone Equipment was $60,003.88 (Plaintiff's Exhibit 2) for the first part of the transaction and $18,134.99 (Plaintiff's Exhibit 3) for the other part of the transaction, which closed a day apart.

On March 31 and April 1, 1998, Leibstone Associates also signed Delivery and Acceptance Certificates (Plaintiff's Exhibits 4 and 5) for the computer equipment, which referenced the Lease and the foregoing System Schedules. Each "D & A", as the document is known in common leasing parlance, contains the following lessee representation:

"Lessee hereby acknowledges receipt and acceptance of the Equipment and Software listed on the above referenced SYSTEM SCHEDULE and agrees the Equipment and Software has been delivered and is ready for use under the terms of the above referenced MASTER LEASE AGREEMENT." (Emphasis in original).

Also on March 20, 1998, defendant William Leibstone executed and delivered to Leasetec a personal guaranty (the "Leibstone Guaranty," Exhibit 8), whereby he unconditionally guaranteed the obligations of Leibstone Associates under its lease. The entirety of the Leibstone Associates transaction was orchestrated individually by Leibstone, the company's shareholder, officer and director.

Leibstone also testified at trial and admitted:

(a) He was recommended to Orient through a Dentist whose office was next door to his and who had a good experience with Orient. In effecting this transaction with Orient, Leibstone thought his company was going to receive some leased computer equipment and some capital, which it needed badly, and that the equipment lease and capital funding would be repaid in two to three years.

(b) The value of the computer system was less than the approximate $78,000 amount stated on the two System Schedules, since he expected to receive about $60,000 cash, and this information was not disclosed to Leasetec, with whom he had no contact whatsoever.

(c) The representations Leibstone signed to in the D & A's were not true when they were signed, because Leibstone Associates did not receive the computers (or for that matter, the promised money) from Orient then or at any time thereafter.

(d) That by signing the guarantee, if his company didn't pay its debt, Leasetec had a right to come against him and he admitted he was responsible for the consequences of his actions.

(e) He never paid Leasetec because he never received the computer or the funds from Orient.

(f) His company was in desperate need of financial assistance.

(g) He is an experienced sophisticated businessman, previously serving as CEO of a public company while working with national banks on large lending facilities.

(h) He did not investigate or shop for any other computer supplier besides Orient and did not attempt to seek alternate financing arrangements from any company other than Leasetec.

(ii) As to Montenapoleone and Zakka.

On or about March 19, 1998, Leasetec and Montenapoleone, a high-end men's clothing store at the Aventura Mall, entered into a lease ("Montenapoleone Lease" — Plaintiff's Exhibit 19) whereby Leasetec agreed to lease to Montenapoleone certain computer equipment. Pursuant to the Montenapoleone Lease, Montenapoleone was to pay Leasetec the combined monthly rental of $1,925.80 for the lease term of 36 months. Montenapoleone also signed both a System Schedule certifying to purchasing $57,282.88 of equipment (Plaintiff's Exhibit 20) and a D & A Certificate (Plaintiff's Exhibit 21), both otherwise identical in verbiage to the Leibstone documents described above.

Also on March 19, 1998, defendant Marcel Zakka ("Zakka"), through his authorized agent and store manager, Giovanni Scuotto ("Scuotto"), executed and delivered to Leasetec the Zakka Guaranty (Plaintiff's Exhibit 23) whereby he unconditionally guaranteed the obligations of Montenapoleone under its lease. In fact, all of the Montenapoleone lease documents were signed by Scuotto, who both wrote and printed Zakka's name as President of Montenapoleone for the corporate signatures, and Zakka, individually for the guarantee. Both Zakka and Scuotto had significant involvement in procuring the transaction with Tim Mayer, a high level employee with Orient, because they wanted to acquire computer "point of sale" inventory control equipment for the clothing store Zakka admitted that Scuotto was his highly trusted store manager, and was vested with authority to handle virtually any or all of the business of Montenapoleone, and that he would want his customers and vendors to rely on the authority of Scuotto, in his managerial capacity.

As to Zakka and Montenapoleone, based upon the testimony of Zakka and Scuotto, the Court further finds:

(i) Zakka authorized and negotiated at least part of the transaction, and expected and wanted it to close,

(ii) Zakka signed and delivered a credit application to Leasetec (Plaintiff's Exhibit 17),

(iii) Zakka directed Scuotto to write a check, Plaintiff's Exhibit 18, in the amount of $3851 to Leasetec for the first and last month's payment.

(iv) Zakka knew the computer cost was about $50,000 (it was $57,382, but the Montenapoleone Credit Application was for exactly $50,000) and that the monthly lease payments were about $1800 to $2000 a month (they were $1925.80).

(v) Zakka and Scuotto learned of Orient through Tim Mayer, one of its computer salesmen who was a customer of the store.

(vi) The representations signed to by Scuotto in the D & A were not true when signed, because Montenapoleone did not receive the computer from Orient, then, or at any time thereafter,

(vii) Montenapoleone never paid Leasetec because he never received the computer from Orient.

(viii) Zakka is an educated experienced sophisticated businessman, owning numerous business dealing in international exporting and previously dealing with national banks on lending facilities for his...