Lee Sapp Leasing, Inc. v. Catholic Archbishop of Omaha, S-93-781

• Citation: 248 Neb. 829,540 N.W.2d 101
• Decision Date: 01 December 1995
• Docket Number: No. S-93-781,S-93-781
• Parties: , 104 Ed. Law Rep. 1351, 28 UCC Rep.Serv.2d 474 LEE SAPP LEASING, INC., Appellee, v. The CATHOLIC ARCHBISHOP OF OMAHA, Doing Business as Daniel J. Gross High School, Appellant.
• Court: Nebraska Supreme Court

Page 101

540 N.W.2d 101

248 Neb. 829, 104 Ed. Law Rep. 1351, 28 UCC Rep.Serv.2d 474

LEE SAPP LEASING, INC., Appellee, v. The CATHOLIC ARCHBISHOP OF OMAHA, Doing Business as Daniel J. Gross High School, Appellant.

No. S-93-781.

Supreme Court of Nebraska.

Dec. 1, 1995.

Syllabus by the Court

1. Judgments: Appeal and Error. In a bench trial of a law action, the trial court's factual findings have the effect of a jury verdict and will not be set aside on appeal unless they are clearly wrong.

2. Judgments: Appeal and Error. When reviewing a question of law, an appellate court reaches a conclusion independent of the lower court's ruling.

3. Uniform Commercial Code: Contracts. The Nebraska Uniform Commercial Code provides that general principles of contract law supplement its provisions unless displaced by particular provisions of the code.

4. Contracts: Time. Instruments made in reference to and as part of the same transaction are to be considered and construed together; that the instruments were made or dated at different times is not significant if they are related to and were part of the transaction.

5. Contracts. If an agreement provides for the payment of money upon the happening of certain contingencies, the cause of action will usually not arise until occurrence of the conditions.

6. Contracts: Intent: Words and Phrases. The existence of a condition precedent depends upon the intent of the parties as gathered from the words they have employed.

7. Contracts: Testimony. Testimony will not be allowed to vary the meaning of the document. If the contents of a document are not ambiguous, the document is not subject to interpretation and will be enforced according to its terms.

8. Contracts. The nonoccurrence of a condition precedent cannot be excused if occurrence of the condition was a material part of the agreed exchange.

Edward D. Hotz and Patrick M. Flood, of Betterman Katelman & Hotz, Omaha, for appellant.

Bradley K. Schweer, of Schweer & Ferraro, Omaha, for appellee.

WHITE, C.J., and CAPORALE, FAHRNBRUCH, LANPHIER, WRIGHT, CONNOLLY, and GERRARD, JJ.

LANPHIER, Justice.

The Catholic Archbishop of Omaha, doing business as Daniel J. Gross High School (Gross High) refused to make payments to Lee Sapp Leasing, Inc. (LSL), due under a "lease." Under the agreement, Gross High was to purchase surge suppressors from Midwest Energy Controls, Inc. (Midwest Energy), and LSL was to finance the sale. Payment was to be made by LSL to Midwest Energy when Gross High accepted delivery. After some of the suppressors blew up on installation, Gross High asked Midwest Energy to remove the suppressors, refused to accept delivery, and refused to pay LSL. LSL filed a collection action against Gross High in the district court for Sarpy County.

Both parties waived jury trial. After a bench trial, the district court found that under the Nebraska Uniform Commercial Code, the agreement was intended as security governed by article 9 rather than a lease governed by article 2, and that, therefore, Gross High's only remedies were against the true seller of the goods, Midwest Energy. Gross High was ordered to pay the purchase price of the equipment, plus court costs, to LSL. Gross High appealed to the Nebraska Court of Appeals, and we removed the case to our docket. Finding that the duties to perform under the agreement were subject to a condition precedent of Gross High's acknowledgment of delivery which did not occur, we reverse, and remand the cause with directions.

BACKGROUND

In September 1990, Midwest Energy approached Gross High for the purpose of selling to Gross High surge suppressors which would purportedly save Gross High money on electric bills. Gross High did not want to The agreement provided for 39 surge suppressors made by Redi-Volt and sold by Midwest Energy to be furnished to Gross High in return for monthly rental. The terms of the agreement provided for monthly rental payments of $846.72 for 48 months.

pay cash for the suppressors, so in order to consummate the sale to Gross High, Midwest Energy contacted LSL for financing. LSL was not in the energy or equipment business, but it agreed to provide financing for the surge suppressors in the form of a lease. Dennis Monahan, general manager of LSL, prepared a lease, dated November 15, 1990.

The scheduled payments would return to LSL the cost of the equipment, plus interest. Gross High would become owner of the surge suppressors at the end of the term without additional consideration. Gross High, through its agent, signed the lease.

The language of the lease stated: "22. INTEGRATION. This lease and any schedules or addendums attached hereto constitutes the full agreement of the parties...." LSL presented a letter of acceptance and delivery with the lease. The acceptance and delivery letter was attached to the lease, referred to the lease, and was presented to Gross High at the same time as the lease. The letter stated:

ACCEPTANCE AND DELIVERY LETTER

The undersigned Lessee hereby acknowledges receipt of the equipment described below or on any attached schedule (the "Equipment") fully installed and in good working condition, and Lessee hereby accepts the Equipment after full inspection thereof as satisfactory for all purposes of the above referenced lease executed by Lessee with Lee Sapp Leasing, Inc. (the "Lessor")....

....

... [Gross High] understands that [LSL] is relying upon this receipt as a condition for making payment for the cost of the leased Equipment to [Midwest Energy].

(Emphasis supplied.)

Although the letter was dated November 15, 1990, the same date as the lease, a handwritten notation stated it was to be signed when the equipment was delivered. LSL does not dispute that the acceptance and delivery letter was a part of the transaction. LSL did maintain that contrary to the language of the documents, the receipt of the letter was a condition of LSL paying only the final 10 percent due to Midwest Energy.

Gross High neither signed nor returned this letter to LSL. Notwithstanding that fact, LSL paid Midwest Energy. Midwest Energy paid the first month's rent and a security deposit to LSL. Midwest Energy's employees attempted to install the surge suppressors at Gross High, but encountered problems. Robert Priborsky, Midwest Energy's installer, wrote to LSL and stated:

As you know, I have been trying desperately to get Global Marketing [Midwest Energy's supplier] to replace the Redi-Volt units, that went out during installation at Gross High School.

....

So in closing, because of Global Marketings [sic], lack of interest and support of their product, I am unable to complete the installation at Gross High School, for Midwest Energy Controls, Inc.

During installation of 24 of the 39 surge suppressors by Midwest Energy, 3 of the suppressors "blew up." Midwest Energy never completed installation of all 39 suppressors. Gross High requested that Midwest Energy remove the installed surge suppressors, but Midwest Energy did not comply. Gross High never accepted delivery of the suppressors or made a payment to LSL on the agreement.

ASSIGNMENTS OF ERROR

Gross High contends that the trial court erred (1) in refusing to recognize that article 2 of the Nebraska Uniform Commercial Code governed the sales aspects of the agreement transaction, (2) in concluding that Gross High's defenses amounted to a breach of

warranty, and (3) in refusing to apply the provisions of Neb.U.C.C. § 2-606 (Reissue 1992), entitled "What constitutes acceptance of goods," to the evidence presented at trial.

STANDARD OF REVIEW

In a bench trial of a law action, the trial court's factual findings have the effect of a jury verdict and will not be set aside on appeal unless they are clearly wrong. Lincoln Lumber Co. v. Fowler, 248 Neb. 221, 533 N.W.2d 898 (1995); First Westside Bank v. For-Med, Inc., 247 Neb. 641, 529 N.W.2d 66 (1995); Label Concepts v. Westendorf Plastics, 247 Neb. 560, 528 N.W.2d 335 (1995).

However, when reviewing a question of law, an appellate court reaches a conclusion independent of the lower court's ruling. Eggers v. Rittscher, 247 Neb. 648, 529 N.W.2d 741 (1995); Dolan v. Svitak, 247 Neb. 410, 527 N.W.2d 621 (1995); Hausse v. Kimmey 247 Neb. 23, 524 N.W.2d 567 (1994).

ANALYSIS

Gross High urges that it has certain rights under article 2 of the Nebraska Uniform Commercial Code which govern the defects in the goods and its nonacceptance of same. LSL urges that article 9 of the Nebraska Uniform Commercial Code governs and that LSL as a financing entity has no responsibility for a defect in the goods and, in any event, that Gross High's refusal to accept delivery and the fact that the goods may have been defective are affirmative defenses which were not pled.

Within that framework, the parties argue over the legal effect of the undisputed fact of Gross High not signing or returning the acceptance and delivery letter to LSL.

The Nebraska Uniform Commercial Code provides that general principles of contract law supplement its provisions unless displaced by particular provisions of the code. Neb.U.C.C. § 1-103 (Reissue 1992).

The general principle of contract law at issue here is not displaced by the particular provisions of the code at issue. See, Cyberchron Corp. v. Calldata Systems Development, 831 F.Supp. 94 (E.D.N.Y.1993), aff'd in part, vacated in part, and remanded 47 F.3d 39 (2d Cir.1995); Brown Mach. v. Hercules, Inc., 770 S.W.2d 416 (Mo.App.1989); Armco Steel Corp. v. Isaacson Struct. Steel, 611 P.2d 507 (Alaska 1980).

The threshold question of law which must be addressed is, what is the legal significance of the refusal of Gross High to accept delivery, given that LSL paid Midwest Energy without receiving the acceptance and delivery letter from Gross High?

Both the lease and the acceptance and delivery letter were part of the LSL-Gross High agreement. The lease itself made the letter part of the agreement. The applicable terms in the lease...