Mayflower Seafoods, Inc. v. Integrity Credit Corp.

Decision Date07 March 1988
Docket NumberNo. 86-1301,86-1301
Citation25 Mass.App.Ct. 453,519 N.E.2d 1355
CourtAppeals Court of Massachusetts

Louis J. Scerra, Jr. (Gary R. Greenberg, Boston, with him), for plaintiff.

Isaac H. Peres, Reading, for defendant.


CUTTER, Justice.

Mayflower Seafoods, Inc. (Mayflower), conducts a restaurant and seafood business in Plymouth. Energy Control Systems, Inc. (the vendor 1), was engaged in selling devices and systems of energy control. Integrity Credit Corporation (the corporate lessor) was formerly known as Tri-Continental Leasing Corporation. The trial judge found that the corporate lessor is a "finance lessor, whose service is to provide funds to persons or entities" to enable them to lease equipment. In the spring of 1983, Robert Harrison, a salesman employed by the vendor but allowed by the vendor also to work for others, approached John Howland, an officer of Mayflower, and made an inspection of that company's facilities. Harrison represented to Howland at various conferences that a Solidyne energy controller or computer device (of a type sold or distributed by the vendor) would reduce Mayflower's energy consumption by about ten percent.

Mayflower, by a preliminary agreement, dated May 16, 1983, agreed to lease the Solidyne equipment recommended by Harrison, rather than to buy it. Harrison, on June 29, 1983, using a blank form (see note 6, infra, and related text) of a type supplied to the vendor by the corporate lessor, had Mayflower execute a lease (not signed by the lessor) of the Solidyne equipment which later was accepted by the corporate lessor. The corporate lessor then purchased the equipment from the vendor for $16,800 and leased it to Mayflower for a monthly rental of $640.29. 2

After the initial transactions, the corporate lessor sent to Mayflower a schedule of payments to become due under the lease. Mayflower made thirteen monthly payments under the lease including a last payment on August 6, 1984.

A few months after using the equipment, Mayflower noticed that the Solidyne equipment was not providing energy savings of the type and amount which met Harrison's representations of a ten percent energy reduction. Mayflower notified Harrison and the vendor of this and tests revealed that the complaint was justified. Efforts made to improve the equipment's performance were not successful. All these transactions took place in the summer and fall of 1983. Mayflower, as already stated, continued to pay to the corporate lessor the rent under the lease due through August 6, 1984.

On October 31, 1984, Mayflower's counsel threatened to bring an action against the corporate lessor for fraud and misrepresentation unless the lessor cancelled the lease, removed the equipment, and stopped attempts to collect from Mayflower the balance due under the lease. To this on November 2, 1984, the corporate lessor (a) by one letter notified Mayflower of its default under the lease and demanded return of the equipment to be sold (the proceeds to be applied on the delinquent account), and (b) by another letter told Mayflower that the payments due under the lease were being accelerated, that the total amount then due was $15,274.12, and that suit would be brought to recover that amount on November 12, 1984, if not then paid.

On July 10, 1985, Mayflower filed in the Superior Court a complaint seeking declaratory relief under G.L. c. 231A. Mayflower sought to recover for breach of contract by the vendor and by the corporate lessor, alleging both of them had committed a breach of contract and had misrepresented negligently the efficiency of the Solidyne equipment leased to Mayflower. Mayflower also sought to recover from both of these then defendants on the ground that they had engaged in unfair and deceptive acts in violation of G.L. c. 93A, §§ 2 and 11. 3

At the opening of trial, the judge (after defaulting the vendor, see note 1, supra ) stated for the record and to counsel that he "reserved to" himself the question of assessment of damages against the defaulted vendor, and all claims by Mayflower pursuant to G.L. c. 231A. He also reserved to himself claims by Mayflower against the corporate lessor based on c. 93A. He submitted to the jury the common law claims.

At the close of all the evidence, which occurred when Mayflower rested its case, the judge denied the corporate lessor's motion for a directed verdict. The judge stated to counsel, in the absence of the jury, that he would deny the corporate lessor's motions for directed verdicts and submit to the jury certain issues which he had not reserved to himself in this bifurcated trial. 4 Part of the bifurcated case was then submitted to the jury on ten special questions. These and the answers are summarized in the margin. 5

The judge, after taking on July 11, 1986, the jury's answers to the special questions, filed on July 17, 1986, consolidated findings of fact, rulings of law, an order for judgment for the corporate lessor on Mayflower's claims against it under G.L. c. 93A, and a declaration under G.L. c. 231A of the rights of the parties on the claims against the corporate lessor made by Mayflower. He also set out an assessment of damages and order for judgment against the defaulted vendor.

In this consolidated order, the judge originally took the position that the answers of the jury to questions 4 and 5 (that as against the corporate lessor Mayflower would be adequately compensated by a payment of $1,500), provided a basis of an order for judgment for Mayflower in that amount. Counsel for the corporate lessor, however, on July 22, 1986, filed a motion for judgment n.o.v. on the claim against it submitted to the jury, and this motion was allowed. Judgment on the issues submitted to the jury was entered for the corporate lessor on September 22, 1986. The net effect of the judgments affecting the corporate lessor thus was (1) a declaration that the lease was valid (as between Mayflower and the corporate lessor) and Mayflower was not justified in its breach of its obligation to pay the accelerated rent, (2) that the corporate lessor was entitled to recover that rent ($17,976.14) and costs from Mayflower, and (3) the corporate lessor had no liability to Mayflower under c. 93A.

1. The lease, signed by Mayflower and thereafter by the corporate lessor, contained at the top of the first page next to the name of the vendor (in legible capital letters) the statement: "NEITHER VENDOR, NOR ANY SALESMAN OR OTHER AGENT OF VENDOR, IS AN AGENT OF LESSOR. NO SALESMAN OR AGENT OF VENDOR IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OR CONDITION OF THIS LEASE, AND NO REPRESENTATION AS TO EQUIPMENT OR ANY OTHER MATTER BY VENDOR SHALL IN ANYWAY AFFECT LESSEE'S DUTY TO PAY THE RENT AND PERFORM ITS OTHER OBLIGATIONS AS SET FORTH IN THIS LEASE." The second paragraph of the lease describes the intended transaction with precision, viz., "Lessee [Mayflower] requests Lessor to purchase the Equipment from a Vendor (the 'Vendor') and arrange for delivery to Lessee at Lessee's expense...." Paragraph 3 (still on the front page), headed in capital letters "NO WARRANTIES BY LESSOR," is set out in the margin. 6

From this two page document (printed on both sides of a letter-size single sheet), Mayflower was put on explicit notice of the corporate lessor's status as a finance lessor and that Harrison, as the vendor's salesman, had no authority to vary any standard term of the lease agreement. John Howland, who acted for Mayflower, testified that he did not understand on May 16, 1983, when he signed a preliminary "lease/purchase agreement" with the vendor (which did not mention the corporate lessor or any finance lessor by name), that "another company" would be involved in the transaction. That preliminary agreement, however, stated in a conspicuous note, "The Specific Terms of the lease may vary depending upon the Leasing Co. The Lease Rates are approximate and may be subject to change prior to installation" (emphasis supplied). In June, when he was presented with the new lease agreement, he admitted that he "did not read the whole agreement."

Even if Howland did not read the lease agreement, he signed what was "obviously a legal document without bothering to ascertain" its contents. He, as matter of law, was bound by its terms (in the absence of a clear fiduciary relationship, which does not appear here). See Markell v. Sidney B. Pfeifer Foundation, Inc., 9 Mass.App.Ct. 412, 440 (1980), and cases cited; 3 Corbin on Contracts, § 607 (1960 & Supp.1984). Howland, as a person engaged in active business in a substantial matter (involving for his restaurant and seafood business at least a $16,800 investment), should have expected that his conduct would be judged by ordinary business prudence and a reasonable recognition of current lease financing practices. See Patriot Gen. Life Ins. Co. v. CFC Inv. Co., 11 Mass.App.Ct. 857, 860-863, 420 N.E.2d 918 (1981); 1 Mechem, Agency, § 726 (2d ed. 1914).

2. Mayflower contends that the corporate lessor, by its conduct, had so dealt with Harrison and the vendor as to give them apparent authority to act for it. Analysis of what the corporate lessor did in this transaction reveals no significant action by it in any way inconsistent with its position as a finance lessor under the Patriot General case, 11 Mass.App.Ct. at 860-863, 420 N.E.2d 918.

Harrison and the vendor plainly had no actual authority to commit the corporate lessor to the lease signed in June, 1983, or to bind it by representations. The evidence reveals only these circumstances:

(a) Harrison told Howland that the vendor would arrange the lease financing. The note in the preliminary lease agreement of May 16, 1983, essentially an application for financing, should have put Howland on notice that the vendor was not to be the lessor of the Solidyne...

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