W.L. Scott, Inc. v. Madras Aerotech, Inc.

• Decision Date: 15 October 1982
• Docket Number: No. 13444,13444
• Citation: 103 Idaho 736,653 P.2d 791
• Parties: , 35 UCC Rep.Serv. 956 W.L. SCOTT, INC. dba L.S. Leasing, Plaintiff-Respondent, Cross-Appellant. v. MADRAS AEROTECH, INC. dba Treasure Valley Aviation & Company dba Valley Aviation, and Larry Dowers, an individual, Defendants-Appellants, Cross-Respondents.
• Court: Idaho Supreme Court

Page 791

653 P.2d 791

103 Idaho 736, 35 UCC Rep.Serv. 956

W.L. SCOTT, INC. dba L.S. Leasing, Plaintiff-Respondent, Cross-Appellant. v. MADRAS AEROTECH, INC. dba Treasure Valley Aviation & Company dba Valley Aviation, and Larry Dowers, an individual, Defendants-Appellants, Cross-Respondents.

No. 13444.

Supreme Court of Idaho.

Oct. 15, 1982.

Alan G. Lance, of Foley & Lance, Meridian, attorney for defendants-appellants.

William J. Russell, of Elam, Burke, Jeppesen, Evans & Boyd, Boise, attorney for plaintiff-respondent.

DONALDSON, Justice.

Appeal is brought from a final judgment rendered in favor of the plaintiff corporation in a civil action based upon the breach of a lease agreement.

The trial court found as fact that on December 14, 1976, the corporate defendant entered into a lease agreement with the corporate plaintiff. The agreement provided for the lease of a new Sharp 2600 System computer to the corporate defendant and by its terms required monthly payments. The computer was purchased by the plaintiff from the local Sharp dealer specifically for this lease at a cost of $14,745.00. Performance of the agreement by the corporate defendant was guaranteed by the individual defendant, Mr. Larry Dowers. The individual defendant executed a "Guaranty Agreement" dated January 17, 1977, and thereafter the plaintiff paid the dealer for the computer which had been delivered during the interim between the execution of the two agreements. On January 6, 1977, the plaintiff filed a financing statement on the computer with the Idaho Secretary of State pursuant to the Uniform Commercial Code. Monthly payments were made in accordance with the lease until September 1977 when a dispute arose. The plaintiff notified the local Madras Aerotech office and Mr. Larry Dowers that the lease was in default and requested payment. When no payments were made, the plaintiff with the assistance of the Sharp dealer peacefully repossessed the computer. The plaintiff attempted to sell the computer locally by contacting two potential buyers and by running local newspaper advertisements. These attempts proved futile and the computer was sold to the original supplier for $3,000.00.

L.S. Leasing then commenced suit against the defendants to collect a deficiency judgment based upon the lease and guaranty agreements. During the discovery period prior to trial, the defendants made a motion for summary judgment accompanied by affidavits which alleged that L.S. Leasing was not a legally recognized corporate entity in Idaho and thus had no standing to institute suit in the Idaho courts. Before this motion was heard, plaintiff filed a motion to amend its complaint which together with the motion for summary judgment was heard by the trial judge at a consolidated hearing. The trial judge heard argument on the plaintiff's motion first and granted leave to amend the complaint to reflect that L.S. Leasing is a d/b/a for W.L. Scott, Inc., an Idaho corporation. Then the trial judge heard argument on the motion for summary judgment.

In the memorandum decision which incorporated an order denying the motion for summary judgment, the trial judge rejected defendants' argument that a corporation cannot do business under an assumed name. Colorado Milling and Elevator Co. v. Proctor, 58 Idaho 578, 76 P.2d 438 (1938). Further, the trial judge rejected defendants' arguments that the lease was void as a matter of law for lack of mutuality and for being usurious.

The matter was then tried to the trial court. Among the trial court's conclusions of law, were the following: (1) the lease agreement was a lease and not governed by article 9 of the Uniform Commercial Code, (2) the agreement was not usurious, (3) the computer after repossession was not sold in a commercially reasonable manner, (4) there existed sufficient consideration to support the guaranty agreement, (5) the plaintiff satisfied the requirements of pleading and proving satisfaction of conditions precedent, (6) the plaintiff was entitled to a deficiency judgment, and (7) neither party was entitled to costs or attorney fees. Judgment was entered in favor of the plaintiff lessor. The defendants appeal and the plaintiff cross-appeals.

I.

The first issue we consider is whether the trial court erred by allowing the plaintiff to amend its complaint prior to hearing argument on defendants' motion for summary judgment.

The original complaint which was filed January 11, 1978, named the plaintiff as "L.S. Leasing, Inc." The defendants in their original answer did not raise by specific negative averment that L.S. Leasing, Inc. lacked the legal capacity to enforce a contract in the Idaho courts. Dairy Equipment Co. of Utah v. Boehme, 92 Idaho 301, 442 P.2d 437 (1968); I.R.C.P. 9(a). However, by an amended answer and counterclaim filed with leave of the Court on February 2, 1979, the defendant sufficiently raised this issue. Thereafter on February 9, 1979, defendants filed a motion for summary judgment based on grounds that plaintiff lacked standing to bring suit. The plaintiff then filed on February 13, 1979, a motion to amend its complaint to reflect that W.L. Scott, Inc. was doing business as L.S. Leasing. The trial court exercised its discretion in first hearing and permitting the amendment which reflected W.L. Scott, Inc., d/b/a L.S. Leasing as the plaintiff before considering defendants' motion for summary judgment.

A trial court is vested with the sound discretion to decide whether to permit the amendment of a pleading, Idaho First National Bank v. Wells, 100 Idaho 256, 596 P.2d 429 (1979); Smith v. City of Preston, 99 Idaho 618, 586 P.2d 1062 (1978), and in furtherance of justice between the parties may permit amendment. See Smith v. Shinn, 82 Idaho 141, 350 P.2d 348 (1960). In challenging a decision of the trial court which granted permission to amend a pleading, the challenger must clearly demonstrate an abuse of discretion, see, e.g., Lisher v. Krasselt, 96 Idaho 854, 538 P.2d 783 (1975); Dairy Equipment Co. of Utah v. Boehme, supra; Rankin v. Caldwell, 15 Idaho 625, 99 P. 108 (1908), which has not, here, been shown. We hold that the trial court did not err in hearing and granting the motion to amend before hearing the motion for summary judgment.

Appellants argue that the denial of their motion for summary judgment was error. This argument upon review has no merit. The amendment of the complaint supersedes the original complaint and all subsequent proceedings are based upon the amended complaint. E.g., Billings v. Sisters of Mercy of Idaho, 86 Idaho 485, 389 P.2d 224 (1964). In the absence of statutory prohibition, a corporation may conduct business and enter into a valid contract under an assumed name. However, to enforce that contract the corporation should bring the suit under its corporate name. In a suit on the contract brought under the assumed name, if the affirmative defense is raised and established either during proceedings on a motion for summary judgment or at trial which challenges the legal status of the plaintiff, the defendant will prevail unless the corporation such as here is granted leave to amend its complaint. The defendants presented affidavits in support of their motion which related to the legal status of L.S. Leasing, Inc. and not of W.L. Scott, Inc. ¹ Therefore, we affirm the trial court's denial of the defendants' motion for summary judgment.

II.

Appellants next argue that the trial court erred by denying their motion for dismissal at the close of plaintiff's case which was based on the alleged failure of the plaintiff to plead and prove satisfaction of conditions precedent. The record provides little support for appellants' position.

Appellants contend that the language of the lease agreement raised a question of a condition precedent. This language was:

"Lessee requests Lessor to purchase the above-described Equipment from Supplier and to lease said equipment to Lessee upon the terms and conditions of this lease; and upon written acceptance hereof signed at the Lessor's office by an authorized employee Lessor agrees to lease Equipment. The undersigned agree to all the terms and conditions of this lease as set forth above and on the reverse side hereof, and on the application initially attached to this form."

Appellants argue that "written acceptance ... signed at the Lessor's office by an authorized employee" was a condition precedent. While the trial court did not decide if this was a condition precedent, its finding that if it were a condition precedent that plaintiff's general averment in paragraph II of its amended complaint satisfied the requirement of I.R.C.P. 9(c) ² has not been shown to be error. The record reveals that the lease agreement was introduced into evidence without objection after Roy Farrer authenticated the document and testified to his signature thereon. The trial court determined that "[a]cceptance of the lease agreement appears unequivocally on the face of the document with the signature of Roy Farrer." Thus, it is apparent that the trial court determined that an effective acceptance was proven. The appellants have failed to demonstrate that these findings were clearly erroneous. I.R.C.P. 52(a). Consequently we reject their argument.

III.

We next consider appellants' arguments that the lease agreement was intended as a security device, that provisions of the Uniform Commercial Code, I.C. §§ 28-9-101 to -507, were thus applicable with regard to notice requirements, good faith, commercial reasonableness, waivability of notice and procedural and substantive determinations, and that the agreement was usurious.

We uphold the trial court in its conclusion of law that the lease agreement at issue was not a security interest subject to article 9 of the Uniform Commercial Code. The trial court properly analyzed the lease agreement upon the facts of the case. Whitworth v. Krueger, 98 Idaho 65, 558 P.2d 1026 (1976); I.C. § 28-1-201(37). We find...