Walter E. Heller & Co., Inc. v. Convalescent Home of the First Church of Deliverance

• Decision Date: 25 March 1977
• Docket Number: No. 76-67,76-67
• Citation: 49 Ill.App.3d 213,22 U.C.C.Rep. 574,8 Ill.Dec. 823,365 N.E.2d 1285
• Parties: , 8 Ill.Dec. 823, 22 UCC Rep.Serv. 574 WALTER E. HELLER & COMPANY, INC., Plaintiff-Appellee, v. CONVALESCENT HOME OF the FIRST CHURCH OF DELIVERANCE and First Church of Deliverance, Defendants-Appellants, v. BURROUGHS CORPORATION et al., Cross Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 1285

365 N.E.2d 1285

49 Ill.App.3d 213, 8 Ill.Dec. 823, 22

UCC Rep.Serv. 574

WALTER E. HELLER & COMPANY, INC., Plaintiff-Appellee, v. CONVALESCENT HOME OF the FIRST CHURCH OF DELIVERANCE and First Church of Deliverance, Defendants-Appellants, v. BURROUGHS CORPORATION et al., Cross Defendants-Appellees.

No. 76-67.

Appellate Court of Illinois, First District, Fifth Division.

March 25, 1977.

As Modified on Denial of Rehearing July 8, 1977.

[8 Ill.Dec. 824] Bernard Allen Fried, Chicago, for defendants-appellants.

Rosenthal & Schanfield, Chicago, for plaintiff-appellee; Harvey J. Barnett, Bruce A. Spear, Chicago, of counsel.

LORENZ, Justice:

Defendants, Convalescent Home of the First Church of Deliverance (Convalescent Home) and First Church of Deliverance (First Church), appeal from a judgment on the pleadings in plaintiff's favor in the amount of $7,137.82 plus interest for rent due on an equipment lease. They contend (1) the complaint was defective because it failed to comply with section 22(1) of the Civil Practice Act (Ill.Rev.Stat.1975, ch. 110, par. 22(1)) concerning suits by assignees and because it misjoined the principal obligor, Convalescent Home, and its guarantor, First Church, in the same action; (2) the equipment lease was unconscionable, lacked mutuality and contained inconspicuous disclaimers of warranties, and (3) plaintiff, as lessor Mutual Leasing Associates, Incorporated's assignee, was subject to defenses assertable against its assignor.

Plaintiff's verified complaint alleged that Convalescent Home entered into a lease for computers with Mutual Leasing Associates, Inc., as lessor, on or about April 1, 1972. Incorporated into the complaint was the lease which provided:

"4. Warranties. Lessor will include as a condition of its purchase order that the supplier authorize Lessee to enforce in its own name all warranties, agreements, and representations, if any, which may be made by the supplier to Lessee or Lessor, but Lessor makes no express or implied warranties as to any matter whatsoever, including, without limitation, the condition of the equipment, its merchantability or its fitness for any particular purpose. No defect or unfitness of the equipment shall relieve Lessee of the obligation to pay rent or of any other obligation under this Lease. Lessor shall not be liable for any damages caused by defects or breakdown of the equipment.

26. Assignment * * *

Lessor may assign or sell this Lease and/or mortgage the equipment, in whole or in part, without notice to Lessee, and its assignee or mortgagee may reassign this Lease and/or such mortgage, without notice to Lessee. Each such assignee and/or mortgagee shall have all of the rights but none of the obligations of Lessor under this Lease. Lessee shall not assert against the assignee and/or mortgagee any defense, counterclaim or offset that Lessee may have against Lessor. Subject to the foregoing, this Lease inures to the benefit of and is binding upon the heirs, legatees, personal representatives, survivors and assigns of the parties hereto.

"ASSIGNMENT

To Walter E. Heller & Company, Inc.

To induce you to purchase the within Lease Agreement, undersigned warrants that it is genuine and represents a valid obligation of a bona fide lessee (hereafter called 'Lessee'), all names, addresses, amounts, dates, signatures and other statements and facts contained therein are true and correct, the Equipment described therein has been previously duly delivered or installed, as applicable, and accepted by Lessee, the Lease Agreement and any guaranty in connection therewith are and will be legally enforceable by you as the assignee thereof in the State(s) where the Lessee and Equipment covered thereby are located; the Lease Agreement evidences a valid reservation of title to the described Equipment effective as against all persons, the Lease Agreement is and will be free from any liens, setoffs, counterclaims and other defenses, undersigned has properly and timely filed or recorded said Lease Agreement as required under all applicable filing and recording statutes; undersigned has the right to assign the Lease Agreement, and this Assignment conveys good title to the Lease Agreement and Equipment described therein, free and clear of any other liens and encumbrances whatsoever.

For value received, the undersigned hereby sells, transfers and assigns to you all its rights, title and interest in and to said Lease Agreement and Equipment described therein, and all undersigned's rights and remedies thereunder, including without limitation the right to collect any installment due thereon and to take any action thereunder which undersigned might otherwise take.

"All the terms of any existing written agreements between the undersigned and you are made a part hereof by reference and undersigned understands that you rely upon the above warranties and upon said agreements in purchasing said instrument."

The Assignment was dated June 1, 1972, and signed by a vice-president. First Church guaranteed the lease and payment obligations of Convalescent Home in a separate guaranty instrument which was also incorporated into the complaint and provided "This guaranty shall bind our respective heirs, administrators, personal representatives, successors and assigns, and shall ensure to your successors and assigns." The complaint further alleged that since September 1, 1974, Convalescent Home failed to pay its monthly rental despite plaintiff's demands. It prayed for judgment against defendants jointly and severally in the amount of $7,137.82 plus interest, attorney's fees and costs.

Defendants' initial answer alleged that the computers were inadequate for their needs and that Burroughs Corporation, the supplier of the computers, had unsuccessfully attempted to insert a suitable computer program to meet defendants' needs. Attached to the answer was a letter, dated August 15, 1974, from defendant Convalescent Home to Burroughs Corporation notifying them of a termination of "our contract" in thirty days.

Defendants also filed a third party complaint against plaintiff, Mutual and Burroughs alleging reliance upon Burroughs' representations as to the computer's capabilities and a "reprehensible scheme" by cross-defendants whereby defendants would be liable for payments without any obligations by cross-defendants.

On May 2, 1975, the trial court granted motions by Mutual and plaintiff to strike defendants' answer and third party complaint and allowed defendants 28 days to replead.

On June 5, 1975, the trial court found that defendants had failed to replead and dismissed third party defendant Burroughs with prejudice.

Defendants later filed an amended answer which alleged that the lease attached to the complaint failed to include the purchase order between the lessor Mutual and its supplier Burroughs, that the warranty disclaimers were inconspicuous, that Mutual failed to assign its rights against Burroughs to defendants, that the lease was unconscionable and lacked mutuality, that plaintiffs had repossessed the computers from defendant Convalescent Home and unfairly resold them, that defendants had terminated the lease after Burroughs' efforts to adapt the computer were unsuccessful, that plaintiff failed to comply with section 22(1) of the Civil Practice Act (Ill.Rev.Stat.1975, ch. 110, par. 22(1)), and that the complaint failed to allege the guaranty had been assigned to plaintiff.

On June 24, 1975, the trial court denied defendants' motion to vacate its prior dismissal of Burroughs and found that there was no just reason for delaying enforcement of an appeal from its order.

Thereafter, plaintiff moved to strike defendants' amended answer and for a judgment on the pleadings alleging that defendants' answer raised insufficient defenses as a matter of law.

The trial court granted plaintiff's motion on November 6, 1975, and defendants appealed from that order.

OPINION

Defendants contend plaintiff's complaint was defective because it improperly joined the principal obligor and its guarantor in the same suit and because it failed to comply with section 22(1) of the Civil Practice Act concerning suits by assignees.

Defendants' joinder argument was not presented in the trial court and therefore is waived. Ill.Rev.Stat.1975, ch. 110, par. 42(3); Berry v. Berry (1975), 32 Ill.App.3d 711, 336 N.E.2d 239.

Defendants contend that the verified allegation "on or about June 1, 1972, Mutual Leasing Associates, Inc., assigned to plaintiff all of its right, title and interest in the aforesaid lease, as set forth on the face of said lease" is insufficient to comply with section 22(1)'s requirement that the assignee of a non-negotiable chose in action "shall in his pleading on oath allege that he is the actual bona fide owner thereof, and set forth how and when he acquired title." (Ill.Rev.Stat.1975, ch. 110, par. 22(1).) In addition to the specific allegation, plaintiff's verified complaint incorporated the equipment lease which contained a provision allowing the lessor to assign its rights under the lease and an actual assignment to plaintiff dated June 1, 1972 and executed by a vice-president. We believe the complaint's allegation, assignment provision and executed assignment more than satisfy the requirements of section 22(1). Cf. Alexander v. State Savings Bank & Trust Co. (1935), 281 Ill.App. 88.

Defendants next contend the equipment lease was unconscionable, lacked mutuality, and contained inconspicuous disclaimers of warranties. They argue that the provisions of Article 2 of the Uniform Commercial Code (Ill.Rev.Stat.1975, ch. 26, par. 2-101 et seq.) should apply because an equipment lease is a "transaction in goods" under section 2-102 of the Code. (Ill.Rev.Stat.1975, ch. 26, par. 2-102.) Whether or not Article 2 of the Commercial Code applies to equipment leases is an issue of first impression in this state. The essence of both transactions is that the...