Copper State Leasing Co. v. Blacker Appliance & Furniture Co.
Docket: 20785
Court: Utah Supreme Court; August 31, 1988; Utah; State Supreme Court
Copper State Leasing Company appealed a summary judgment in favor of the defendants, which included various Blacker family members and two Blacker corporations, following two consolidated cases in which Copper State was the plaintiff. The disputes arose from the Blackers' investment of $300,000 in a commodity arbitrage program, which was misdirected by third parties, Gray and Graven, into an interim diamond investment. To facilitate their investment in computers needed for the program, the Blackers filled out loan applications and provided financial documentation to Copper State, who then executed commercial lease agreements with both Blacker Furniture and Blacker Appliance, along with personal guarantees from the Blacker individuals. Requests made to Copper State led to the disbursement of $84,000 to Cowboy Computers for the purchase of two computers; however, Gray and Graven diverted these funds to diamond investments instead of forwarding them to the intended vendor, resulting in a total loss of the investment.
Blacker Furniture and Blacker Appliance did not receive the computers nor make lease payments to Copper State, which led to Copper State suing them and related individuals for unpaid lease amounts and damages from alleged misrepresentations. Claims against Gray and Graven were dismissed due to their bankruptcy filings. On appeal, Copper State contends that the trial court wrongly granted summary judgment to the defendants regarding the lease payments and misrepresentation claims.
Copper State argues that material factual disputes should have prevented summary judgment, asserting that the defendants were not entitled to such judgment as a matter of law. The court's review of summary judgment requires analyzing facts favorably to the losing party and determining if any genuine issues of material fact exist. The undisputed facts reveal that the defendants signed lease agreements and personal guarantees for thirty-six monthly payments of $1,574.56 each, and that Copper State paid $84,000 for the computers, which were instead misappropriated by Gray and Graven.
While disputes exist over the misrepresentation claim, the essential facts regarding the leases are not contested. The court will assess whether the lease agreements are unenforceable due to failure of consideration, focusing on two main issues: the contract terms and whether the trial court correctly ruled on the enforceability of the agreements. Contract interpretation can involve legal questions or factual inquiries based on intent. The court must first determine if modifications in the Acceptances changed the original contract, and if so, whether any failure of consideration occurred. Modifications govern the parties' contractual rights, and prior conflicting rights may be waived.
Inserted words in a printed contract take precedence over the original wording, as established in Bank of Ephraim v. Davis. In this case, leases required Copper State to purchase computer equipment, with Blacker Furniture and Blacker Appliance responsible for delivery. The leases stipulated that payment was contingent upon delivery. However, the Acceptances contained modified provisions indicating that payment should occur before delivery. Specifically, Blacker Furniture requested payment to Cowboy Computers before delivery and accepted responsibility for the equipment's delivery, while Blacker Appliance agreed to a similar arrangement, with payments starting one month after funding.
The court determined that the typed provisions in the Acceptances superseded the printed terms, indicating a shift in the payment obligation to prior to delivery. Furthermore, the court examined whether the trial court erred in ruling the contract unenforceable due to a failure of consideration. Consideration requires a binding promise from both parties, and a promise to pay is sufficient to establish consideration. The court found that the contracts were clear and contained mutual promises that constituted valid consideration. Copper State fulfilled its obligation by advancing $84,000 for the purchase, thus validating the contract despite the modified payment terms.
Defendants reference two Utah cases to support their summary judgment argument. In *FMA Financial Corp. v. Hansen Dairy, Inc.*, the court ruled that parol evidence could be considered to determine the necessity of a silo for harvest, even though an acceptance notice stated the leased goods were satisfactory. The court identified a failure of consideration due to the actual non-delivery of the silo, despite FMA’s belief that it had been delivered. In *Nielsen v. MFT Leasing*, the court addressed a lease rescission due to the delivery of incorrect equipment. The acknowledgment of delivery by the lessee did not negate the claim of failure of consideration, which was found to challenge the contract's existence rather than its terms. The court upheld the rescission based on the lessor's failure to deliver the specified equipment.
In the current case, the contracts differ significantly from those in *FMA Financial* and *Nielsen*. Here, all parties acknowledged that the equipment was not delivered, but payment was made prior to delivery per the lessees' request. The final modified contracts stated that delivery was not a condition precedent to payment. Consequently, there was no failure of consideration that would prevent contract enforcement, as the lessees received the promised consideration. The court concluded that the summary judgment in favor of the defendants on Copper State's first cause of action was erroneous and reversed the decision, remanding for further consideration, including allegations of fraudulent inducement against the defendants.
Additionally, regarding the claim of misrepresentation, Copper State argued that the trial court erred in its judgment favoring defendants, as findings indicated that Copper State did not meet its burden of proof for its claims in the second cause of action.
Defendants did not intentionally deceive or authorize John Gray, Edward Graven, or their entities to misappropriate funds from Plaintiff for an investment scheme, of which Plaintiff was unaware. They also did not willfully conceal the misuse of funds intended for computer purchases. John Gray and Edward Graven were not considered agents of Defendants regarding the use of these funds. The court concluded that a judgment should be entered favoring Defendants against Plaintiff on the second cause of action, ruling there was no valid claim. Defendants are entitled to recover their costs. Regarding misrepresentation claims, the court noted that a false representation must be knowingly made to induce reliance, and such claims may also arise from material omissions where there is a duty to disclose. However, this duty is absent in arm's length transactions where both parties have access to the relevant facts. The court affirmed that Copper State failed to prove misrepresentation by Defendants, thus upholding the judgment in favor of Defendants on this claim. Part of the ruling was affirmed, while another part was reversed and remanded. Chief Justice Hall disqualified himself from participating in the decision.
