Schedule No. 1 required defendant to make monthly payments of $ 4,978.00, starting on September 7, 1991. Plaintiff received only 10 payments from defendant pursuant to Schedule 1; defendant made no Schedule 1 payments after the June 7, 1992 payment. Schedule No. 2 required defendant to make monthly rental payments of $ 522.46 for 38 months, starting on July 7, 1992. Plaintiff received only 4 payments from defendant pursuant to Schedule 2; defendant made no Schedule 2 payments after the October 7, 1992 payment.
Under Paragraph 9(a) of the Master Agreement, the failure to make monthly rental payments constitutes default. Plaintiffs, therefore, repossessed the equipment from defendant in June of 1993, and re-leased it to Neodata, Inc. on a six-month lease at $ 8,500 per month, starting on December 1, 1993.
Defendant claims that the equipment never worked properly and proved unsuitable and unable to perform the tasks which SISI's sales representatives had represented it would perform. The equipment was not capable of performing, due to both shortcomings in design, and defects in its workmanship. Newlands Decl. P 11. Due to the equipment's shortcomings, he was unable to fulfill his production commitments, resulting in significant loss of income and an inability to make the payments under the Lease. Id. P 12.
Under Paragraph 9(b) of the Master Agreement, plaintiffs are entitled to all past due Lease payments and all future Lease payments discounted at 6% per annum. The balance due for rental payments under the Lease is $ 206,154.86. Joint Statement P 13. The Lease also provides that upon defendant's default, it is entitled to its attorneys' fees and prejudgment interest on the Lease balance. Plaintiff claims attorneys' fees in the amount of $ 17,209.08, and prejudgment interest in the amount of $ 22,382.72. Additionally, although the Lease does not require plaintiff to re-sell or re-lease the equipment, plaintiff originally proposed giving defendant a credit in the amount of $ 25,500.00 for payments received from Neodata. This brings the total damages claimed by plaintiffs to $ 220,246.66. Id. PP 13, 15-16.
Defendant does not dispute that he ceased making payments under the Lease. Instead, defendant opposes plaintiff's motion for summary judgment on the grounds that (1) plaintiff "breached the Equipment Purchase Agreement," in that the equipment was not free from defects in workmanship and materials as warranted; (2) that plaintiff breached oral and express warranties of suitability and fitness; (3) that plaintiff acted in bad faith and fraudulently in representing to defendant that plaintiff and SISI (or its successor in interest, Siemens Nixdorf (hereinafter, "Nixdorf") were all "part of the same company" and defendant was falsely led to believe he was purchasing and leasing the equipment from the same company; and (4) that the Lease Agreement was unconscionable and unenforceable because it is adhesive in nature, purports to eliminate breach of express or implied warranties as defenses to the obligation to make lease payments, and was secured through unequal bargaining, misrepresentation or fraud.
Plaintiff, citing two Fifth Circuit cases and a Seventh Circuit case, argues that these are affirmative defenses and that Fed. R. Civ. P. Rule 8(c) requires an answering party to set forth affirmative defenses in its answer or consider them waived. While Rule 8(c) lists fraud as an affirmative defense, it is less clear whether defendant's other arguments are affirmative defenses, or whether they negate an element of plaintiff's prima facie case. See In re Rawson Food Service, Inc., 846 F.2d 1343, 1349 (11th Cir. 1988). The Court need not resolve this question, however, because the Court finds defendant's objections to plaintiffs motion for summary judgment without merit.
I. STANDARD FOR SUMMARY JUDGMENT
In order to withstand a motion for summary judgment, the opposing party must set forth specific facts showing that there is a genuine issue of material fact in dispute. Fed. R. Civ. P. 56(e) (West 1994). A dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). In the absence of such facts, "the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).
In opposing summary judgment, plaintiff is not entitled to rely on the allegations of his complaint. See Fed. R. Civ. P. 56(e) (West 1994). Furthermore, "a party cannot manufacture a genuine issue of material fact merely by making assertions in its legal memoranda." S.A. Empresa de Viacao Aerea Rio Grandense (Varig Airlines) v. Walter Kidde & Co., 690 F.2d 1235, 1238 (9th Cir. 1982). Rule 56 provides that "when a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or otherwise as provided in this rule, must set forth specific facts [that would be admissible as evidence] showing that there is a genuine issue for trial . . . ." Fed. R. Civ. P. 56(e) (West 1994).
The court does not make credibility determinations with respect to evidence offered and is required to draw all inferences in a light most favorable to the non-moving party. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n., 809 F.2d 626, 630-31 (9th Cir. 1987) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986)). Summary judgment is, therefore, not appropriate "where contradictory inferences may reasonably be drawn from undisputed evidentiary facts . . . ." Hollingsworth Solderless Terminal Co. v. Turley, 622 F.2d 1324 (9th Cir. 1980).
II. PLAINTIFF PERFORMED THE LIMITED FUNCTION OF FINANCING DEFENDANT'S EQUIPMENT PURCHASE; THE LEASE WAS, THEREFORE, A FINANCE LEASE AND DEFENDANT MUST LOOK EXCLUSIVELY TO THE SUPPLIER, SIEMENS NIXDORF, FOR REPRESENTATIONS, COVENANTS AND WARRANTIES
Defendant argues that plaintiff "breached the Equipment Purchase Agreement," by supplying equipment that contained defects in workmanship and materials; that plaintiff breached oral and express warranties of suitability and fitness; and that the Lease Agreement is unconscionable and unenforceable because it purports to eliminate breach of express or implied warranties as defenses to the obligation to make lease payments. The Court rejects these arguments because the Lease was a "finance" lease. Plaintiff was, therefore, obligated to do no more than finance defendant's equipment lease, and defendant was obligated to look exclusively to the manufacturer for all representations, covenants and warranties.
Finance leases are defined in section 2A-103 of the Uniform Commercial Code. Official comment (g) to that section describes these types of transactions as follows:
A finance lease is the product of a three party transaction. The supplier manufactures or supplies the goods pursuant to the lessee's specification, perhaps even pursuant to a purchase order, sales agreement, or lease agreement between the supplier and the lessee. After the prospective finance lease is negotiated, a purchase order, sales agreement, or lease agreement is entered into by the lessor (as buyer or prime lessee) or an existing order, agreement or lease is assigned by the lessee to the lessor, and the lessor and the lessee then enter into a lease or sublease of the goods. Due to the limited function usually performed by the lessor, the lessee looks almost exclusively to the supplier for representations, covenants and warranties. If a manufacturer's warranty carries through, the lessee may also look to that. Yet, this definition does not restrict the lessor's function solely to the supply of funds. If the lessor undertakes or performs other functions, express warranties, covenants and the common law will protect the lessee.