Opinion ID: 2119579
Heading Depth: 1
Heading Rank: 1

Heading: Prior Facts and Proceedings.

Text: Outlook, a company located in Maine, received an unsolicited fax from Royal Links, an Ohio corporation, which advertised the beverage caddy express available on a net-zero basis. Jeff Maldonis, a representative of Outlook, entered into an Equipment Lease Agreement which obligated Outlook to pay $628 in monthly payments to C & J, an Iowa corporation, to lease two beverage carts ($314 per beverage cart). Outlook also entered into an agreement with Royal Links that required Royal Links to pay $628 ($314 per beverage cart) to Outlook in exchange for Outlook placing Royal Links' advertising on the beverage carts. Therefore, the result was intended as a net-zero for Outlook because it was obligated to pay the same amount monthly to C & J that it would receive monthly from Royal Links. As part of this transaction, C & J purchased the two beverage caddy carts from Royal Links for $12,500 per cart. C & J then leased the carts to Outlook for 60 monthly payments of $314 per cart, or $18,840 total per cart. Both parties agree that the carts are worth substantially less than $12,500 and $18,840. Outlook estimates the carts are worth $1,500 at best. C & J was able to sell a similar cart on eBay for $642.58. [2] The agreement between C & J and Outlook contained a hell-or-high-water clause which stated the obligations are absolute and unconditional and are not subject to cancellation, reduction or setoff for any reason whatsoever. A hell-or-high-water clause is a clause requiring the lessee to continue to make full rent payments to the lessor even if the thing leased is unsuitable, defective, or destroyed. Black's Law Dictionary 742 (8th ed.2004). Additionally, the agreement disclaimed any causes of action based on express or implied warranties against C & J. Approximately six months later, Royal Links stopped making advertising payments to Outlook, and Outlook in turn stopped making the monthly payments to C & J. C & J brought this breach of contract action against Outlook. Outlook filed an answer asserting the affirmative defense of fraud in the inducement and a counterclaim of fraudulent misrepresentation, alleging that Royal Links was acting as an agent for C & J. C & J moved for summary judgment. The district court stayed this case pending resolution of C & J Leasing Corp. v. Hendren Golf Management., Inc., No. 06-0249, 2007 WL 257955 (Iowa Ct.App. Jan.31, 2007). This case and Hendren represent two of 409 similar arrangements between golf courses, Royal Links, and C & J. In Hendren, the Iowa Court of Appeals upheld the district court's decision after trial that there was no agency relationship between C & J and Royal Links, reversed the district court's decision that the agreement was unconscionable, and held that the agreement was a finance lease with a valid hell-or-high-water clause. Id. at -4. The appellate court enforced the agreement. Hendren did not seek further review with this court. After the appellate court entered its decision in Hendren, the district court entered summary judgment for C & J. Outlook appealed, arguing that summary judgment was inappropriate because: (1) the transaction should be considered a secured transaction instead of a finance lease; (2) there is a genuine issue of material fact regarding whether an agency relationship existed between C & J and Royal Links, which would allow Outlook's defense of fraud in the inducement to proceed; and (3) the close-connection doctrine prevents C & J from enforcing the lease.