Court Opinion

ID: 6931202
Source: CourtListenerOpinion
Date Created: 2022-07-24 00:02:07.047665+00
Date Added: 2024-06-11T16:07:11.701782
License: Public Domain

VAN HOOMISSEN, J.,
dissenting.
This is an action on a lease with a counter-claim for rescission based on failure of consideration. On de novo review, I would modify the judgment to require defendant to refund the $2,641 in expense and down payment money she received from plaintiff, and, as modified, I would affirm.
The precise nature of the “transaction” between the parties is far from clear. Plaintiffs complaint alleged only a breach of a lease agreement by failure to make lease payments. Defendant admitted the lease agreement. Her counter-claim for rescission alleged that the hardware and software that was part of the lease agreement
“* * * was purchased by [plaintiff] and was to be provided to Defendant. [Plaintiff] knew the purpose for which the material was to be used and that the hardware would be of no value to defendant unless the software was as agreed. Defendant signed the lease agreement with the understanding that the software would be workable with the hardware, that, at that time, had not been received.”
Defendant further alleged that when the software was received
«* * * ^ turned out to be of a different kind and quality as agreed upon and was of absolutely no value to defendant. In fact, the software material, rendered the hardware unit of no value to Defendant.”
The affidavit of plaintiffs agent Berrie in support of plaintiffs motion for summary judgment states in relevant part:
“* * * Defendant had not received all of the software at the time of signing the acceptance. Defendant did not directly order or purchase the computer or software. * * *” (Emphasis supplied.)
Plaintiffs summary judgment memorandum states in relevant part:
*296«* * * piaintiff purchased the equipment from Burroughs Company and PSCI. * * *” (Emphasis supplied.)
The trial court denied plaintiffs motion for summary judgment:
“* * * court found that there was a genuine issue of fact as to whether Defendant received what was promised by Plaintiff under the lease and that, if she did not receive what was contracted for, she would have a defense to Plaintiffs complaint.”
Plaintiff then filed an amended reply alleging that defendant was estopped to deny receipt of the equipment described in the lease agreement because she had signed documents prepared by plaintiff stating that she had received the equipment. Plaintiff asked for dismissal of defendant’s counter-claim for rescission and for judgment. In its trial memorandum, plaintiff argued that:
«* * * rphg agreement entered into between plaintiff and defendant was a secured transaction.
<<* * * * *
“The equipment was purchased by plaintiff specifically for the defendant’s use and was delivered directly to defendant. * *
The trial court found that plaintiff knew defendant had not received the software described in the agreement when she signed the documents prepared by plaintiff, and that the equipment she received later “was different than either party believed it to be.” It concluded that, under the circumstances, this constituted a complete failure of consideration entitling defendant to rescind.
At trial, therefore, plaintiffs theory was that this was a secured transaction, or, in the alternative, that defendant was estopped to deny she had received the subject matter of the lease. Defendant’s theory was that the arrangement between the parties “was never considered by [defendant], other than a lease. * * * Our position simply is, that the Plaintiff, here, has entered into a Lease Agreement.” Plaintiff made no objection to defendant’s theory that this was nothing more than a simple lease and that plaintiff breached the agreement by failing to provide the equipment described in the lease documents.
*297At trial, plaintiffs agent Berrie testified in relevant part:
“Q At the time of this transaction, you were Marketing Representative for Bancorp; is that right?
“A Right.
“Q And Bancorp did, in fact, purchase this equipment with checks to both Burroughs and PSCI. That’s a fact; isn’t it?
“A That’s a fact.
“Q And, as far as you know, there was no Bill of Sale from these two manufacturers, either to Bancorp or to Mrs. Brunner; is that a fair statement?
“A As far as I knew.
“Q But you did have her execute, on that day that you arrived at her office, a Bill of Sale?
“A Yes.
“Q It would be fair to say that the purpose of that is to assure that Bancorp was owner of the equipment, that they intended to lease to Mrs. Brunner?
“A That’s fair.
“Q And, as you stated under oath here a few minutes ago, you always intended to treat this as a lease; this transaction?
“A Yes.
“Q That’s a fair statement?
“A That’s a fair statement.
‡ jJc s}c
“Q Then, on page eleven, starting at line six, I’ll ask you if you remember this — these questions and these answers. Question: ‘One of the documents that your attorney introduced, Mr. Berrie, stated that equipment was received and it was satisfactory. Why would Bancorp ask her to sign such a document?’ Answer: ‘Because we had no use for the equipment if the user isn’t satisfied with it. We, obviously, have to have the user satisfied with it to make it viable.’ Question: ‘You said the user has to be satisfied with it to make it viable. And, if it turns out that she has — the equipment has been delivered and isn’t that good, you wouldn’t ask her to sign such an agreement, would you?’ Answer: ‘No.’
“Q Do you recall those questions and those answers?
“A Yes.
*298“Q And on page twelve this question and this answer. Question: ‘Would it be fair to assume that the reason Bancorp has somebody sign the document that they’re satisfied with, because you wouldn’t enter into a lease with them if they weren’t satisfied with it?’ Answer: ‘Yes.’
“Q Do you recall that question and that answer?
“A Yes.
“Q Then, on page eighteen of the deposition this question and this answer, Mr. Berrie. Question: ‘If somebody at Ban-corp had knowledge that the software equipment had not been received, would it be proper, normal procedure, rather, to have Mrs. Brunner sign for it?’ Answer: ‘I don’t believe so.’
“Q Do you recall that question and that answer?
“A Yes.”
At trial, defendant testified in relevant part:
“Q Your understanding of the transaction with Bancorp, Mrs. Brunner, you stated, was a lease situation. Who was to provide the money to the manufacturers of the computer?
“A Bancorp Leasing was buying the equipment.
“Q How about the software?
“A They bought the software, too.
“Q And, did the invoices actually get sent to you?
“A Yes, they did.
“Q And, when you received those invoices, what did you do with them? I’ll hand you Plaintiffs Exhibit Number 3.
“A I sent them to Bancorp for their payment.
“Q Was that the arrangement between you and Bancorp?
“A Okay. I really didn’t know, exactly, how that was going to be handled. I knew that they were purchasing the equipment, and I was leasing the equipment, but because of the invoices coming to me, I don’t knew whether they wanted me to submit my checks, or whether they would submit the checks directly. So, it was the start of tax season. I didn’t have everything going yet.
“Q They prepared the papers that were presented to you, on the 28th; did they not?
“A Yes, they did.
“Q You never received a Bill of Sale, from PSCI, or from Bancorp?
*299“A No. The only thing I had was invoices that I sent to Bancorp.
“Q This Bill of Sale, that you signed, was it prepared by Bancorp; Plaintiffs Exhibit Number 12?
“A Yes, it is.
“Q This is one of the documents they asked you to sign, to complete the lease transaction?
“A That’s right.”
Plaintiffs primary theory at trial was that this was a secured transaction. The trial court had difficulty understanding that theory. The following colloquy occurred near the end of the trial:
“THE COURT: Let’s talk about that for a second.
“Let’s suppose that I find that the lease is a secured transaction. Does that finding necessarily require that the transaction be treated as a sale rather than a lease?
“MR. MacRITCHIE: Well, no, I don’t believe so. I think the language, in that case, says the UCC concepts are applicable to a situation like this, but there is not necessarily — or there is not necessarily to a finding that the title is transferred or that there is a technical sale.
“THE COURT: Give me a second, because I’m having difficulty articulating what I am thinking.
“In order to prevail, in this matter, you’re going to have to prove that, in fact, your Client did not lease the property to the Defendant; true?
“MR. MacRITCHIE: I think our position is two-fold.
“THE COURT: Respond to that, if you will.
“MR. MacRITCHIE: Respond to just the first?
“THE COURT: Well, respond to my question, in any way you want.
“MR. MacRITCHIE: Okay. I think that if you find that it’s a secure transaction, I think that you will also find it’s stipulated that there has been a default on the payment obligations, and the concepts of the UCC apply and we’re entitled to judgment.
“THE COURT: That’s what I’m struggling with, because it seems to me that I can find this to be a secure transaction, but that doesn’t determine whether or not the difference *300interposed, by the Defendant, prevails. We’re not really talking about the recapture of the collateral here. What we’re talking about is whether there was, in fact, a lease agreement whereby the Plaintiffs agreed to lease a designated piece of personal property.
“MR. MacRITCHIE: Well, I really think that there are two different issues. One is if it’s a secure transaction, then the rights and liabilities from the UCC apply. And, in this case, the Plaintiffs, then, would be the secure party to the Defendants, the debtor. The debtor is in default, and the secured party is — should recover. I would analogize that situation to say, a straight loan, to a bank, to a debtor, for a Pontiac car, and the debtor went out and bought what they thought was a Pontiac car, from a car dealer, when, in fact, it was a Chevrolet —
“THE COURT: What I’m having difficulty understanding is why it makes any difference if it’s a secured transaction, whether it’s a lease or a sale, to the disposition of this case. Because the disposition of the collateral is not at issue.
“Can you enlighten me why it makes a difference?
“MR. MacRITCHIE: I didn’t think it made a difference how you label it, lease and sale rights and liabilities of the parties. Those flow from the determination of whether or not it’s a secure transaction, and entitled to be treated under the UCC. I mean, I don’t care what we call it.
“THE COURT: Okay. Maybe I’m not communicating very well. Let’s go through it again.
“MR. MacRITCHIE: Okay.
“THE COURT: Let’s assume, without deciding, that what this case was was a secure transaction. What difference does that make in defining the Defendant’s counterclaim?
“MR. MacRITCHIE: Well, I’m not sure I quite understand the question, but, my point is, I don’t think it makes any difference. I think we’ve got default on secure obligations.
“THE COURT: If it doesn’t make any difference, why is this testimony, that would be offered, to prove one of the factors in the Allstate case, to show that it’s a secure transaction?
“MR. MacRITCHIE: I think it’s important to show whether it’s a secure transaction. I think there’s a lot of factors listed, in this case, and I think this is just one. I don’t think it’s just limited to that case.
*301“THE COURT: I’m going to sustain the objection. I don’t think it’s appropriate, in this case.”
At the conclusion of the trial, the trial court stated:
“This court makes the following findings of the Fact and Conclusions of Law:
“Defendant contacted Plaintiff regarding financing for computer equipment that she sought to be purchased for her business and other businesses. She selected the particular equipment that was to be purchased. The Defendant agreed to finance the purchase and pay for the equipment, and agreed further to lease it back to the Plaintiff —
“MR. BRYANT: Excuse me, to the Defendant? You mean the —
THE COURT: Let me say that again. I’m sorry.
“The Defendant selected the equipment, the Plaintiff agreed to pay for the equipment and lease it to the Defendant.
“Is that better, gentlemen?
“MR. BRYANT: Yes. Thank you.
“THE COURT: Thank you for interrupting me.
“Defendant executed a bill of sale to the Plaintiff and the Plaintiff leased it back to her. That resulted in ownership of the property unvesting [sic] in the Plaintiff. The lease was materially breached because the equipment was different than what either party believed it to be, and the defect was material to the parties agreement because it rendered the remainder of the equipment unusable for the purpose that the parties contemplated.
“Based upon these findings, I conclude, regarding the lease, that there has been a failure of consideration and parties should be returned to the status quo that existed prior to their agreement.
“Mr. Belknap, you may draw an appropriate decree, in this matter, providing for return of all of the computer equipment to the Plaintiff and return, by the Plaintiff to the Defendant, of the monies that she has paid.
“Mr. Bryant, I’m hesitant to make any conclusions of law concerning whether there was a sale from the manufacturer to the Defendant, and then a second sale from the Defendant to the Plaintiff, and then a lease, or whether there was a sale directly from the manufacturer to the Plaintiff, because that decision is not material to my findings in this case. Once I *302determined the title, vested the Plaintiff, and what was being framed in the pleadings here is the lease agreement itself. What I’m saying is, that if I went beyond those findings, I would be making conclusions of law based upon issues that haven’t been plead. However, based upon the evidence I’ve heard today, I did make specific findings as to the facts that occurred. The legal impact of those facts would have to be left to further litigation, if any.
“Mr. Belknap, do you have any questions about the decree?
“MR. BELKNAP: No, sir.
“THE COURT: Mr. Bryant?
“MR. BRYANT: No, sir.
“THE COURT: Thank you, gentlemen, we’ll be in recess.
“(Let the record reflect, an off-the-record discussion was then had.)
“THE COURT: Back on the record for a second.
“I make further findings of fact that the Defendant’s testimony concerning the knowledge that the Plaintiff had when the acceptance was signed is credible and, based upon that finding, the Defense of Estoppel cannot prevail because both parties recognized that all of the property had not yet been received.”
Plaintiffs brief summarizes its argument on appeal:
“The doctrine of failure of consideration does not apply to the case at bar. The correct analysis is to determine whether the agreement between Plaintiff and Defendant was a ‘true lease’ or a secure transaction. The agreement here is a secure transaction * * *.”
My objection to the majority’s result is one of appellate procedure. Plaintiffs primary theory below was that this was a secured transaction. Plaintiff did not prevail on that theory. We have rejected it as well.1 Nevertheless, the majority would now let plaintiff prevail and would reverse a trial court whose decision is defensible on the merits given plaintiffs theory at trial and on appeal.
Some of the “facts” relied on by the majority are disputed. To illustrate, the majority states that defendant’s *303“bargain was with her suppliers.” (65 Or App at 293.) The statements of plaintiffs agent Berrie that “[d]efendant did not directly order or purchase the computer or software,” that “[p]laintiff purchased the equipment from Burroughs Company and PSCI” and that plaintiff would not have asked defendant to sign the lease agreement if she was not satisfied with the equipment, tell me that the result reached by the trial judge was, as I independently read this record, correct (with the modification I have suggested to return the parties to the status quo ante).

I agree with the majority that the terms of the lease itself negate any conclusion that this is a secured transaction.