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Edison Generator Exchange, Inc. v. Quality Business Communications

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 1, 2010

EDISON GENERATOR EXCHANGE, INC., PLAINTIFF-APPELLANT,
v.
QUALITY BUSINESS COMMUNICATIONS, INC., A/K/A QUALITY BUSINESS SOLUTIONS, CHRISTOPHER MELIA, INDIVIDUALLY, AVAYA FINANCIAL SERVICES, INC., CIT COMMUNICATIONS FINANCE CORP., AND AVAYA, INC., DEFENDANTS-RESPONDENTS.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-9367-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued June 1, 2010

Before Judges Reisner and Yannotti.

Plaintiff Edison Generator Exchange, Inc. (Edison) appeals from an order entered by the Law Division on August 14, 2009, which granted summary judgment to defendant CIT Communications Finance Corporation (CIT).*fn1 We affirm.

This appeal arises from the following facts. Edison is a commercial enterprise that sells batteries, alternators and generators. Quality Business Communications, Inc. (QBC) is a seller of voice and data telecommunications equipment, and is authorized to sell telephone systems manufactured by Avaya, Inc. (Avaya). Christopher Melia (Melia) was one of QBC's salespersons.

In November 2005, Edison entered into an agreement with QBC to acquire an office telephone system manufactured by Avaya. Rather than purchase the equipment for cash, Edison elected to lease the equipment through CIT. Edison and CIT entered into a lease agreement for a sixty-month lease of the Avaya office telephone system. The lease stated in pertinent part that:

BY SIGNING THIS LEASE: (I) YOU ACKNOWLEDGE THAT YOU HAVE READ AND UNDERSTAND ALL OF THE TERMS AND CONDITIONS OF THIS LEASE,... (III) YOU AGREE THAT THIS LEASE IS A NET LEASE THAT YOU CANNOT TERMINATE OR CANCEL, YOU HAVE AN UNCONDITIONAL OBLIGATION TO MAKE ALL PAYMENTS DUE UNDER THIS LEASE, AND YOU CANNOT WITHHOLD, SETOFF OR REDUCE SUCH PAYMENTS FOR ANY REASON.

On November 29, 2005, John B. Chemidlin (Chemidlin), Edison's owner and President, executed the lease on Edison's behalf.

The equipment was delivered in March 2006. On March 28, 2006, Chemidlin executed a Delivery and Acceptance Certificate (DAC) for the equipment on Edison's behalf. The DAC stated:

A) That all equipment described in the lease identified above ("Equipment") has been delivered, inspected, installed and is unconditionally and irrevocably accepted by you as satisfactory for the purposes of the lease; and

B) That we, the Lessor, CIT Communications Finance Corporation, are authorized to purchase the Equipment and start billing you under the lease....

On November 7, 2007, Edison filed a complaint in the Law Division, naming QBC, Melia, AFC, CIT and Avaya as defendants. Edison alleged that its agreement with QBC was for a thirty-six month lease, not a sixty-month lease. Edison alleged that defendants engaged in a "bait and switch" tactic, which "[t]ricked and/or defrauded" it into a contract for which there was no meeting of the minds. Edison further alleged that the phone system was not the "correct" system and did not perform as promised. Edison asserted claims for breach of contract, breach of implied warranty, and violation of the Consumer Fraud Act, N.J.S.A. 59:8-1 to -20.

In January 2008, CIT filed an answer, cross claims against QBC and Melia, and counterclaims against Edison. In March 2008, Melia filed an answer to Edison's claims and CIT's cross claims, and asserted a cross claim against CIT.

In July 2009, CIT filed a motion for summary judgment seeking dismissal of Edison's complaint, Melia's cross claim, and judgment on its counterclaim for breach of contract. CIT argued, among other things, that Edison had an unconditional obligation to make the payments due under the lease and had failed to do so. CIT sought damages of $54,725.64, which represented the rentals due ($34,650.33), anticipated residual interest ($13,519.06), past due rentals ($5,849.60), and late charges ($706.65). Edison opposed CIT's motion; Melia did not.

In a certification submitted to the trial court, Chemidlin stated he signed a contract on Edison's behalf for a thirty-six month lease. He stated that he did not recall signing a lease between Edison and CIT. Chemidlin asserted that Melia presented the lease to him, along with other documents, but he "was both rushed and hurried through the signing processes." Chemidlin stated that he "had no idea" that he was signing a sixty-month lease.

Chemidlin also acknowledged that he signed the DAC. He stated, however, that he "indicated" that the system was not working properly and he had refused to accept it. He asserted that while the DAC states that acceptance was subject to "final completion by the vendor," final completion "never took place." Chemidlin also pointed out that the DAC was subject to review by the financing company of the terms and conditions of the lease. Chemidlin asserted that the financing company never reviewed the lease terms and conditions with him "at anytime."

Chemidlin additionally asserted that Edison had been required to make the first lease payment contemporaneously with the installation of the equipment, as a condition of the transaction. He said that it was his understanding that Melia "actually made the first payment" on Edison's behalf, so that this condition could be met and the vendor would receive its commission from CIT. Chemidlin stated that Edison had initially made the lease payments but Edison did not know that it was making payments on a sixty-month, rather than a thirty-six month, lease.

The court heard argument on the motions on August 14, 2009 and placed its decision on the record on August 17, 2009. The court found that there were no genuine issues of fact material to Edison's claims against CIT, Melia's cross-claim against CIT and CIT's counterclaim against Edison for breach of contract. The court found that Edison's agreement with CIT was a financing lease, under which it had an unconditional obligation to make the monthly lease payments. The court noted that there was no principal/agent relationship between CIT and QBC and no evidence that QBC was authorized to act on CIT's behalf.

The court entered an order dated August 14, 2009, granting CIT's motion for summary judgment. The court dismissed Edison's complaint as to CIT and Melia's cross claim against CIT, and entered final judgment against Edison and in favor of CIT in the amount of $54,725.64. On September 25, 2009, the court entered an order certifying its August 14, 2009 order as a final judgment pursuant to Rule 4:42-2. This appeal followed.

On appeal, Edison argues that the court erred by granting summary judgment to CIT on Edison's claim because there are genuine issues of fact as to whether CIT is vicariously liable for the actions of QBC and its agents under the "close connection doctrine." Edison also argues that the trial court should have denied CIT's motion for summary judgment because there are genuine issues of material fact as to the validity and enforceability of the finance lease. We reject these contentions and affirm.

The Uniform Commercial Code provides in pertinent part that:

(1) In the case of a finance lease that is not a consumer lease the lessee's promises under the lease contract become irrevocable and independent upon the lessee's acceptance of the goods.

(2) A promise that has become irrevocable and independent under subsection (1):

(a) is effective and enforceable between the parties, and by or against third parties including assignees of the parties, and

(b) is not subject to cancellation, termination, modification, repudiation, excuse, or substitution without the consent of the party to whom the promise runs. [N.J.S.A. 12A:2A-407.]

The UCC defines the term "finance lease" in N.J.S.A. 12A:2A-103(g) as a lease for which:

(i) the lessor does not select, manufacture, or supply the goods;

(ii) the lessor acquires the goods or the right to possession and use of the goods in connection with the lease; and

(iii) one of the following occurs: * * *

(D) if the lease is not a consumer lease, the lessor, before the lessee signs the lease contract, informs the lessee in writing (a) of the identity of the person supplying the goods to the lessor, unless the lessee has selected that person and directed the lessor to acquire the goods or the right to possession and use of the goods from that person, (b) that the lessee is entitled under this chapter to the promises and warranties, including those of any third party, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods, and (c) that the lessee may communicate with the person supplying the goods to the lessor and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies.

The lease at issue in this case meets the definition of a "finance lease" in N.J.S.A. 12A:2A-103(g). The lease is not a consumer lease, because the lease was not made to a natural person "primarily for a personal, family, or household purpose." N.J.S.A. 12A:2A-103(e). Furthermore, CIT did not select, manufacture or supply the equipment, and it did acquire the right to possess the equipment for purpose of leasing it to Edison.

Moreover, Edison knew the identity of the supplier of the equipment and there is no claim that Edison may not assert warranties and remedies against the supplier in connection with its acquisition of the goods. Consequently, the promises under the lease, including Edison's promise to make sixty monthly lease payments, became "effective and enforceable between the parties" when Edison accepted the goods. N.J.S.A. 12A:2A-407(1).

We reject Edison's contention that it may disclaim liability under the lease because there allegedly is a "close connection" between CIT and QBC. The so-called "close connection" doctrine applies to the sales of consumer goods, and allows a consumer to assert defenses against a financing company whose "involvement with the seller's business is... close, and whose knowledge of... the terms of the underlying sale agreement -- is... pervasive[.]" Unico v. Own, 50 N.J. 101, 116 (1967).

Here, the trial court correctly recognized that, the lease at issue is a "finance lease" as that term is defined in the UCC, and Edison's obligation under the lease became irrevocable and independent upon its acceptance of the leased equipment. See AT&T Credit Corp. v. Transglobal Telecom Alliance, Inc., 966 F. Supp. 299, 304 (D.N.J. 1997) (holding that the agreement under which the defendant agreed to lease certain equipment was a "finance lease" under N.J.S.A. 12A:2A-407, and the lessee's agreement to make lease payments thereunder was effective), aff'd, 261 F.3d 490 (3d Cir. 2001).

Edison also argues that the trial court erred by granting summary judgment to CIT because there are genuine issues of material fact as to whether it accepted the delivery of the equipment. Again, we disagree. It is undisputed that Chemidlin signed the DAC, which states that all of the equipment described in the lease had been "delivered, inspected, installed" and was "unconditionally and irrevocably accepted... as satisfactory for the purposes of the lease[.]" The DAC conclusively refutes any claim by Edison that some of the equipment was not delivered or did not operate satisfactorily.

Affirmed.


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