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De Lage Landen Financial Services v. St. Bernard's Episcopal Church


February 16, 2012


On appeal from Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-223-10.

Per curiam.


Argued January 17, 2012

Before Judges Ashrafi and Fasciale.

Defendant St. Bernard's Episcopal Church, located in Bernardsville, appeals from orders of the Law Division dated February 18 and April 1, 2011, granting summary judgment for $12,116 in favor of plaintiff. We affirm.

In reviewing a grant of summary judgment, we apply the same standard under Rule 4:46-2(c) that governs the trial court. Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007). We must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Viewed most favorably to defendant church, the summary judgment record established the following facts.

The church suffered a fire in 2004 that resulted in substantial depletion of its endowment fund. Over the next several years, the vestry, which is the church's governing body, was immersed in reconstruction and major financial matters and did not pay close attention to lesser expenditures. Also, the long-standing priest in the parish resigned during that time and was replaced temporarily by a substitute rector.

In October 2006, a newly-hired executive assistant to the rector executed a contract with OCE Financial Services, Inc. (OCE), for a five-year lease of a copying machine. The new copying machine replaced an existing one that still had about two years left before the end of its lease term. The new lease required that the church make sixty monthly payments of $388. The rector was apparently aware of the lease, but neither the rector nor the executive assistant reported the transaction to the vestry and sought its approval. The copier was delivered and installed, and it was used for the work of the church for more than two years until February 2009. The church made the payments required by the lease until that time.

In January 2009, a new church treasurer was appointed. The treasurer conducted an audit of the church's obligations and expenses and determined that a copier adequate for the church's needs could be obtained at much lower cost. Counsel for the church wrote to OCE in February 2009 to terminate the five-year lease and request that the OCE copier be reclaimed. Plaintiff De Lage Landen Financial Services, which had been assigned the lease by OCE in December 2006, responded that the lease could not be terminated without payment of the entire amount due through the end of the five-year term. The parties were not able to agree to terms for an early termination of the lease. Defendant church obtained a new copier at significantly lesser cost, and it packed and stored the OCE copying machine so that it could be reclaimed by plaintiff.

Plaintiff brought a collection action seeking payments totaling $17,679.43, which included the accelerated balance of the remaining lease payments, a "booked residual" for the machine, late charges, court costs, and attorney's fees. Defendant church filed an answer and a counterclaim alleging violations of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20, and other causes of action. After discovery, plaintiff moved for summary judgment. Following several adjournments and other accommodations to allow defendant church to file opposition to the motion, the trial court heard argument on February 18, 2011.

In an oral decision on that date, the court granted summary judgment to plaintiff on its cause of action, also dismissing defendant's counterclaim. The court rejected defendant's argument that the action should be dismissed on grounds of improper venue, concluding that the lease contract provided that Illinois law would apply to any dispute, but the forum selection clause of the lease did not require that litigation be brought only in Illinois. The court also concluded that no genuine issues of material fact existed as to the execution of the lease and its terms, which included a provision requiring payment of the entire contract amount even if defendant terminated the lease early. The court stated that defendant had failed to provide evidence or legal authority to support its vague claims that the lease did not qualify as a financing lease under the Uniform Commercial Code. Because defendant's counterclaim and defenses were not supported by the record, plaintiff was entitled to summary judgment on its collection action. Finally, ruling partially in favor of defendant, the court found that the lease contained no provision for payment of attorney's fees.

After the court entered an order for judgment in the full amount claimed by plaintiff, defendant filed a motion for reconsideration. The trial court issued a written decision confirming summary judgment in favor of plaintiff but correcting the amount of the monetary award. It deleted from the total judgment the sums plaintiff claimed for attorney's fees and "booked residual" value of the machine. The court's order of April 1, 2011, modified plaintiff's award to $12,116, which included the accelerated payments, late charges, and court costs. Defendant then filed this appeal.

Initially, we reject without extensive discussion defendant's contention that the lease required litigation only in the state of Illinois. The lease contained both a choice of law clause designating Illinois law as applicable and a forum selection clause requiring that defendant consent to personal jurisdiction in Illinois. But the lease did not exclude litigation in other states. Although plaintiff could have sued in Illinois, it chose to bring its collection action in the church's home state, New Jersey. The lease did not exclude New Jersey as the forum for litigation.

On the merits, defendant does not contest execution of the lease or its relevant terms. It argues that the executive assistant*fn1 who signed the lease had no actual or apparent authority to do so without approval of the church vestry. Defendant argues that plaintiff's predecessor, OCE, had a duty to determine whether the employee was authorized to execute the lease on behalf of the church. Instead of fulfilling that duty, it contends, a salesman for OCE deceptively induced the employee to sign a new lease for a copying machine that far exceeded the church's needs and was excessively costly at a time when the church was undergoing financial hardship and did not need a new machine.*fn2

We are not persuaded by defendant's arguments. Whether or not the employee, as an agent of the church, had authority to bind the church when she signed the lease is not a decisive issue in this case given the undisputed facts. The church ratified the lease contract even if its execution was unauthorized. See Swader v. Golden Rule Ins. Co., 561 N.E.2d 99, 103-04 (Ill. App. Ct.), appeal denied, 564 N.E.2d 848 (Ill. 1990). In Karetzkis v. Cosmopolitan Nat'l Bank, 186 N.E.2d 72, 75 (Ill. App. Ct. 1962), the Illinois court stated that implied ratification of an agent's unauthorized transaction can be found where the principal knows about the transaction and retains its benefits. That is what occurred in this case.

Defendant argues that a genuine issue of disputed fact exists regarding whether the church as the principal knew the terms of the contract, and therefore, whether it should be found to have ratified the contract. See Jones v. Beker, 632 N.E.2d 273, 277 (Ill. App. Ct. 1994). However, in Stathis v. Geldermann, Inc., 692 N.E.2d 798, 808 (Ill. App. Ct.), appeal denied, 705 N.E.2d 450 (Ill. 1998), the court stated: "Ratification may be inferred from surrounding circumstances, including long-term acquiescence, after notice, to the benefits of an allegedly unauthorized transaction."

Here, the equipment was delivered; it was not concealed from members of the vestry or other church officials; and the church used the machine and, in fact, paid the lease charges for some twenty-six months. During that time, members of the vestry and other church officials must have been aware that the church had use of a copier and that a monthly charge was being paid for it under a contract. Having accepted the benefits of the contract entered into by its agent, even if unauthorized at its inception, the church could not repudiate the contract halfway through its term.

Because the undisputed facts lead inevitably to a conclusion that defendant church ratified the lease contract, we need not address the alternative issue of whether the executive assistant had actual or apparent authority under Illinois law to enter into the contract.


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