Opinion
No. CV 06 5003796
File Date: February 13, 2007
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT (#101)
On May 10, 2006, the plaintiffs, Colony Diner Restaurant, LLC (Diner), Erkan Celik, Guven Celik, and Miss Washington Diner, LLC, filed a ten-count complaint against the defendants, Capital Innovations, Inc. (Capital), and U.S. Bancorp, doing business as Manifest Funding Services (Bancorp). This action arises out of an equipment lease agreement that the Diner signed with Capital for the use of a computerized cash register. Capital's interest in the lease agreement was later assigned to Bancorp.
Count one of the ten-count complaint alleges a breach of contract by Capital, arising out of the lease agreement; count two alleges misrepresentation by Capital; count three alleges a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq., against Capital; count four alleges a lack of consideration relating to the lease agreement with Capital. Counts five and six allege unconscionability and a violation of Connecticut's public policy, respectively. Count seven alleges unconscionability under the laws of Minnesota, which allegedly governs the contract if it is enforced. Counts eight and nine allege a breach of the implied warranty of merchantability and warranty of use and enjoyment, respectively. Finally, count ten alleges that Capital assigned the lease to Bancorp, and due to the failure of consideration paid for the equipment, the plaintiff's are not indebted to Bancorp.
On May 24, 2006, Bancorp filed a motion for summary judgment on all counts of the plaintiffs' complaint, accompanied by a memorandum of law and documentary evidence, on the ground that the named defendants in the action are not the proper defendants. On May 31, 2006, Capital also filed a motion for summary judgment, accompanied by a memorandum of law and documentary evidence. This motion was granted by the court, Jones J., on September 18, 2006. The plaintiffs filed a motion to reargue on September 29, 2006, requesting the court to reopen the motion for summary judgment granted in favor of Capital, which was granted on October 12, 2006. On October 13, 2006, the plaintiff's filed a memorandum in opposition to both of the defendants' respective motions for summary judgment. Oral argument regarding Bancorp's motion for summary judgment was heard at short calendar on November 27, 2006, and is the only motion presently before the court.
"Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Neuhaus v. Decholnoky, 280 Conn. 190, 199, 905 A.2d 1135 (2006). "In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any such issues exist." Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988). "`Issue of fact' encompasses not only evidentiary facts in issue but also questions as to how the trier would characterize such evidentiary facts and what inferences and conclusions it would draw from them." United Oil Co. v. Urban Redevelopment Commission, 158 Conn. 364, 379, 260 A.2d 596 (1969). Summary judgment "is appropriate only if a fair and reasonable person could conclude only one way." Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815, 830 A.2d 752 (2003).
"The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any of material fact . . . As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent . . . When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the non-moving party has no obligation to submit documents establishing the existence of such an issue . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue." (Internal quotation marks omitted.) Zielinski v. Kotsoris, 279 Conn. 312, 318-19, 901 A.2d 1207 (2006). The court, however, may consider not only the facts presented by the parties' affidavits and exhibits, but also the "inferences which could be reasonably and logically drawn from them . . ." United Oil Co. v. Urban Redevelopment Commission, supra, 158 Conn. 381.
Bancorp moves for summary judgment on all counts of the plaintiffs' complaint on the ground that there is no disputed issue of material fact that the plaintiffs have asserted their claims against the wrong defendants. Bancorp argues that the supplier, Future Consulting Services LLC, is the proper defendant for claims arising out of the defective cash register system. The court need not address counts one through nine of the complaint because only count ten raises a claim against Bancorp.
A party who is not implicated in the allegations of a specific count cannot be entitled to judgment as a matter of law for that count. Summary judgment on the first nine counts of the complaint should be, and have been raised by Capital, in a separate motion for summary judgment.
In support of summary judgment, Bancorp has submitted numerous unauthenticated documents. The signed and sworn affidavit of Becky Swanson, intended to authenticate the accompanying documents, fails to conform to the provisions of Practice Book § 17-46, and, therefore, is inadmissible. The remaining exhibits appended to Bancorp's motion for summary judgment are unauthenticated and uncertified. The plaintiffs, however, have not objected to these documents, several of which have also been appended to the plaintiffs' complaint. Accordingly, it is within the court's discretion to take these documents into account to determine the appropriateness of summary judgment. See Barlow v. Palmer, 96 Conn.App. 88, 92, 898 A.2d 835 (2006). These documents include: 1) the equipment lease agreement between Capital and Colony; 2) Schedule A to the lease agreement, listing supplier information for Future Consulting Services, LLC; 3) the corporate guaranty agreement signed by Miss Washington Diner LLC in order to induce Capital to lease equipment to Colony pursuant to the lease agreement; 4) the personal guaranty agreement signed by Guven Celik in order to induce Capital to lease equipment to Colony pursuant to the lease agreement. Two additional documents are submitted only by Bancorp, including: 1) the assignment agreement between Capital and Bancorp; and 2) verification of Bancorp Manifest Funding Services.
The signed and sworn affidavit of Becky Swanson, a collection manager employed by Bancorp, fails to conform with the provisions of the relevant rules of practice, and, therefore, is inadmissible to support the motion for summary judgment. Practice Book § 17-46, titled Form of Affidavits, provides in relevant part: "Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." (Emphasis added.) Swanson's affidavit states that she is familiar with the facts of the case, but fails to attest to having the requisite personal knowledge of the information contained in her affidavit. The affidavit is intended to convey the information that was allegedly conveyed to Celik by another employee of Bancorp.
In opposition to the motion for summary judgment, the plaintiffs argue that substantial factual issues have been raised in the pleadings and summary judgment in favor of both defendants is inappropriate at this time. Specifically, the plaintiffs argue that the following issues are contested: 1) the lease agreement is void due to failure of consideration; 2) the lease agreement which allows payment despite the lack of consideration, is void pursuant to public policy; 3) an implied warranty existed on the use and enjoyment of the computer system, which never worked; and 4) the defendants' conduct constituted a breach of CUTPA. In support of their argument, the plaintiffs submitted the signed and sworn affidavit of plaintiff Erkan Celik.
In count ten of the complaint, the plaintiffs allege that the plaintiffs and the guarantors are not indebted to Bancorp, as the assignee of the plaintiffs' original contract with Capital. They allege that the equipment was defective, resulting in a failure of consideration. Bancorp argues that pursuant to the express terms of the contract, any claim for defective equipment should have been brought against the supplier, not the lessor. Therefore, any allegation of defective equipment is not properly raised against Bancorp or Capital, and does not affect Bancorp's rights under the contract. In addition, Bancorp argues that adequate consideration was paid to support the assignment of the contract from Capital to Bancorp.
It appears that Bancorp may have misinterpreted the allegations of count ten. The count seems to allege that the plaintiffs do not have to pay Bancorp, as the assignee, because the original contract between the plaintiffs and Capital is void for lack of consideration. Bancorp interprets this provision to mean that the assignment itself is void for lack of consideration, which is not at issue.
Bancorp relies on a copy of the lease agreement to support its contention that the plaintiffs' claims for receiving a defective product should be raised against the supplier, not the original lessor and assignee of the lease. "When a contract provision is unambiguous, its interpretation presents an issue of law for determination by the court . . . When, however, a contract provision is ambiguous or contract provisions are internally inconsistent, a question of fact is involved . . ." (Citations omitted.) Bank of Boston Connecticut v. Avon Meadow Associates, 40 Conn.App. 536, 540, 671 A.2d 1310, cert. denied, 237 Conn. 905, 674 A.2d 1329 (1996).
In the present case, the unambiguous terms of the lease agreement establish that the equipment lease was a financing agreement. The lease states: "YOU AGREE THAT YOU HAVE SELECTED THE SUPPLIER AND EACH ITEM OF EQUIPMENT BASED ON YOUR OWN JUDGMENT . . ." The provisions of the lease agreement further establish that the plaintiffs selected the supplier and the equipment and certified that the equipment was delivered and installed completely and satisfactorily, before authorizing Capital to pay the supplier for the equipment. Directly above the signature of Erkan Celik, the lease states: "Your approval . . . of our purchase of the equipment from the supplier is a condition precedent to the effectiveness of this lease." Even viewing the evidence in the light most favorable to the nonmovant, the trier of fact could not reasonably reach any other conclusion than that the plaintiffs bargained with Capital to provide financing, and in return, received the bargained-for financing for the product they selected.
The documentary evidence also supports the nonexistence of a genuine issue of material fact that Capital was not responsible for the condition of the actual equipment as part of its consideration under the contract. The lease agreement states in relevant part: "YOU AGREE THAT YOU HAVE SELECTED THE SUPPLIER AND EACH ITEM OF EQUIPMENT BASED UPON YOUR OWN JUDGMENT AND DISCLAIM ANY RELIANCE UPON ANY STATEMENTS OR REPRESENTATIONS MADE BY US OR ANY SUPPLIER. WE DO NOT TAKE RESPONSIBILITY FOR THE INSTALLATION OR PERFORMANCE OF THE EQUIPMENT . . . WE HAVE NO RESPONSIBILITY FOR ANY MAINTENANCE OR SUPPORT TO BE SUPPLIED BY SUPPLIER. YOU WILL CONTINUE TO MAKE ALL PAYMENTS UNDER THIS LEASE AGREEMENT REGARDLESS OF ANY CLAIM OR COMPLAINT OF NONPERFORMANCE AGAINST SUPPLER." Based on this provision, Bancorp has sufficiently established the nonexistence of a genuine material issue of fact that the plaintiffs should be pursuing their claim for receiving a defective product against the supplier, not Capital or Bancorp. Once again, viewing the evidence in the light most favorable to the plaintiffs, a trier fact can reach only one reasonable conclusion: Capital's obligation under the lease agreement was to finance the equipment, not provide the actual equipment. Therefore, Bancorp is not the proper defendant in any claim arising out of the receipt of a defective product.
When the burden is shifted to the plaintiffs, as required under summary judgment, the plaintiffs argue that their obligation to make payments to Bancorp is subject to several factual disputes, thereby making summary judgment inappropriate. In response to the motions for summary judgment filed by both Capital and Bancorp, the plaintiffs argue that four disputed issues of material fact still remained for trial. The court, however, need only address the merits of the plaintiffs' arguments that the contract is void for unconscionability and failure of consideration.
The plaintiffs raise two other arguments to both defendant's respective motions for summary judgment. They argue that the defendants' conduct constituted a violation of CUTPA and that the defendants breached the implied warranty on the use and enjoyment of the product. The court, however, need not address the merits of these two arguments. The CUTPA argument contained in the plaintiffs' memorandum seems to have been included in error. The argument does not relate to the facts of the present case, and actually argues against the plaintiffs' position. The implied warranty argument is mentioned in the initial discussion of background, but is not actually briefed.
"[U]nconscionability is a matter of law to be decided by the court based on all the facts and circumstances of the case." Cheshire Mortgage Service, Inc. v. Montes, 223 Conn. 80, 87, 612 A.2d 1130 (1992). "The purpose of the doctrine of unconscionability is to prevent oppression and unfair surprise." Id., 88. The plaintiffs argue that the lease agreement is unconscionable, and, therefore void, because they are expected to make payments on a contract when they have not received a benefit in return. In TBF Financial, LLC v. Grassilli, Superior Court, judicial district of Hartford, Docket No. CV 01 0805809 (January 29, 2003, Booth, J.), this court addressed the unconscionability of a equipment lease agreement that requires payment even when the lessee does not receive a benefit under the agreement because of defects. The court held that this type of provision "`is frequently part of a finance lease because upon delivery and acceptance of the subject equipment, the lessor's promised obligation, which is to purchase the equipment, has been fulfilled. The lessor's money has been spent and it is required to do nothing further. In that respect, the lessor's position is similar to that of a bank holding a note for the price of the equipment. The lessee, however, will not have fulfilled its promised obligations until all rental payments have been made. The purpose of the clause, therefore, is to ensure completion of the lessee's performance. This is not unconscionable in the context of a finance lease where . . . the facts and circumstances do not indicate any inequality of bargaining power or element of unfair surprise.' Emlee Equipment Leasing v. Waterbury Transmission, 31 Conn.App. 455, 472-73, 626 A.2d 307 (1993)." TBF Financial, LLC v. Grassilli, supra, Superior Court, Docket No. CV 01 0805809. In the present case, the plaintiffs have not offered any evidence to establish unconscionability beyond the mere fact that the lease agreement required payment even when product was defective. This is not enough to demonstrate the existence of a genuine issue of material fact that the contract is unconscionable.
The plaintiffs also argue that a genuine issue of material fact exists concerning the sufficiency of the consideration paid by Capital under the lease agreement. They argue that the lease agreement is void due to lack of consideration because "[n]o services were provided under the contract/lease in question." This argument shares a similar foundation with their argument that the lease agreement was unconscionable. Like unconscionability, whether a contract is supported by sufficient consideration is a question of law based upon the evidence. See Town Bank Trust Co. v. Benson, 176 Conn. 304, 307-08, 407 A.2d 971 (1978). The Appellate Court has held that "[c]onsideration is [t]hat which is bargained-for by the promisor and given in exchange for the promise by the promisee . . . [T]he doctrine of consideration does not require or imply an equal exchange between the contracting parties . . . Consideration consists of a benefit to the party promising, or a loss or detriment to the party to whom the promise is made." (Internal quotation marks omitted.) Martin Printing, Inc. v. Sone, 89 Conn.App. 336, 345, 873 A.2d 232 (2005).
In the context of valid consideration for an equipment lease agreement, no clear law is available on whether an equipment lease agreement is invalid for lack of consideration if the product leased is ultimately defective. In Emlee Equipment Leasing v. Waterbury Transmission, supra, 31 Conn.App. 455, the Appellate Court did not address the merits of the argument of failure of consideration due to defective product, however, the court's discussion of finance agreements provides direction to the present case. "A finance lease differs considerably from an ordinary lease, which typically involves only a lessor and a lessee, because it involves an additional party, the equipment supplier or manufacturer. Because the finance lessor is strictly a financing entity, the lessee ordinarily must look to that additional party for warranty liability. In effect, the finance lessee . . . is relying upon the manufacturer . . . to provide the promised goods and stand by its promises and warranties; the [lessee] does not look to the [lessor] for these. The [lessor] is only a finance lessor, and deals largely in paper, rather than goods. In that situation, it makes no sense to treat the [lessor] as a seller to the [lessee] with warranty liability, nor does it make any sense to free the manufacturer . . . from liability for breach of promises and warranties that it would have given in an outright sale to the [lessee]. Usually, the [lessor] expects to be paid, even though the [product] might prove to be defective or totally unsuitable for the [lessor's] particular business." (Internal quotation marks omitted.) Id., 465-66. In the present case, the plaintiffs' position that the lease agreement is unsupported by valid consideration, is contrary to this understanding of a finance lease agreement.
The plaintiffs do not offer any evidence to refute the express terms of the lease agreement, which establish that the plaintiffs contracted with Capital to provide the financing for the equipment they selected. The lease agreement also establishes that this consideration was paid by Capital only after the plaintiffs certified that the equipment was delivered and installed satisfactorily. The plaintiffs fail to supply any additional evidence, besides Erkan Celik's own self-serving affidavit, to demonstrate the existence of a genuine issue of material fact regarding the consideration paid. The mere assertion that the contract is void for lack of consideration is not enough to withstand summary judgment.
A party's affidavit containing conclusory statements does not "constitute evidence sufficient to establish the existence of disputed material facts." Gupta v. New Britain General Hospital, 239 Conn. 574, 583, 687 A.2d 111 (1996).
For this reason, summary judgment is granted in favor of the defendant Bancorp on count ten of the complaint.