Colonial Pacific Leasing Corp. v. J.W.C.J.R. Corp.

1999 UT App 091, 1999 UT App 91, 977 P.2d 541, 1999 WL 161326, 365 Utah Adv. Rep. 27, 38 U.C.C. Rep. Serv. 2d (West) 424, 1999 Utah App. LEXIS 50
CourtCourt of Appeals of Utah
DecidedMarch 25, 1999
Docket980062-CA
StatusPublished
Cited by9 cases

This text of 1999 UT App 091 (Colonial Pacific Leasing Corp. v. J.W.C.J.R. Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals of Utah primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Colonial Pacific Leasing Corp. v. J.W.C.J.R. Corp., 1999 UT App 091, 1999 UT App 91, 977 P.2d 541, 1999 WL 161326, 365 Utah Adv. Rep. 27, 38 U.C.C. Rep. Serv. 2d (West) 424, 1999 Utah App. LEXIS 50 (Utah Ct. App. 1999).

Opinion

OPINION

BILLINGS, Judge:

¶ 1 Appellants J.W.C.J.R. Corp. (JWCJR) and John W. Cumberledge, Jr. (Cumberledge) appeal a judgment in favor of appellee Colonial Pacific Leasing Corp. (Colonial Pacific), awarding Colonial Pacific the amount due under its finance lease agreement with JWCJR. Because we conclude the trial court’s findings of fact are insufficient to support its judgment enforcing the finance lease agreement, we reverse and remand.

FACTS

¶ 2 JWCJR, an autobody shop, sought a computer and software package that would facilitate the generation of estimates for insurance companies and improve internal shop management. JWCJR was approached by Bottomline Systems, Inc. (Bottomline), who demonstrated a computer and software system. To obtain the demonstrated system, JWCJR entered into a finance lease agreement with Colonial Pacific, the lessor. JWCJR’s owner, Cumberledge, signed the lease both as an agent of JWCJR and as a personal guarantor. Colonial Pacific purchased the equipment from Bottomline. Under the finance lease agreement, JWCJR was to make monthly payments to Colonial Pacific.

¶3 A few days before JWCJR received the computer and software package from Bottomline, Colonial Pacific required Cum-berledge to sign an “acceptance and acknowledgment” form that stated the equipment had been received from Bottomline and was satisfactory. Cumberledge signed the acceptance and acknowledgment form and made an initial lease payment. On the day JWCJR received the equipment, Colonial Pacific contacted Cumberledge seeking a verbal verification that the equipment was acceptable. Cumberledge told Colonial Pacific’s representative that JWCJR had received the equipment, but it was not yet operational.

¶ 4 Cumberledge had difficulty getting the computer system to function properly and repeatedly contacted Bottomline with his concerns. On the second day JWCJR had the computer equipment, Colonial Pacific again contacted Cumberledge to inquire whether the system was operational; Cum-berledge responded that the system was working. Colonial Pacific then paid Bottom-line for the equipment. Later that day the system crashed, and despite repeated calls to Bottomline and many attempts to get it functioning, Cumberledge could not get the system to work.

¶ 5 Soon after, Cumberledge phoned Colonial Pacific and informed it the computer equipment was not functioning and never had functioned properly. Cumberledge boxed up the equipment and contacted Bottomline to pick it up. Within the next few weeks, Cum-berledge again phoned Colonial Pacific to tell it of his problems with the computer system and to cancel the lease. From his conversation with a Colonial Pacific representative, Cumberledge believed the lease was canceled and that he was no longer obligated to make lease payments. Colonial Pacific had no record of the telephone calls.

¶6 More than two years later, Colonial Pacific sought to recover the unpaid lease payments. JWCJR, and Cumberledge as guarantor of the lease, refused to pay. Colonial Pacific brought this action to recover the full lease amount. The trial judge concluded JWCJR had breached the lease agreement by failing to make the required lease payments and awarded Colonial Pacific a judgment for $21,275.30. JWCJR and Cumber-ledge now appeal.

*544 ANALYSIS

I. Acceptance

¶7 On appeal JWCJR argues the trial court erred in enforcing the lease agreement because JWCJR never accepted the goods covered by the lease. JWCJR contends any alleged acceptance took place before it had a reasonable opportunity to inspect the computer equipment.

¶ 8 Under Article 2A of the Uniform Commercial Code (UCC), which governs enforcement of financing leases, we must determine if a lessee has accepted the goods, and therefore, has agreed to the lease. Once a lessee has accepted the goods, the lessee’s promises are deemed irrevocable. See Utah Code Ann. § 70A-2a407(l) and (2) (1997). Subsections 407(1) and (2), commonly referred to jointly as “the hell or high water provision,” state:

(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.

Id. (emphasis added.).

¶ 9 Utah Code Ann. § 70A-2a-515 (1) (1997) explains when a lessee has accepted leased goods:

(1) Acceptance of goods occurs after:
(a) the lessee has had a reasonable opportunity to inspect the goods and the lessee signifies or acts with respect to the goods in a manner that signifies to the lessor or the supplier that the goods are conforming or that the lessee will take or retain them in spite of their nonconformity; or
(b) the lessee fails to make an effective rejection of the goods as provided in Subsection 70A-2a-509(2).

Utah Code Ann. § 70A-2a-515 (1) (1997) (emphasis added).

¶ 10 One commentator further explains acceptance in financing leases:

Section 2A-515(1) provides that acceptance occurs when the lessee does any of three things after a reasonable opportunity to inspect the goods: (a) signifies acceptance; (b) fails to make an effective rejection; or (c) does any act that signifies acceptance. Normally, acceptance occurs under the first test where the lessee, after inspection, indicates that the lessee is satisfied with the goods and will take them, or signifies that the lessee will take or retain them notwithstanding their defects.

2A William D. Hawkland & Frederick H. Miller, Uniform Commercial Code Series § 2A-515, at 839 (1993) (emphasis added).

¶ 11 Because it is generally accepted that UCC sections 2-606 and 2A-515 are analogous, 1 we look to case law interpreting both provisions to help us determine whether JWCJR had a reasonable opportunity to inspect the computer equipment, and thus by its acts accepted the equipment.

¶ 12 Whether a party has had a “reasonable opportunity to inspect,” and thus whether an acceptance has occurred, is a question of fact. See Figueroa v. Kit-San Co., 123 Idaho 149, 845 P.2d 567

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1999 UT App 091, 1999 UT App 91, 977 P.2d 541, 1999 WL 161326, 365 Utah Adv. Rep. 27, 38 U.C.C. Rep. Serv. 2d (West) 424, 1999 Utah App. LEXIS 50, Counsel Stack Legal Research, https://law.counselstack.com/opinion/colonial-pacific-leasing-corp-v-jwcjr-corp-utahctapp-1999.