OPINION OF THE COURT
Plaintiff Direct Capital Corporation moves, pursuant to CPLR 3212, for summary judgment against defendants New ABI Inc., doing business as ABI Inc., and Angela Lu, also known as Angela Huang (collectively defendants), for breach of a finance lease contract for photo printer equipment and default under a related personal guaranty; pursuant to CPLR 3211, for dismissal of defendants’ affirmative defenses; and for an order prohibiting the removal, transfer, concealment, disposition, sale, pledging, and/or assignment of the leased equipment and directing the sheriff in the appropriate county to seize the equipment.
Facts and Procedural History
Plaintiff commenced the instant action to recover the balance allegedly due under an equipment finance lease and personal guaranty executed by Angela Lu covering photo printer equipment supplied by third-party defendant Mullersohn Foto Labor Technik, G.M.B.H., a German manufacturer of photo printers and related equipment for use in photo duplicating.
In March or April 2005, an entity known as World Images Digital (WID), purportedly acting as a representative of Mullersohn, solicited ABI for the sale of a photo printer and related equipment for use in ABI’s retail photo print shop. ABI and WID subsequently entered into a contract for the sale of the photo equipment as reflected in a letter dated April 11, 2005. In that letter, which preceded any relationship with plaintiff, Jens Jensen, president of WID states:
“3) I confirm that you can return the scanners if you are not satisfied with the results produced. I confirm that we will either refund any payment made for scanners or replace them with scanners that you like, as you wish. You have unrestricted right of return on the scanners for 60 days after installation is finished.
“4) You can rest assured that your warranty will be*1153 honored under all circumstances. Müllersohn has been in the business since 1936, we have been in business since 1994 and we currently have a very big success with the Müllersohn printers and minilabs.”
The letter further indicated that ABI was preapproved for financing with monthly payments of $1,845.10 for 60 months, and that upon receipt of ABI’s down payment, delivery was guaranteed. An 11-page “Order Confirmation/Bill of Sale,” for signature by defendants, appears to have been enclosed with this letter. The order confirmation recites the specifications of the merchandise to be purchased for a “Total Package price” of $118,965 less a trade-in credit of $10,000. Page three of this document states: “We . . . World Images Digital, Inc. . . . hereby confirm to have sold to . . . New A.B.I, Inc. . . . the following equipment [description omitted].” This document further provides:
“Payment: The above-mentioned equipment is to be financed via leasing . . .
“Buy out after lease $1.00 (one dollar).
“We will set up automatic bank transfer for the monthly payments.”
It further provides:
“Payment of the price; Security interest.
“The above mentioned equipment is to be financed (leased) or paid cash. If paid cash the purchase price is payable upon delivery on cashiers check or certified funds. If any instalment [szc] is not paid when due, World Images Digital Inc. can declare the entire purchase price to be immediately due and payable. The buyer will pay interest at 19% per annum on any part of the purchase price that is not paid when due.
“World Images Digital Inc. reserves a security interest in the equipment until the purchase price is paid in full. The buyer authorizes World Images Digital Inc. to sign the buyer name to and to file a financing statement describing the equipment in order to perfect the security interest. World Images Digital Inc. may reposes [szc] the equipment and foreclose it’s [sic] security interest upon the buyer’s failure to pay the purchase price, or any part thereof, when due. The complete equipment as listed above will be the property of World Images Digital Inc. till paid in*1154 full, please sign here.”
Despite the reference to financing via lease, to the unsophisticated, it would appear from the language of the order confirmation that an exclusively bilateral contract between WID and ABI was contemplated, particularly in light of WID’s retention of the right “to reposses[s] the equipment and foreclose it’s [sic] security interest” upon buyer’s default (see “Arbitration-litigation”). On May 17, 2005, ABI paid WID a $25,000 down payment.
Subsequently, a “CONTRACT” dated August 9, 2005, on the letterhead of “MüllerSOHN” was presented to the president of ABI (addressed as 28 Minute Photo), Benson Huang. This document, which is signed on behalf of WID and Mullersohn, indicates that WID was unable to perform under its contract with Mr. Huang and Mullersohn was taking over performance, in return for which Mr. Huang would pay to Mullersohn the agreed purchase price pursuant to the contract with WID “before delivery by bank transfer or Letter of Credit.” Thereafter, by letter dated August 18, 2005, addressed to Angela Lu at ABI, plaintiff provided the lease documents upon which this action is brought.
On August 20, 2005, defendants executed the written commercial equipment lease agreement and guaranty whereby plaintiff agreed to lease the equipment to ABI. By letter dated August 19, 2005 to defendant Angela Lu, Direct Capital explained that the proposed agreement was “a business financing agreement” and described the credit evaluation process and personal exposure of the business owner. No mention is made therein of a waiver of warranty. Pursuant to the terms of the lease, ABI selected the equipment listed on exhibit A from Mullersohn, which was acquired by plaintiff and then leased to ABI. The balance on the lease, after payment of an “Advance Rental [Payment]” of $1,999.30 plus a “Documentation Fee” of $1,300, was payable in 60 consecutive monthly installments (the initial term), in the amount of $1,844.80, exclusive of taxes thereon. Although the equipment was not delivered until September 26, the lease agreement executed August 20 includes an acknowledgment that the equipment had been delivered and installed and was “in good condition, working order” to the satisfaction of lessee. In slightly bolded, minuscule type, paragraph 2 of the lease, contained within the numerous boilerplate provisions beginning on page 2, entitled “Disclaimer of Warranties and Claims; Limitation of Remedies,” provides, in pertinent part:
*1155 “There are no warranties by or on behalf of Lessor. Lessee acknowledges and agrees as follows: a) Lessor makes no warranties, either express or implied, against interference or infringement with respect to the Equipment or as to the condition of the Equipment, its merchantability, its fitness or suitability for any particular purpose, its design, its capacity, its quality, or with respect to any characteristics of the Equipment; b) [Lessee has inspected Equipment and is satisfied with condition]; c) Lessee leases the Equipment ‘as is’ and with all faults; ... e) If the Equipment is not properly installed, does not operate as represented or warranted by the supplier or manufacturer, or is unsatisfactory for any reason, regardless of cause or consequence, Lessee’s only remedy, if any, shall be against the supplier or manufacturer of the Equipment and not against Lessor; f) Provided Lessee is not in default under this Lease, Lessor assigns to Lessee any warranties made by the supplier or manufacturer of the Equipment;[1 ] g) Lessee shall have no remedy for consequential or incidental damages against Lessor; and h) No defect, damage, or unfitness of the Equipment for any purpose shall relieve Lessee of the obligation to pay rent or relieve Lessee of any other obligation under this lease. The Lessor and Lessee have specifically negotiated and agreed to the foregoing paragraph.”
On the face of the lease, immediately above the signatures of the parties, enclosed within a box and bolded in all capital letters larger than the typeface used throughout the balance of the lease, appears the caveat: “THIS IS A NONCANCELABLE/ IRREVOCABLE LEASE, THIS LEASE CANNOT BE CAN-CELLED OR TERMINATED.” In much smaller, nonbolded type, under “ACCEPTANCE OF DELIVERY” and included within a six-sentence paragraph, the lease states: “You understand and agree that we have purchased the equipment from supplier(s) and you may contact the supplier(s) for your warranty rights, if any, which we transfer to you for the term of the lease.” This paragraph does not expressly caution the lessee that it will have no recourse against lessor for defects in the
On or about September 26, 2005, the equipment was delivered to ABI and ABI tendered to plaintiff the first monthly rental payment due under the lease.
Plaintiff commenced the instant action on or about February 21, 2006, seeking to recover damages for breach of the equipment lease. The complaint also seeks an order prohibiting the transfer, disposition or assignment of the equipment, and directing seizure of the equipment by the sheriff in the appropriate county. Defendants interposed an answer and third-party complaint against Mullersohn and Sterling raising as an affirmative defense that “by virtue of Mullersohn’s default under its contract with ABI [plaintiff] is barred from recovery herein.”
Arguments
In support of its motion for summary judgment, plaintiff annexes the affidavit of Mr. Shaun Buswell, litigation manager and employee of plaintiff, who argues that, as a result of ABI’s default under the lease, and upon plaintiff’s election under paragraphs 15 and 24, all of the obligations of ABI due and to become due under the lease, became immediately due and pay
Mr. Buswell also asserts, and the lease provides, that pursuant to paragraphs 15, 17 and 24, ABI is required to reimburse plaintiff for all taxes paid, payable or required to be collected by plaintiff by reason of ABI’s use and/or rental of the equipment valued at $8,262.78; that paragraphs 15 and 24 of the lease entitle plaintiff to recover all costs and expenses incurred in collecting amounts due and owing under the lease, including attorney’s fees; and that paragraph 22 entitles plaintiff to recover interest on all delinquent amounts due under the lease calculated at 15% per annum from the date of default. The present discounted value of the delinquent balance on the lease as of November 1, 2005 is $98,660.03. The fair market value of the equipment is $50,000. (The $70,000 set forth in the complaint was an error.)
In addition, Mr. Buswell asserts that by virtue of the personal guaranty executed by Angela Lu on August 20, 2005, Ms. Lu is unconditionally indebted to plaintiff for the present-valued discounted balance of payments due under the lease.
Finally, Mr. Buswell notes that, pursuant to paragraph 24 of the lease, in the event of ABI’s default, plaintiff is entitled to repossess the equipment. Given that the equipment can be easily moved, secreted, or sold, and ABI’s history of default and refusal to return the equipment despite a demand to do so, Mr. Buswell argues that plaintiff is entitled to an order prohibiting the removal of the equipment and directing its seizure.
Counsel for plaintiff reiterates that pursuant to paragraph 2 of the lease, plaintiff made no representations or warranties to
Counsel asserts that the waiver of warranty provision is in full compliance with UCC 2-316 (2), which requires that the waiver be conspicuous within the meaning of UCC 1-201 (10), and argues that pursuant to UCC 2-A-214, an equipment lessor is entitled to waive any and all warranties in writing and that the language “as is,” as set forth in the lease, is sufficient to modify and exclude warranties. Thus, plaintiff contends that any alleged damage or imperfections in the equipment do not relieve defendants of their obligations to plaintiff under the lease or guaranty.
With respect to plaintiffs entitlement to repossess the equipment, counsel adds that it has purchased a bond in an amount twice the fair market value of the equipment. As to counsel fees, counsel states that, to date, plaintiff will have incurred fees in excess of $1,600.
In opposition, Benson Huang, president of ABI and husband of Angela Lu, submits a sworn affidavit in which he states that Mullersohn was joined as a third-party defendant because it sold the equipment to ABI and guaranteed its performance and fitness for ABI’s use. He asserts that while Mullersohn remained liable on this guarantee, there was “some question” concerning the party with whom ABI contracted. Specifically, Mr. Huang states that ABI first dealt with WID, whose “position” was taken over by Mullersohn in August 2005, and that Mullersohn’s position was taken over almost immediately thereafter by plaintiff. He also avers that ABI was not represented by counsel during contract review and negotiations and that ABI entered into the financing agreement as “an accommodation” to Mullersohn.
Mr. Huang claims that almost immediately after delivery, the equipment repeatedly malfunctioned. He argues that plaintiffs motion should be denied until it is determined whether Mullersohn complied with its express obligations under its guarantee, and whether plaintiff, as Mullersohn’s assignee, is liable for
In another sworn affidavit, Ms. Lu avers that when the lease was presented to her for signature, she was told that it was “for financing purposes only” and that it would not affect “the stance of the transaction which had been entered into between ABI and Mullersohn as supplemented by agreement with [WID].” She also states that ABI was not represented by counsel during “these discussions and [that] the agreements were prepared by Mullersohn, [WID] and/or Direct”; that during negotiations, she was not told that there was a waiver of warranty included in the agreement, which may have prevented defendants from entering into the lease; and that she was advised that “the agreements” were “merely formal changes required to obtain the necessary financing for the purchase, similar in scope to when one purchases a car.”
Counsel for ABI argues that the waiver of warranty provision in the lease is unenforceable and seeks leave to amend ABI’s answer should the court require this defense to be separately pleaded. Counsel further contends that plaintiff acquired its rights through Mullersohn and that plaintiffs rights against ABI are subject to Mullersohn’s performance of the contract, including applicable warranties. Counsel asserts that plaintiffs remedy lies against Mullersohn. Noting that Mullersohn is a German corporation which does not have a registered agent for service of process in New York, counsel states that he is currently arranging for service of process on Mullersohn through a German attorney.
In ABI’s memorandum of law, ABI argues that the waiver of warranty provision does not comply with UCC 2-316 (2) and is therefore ineffective because the disclaimer is not set forth in conspicuous print but rather is buried in a mass of small similar print on the third page of the seven-page lease, and is neither larger nor bolder than the remainder of the print on the page. Counsel contends that assuming the waiver of warranty provision is held to be unenforceable, plaintiffs liability under the
In reply, plaintiff reiterates that ABI’s defense that the equipment was defective is insufficient to defeat plaintiffs motion as a matter of law since, based upon the waiver of warranty provision, plaintiff made no representations or warranties to defendants regarding the equipment, and plaintiff has no obligation to service the equipment. Counsel states that defendants were at all times aware that plaintiff is not responsible for the equipment, and it would be inappropriate to deny the motion until it can be determined whether defendants’ own chosen vendor (Mullersohn) has complied with its obligations to defendants, if any. Counsel argues that in a finance lease transaction like the subject lease agreement here, the obligations of the vendor are independent of plaintiff’s claim against the defendants and that the clause above defendants’ signatures in bold, large font upper case letters, “THIS IS A NONCANCELABLE/IRREVOCABLE LEASE, THIS LEASE CANNOT BE CANCELLED OR TERMINATED,” makes ABI’s obligation to make rental payments under the lease absolute and unconditional.
Analysis
“A third-party finance agreement is an agreement whereby a third party agrees to provide the financing between a supplier and a consumer” (Netrix Leasing, LLC v K.S. Telecom, Inc.,
In accordance with UCC 2-A-103 (1) (g), defendants selected the subject equipment from Mullersohn, paid Mullersohn a down payment, and entered into the lease with plaintiff to finance the equipment. By submitting the subject lease and proof that defendant defaulted thereon after making only one payment, plaintiff has met its initial burden of establishing its entitlement to judgment as a matter of law. Although defendants’ answer indicates that the equipment was defective, under the terms of the lease, plaintiff made no representations or warranties to defendants regarding the equipment. In this regard, paragraph 2 of the lease provides, in pertinent part, that “[t]here are no warranties by or on behalf of the Lessor”; that “Lessor acknowledges and agrees . . . [that] Lessor makes no warranties, either express or implied . . . with respect to the Equipment or as to the condition of the Equipment, its
Defendants’ demand that the court deny or hold the motion in abeyance pending a determination as to whether Mullersohn complied with its express obligations to guarantee performance of the equipment is rejected. As the court held in an analogous case, “Whatever the liability of the third-party defendant! ] to [defendants], [it is] not [a] part[y] to the Lease. [Defendants’] liability to [plaintiff] is independent of [its] claims against the supplier and manufacturer, as UCC article 2-A and the Lease terms clearly delineate” (General Elec. Capital Corp.,
Defendants maintain that the waiver of warranty provision (paragraph 2) is ineffective since it is not sufficiently conspicuous as that term is defined by UCC 2-316 (2) and 1-201 (10). UCC 2-316 (2) provides, in pertinent part, that “to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous.” UCC 1-201 (10) provides, in pertinent part, that
*1163 “[a] term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals ... is conspicuous. Language in the body of a form is ‘conspicuous’ if it is in larger or other contrasting type or color . . . Whether a term or clause is ‘conspicuous’ or not is for decision by the court.”
The critical waiver of warranty provision here, “Disclaimer of Warranties and Claims; Limitation of Remedies,” quoted above, appears on the second page of the equipment lease agreement as paragraph 2. It is essentially buried in the text of a six-page document. The typeface is identical to the surrounding provisions and is almost imperceptibly darker than other text. In examining the appearance of page 2, the court notes that the slightly darker print of paragraph 2 may be perceived to be the result of a defect in the printing rather than an intentional effort to draw the reader’s attention to the provision. It does not appear adjacent to the signature lines and is separated from the critical payment details, the guaranty and the clearly highlighted, boxed and bolded “drop-dead” caveat indicating that the lease is “NONCANCELABLE/IRREVOCABLE” and “CANNOT BE CANCELLED OR TERMINATED” by being placed on a separate page contained within 32 boilerplate paragraphs.
The test to determine whether a clause is “conspicuous” so as to satisfy UCC 2-316 “is whether a reasonable person would notice the disclaimer when its type is juxtaposed against the rest of the agreement.” (Commercial Credit Corp. v CYC Realty,
“[U]nless the circumstances indicate otherwise, all implied warranties are excluded by expressions like ‘as is,’ or ‘with all faults,’ or by other language that in common understanding calls the lessee’s attention to the exclusion of warranties and makes plain that there is no implied warranty, if in writing and conspicuous.”
Though not “conspicuous” within the entire lease, paragraph 2 does contain all the prescribed statutory language. Moreover, paragraph 3 expressly states that the lease is meant to qualify as “a statutory finance lease under Article 2A of the Uniform Commercial Code.”
Article 2-A was added to New York’s UCC, effective June 30, 1995, to cover leases of goods, as distinguished from sales, which are dealt with under article 2. Within article 2-A are provisions specifically dealing with “finance leases” in which the lessor is only supplying the funds to cover the cost of merchandise or equipment that is actually selected and purchased at the lessee’s direction from a third-party vendor. As noted in the Comment to UCC 2-A-101, these “leasing transactions substitute the supplier of the goods for the lessor as the party responsible to the lessee with respect to warranties and the like.” (UCC 2-A-101, Comment, reprinted in McKinney’s Cons Laws of NY, Book 62½, UCC 2-A-101, at 314.) Such was the legislative intent. Further, where the finance lease is not a consumer lease, as is the case here, the so-called “hell or high water” clause pursuant to which the lease becomes irrevocable and noncancelable and requires the lessee to make payments irrespective of any defects in performance, is fully enforceable in New York in the absence of fraud. (See Wells Fargo Bank, N.A. v BrooksAmerica Mtge. Corp.,
While defendants have used the word “fraud” in resisting plaintiff’s claims, there is no evidence thereof. As is evident from the earliest documentation, the intent was to finance defendants’ purchase through a finance lease. Defendants were provided with numerous written documents which they discussed with plaintiff and with the vendor. When the equipment
Plaintiff moves to dismiss defendants’ affirmative defenses pursuant to CPLR 3211, claiming that the only affirmative defense which defendants appear to raise is their uncertainty as to whether they are obligated to make payments to plaintiff or to third-party defendant Sterling. However, the record reveals that defendants entered into the lease and guaranty with plaintiff and, while plaintiff assigned the lease and guaranty to Sterling, Sterling subsequently reassigned the lease and the guaranty back to plaintiff. Since there is no claim by Sterling against defendants, this affirmative defense is dismissed.
Defendants’ other affirmative defense, that plaintiff is barred from recovery because Mullersohn defaulted under its contract with defendants by providing defective equipment, is also dismissed. It has already been established that plaintiff is entitled to recovery despite the fact that the equipment supplied by Mullersohn was defective since plaintiff made no representations or warranties to defendants regarding the equipment and has no obligation to service it. Moreover, to the extent that the affirmative defense may be read to suggest that plaintiff is an agent of Mullersohn, and is therefore liable for providing the defective equipment, such a theory is rejected as there is no evidence of any agency relationship in the record.
Finally, plaintiffs seek an order prohibiting the removal, sale or assignment of the equipment and, pursuant to CPLR 7102,
Based upon the provisions in the lease, and in the absence of any opposition by defendants with respect to the sums demanded, that branch of plaintiffs motion for summary judgment against defendants for breach of the lease and guaranty is granted. Plaintiff is entitled to be compensated for the present-valued discount balance of payments due under the lease, $98,660.03, plus interest thereon calculated at the rate of 15% per annum from the November 1, 2005 date of defendants’ default, plus taxes in the sum of $8,262.78, plus all costs and expenses incurred in collecting amounts due and owing under the lease, including reasonable attorney’s fees in the amount of $2,100. The motion to dismiss defendants’ affirmative defenses is granted. That branch of the motion prohibiting the removal, transfer, concealment, disposition, sale, pledging and/or assignment of the equipment is granted. That branch of the motion seeking an order directing seizure of the equipment pursuant CPLR 7102 is granted to the extent of directing the sheriff of any county where the equipment is located to seize the equipment, and if the equipment is not delivered to said sheriff, permitting the sheriff to break open, enter, and search for the equipment at 1959 86th Street, Brooklyn, New York, 11214 and/or 1763 77th Street in Brooklyn, New York, 11214.
Notes
. Under this provision, the lessee cannot even seek recourse to the manufacturer’s warranties if it has not paid the lessor since the right to such contractual remedies remains with lessor.
. On or about September 27, 2005, plaintiff assigned all of its right, title and interest in and to the equipment, the lease, and all payments due under the lease to third-party defendant Sterling National Bank. As a result of ABI’s default, on or about January 27, 2006, Sterling assigned and transferred all of its right, title and interest in and to the equipment, the lease and payments due thereunder back to plaintiff.
. Carbo Indus. v Becker Chevrolet (