Lindа and William McNatt, the sole shareholders of Quick-Trip Printers, Inc. (collectively “McNatt”) sued Itex Systems Southeast, Inc. (“Itex”), Burnham Leasing Company, Inc. (“Burnham”), Datronic Rental Corporation, independently and as general partner of Datronic Equipment Income Fund XVII, L.P. (“Datronic”), Coloniаl Pacific Leasing Corporation (“Colonial”), Terry Demarest, Scott Vines, Drew Alston, 1 Automated Laser Personalization System, Inc., and Laser Systems, Inc., seeking to revoke the acceptance of an allegedly defective printing system, to rescind two leases, and alleging negligent release of funds by Colonial and Datronic to Itex. Datronic and Colonial counterclaimed for breach of the leases and moved for summary judgment on their counterclaims and McNatt’s claims. The trial court entered an order against McNatt in favor of Datronic and Colonial on their counterclaims and on the issue of negligent release of funds. McNatt appeals the trial court’s grant of summary judgment to Colonial and Datronic on both the main action and the counterclaims.
To prevail at summary judgment under OCGA § 9-11-56, the movant must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the non-movant, warrant summary judgment as a matter of law. OCGA § 9-11-56 (c).
Lau’s Corp. v. Haskins,
None of the componеnts of the Itex printing system were delivered until June 14, and both William McNatt and Linda McNatt testified the system never worked properly and had multiple problems. However, Linda McNatt signed an Acknowledgment and Acceptance of Equipment by Lessee (Quick-Trip) before any equipment was delivered and before Burnham executed either lease or assigned the leases. 2 The acceptance indicates that the equipment was “received in good condition and repair,” and was “properly installed, tested, and inspected, and is operating satisfаctorily in all respects for all of Lessee’s intended uses and purposes.” The McNatts testified that they were pressured by sales agents of Itex to sign the leases and other documents without reading them in order for Linda McNatt to be able to participate in a training session beginning on the same day as she signed the paperwork.
Whether the system ever functioned or functioned properly is disputed. McNatt claimed that they discovered that the machine was used, not new, and vastly inferior to what they had been led to expect by Itex and its agents. McNatt аlleged that Alston, Demarest and Vines made material misrepresentations of the capabilities of the Itex system, which failed to produce saleable, marketable copy. Instead of a system capable of performing all their typesetting needs, McNatt alleged it could not even produce clean, commercial grade copy or perform the tasks as represented by the Itex sample book. William McNatt testified that on June 20 or 21 he advised Burnham not to release funds to Itex, the vendor, because the equipment was unsatisfactory and incomplete. Linda McNatt testified that in late June the system was not running correctly and was not even fully assembled until at least two weeks after the June 14 delivery of its components.
William McNatt testified that he received telephone calls from Colonial and Datrоnic inquiring as to whether the equipment was in place and working and whether funds should be released, and that he advised both companies that there were problems and cautioned them saying, “I sure wouldn’t want you to give anyone any money.” According to his testimony, he advised both assigneеs that they would be releasing the funds at their own risk. Colonial and *770 Datronic, the assignees of the leases, nevertheless, released funds to Itex for the allegedly defective system on June 24, 1991.
Deeming the system defective and totally unacceptable for its business, Quick-Trip made no further payments to Burnham, Colonial or Datronic and a part of the leased equipment was retrieved on or about July 12, 1991. 3 In correspondence dated August 9, 1991, William McNatt described the major deficiencies of the equipment in detail and Quick-Trip’s unsuccessful efforts to have the prоblems corrected. Ultimately, Colonial sold its portion of the system for $500 on October 14, 1992 and Datronic’s portion was not sold but was scrapped on July 24, 1992.
Linda McNatt and Quick-Trip filed this action seeking revocation of acceptance, rescission of the leases, and compensatory and punitive damages for the allegedly negligent funding to Itex. Datronic and Colonial counterclaimed for breach of their respective leases. The trial court awarded $88,932.06 in favor of Datronic and Colonial with interest accruing from July 15, 1991, the date of defаult. Held:
1. McNatt contends that the trial court erroneously granted summary judgment on Datronic and Colonial’s counterclaims on the breach of lease issue when it failed to first determine the merit of McNatt’s rescission claim. We agree.
“ A contract may be rescinded at the instancе of the party defrauded; but, in order to rescind, the defrauded party must promptly, upon discovery of the fraud, restore or offer to restore to the other party whatever he has received by virtue of the contract if it is of any value.’ OCGA § 13-4-60.”
Potomac Leasing v. Thrasher,
We reject both Datronic and Colonial’s efforts to use the merger clause and the disclaimer provisions in the leases to defeat McNatt’s rescission claim. The contractual defense of fraud in the inducement by oral misrepresentation is the functional equivalent of a tort action for fraud and deceit and a merger clause cannot be used to defeat such a claim.
Thrasher,
Colonial and Datronic further argue that it does not matter whether Itex and its employees were the “bad guys” or engaged in fraudulent conduct because Colonial and Datronic are insulated by the “hell and high water” provisions in the leasing documents. This is plainly incorrect because before any of the contract provisions can apply there must be a valid and enforceable contract. Whether McNatt was fraudulently induced by Itex’s misrepresentations to contract with Burnham is a material issue of disputed fact, as is whether the contract was rescinded under OCGA § 13-4-60. See
Stricker v. Epstein,
2. McNatt contends that the trial court erroneously granted summary judgment to Datronic and Colonial on McNatt’s negligent release of funds claim.
The evidence presented by Colonial and Datronic on this issue was conflicting and disputed. To refute McNatt’s negligent release of funds claim, Colonial and Datronic offered the Acknowledgment and Acceptance of Equipment by Lessee document, Barbara Varnes’ affidavit testimony that Linda McNatt told her the system was operating satisfactorily, and a portion of a letter tо Itex from William McNatt appearing to conditionally authorize the release of funds to Itex. Barbara Varners, a lease processor of Colonial, testified that Linda McNatt informed her that the system was installed and operating satisfactorily as of June 21, and that relying on Lindа McNatt’s *772 verbal assurance, she approved the funding transaction.
McNatt offered testimony that Datronic and Colonial were warned about the problems with the system and cautioned not to release funds except at their own risk. Also, Linda McNatt disputes the existence of any conversation with Varnes of Colonial and testified that she had no recollection of ever speaking with anyone from Colonial. Because material issues of fact are disputed, Datronic and Colonial were not entitled to summary judgment on the negligent release of funds count. OCGA § 9-11-56 (c).
3. McNatt claims that the trial court erroneоusly granted summary judgment on Colonial’s counterclaim against Linda McNatt as personal guarantor of the Colonial lease because a material issue of fact remains unresolved as to whether she actually signed the equipment lease guarantee. 4 Linda McNatt testifiеd that Itex representatives rushed her into signing documents and that she did, in fact, sign papers without reading them. Although she admitted signing the personal guarantee for the lease assigned to Datronic, she indicated that she was not certain the signature on the Colonial personal guarаntee was hers and she testified that she lacked any independent recollection of signing that particular document. Linda McNatt’s somewhat ambivalent, uncertain testimony is disputed by the affidavit of Ann Roesinger, a contract employee of Itex, who affirmatively swore that shе witnessed Linda McNatt sign both guarantees. Although the evidence clearly weighs toward Colonial, it cannot be said to be undisputed, and Colonial was not entitled to summary judgment on this issue.
4. McNatt claims that the trial court erroneously granted summary judgment to Datronic and Colonial on the issue оf failure of consideration because the printer was not new, was unusable from the date of its delivery, and the system was subsequently sold for a mere $500.
A written disclaimer of warranty clause in a contract does not foreclose the defenses of failure of consideration аnd fraud where the goods supplied are not what was specified in the contract.
Granite Equip. Leasing Corp. v. Folds,
Here, McNatt disputes that it ever received what it had bargained for or accepted a lesser substitute.
Folds,
Judgment reversed.
Notes
Demarest, Vines, and Alston were all affiliated with Itex.
For part of the system, Linda McNatt signed a separate certificate of acceptance acknowledging delivery and receipt.
The trial court determined the date of default as July 15, 1991.
It is undisputed that Linda McNatt signed the personal guarantee for the Datronic lease.