Constr. Res. Grp., Ltd. Liab. Co. v. Element Fin. Corp. - No. CIV-14-1394-M, 2017 U.S. Dist. LEXIS 77822 (W.D. Okla. May 23, 2017)

Rule:

The provision in the Element Agreement that it is a finance lease as defined in Article 2A of the Uniform Commercial Code is valid and that the Element Agreement is a "finance lease." Additionally, the Element Agreement contains a hell or high-water provision. Further, under Oklahoma law, a lessor may exclude and disclaim warranties.

Facts:

Plaintiffs Construction Resources Group et al. entered into an agreement to excavate a lake. The agreement provided that plaintiff would excavate the land for the lake in exchange for the ability to use the dirt that it excavated. In the anticipation of the commercial sales of dirt, Plaintiff Maxwell began searching for a wheel loader. Plaintiffs obtained the Doosan model wheel loader financed through defendant Element Financing Corp. However, plaintiffs did not make any rent payments for the Loader since it suffered failures in relation to its engine and emissions system. Thus, defendant repossessed the Loader. Defendant also contends that plaintiffs owe a sum of money for the Loader under the Element Agreement. Defendant filed a motion for summary judgment against plaintiffs.

Issue:

Should the defendant’s claim that the agreement was a finance lease, and that there was a breach of contract be granted?

Answer:

Yes.

Conclusion:

The Court found that the provision in the Element Agreement that it was a "finance lease" as defined in Article 2A of the Uniform Commercial Code was valid and that the Element Agreement was a finance lease. Since the Element Agreement was a finance lease and was undisputed that plaintiffs accepted the Loader, the Court found that plaintiffs' promises under the Element Agreement were irrevocable and were not subject to cancellation, termination, modification, repudiation, excuse, or substitution without defendant’s consent. Thus, Plaintiffs were obligated to pay rent regardless of what might happen. On the other hand, since the Agreement provides a provision disclaiming any implied warranty of merchantability, the court found that defendant was entitled to summary judgment as to plaintiff’s breach of implied warranty of merchantability claim. Also, the court found that plaintiffs cannot prevail on their rescission claim to cancel the Agreement.