All-States Leasing Co. v. Top Hat Lounge, Inc.

No. 81-391
IN THE SUPREME COURTCF THE STATE OF MONTANA
1981

ALL-STATES LEASING COMPANY,
A Montana Corporation,
Plaintiff and Respondent,

TOP HAT LOUNGE, INC., A
Montana Corporation and
HARRY BOSKOVICH,
Defendants and Appellants.

Appeal from: District Court of the Fourth Judicial District,
In and for the County of Missoula
Honorable Jack L. Green, Judge presiding.
Counsel of Record:
For Appellants:
Hood & Sherwood, Missoula, Montana
For Respondent:
Milodragovich, Dale & Dye, Missoula, Montana
Donald S. Smith, Great Falls, Montana

Submitted on briefs: December 3, 1981
Decided: FEO 2 S m
Mr. J u s t i c e Gene B. Daly d e l i v e r e d t h e O p i n i o n o f t h e C o u r t .

T h i s i s an a p p e a l from a summary judgment e n t e r e d by

t h e D i s t r i c t Court of t h e Fourth J u d i c i a l D i s t r i c t , Missoula

County, against Top Hat Lounge, Inc., and H a r r y B o s k o v i c h

f o r $9,032.92 i n d e l i n q u e n t l e a s e payments.

Appellant, Top Hat Lounge, Inc. (Top H a t ) , and

respondent All-States Leasing, Inc. (All-States) , a r e cor-

p o r a t i o n s o r g a n i z e d and e x i s t i n g under t h e l a w s of t h e S t a t e

o f Montana and a u t h o r i z e d t o do b u s i n e s s h e r e . On o r a b o u t

January 22, 1975, All-States and Top Hat entered into a

l e a s e agreement for an a u t o m a t e d liquor-dispensing system.

Under t h i s agreement, Top Hat a g r e e d t o pay $134 p e r month

for sixty months. Harry Boskovich, as an individual,

g u a r a n t e e d Top H a t ' s payments on t h e l e a s e .

I n a p u r c h a s e o r d e r , Top Hat r e q u e s t e d A l l - S t a t e s to

purchase the 1i q u o r - d i s p e n s i n g systern from a third party

supplier, C & C Sales. A f t e r p u r c h a s i n g t h e s y s t e m from t h e

supplier, All-States l e a s e d t h e s y s t e m t o Top Hat.

On t h e back o f t h e l e a s e agreement a r e twenty-three

separate paragraphs stating the rights and obligations of

the parties. The print of these clauses is t h e s~nallest

p r i n t on t h e a g r e e m e n t . The h e a d i n g f o r e a c h p a r a g r a p h i s

l a r g e r bold-face print. Under t h i s a g r e e m e n t , A l l - S t a t e s as

lessor disclaimed a l l warranties; Top Hat a s l e s s e e w a i v e d

the rights of jury trial, counterclaim and offset, and

personal service.

On January 20, 1975, when the liquor-dispensing

s y s t e r i ~ was i n s t a l l e d , Boskovich, a s a r e p r e s e n t a t i v e o f Top

H a t , s i g n e d a " c o m p l e t i o n c e r t i f i c a t e " which s t a t e d t h a t t h e

s y s t e m was i n proper c o n d i t i o n and i n f u l l compliance with
t h e t e r r n s a n d specifications o f t h e c o n t r a c t .

Top Hat has not made any payments on the liquor-

d i s p e n s i n g system s i n c e June 1 0 , 1976. A l l - S t a t e s eventually

r e p o s s e s s e d t h e s y s t e m and s o l d i t f o r $ 1 0 0 .

On May 3 , 1979, All-States began t h i s a c t i o n a g a i n s t

Top Hat and Boskovich for payments owed to it under the

l e a s e agreement. All-States s e n t Top H a t and Boskovich a

request for a d m i s s i o n s on September 5, 1979. Neither Top

H a t n o r B o s k o v i c h made a n a t t e m p t t o a n s w e r t h i s r e q u e s t f o r

a d m i s s i o n s u n t i l December 1, 1 9 8 0 .

On December 15, 1980, a hearing was held on All-

States' [ n o t i o n f o r summary j u d g m e n t . After concluding t h a t

under Rule 36, M.R.Civ.P., the facts in the request for

a d m i s s i o n s m u s t b e deemed t r u e , t h e District Court granted

All-States' m o t i o n f o r summary j u d g m e n t .

The f o l l o w i n g f a c t s w e r e deemed t r u e by t h e D i s t r i c t

Court:

1. H a r r y B o s k o v i c h , a s a n i n d i v i d u a l , g u a r a n t e e d Top

Hat's o b l i g a t i o n s t o respondent.

2. The s u p p l i e r o f t h e e q u i p m e n t , C & C Sales, acted

as the appellants' agent in proposing the leasing trans-

a c t i o n t o respondent.

3. Appellants selected both the equipment and the

s u p p l i e r of t h e equipment.

4. Respondent o r d e r e d t h e equipment a t t h e r e q u e s t

of t h e a p p e l l a n t s .

5. Pursuant to paragraph two on page one of the

lease agreement, appellants agreed t h a t no o r a l a g r e e m e n t ,

guarantee, promise, condition, representation or warranty

s h a l l be binding.
 6. Pursuant to paragraph four of the lease agree-

ment, respondent disclaimed express o r implied w a r r a n t i e s of

merchantability, fitness, quality, design, condition, capa-

city, f i t n e s s f o r any p a r t i c u l a r p u r p o s e , and s u i t a b i l i t y o f

p e r f o r m a n c e o f t h e e q u i p m e n t o r t h e m a t e r i a l o r workmanship

t h e r e o f and l e a s e d t h e e q u i p m e n t " a s i s . "

7. Appellants, pursuant to paragraph four of the

l e a s e agreement, agreed that the respondent was n o t t o be

obligated to i n s t a l l , erect, t e s t , adjust, service or repair

t h e e q u i p m e n t and t h a t a n y i n s t a l l a t i o n o r e r e c t i o n o f the

e q u i p m e n t o r p r o p e r t y l e a s e d was t o be a t t h e s o l e d i s c r e -

t i o n and u n d e r t h e c o n t r o l o f t h e a p p e l l a n t s .

8. Pursuant t o paragraph f i v e of t h e l e a s e agree-

ment, t n e r e s p o n d e n t g r a n t e d and a s s i g n e d t o t h e a p p e l l a n t s
t h e r i g h t t o enforce a l l w a r r a n t i e s , agreements representa-

tions, i f a n y , made by t h e s u p p l i e r t o t h e r e s p o n d e n t .

9. Pursuant to paragraph f i v e of t h e l e a s e agree-

ment, a p p e l l a n t s agreed t h a t no d e f e c t o r u n f i t n e s s o f the

e q u i p m e n t would relieve the obligation to pay rent or any

other o b l i g a t i o n s due under the terms of the l e a s e agree-

ment.

10. Pursuant to paragraph s i x of t h e l e a s e agree-

ment, appellants agreed to inspect the property within

forty-eight hours of their receipt thereof, and unless

w i t h i n such period gave n o t i c e t o t h e respondent s p e c i f y i n g

any defects in the property received, the property would

c o n c l u s i v e l y be deemed a c c e p t e d by t h e a p p e l l a n t s .

The D i s t r i c t C o u r t c o n c l u d e d a s a m a t t e r of law t h a t

while the lease agreement had an unconscionable provision

providing f o r waiver of jury trial and counterclaims, the
a g r e e ~ n e n t was not unconscionable without this provision.

The District Court therefore held that the agreement was

entitled to full enforcement once the unconscionable

p r o v i s i o n s were s t r i c k e n .

Appellants raise only two issues for review: (1)

whether the summary judgment was improper since genuine

i s s u e s of material f a c t a r e still present i n t h e record; and

( 2 ) whether t h e l e a s e agreement is u n c o n s c i o n a b l e .

Under Rule 5 6 ( c ) , M.R.Civ.P., summary judgment is

proper only if the record discloses no genuine issues of

inaterial fact. The initial burden is o n the p a r t y moving

for summary judgment to show that no genuine issues of

inaterial fact exist. Once the moving party has met its

burden, t h e p a r t y o p p o s i n g t h e m o t i o n m u s t come f o r w a r d w i t h

substantial evidence raising a genuine issue of material

fact. Rumph v . Dale Edwards, Inc. ( 1 9 7 9 ) , - Mont. -I

6 8 0 P.2d 1 6 3 , 36 S t . R e p . 1822; Harland v. Anderson (1976),

1G9 Mont. 4 4 7 , 548 P.2d 613.

Here, all i s s u e s of material fact were resolved by

the facts deemed admitted as true by the District Court.

A p p e l l a n t s h a v e , a t no t i m e , a r g u e d t h a t t h e D i s t r i c t C o u r t

e r r e d by deeming s u c h f a c t s a s t r u e . I n s t e a d o f making t h i s

argument, appellants claim that two questions of material

f a c t still e x i s t : (1) w h e t h e r Top H a t e f f e c t i v e l y w a i v e d a n y

w a r r a n t i e s ; and ( 2 ) whether Boskovich s i g n e d t h e completion

c e r t i f i c a t e a s p a r t of an o b l i g a t i o n under t h e l e a s e agree-

ment .
I n F i n d i n g o f F a c t No. 12, t h e D i s t r i c t Court found

t h a t under t h e l e a s e agreement A l l - S t a t e s had d i s c l a i m e d a l l

express o r implied warranties. T h i s f i n d i n g is s u p p o r t e d by
a f a c t deemed a s t r u e by t h e D i s t r i c t C o u r t . In its request

f o r admissions, All-States had r e q u e s t e d a p p e l l a n t s t o a d m i t

All-States had disclaimed all warranties. Because

a p p e l l a n t s f a i l e d t o answer t h i s r e q u e s t f o r a d m i s s i o n s i n a

t i m e l y manner, t h e D i s t r i c t C o u r t deemed it admitted under

R u l e 36 ( a ) , M.R.Civ.P.

Under R u l e 36 ( a ) , M.R.Civ . P . , a matter i s deemed ad-

mitted if t h e r e q u e s t f o r a d m i s s i o n s is n o t answered w i t h i n

thirty days after service of the request. In Morast v.

Auble ( 1 9 7 4 ) , 1 6 4 Mont. 1 8 8 , 519 P.2d 1 5 7 , t h e c e n t r a l and

c o n t r o l l i n g f a c t u a l i s s u e s o f t h e c a s e were deemed a d m i t t e d

f o r f a i l u r e t o make a t i m e l y r e p l y u n d e r R u l e 3 6 ( a ) . More-

over, i n M o r a s t we a l s o s t a t e d t h a t " a d m i s s i o n s o b t a i n e d by

t h e u s e of R u l e 36 may show t h a t t h e r e i s no g e n u i n e i s s u e

a s t o any m a t e r i a l f a c t and j u s t i f y t h e e n t r y o f a summary

judgment u n d e r R u l e 5 6 . " M o r a s t , 519 P.2d a t 160, quoting 8

Wright & Miller, Federal Practice and Procedure: Civil

$2264. See a l s o , S t a t e of N o r t h Dakota v . Newberger (1980),

- Mont. , 613 P.2d 1 8 8 2 , 37 S t . R e p . 1119.

Appellants cannot now a r g u e that the disclaimer of

w a r r a n t i e s i s s t i l l i n i s s u e when i t was r e s o l v e d u n d e r t h e

f a c t s deemed a d m i t t e d . S i n c e t h e s i g n i n g of t h e c o m p l e t i o n

c e r t i f i c a t e goes t o the i s s u e of waiver of warranties, it

also is resolved by the admitted facts, or at least, in

l i g h t o f t h e f a c t s a d m i t t e d , c a n n o t be c o n s i d e r e d m a t e r i a l .

Appellants have come forward with no evidence, by

a f f i d a v i t o r o t h e r w i s e , t o r a i s e an i s s u e of m a t e r i a l fact.

We must therefore agree with the District Court that a

summary judgment was p r o p e r .

Appellants cite no authority for their contention
t h a t t h e l e a s e is u n c o n s c i o n a b l e . They m e r e l y c l a i m t h a t a

more o p p r e s s i v e l e a s e i s h a r d t o i m a g i n e . Such an a r g u m e n t ,

u n s u p p o r t e d by a n y a u t h o r i t y , must f a i l .

A p p e l l a n t s c i t e o n l y s e c t i o n 30-2-302, MCA, which i s

modeled after t h e same p r o v i s i o n i n t h e Uniforra Commercial

Code (UCC) , to support their argument that the lease is

unconscionable. S e c t i o n 30-2-302, MCA, provides:

"(1) I f t h e c o u r t a s a m a t t e r of law f i n d s
t h e c o n t r a c t o r any c l a u s e o f t h e c o n t r a c t t o
h a v e been u n c o n s c i o n a b l e a t t h e t i m e i t was
made t h e c o u r t may r e f u s e t o e n f o r c e t h e
c o n t r a c t , o r i t may e n f o r c e t h e r e m a i n d e r o f
t h e contract without t h e unconscionable
c l a u s e , o r i t may s o l i m i t t h e a p p l i c a t i o n o f
any u n c o n s c i o n a b le c l a u s e a s t o a v o i d any
unconscionable r e s u l t . "

We agree with appellants that this statute should

guide t h i s Court i n determining unconscionability. While

Article 2 of the UCC applies directly to sales, we agree

w i t h t h e m a j o r i t y o f c o u r t s t h a t A r t i c l e 2 c a n , a t l e a s t by

a n a l o g y , be a p p l i e d t o l e a s e t r a n s a c t i o n s . See, e.g., All-

States Leasing Company v . Bass ( 1 9 7 5 ) , 96 Idaho 873, 538

I n t h e o f f i c i a l comment t o s e c t i o n 2-302 of t h e UCC,

a b a s i c t e s t f o r u n c o n s c i o n a b i l i t y is suggested:

". . . w h e t h e r , i n l i g h t o f t h e g e n e r a l com-
m e r c i a l b a c k g r o u n d and t h e c o m m e r c i a l n e e d s
of the p a r t i c u l a r t r a d e or case, the clauses
i n v o l v e d a r e s o o n e - s i d e d a s t o be uncon-
s c i o n a b l e under t h e c i r c u m s t a n c e s e x i s t i n g a t
t h e t i m e o f t h e making of t h e c o n t r a c t ...
The p r i n c i p l e i s o n e o f t h e p r e v e n t i o n - of
o p p r e s s i o n and u n f a i r s u r p r i s e . "

Here, under the facts deemed admitted, appellants

selected both the equipment and the supplier of the

e q u i p m e n t and n o t i f i e d respondent of their desire t o make

this transaction. The admitted facts suggest neither

oppression nor u n f a i r s u r p r i s e .
 Although c o u r t s have r e a d i l y a p p l i e d t h e d o c t r i n e of

u n c o n s c i o n a b i l i t y t o c o n t r a c t s between consumers and s k i l l e d

businessn~en, they a r e reluctant to rewrite the terms of a

c o n t r a c t between businessmen themselves. C o m p a r e , W a l t e r E.

Heller & Company, Inc. v. Convalescent Home of the First

Church of D e l i v e r a n c e ( 1 9 7 7 ) , 49 I l l . A p p . 3 d 213, 8 I11.Dec.

823, 365 N.E.2d 1285, with Williams v. Walker-Thomas

Furniture Co. (D.C. Cir. 1965), 350 F.2d 445. When, as

here, a l l p r o v i s i o n s were a g r e e d t o by businessmen, none o f

the surrounding circumstances suggest oppression of

appellants' f r e e d o m t o s e l e c t a n o t h e r l e s s o r , a n d n o t h i n g on

t h e r e c o r d s u g g e s t s d i s p a r i t y o f b a r g a i n i n g power, the lease

cannot be considered unconscionable,

The D i s t r i c t C o u r t ' s summary j u d g m e n t is a f f i r m e d .

/ . - /
4/ '.
.
)i ,i,,
Justice

W e concur :

Chief J u s t i c e