Beneficial Commercial Corp. v. Cottrell

No. 83-343

I i J THE SUPREME COURT O F THE S T A T E O F MONTANA

1984

B E N E F I C I A L C O W R C I A L CORPORATION,

P l a i n t i f f and R e s p o n d e n t ,

JAMES E. COTTRELL and P m D E L I N E
COTTRELL,

D e f e n d a n t s and A p p e l l a n t s .

A P P E A L FROM: D i s t r i c t C o u r t of t h e F i r s t J u d i c i a l D i s t r i c t ,
I n and f o r t h e C o u n t y of L e w i s & C l a r k ,
T h e H o n o r a b l e H e n r y L o b l e , Judge p r e s i d i n g .

COUNSEL O F RECORD:

For A p p e l l a n t s :

S m i t h Law F i r m ; C h a r l e s A. Smith, Helena, Montana

For R e s p o n d e n t :

1 1 ~ 1 1& S h e r l o c k , H e l e n a , Montana

S u b m i t t e d on B r i e f s : December 8, 1 9 8 3
October 12, 1984

Filed:
UG I m !* t t3
Y. 9

--
Clerk
Mr. Justice Daniel J. Shea delivered the Opinion of the
Court.

Defendants, James and Madeline Cottrell, who leased from
plaintiff, Beneficial Commercial Corporation, a large offset
printing press, appeal a summary judgment entered against
them in Lewis and Clark County District Court, the effect of
which made them liable for a I-ump-sum lease payment in the
amount of $9,351.60. We reverse on the ground that the
transaction involved was actually a sales agreement and that
a genuine issue of fact exists under sections 30-2-601 and
-602, MCA (the Uniform Commercial Code) as to whether the
printing press was properly and timely rejected because j t
.
was alleged to be defective.
In contending that the summary judgment was improperly
granted the lessees raise three issues, but none of them
addresses the djspositive issue of why, under Rule 56,
M.R.Civ.P., a material question of fact remains for trial
determination. They contend first that they properly
rejected the goods after delivery and therefore are not
liable for the full lease payment. Second, they contend that
the transaction was a bailment and therefore that the
warranty provisions of section 70-8-101, MCA, are applicable.
Third, they contend that the warranty disclaimer clause in
the agreement (paragraph 5) is unconscionable, and therefore
that the agreement j s unenforceab1.e.
. As we h ~ v estated, we
reverse and remand for trial on the question of whether the
lessees properly and timely rejected the printing press.
The Cottrells leased the printing press from Parliament
Leasing and Perliament in turn assigned its interest in the
lease to Beneficial Commercial Corporation. The lessees were
required to make 59 monthly payments of $177.00 each and at
the end of that term, upon payment of a small sum, they could
obtain title to the printing press. They made two monthly
payments, but then stopped, allegedly because they believed
the printing press to be defective. They contend that they
notified the lessor immediate]-y and more than once that the
press was defective. The lessor has neither admitted nor
denied this contention. It appears that the press remains in
the possession of the lessees, in the condition it was in
when leased.
In moving for summary judgment, the lessors contended
that section 5 of the lease agreement waived all implied
warranties, that the law permitted such a waiver, and
therefore that the lessees had no risht to assert a breach of
warranty defense. One trial court denied the motion for
summary judgment, hut later another trial court assumed
jurisdiction and the lessors renewed their motion for summary
judgment before the new judge. The second judge granted. the
motion for summary judgment, and in doing so, erroneously
relied on All-States Leasing Co. v. Top Hat Lounge, Inc.
(Mont. 1982), 649 P.2d 1250, 39 St.Rep. 425, which upheld a
lease provision disclaiming warranties as long as the
disclaimer clause was not unconscionable. But All-States
Leasing has no application to this case.
In All-States Leasing, the lessors sued for lease
payments owed on an automated liquor dispenser. The case was
decided in part on the ground that the warranty disclaimer
provisions in the lease agreement were not unconsci.onable.
Although this Court analogized to the Uniform Commercial Code
in determining the issue of conscionability, the question of
whether the lease was in fact a contract of sale was not
involved. Nor did the lessees ever attempt to reject the
equipment on the ground that it was defective or for any
other reason. In fact, because of a failure to comply with
requests to admit, the lessees were deemed. to have admitted
under Rule 36, M.R.Civ.P., that the dispenser was not
defective. By analogy, we held that the validity of the
warranty disclaimer clause would be determined by the
unconscionability test set forth in section 30-2-302, MCA,
modeled after section 2-302 of the Uniform Commercial Code.
The lease a.greement here contained an option to
purchase for a small sum at the end of the lease agreement,
and so it fa.lls within the sale of goods provisions of the
Uniform Commercial Code, codified in this state as section
30-2-101, et seq. , MCA. See Kid.-Continent Refrigerator Co.
v. Way (1974), 263 S.C. 101, 208 S.E.2d 31. A.lthough the
lease provided that ". . . nothing Tin the agreement] shall
be construed as conveying to lessee any right, title, or
interest . . ." in the printing press, the purcha.se option
clause establishes the underlying transaction to be a sale.
Therefore it must be governed by the Uniform Commercial Code
sales provisions.
The disclaimer involved here deprived the lessees from
asserting a defense based on breach of implied warranties,
but the clause did not attempt to deprive the lessees of all.
remedies available under the Uniform Commercial Code.
Therefore, other remedies were still available to the
lessees. See Ford Motor Co. v. Reid (1971), 250 Ark. 176,
465 S.W.2d 80. Although the parties could have further
limited or modified the remedies available t.o either party
upon breach (see section 30-2-719, MCA, and 2-719, UCC), they
did not do so. Therefore, under section 30-2-601. and -602,
the lessees still possessed the right to reject the printing
press--provided it was timely and proper.
Summary judgment was proper if the lega?ity of the
warranty disclaimer was the only issue. Recause the question
of whether the printing press had been properly rejected, was
not resolved, and could only be resolved by a trier of fact,
summary judgment was improper.
Because we have held the underlying transaction is a
sale subject to the statutory Uniform Commercial Code
provisions regulating sales, we must hold the bailment
statute, section 70-8-101, inapplicable to this case. This
statute imposes duties upon the lessor as to the condition of
the goods let for hire, and assumes that the property will be
returned to the lessor once the purpose of the bailment has
been fulfilled. Simply stated, the transaction involved here
was not a bailment, and therefore section 70-8-101, does not

appl17
Final-ly, the lessees argue that the warranty dj sclaimer
clause cannot be enforced because it is unconscionable. In
determining this issue, courts must focus on the relative
bargaining power of the parties and the conspicuousness of
the challenged disclaimer language. W. E. Heller & Co., Inc.
v. Convalescent Home of First Church of Deliverance (1977),
49 Ill.App.3d 213, 365 N.E.2d 1285. In All-States Leasing,
supra, we stated! the purpose of the statute to be one of
preventing "oppression and unfair surprise,'' the approach
taken in the comments to UCC 2-302. Here the disclaimer
clause appeared at the top of page two, in bold-faced type
distinctively larger and more conspicuous than the other
contract language. Unless other facts establish oppression
or unfair surprise, it is not unconscionabl~e to limit
warranties or remedies in that manner. The lessees have
alleged no facts, that, if believed, could amount to
oppression or unfair surprise.
The order granting summary judgment is reversed and this

cause remanded for trial on the question of whether the
lessees timely and properly rejec

We Concur: