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NATIONAL EQUIP. RENTAL, LTD. v. PRIORITY ELECS. CO

July 29, 1977

NATIONAL EQUIPMENT RENTAL, LTD., Plaintiff, against PRIORITY ELECTRONICS CORP., GEORGE M. VON BURGER, REGINA VON BURGER, HANS ROSSEN, MARGARET ANN ROSSEN, GEORGE N. HADDAD and LOIS Y. HADDAD, Defendants.


The opinion of the court was delivered by: PLATT

PLATT, D.J.

The plaintiff, National Equipment Rental ("NER"), moves pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment against the defendants, George Haddad and Lois Haddad. Those defendants cross move for summary judgment against the plaintiff. This case was brought in this Court under diversity jurisdiction.

 FACTS

 On April 4, 1973, the plaintiff NER entered into an agreement ("Agreement A") with Priority Electronics Corp. ("Priority") concerning the use by Priority of certain computer equipment. On November 16, 1973, NER entered into a second agreement ("Agreement B") with Priority involving more computer equipment. On March 26, 1973, prior to signing these agreements, NER had obtained written guarantees of payment of these agreements from several guarantors, including the defendants Mr. and Mrs. Haddad.

 Agreement A provided that Priority was to pay $933.82 a month for the first sixty months plus $2,122.31 per month for the next two years for a total payment of $60,273.82. Added to this agreement was an option contract that gave Priority the option to purchase the equipment at the end of the seven years for $1,697.85 "plus applicable taxes or fair market value, whichever is greater."

 The cost to NER of the equipment covered by Agreement A was $40,425. This equipment was purchased by NER after Agreement A was signed, and the agreement specified under the heading "Description of Leased Equipment (Include Name and Address of Vendor)" that the vendor was to be Teredyne, Inc.

 Agreement B provided for payments of $1,249.96 per month for the first sixty months plus $2,840.82 per month for the next two years for a total payment of $80,679.82. The added option contract had the same terms as Agreement A, but the purchase price was $2,164.43" plus applicable taxes or fair market value, whichever is greater." The cost to NER of the equipment covered by Agreement B was $54,110.86.

 In both agreements there was an "acceleration clause" providing that if Priority defaulted in its payments, the full balance became due and owing.

 On April 23, 1973, NER filed financing statements covering the equipment in both agreements. Further, NER published notice of intention to create a security interest for the equipment covered by Agreement B.

 On October 20, 1974, Priority defaulted on both agreements leaving an unpaid balance of $44,398.88 on Agreement A and an unpaid balance of $65,679.72 on Agreement B.

 NER then hired Leasing Services, Inc. ("Leasing") to repossess the computer equipment from Priority. On January 30, 1975, Leasing repossessed the equipment and stored it in its warehouse. In the spring of 1975 NER inventoried the repossessed equipment at the Leasing warehouse, and found that Leasing had, without authority, sold most of the NER equipment. In effect, Leasing illegally converted the equipment owned by NER.

 DISCUSSION

 It is the plaintiff's position that the agreements in this case were true leases and so on Priority's default the unpaid balances were now due and owing.

 It is the defendants' position that these agreements were leases intended as security for the payment of the purchase price and so the transactions are governed by Article 9 of the Uniform Commercial Code. Further the defendants argue that the plaintiff's action was a ...


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