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WELLS FARGO BANK MINNESOTA v. BROOKSAMERICA MORTGAGE CORP.

United States District Court, S.D. New York


WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, Indenture Trustee, Plaintiff,
v.
BROOKSAMERICA MORTGAGE CORPORATION and MICHAEL WAYNE BROOKS, Defendants.

The opinion of the court was delivered by: HAROLD BAER, JR., District Judge[fn1] [fn1] Christopher Slowik, a summer 2004 intern in my Chambers and a second-year law student at Brooklyn Law School, provided substantial assistance in the researching and drafting of this Opinion.

OPINION & ORDER

Plaintiff Wells Fargo Bank Minnesota, National Association ("Wells Fargo") brings a breach of contract action against defendants BrooksAmerica Mortgage Corporation ("BrooksAmerica") and Michael W. Brooks ("Brooks"). The parties submit cross-motions for summary judgment under Federal Rule of Civil Procedure ("Fed.R. Civ. P.") 56. Wells Fargo seeks an award of sums past due from BrooksAmerica under the contract between the parties, and declarations of the obligations of BrooksAmerica to perform and of Brooks to honor his personal guaranty, and BrooksAmerica demands dismissal of the action. For the following reasons, Wells Fargo's motion for summary judgment is granted and BrooksAmerica's is denied.

I. BACKGROUND

  A. The Contract Between BrooksAmerica and Terminal Marketing

  In 2000, Brooks, chief executive officer of BrooksAmerica (Brooks Aff. ¶ 1), sought financing for BrooksAmerica from the Terminal Marketing Company ("Terminal"), an equipment lessor (Brooks Aff. ¶ 5).*fn2 Brooks and Terminal negotiated a "sale-leaseback" transaction ("Transaction"), in which Terminal agreed to pay BrooksAmerica $250,000 to acquire title to certain computers and peripherals ("Equipment") owned by BrooksAmerica.*fn3 BrooksAmerica then agreed to lease the Equipment back from Terminal in exchange for monthly payments over three years totaling $353,795.76. (Id. Ex. D.) Brooks stated that BrooksAmerica entered into the Transaction because it was "in need of capital." (Id. ¶ 3.) No other goods were supplied to BrooksAmerica, and the Equipment never left BrooksAmerica's physical possession. (Id. Ex. Q.)

  Terminal and BrooksAmerica memorialized their agreement in a contract executed by both parties ("Contract") on October 26, 2000. (First Bass Decl. Ex. A; Brooks Aff. Ex. F.) A bill of sale, which transferred title to the Equipment from BrooksAmerica to Terminal, accompanied the Contract. (Mowbray Decl. Ex. F.) BrooksAmerica executed both of these documents and dated them October 26, 2000. (First Bass Decl. Ex. A; Mowbray Decl. Ex. F.) On the same date, BrooksAmerica also executed an approval letter from Terminal ("Approval Letter")*fn4 that confirmed that the "Amount to Finance" was $250,000. (Approval Letter at 1.)

  The Contract contained a hell or high water clause, which stated that BrooksAmerica's obligation to pay was "absolute and unconditional," and that BrooksAmerica was not "entitled to any abatement, reduction, set-off, counterclaim, defense or deduction with respect to any Rent or other sum payable hereunder." (Contract ¶ 5.) Another clause provided that the Contract was assignable by Terminal without notice, and that assignees took "without any obligations or liabilities" and "FREE FROM ALL DEFENSES, SETOFFS, OR COUNTERCLAIMS WHICH LESSEE [BrooksAmerica] MAY BE ABLE TO ASSERT." (Id. ¶ 14) (emphasis in original.) The Contract stipulated that it commenced "with delivery of the Equipment to the Lessee [BrooksAmerica]." (Id. ¶ 1.)

  Brooks also executed a personal guaranty of BrooksAmerica's obligations under the Contract ("Guaranty") (Brooks Aff. Ex. G),*fn5 in which Brooks "unconditionally guarantee[d] to Lessor [Terminal], its successors and assigns, the prompt and due payment and performance by Lessee [BrooksAmerica] of all of Lessee's obligations pursuant to the Lease and all other documents and agreements entered into by Lessee in connection therewith." (Guaranty ¶ 1) (emphasis added.)

  B. The Delivery Certificate and Lessee's Acknowledgement

  Brooks, as agent for BrooksAmerica (Brooks Aff. ¶ 7), also executed the "Delivery and Acceptance Certificate and Lessee's Acknowledgment and Consent" ("Certificate"), dated October 26, 2000 (First Bass Decl. Ex. B; Brooks Aff. Ex. H). Through the Certificate, BrooksAmerica attested that the Equipment had been delivered by Terminal and accepted by BrooksAmerica pursuant to the Contract. (Certificate ¶ 1.) BrooksAmerica further warranted that "(i) Lessor [Terminal] has fully and satisfactorily performed all covenants and conditions required to be performed by Lessor under the Lease [Contract] and (ii) Lessee has no defenses, counterclaims or set-offs against Lessor." (Id. ¶ 2.)

  The Certificate reiterated BrooksAmerica's recognition of Terminal's right to assign the Contract, and also provided:

that Lessee's [BrooksAmerica's] obligation to pay rent to [an] Assignee under the Lease [Contract] shall be absolute and unconditional and shall be payable whether or not the Lease is terminated by operation of law or otherwise and notwithstanding any defense, setoff, or counterclaim whatsoever and . . . that Lessee holds the Equipment for the benefit of Assignee, subject to and without impairing Lessee's rights under the Lease.
Id. ¶ 3.

  Brooks made these representations on behalf of BrooksAmerica despite the fact that Terminal had not paid BrooksAmerica. (Brooks Aff. ¶ 6.)

  C. Assignment of the Contract to Wells Fargo as Indenture Trustee

  Terminal entered into the Contract as part of an ongoing course of business whereby it arranged secured leases with various companies and then sold and assigned the leases and underlying security interests to Terminal Finance Corporation II ("TFC II") (Mowbray Decl. ¶ 5), a special purpose entity apparently controlled by the management of Terminal.*fn6 TFC II borrowed funds to purchase the leases from a group of investors ("Noteholders"). (Id.) As security for these loans, TFC II assigned its rights to the leases and equipment to the Noteholders, with Wells Fargo acting as the Noteholders' indenture trustee. (Id. ¶ 6.) As indenture trustee, Wells Fargo obtained all of the rights and interests in the leases and equipment sold by Terminal to TFC II. (Id.) At the time of this action, Wells Fargo held the rights to more than 2,000 equipment leases assigned to it by TFC II. (Id. ¶ 4.)

  On November 27, 2000, Terminal sold and assigned its rights in the Contract and Equipment to TFC II (Pl. 56.1 Statement ¶ 9) and TFC II assigned these interests to Wells Fargo as indenture trustee for the Noteholders (Id. ¶ 10). Simultaneously, the Noteholders lent TFC II more than $245,000 toward the purchase of the Contract and Equipment (Mowbray Decl. ¶ 4), and TFC II paid that sum to Terminal in exchange for the Contract and Equipment (Pl. 56.1 Statement ¶ 9).

  D. Events Following Execution of the Contract and Certificate

  After the execution of the Contract and Certificate, Terminal did not pay any portion of the promised $250,000 to BrooksAmerica. (Def. Memo Supp. Summ. J. at 2.) Nevertheless, Terminal requested that BrooksAmerica sign or produce additional documents*fn7 (Brooks Aff. ¶ 9) and tender $19,655.32 for the first and last lease payments, as required by the Contract (Contract at 1). Meanwhile, Brooks described Terminal's request for more documents as "nonsense" and told Terminal that he was "thoroughly frustrated" with its refusal to provide funding. (First Bass Decl. Ex. 5.) BrooksAmerica then sent Terminal a check for the first and last months of the lease, but stopped payment when Terminal did not advance any funds to BrooksAmerica. (Brooks Aff. Ex. M.) BrooksAmerica made no further rental payments under the Contract. (Pl. Mem. Supp. Summ. J. at 4; BrooksAmerica Answer ¶ 9.) BrooksAmerica asserts, and Wells Fargo does not deny, that Terminal exhausted its funds and ceased operations shortly after executing the Contract. (Def. Memo Opp. Pl. Summ. J. at 7; Mongelli Decl. at 7:17-18.)

  E. Procedural History

  Wells Fargo commenced this action in New York Supreme Court in March 2001 (Complaint at 1), requesting declarations of the validity of the Contract (id. ¶ 38) and of the guaranties of Brooks (id. ¶ 41), and seeking payment of all monies due under the Contract, including late fees (id. ¶ 35). Wells Fargo also sought payment of attorneys' fees and pre-judgment interest. (Id. at 10.) BrooksAmerica removed the case to this Court on the basis of this Court's diversity jurisdiction.*fn8 28 U.S.C. § 1332. BrooksAmerica then moved to transfer the action to the United States District Court for the Central District of California, where it was litigating a related action against Terminal, or alternatively, to stay this action until the resolution of the California action. (Brooks Decl. Supp. Mot. Transfer or Stay at 1-2.) The California Court denied the motion for transfer. On October 23, 2003, this Court denied BrooksAmerica's motion to transfer or stay.*fn9 The parties cross-moved for summary judgment and submitted their motions fully-briefed on April 11, 2004. Oral argument was heard on these motions on April 29, 2004.

  II. DISCUSSION

  BrooksAmerica contends that its transaction with Terminal ("Transaction") was a secured loan, not a lease, and that its duty to render payment under the Contract is accordingly mitigated. Alternatively, BrooksAmerica argues that Wells Fargo cannot present a prima facie case for breach of contract because it cannot establish the necessary element of performance by Terminal. Wells Fargo counters that the hell or high water clause subjects BrooksAmerica to an incontrovertible payment obligation, and that BrooksAmerica can make no valid attack as a consequence of the waiver of defenses clause. I address these contentions seriatim, and conclude that Wells Fargo has a right to collect from BrooksAmerica under the Contract.

  A. Summary Judgment Standard of Review

  Summary judgment shall be granted under Fed.R. Civ. P. 56(c) if the evidence demonstrates that "there is no genuine issue as to any material fact and [that] the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). To defeat a motion for summary judgment, "the nonmoving party must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting Fed.R. Civ. P. 56(e)) (emphasis in original). In determining whether there is a genuine issue of material fact, a court must resolve all ambiguities and draw all inferences against the moving party. Harris v. Provident Life and Acc. Ins. Co., 310 F.3d 73, 78 (2d Cir. 2002).

  However, the mere existence of disputed factual issues is insufficient to defeat a motion for summary judgment. Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11-12 (2d Cir. 1986). The non-moving party "may not rely on mere conclusory allegations nor speculation, but instead must offer some hard evidence showing that its version of the events is not wholly fanciful." D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir. 1998). Furthermore, any disputed issues of fact must be "material to the outcome of the litigation." Knight, 804 F.2d at 11. With respect to materiality, "substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson, 477 U.S. at 248. In a contract dispute, summary judgment is appropriate if the language of the contract is clear and unambiguous. See, e.g., Sayers v. Rochester Tel. Corp. Supplemental Mgmt. Pension Plan, 7 F.3d 1091, 1094 (2d Cir. 1993); Seiden Assoc., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992).

  B. Characterization of the Transaction Between Terminal and BrooksAmerica

  The parties differ in their characterization of the Transaction. BrooksAmerica asserts that the Contract records a loan from Terminal to BrooksAmerica, secured by the Equipment, rather than a lease. (Def. Mot. Supp. Summ. J. at 3-6; Def. Mem. Opp. Pl. Summ. J. at 4-5.) BrooksAmerica maintains that the Transaction meets the Uniform Commercial Code ("UCC") definition of a security interest (Def. Mot. Supp. Summ. J. at 5) and points to language in Terminal's documents to show that the parties intended the Transaction to be a secured loan (id. at 6). Wells Fargo refers to the Contract as the "Lease," and points out that the Contract and Certificate are replete with allusions to BrooksAmerica as "Lessee" and Terminal as "Lessor" of the Equipment. (Pl. Mem. Opp. Def. Summ. J. at 6.) Alternately, Wells Fargo argues that the question is immaterial because the characterization of the Transaction as a security interest does not relieve BrooksAmerica of its obligations. (Id. at 8.) Fortunately here, it is unnecessary to determine whether the Transaction was a lease or a loan because under either definition, BrooksAmerica is obliged to perform.

  BrooksAmerica contends that, because the Transaction is a secured loan, Wells Fargo cannot seek refuge in UCC Article 2-A, which governs leases. Wells Fargo Bank Northwest, N.A. v. Taca Int'l Airlines, 315 F. Supp. 2d 347, 350 (S.D.N.Y. 2003) ("Taca") ("Article 2A of the [UCC] . . . applies to any transaction . . . that creates a lease.") However, Wells Fargo does not rely upon Article 2-A's hell or high water clause to enforce the Contract.*fn10 Instead, Wells Fargo argues that the contractual hell or high water clause provides sufficient protection. See Gen. Elec. Capital Corp. v. Nat'l Tractor Trailer Sch., Inc., 667 N.Y.S.2d 614, 619 (stating that Article 2-A's hell or high water clause supplements, but exists independently of, any such clauses in the contract itself). BrooksAmerica's characterization of the Contract thus has no effect on Wells Fargo's ability to employ the contractual hell or high water clause.

  Moreover, were BrooksAmerica to succeed in defining the Transaction as a security interest, the Transaction and Contract would come under the aegis of UCC Article 9. Granite Partners, L.P. v. Bear Sterns & Co., Inc., 17 F. Supp. 2d 275, 300 (S.D.N.Y. 1998) (observing that Article 9 governs transactions intended to create security interests in personal property). Section 9-403 enables assignees such as Wells Fargo to enforce contractural waivers of defenses against lessees. Wells Fargo meets the burdens imposed by Section 9-403, see infra, page 15, and could therefore rely on the statute to enforce the Contract. Therefore, designating the Transaction as a security interest would not strip Wells Fargo of its right to assert that BrooksAmerica waived all defenses.

  Similarly, BrooksAmerica has no remedy in common law by characterizing the Transaction as a "disguised loan." (Def. Mem. Supp. Summ. J. at 4.) BrooksAmerica cites several cases where courts found that sale-leaseback transactions were loans. See, e.g., Matter of Sherwood Diversified Servs., Inc., 382 F. Supp. 1359, 1364 (S.D.N.Y. 1974); Footpress Corp. v. Strickland, 251 S.E.2d 278, 279 (Ga. 1978); Wentworth & Irwin, Inc. v. U.S. Nat'l Bank of Oregon, 723 P.2d 1016, 1020 (Or.Ct.App. 1986).*fn11 However, these cases are largely silent on the issue of a lessee's obligation to make payments, and certainly do not support the proposition that a lessee can avoid its duty, in the face of a contractual waiver of defenses clause, solely by characterizing a transaction as a security interest. BrooksAmerica cites only one case where a court found that sale-leasebacks were secured loans, and where that determination nullified a lessee's contractural duty. See B & S Mktg. Enter., LLC v. Consumer Prot. Div., 835 A.2d 215, 220 (Md. Ct. Spec. App. 2002). However, that case dealt with consumer transactions and is thus inapplicable here. Id. at 228-29 (determining that loans to consumers, at high interest rates and secured by household goods, were governed by state Consumer Loan Law, not by UCC).

  Courts have routinely enforced the obligations of borrowers in sale-leaseback transactions classified as security interests. See, e.g., Orix Credit Alliance v. Pappas, 946 F.2d 1258 (7th Cir. 1991); Citipostal, Inc. v. Unistar Leasing, 724 N.Y.S.2d 555, 558 (4th Dep't 1995). Characterizing the Transaction as a security interest simply has no material effect on BrooksAmerica's obligations under the Contract. Accordingly, the characterization of the Transaction is immaterial to BrooksAmerica's obligation to honor the Contract. Therefore, for purposes of these cross-motions, I need not decide whether the Transaction is a lease or a security interest.

  C. Enforceability of the Contract

  As another preliminary matter, in an attempt to defeat the workings of the Contract's hell or high water clause and waivers of defenses, BrooksAmerica maintains that the Contract is unenforceable. BrooksAmerica does not dispute as a matter of fact that both BrooksAmerica and Terminal executed the Contract and Certificate (Def. 56.1 Statement ¶ 5, ¶ 6), but maintains that Wells Fargo has not plead, and cannot prove, one of the elements of a prima facie breach of contract claim — its own performance, or that of its assignor. See Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir. 1994) (listing the elements of a breach of contract claim under New York law as existence of contract, proof of breach, damages, and performance by the party claiming breach). BrooksAmerica alleges that Terminal's failure to advance $250,000, as promised, represents a complete failure of performance and that the Contract therefore "may not be enforced" (Id. at 1). The thrust of BrooksAmerica's argument is unclear. On the one hand, BrooksAmerica states that "it is axiomatic that the payment clauses of the Contract upon which Wells Fargo relies for its claim to relief are of no effect if the Contract cannot be enforced," (Def. Mem. Opp. Pl. Summ. J. at 3), thus implying that the Contract had essentially never come into force. On the other hand, BrooksAmerica cites United Airlines, Inc. v. Austin Travel Corp., 867 F.2d 737, 741 (2d Cir. 1989) (stating that nonperformance by one party "so fundamental as to defeat the object of the parties in making the contract" may justify cancellation by the other party) to support the proposition that Terminal's lack of performance entitles BrooksAmerica to "terminate the Contract." (Def. Mem. Supp. Summ. J. at 7). Such a construction implies a recognition that the Contract has taken effect.

  The lack of precision stems from BrooksAmerica's inability to distinguish the elements of contract formation from those of an action for breach of contract. Under New York law, a contract is formed when there is offer, acceptance, consideration, mutual assent, and intent to be bound. Louros v. Cyr, 175 F. Supp. 2d 497, 512 (S.D.N.Y. 2001). Formation of a contract is, in turn, one of the four elements necessary to establish breach. Rexnord Holdings, 21 F.3d at 525. Performance, or lack thereof, simply is not an element of contract formation. BrooksAmerica's assertion that Wells Fargo failed to prove performance, even if true, does nothing to weaken the proposition that the Contract was properly formed and executed. Moreover, United Airlines is of no import here for two reasons. First, the contract in United Airlines contained neither a hell or high water clause nor a waiver of defenses, both of which are crucial to the disposition of the instant case. Second, the executed Certificate, as evidence of Terminal's "full[] and satisfactor[]y" performance (Certificate ¶ 2), also defeats BrooksAmerica's argument that it is entitled to cancel the Contract. United Airlines, Inc., 867 F.2d at 741 (stating that a contract can only be terminated because of "substantial nonperformance" by the other party). I therefore find that Wells Fargo may indeed rely on the terms of the Contract to support its case.

  In any event, BrooksAmerica's assertion that Terminal failed to perform is belied by its execution of the Certificate, which plainly states that "Lessor [Terminal] has fully and satisfactorily performed all covenants and conditions required to be performed by Lessor under the Lease." (Certificate ¶ 2.) BrooksAmerica acknowledged Terminal's performance in clear, unambiguous language, and cannot now refute its representation. Credit Alliance Corp. v. David O. Crump Sand & Fill Co., 470 F. Supp. 489, 492 (S.D.N.Y. 1979) (observing in sale-leaseback case that allegations of nonperformance "fly[ing] in the face of unequivocal acknowledgment of complete and satisfactory delivery" cannot defeat such acknowledgment). BrooksAmerica's execution of the Certificate is fatal to its claim that Terminal failed to perform, and Wells Fargo's presentation of the Certificate satisfies its obligation to prove the performance of its assignor as an element of its action for breach of contract.

  D. Effect of Hell or High Water Clause

  To support its assertion that the hell or high water clause is unconditionally enforceable, Wells Fargo relies extensively, but not exclusively, on the decision of this Court in Wells Fargo Bank Minnesota, N.A. v. Nassau Broad. Partners, 01 Civ. 11255, 2003 U.S. Dist. LEXIS 18285 (S.D.N.Y. Oct. 10, 2003) ("Nassau"), where I ruled that Wells Fargo, as assignee and indenture trustee for a similar sale-leaseback initiated by Terminal, could enforce the obligation of Terminal's lessee to make payments under a contract virtually identical to that in the instant case. There is abundant support, in this jurisdiction and beyond, for the proposition that hell or high water clauses are enforceable without caveat. See, e.g., Taca, 247 F. Supp. 2d 352, 361 (S.D.N.Y. 2002) (observing that "hell or high water clauses are enforceable even in the face of defaults by the party seeking to enforce them"); Netrix Leasing, LLC v. K.S. Telecom, Inc., No. 00 Civ. 3375, 2001 WL 228362, at *5 (S.D.N.Y. Mar. 7, 2001) (citing hell or high water clause as decisive in granting summary judgment to plaintiff lessor in sale-leaseback case); First Bank Nat. Ass'n v. Scripps Howard, Inc., No. 94 Civ. 3186, 1995 WL 548845, at *4 (S.D.N.Y. Sept. 15, 1995) (granting summary judgment to assignee); Midlantic Nat'l Bank v. Bob Mackie Originals, Inc., No. 91 Civ. 6394, 1994 WL 163957, at *3 (S.D.N.Y. Apr. 22, 1994) (upholding sale-leaseback contract with hell or high water clause); Citicorp of N. Am., Inc. v. Lifestyle Communications Corp., 836 F. Supp. 644, 657 (S.D. Iowa 1993) (finding that lessee's defenses cannot be asserted because of hell or high water clause); In re O.P.M. Leasing Servs., Inc., 21 B.R. 993, 1005-06 (Bankr. S.D.N.Y. 1982) (granting summary judgment to lessor in bankruptcy proceeding and stating that hell or high water clause must be given full force and effect); Wells Fargo Bank Minnesota, N.A., v. CD Video, Inc., 603970-2002, slip op. at 14 (N.Y. Sup. Ct. June 30, 2004) (recognizing force of hell or high water clause in grant of summary judgment to Wells Fargo as indenture trustee and assignee of another lease from Terminal); Stewart v. U.S. Leasing Corp., 702 S.W.2d 288 (Tex.Ct.App. 1985) (requiring lessee to make payments even though equipment was never delivered).

  BrooksAmerica acknowledges that the Contract contains a hell or high water clause, and does not gainsay the overwhelming weight of authority supporting the clause. Rather, BrooksAmerica attempts to defeat the workings of the clause by showing that the entire Contract never commenced. Wells Fargo alleges that the Contract commenced either by its own terms on October 26, 2000, the date of execution, or thirty days later, pursuant to a provision of the Approval Letter stating that "the next lease payment is due 30 days after signing of the lease documents." (Pl. Mem. Supp. Summ. J. at 16; Approval Letter at 1.) BrooksAmerica asserts that the "Commencement Date" on the face of the Contract was left blank by the parties (Def. Mem. Opp. Pl. Summ. J. at 9), and that Wells Fargo's business records reflect that the first payment under the Contract was due January 1, 2001. BrooksAmerica also points to a December 22, 2000 letter from Terminal's counsel that characterizes the Transaction as incomplete and speculative as of that date (Brooks Aff. Ex. E), and to a statement of its broker and agent that the Transaction was never consummated because Terminal never provided funds to BrooksAmerica (Id. Ex. Q 5:22-24).*fn12 BrooksAmerica argues that, taken together, these indicia show that the Contract was intended to commence upon satisfaction of the condition precedent of Terminal's payment to BrooksAmerica, and therefore that in light of Terminal's failure to pay, the Contract never commenced.

  In countering this argument, Wells Fargo cites to my finding in Nassau that Terminal customarily did not fill in the "Commencement Date" on its form contracts, and that accordingly, in the usual practice of Terminal, the blank date "does not appear to be dispositive, much less probabtive or indicative of whether the time to make lease payments matured." Nassau, 2003 U.S. Dist. LEXIS 18285, at *25. Collateral estoppel does not apply to that finding of fact because BrooksAmerica was not a party or in privity with a party to the prior adjudication. In re Merrill Lynch & Co., Inc. Research Reports Sec. Litig., 305 F. Supp. 2d 323, 325 (S.D.N.Y. 2004). However, collateral estoppel is unnecessary here.*fn13 It is enough to observe that the Contract plainly states that "Lessee agrees to lease from Lessor, and upon acceptance hereof, Lessor agrees to lease to Lessee, for the period commencing with delivery of the Equipment to Lessee . . ." (Contract ¶ 1.) This language clearly shows that the Contract was to commence upon delivery of the Equipment by Terminal and acceptance by BrooksAmerica. Such unambiguous contract terms are to be given their plain meaning. Krumme v. West Point Stevens, 238 F.3d 133, 139 (2d Cir. 2000). BrooksAmerica cannot defeat this straightforward conclusion by pointing out ambiguities concerning the due date of BrooksAmerica's first payment under the Contract. See New Paradigm Software Corp. v. New Era of Networks, Inc., 99 Civ. 12409, 2002 WL 31749396, at *7 (S.D.N.Y. Dec. 9, 2002) (observing that clear contractural language does not become ambiguous simply because one party urges the court to adopt a varying interpretation). Because BrooksAmerica signaled its acceptance of the Equipment by executing the Certificate, supra, it is clear that the Contract commenced on October 26, 2000, with execution of the Certificate.

  BrooksAmerica alternatively asserts, without citation to authority, that enforcing the hell or high water clause reaches an unjust result and thus weighs against public policy. As a mortgage broker with more than twenty-five years' experience (Brooks Dep. 5:3-4), Brooks cannot reasonably claim that the Contract works an injustice. IBM Credit Corp. v. United Home for Aged Hebrews, 92 Civ. 8747, 1994 U.S. Dist. LEXIS 2886, at *13 (S.D.N.Y. Mar. 3, 1994), vacated on other grounds by 848 F. Supp. 495 (1994) ("Where all parties to an agreement are . . . reasonably knowledgeable concerning its implications — as is usually the case when all are engaged in business activity — the agreement is ordinarily enforceable even if some of its terms are harsh or one-sided.") Moreover, courts and commentators have observed that the viability of the market for commercial leases depends on the ironclad enforceability of hell or high water clauses. See, e.g., O.P.M. Leasing Servs. 21 B.R. at 1007 ("To deny [the] effect [of hell or high water clauses] as a matter of law would seriously chill business in this industry because it is by means of these clauses that a prospective financer-assignee of rental payments is guaranteed meaningful security for his outright loan to the lessor.") See generally Richard M. Contino, Legal and Financial Aspects of Equipment Leasing Transactions 29 (1979). BrooksAmerica's claim of unjust treatment would most appropriately be directed at Terminal, the alleged malfeasor. See First Bank Nat. Ass'n, 1995 WL 548845, at *4 ("The fact that [lessor] did not perform its promises under the [contract] was a matter to be dealt with between [lessee] and [lessor], but this circumstance did not relieve [lessee] of its liability to [assignee]."); Citicorp of N. Am., Inc., 836 F. Supp. at 656 ("A lessee is required to unconditionally pay the full rent when due . . . even though he has a legitimate claim against the lessor for money owed . . . he can still bring a lawsuit against the lessor for any claims.")

  E. Enforceability of Waiver of Defenses

  BrooksAmerica does not credibly refute Wells Fargo's contention that the waiver of defenses clause in the Contract protects Wells Fargo, as Terminal's assignee, from any claims or defenses that BrooksAmerica might assert. Such waiver clauses are routinely upheld in sale-leaseback transactions and in loans. See Rhythm & Hues, Inc. v. Terminal Mktg. Co., Inc., No. 01 Civ. 4697, 2004 U.S. Dist. LEXIS 7625, at *61 (S.D.N.Y. May 4, 2004) (enforcing waiver of defenses clause in case involving another Terminal lease similar to that in the instant case); Benedictine Coll., Inc. v. Century Office Prods., Inc., 853 F. Supp. 1315, 1322-23 (D. Kan. 1994) (finding that waiver of defenses enabled assignee to enforce a contract free of any claims asserted by lessee); Midlantic Nat'l Bank, 1994 WL 163957, at *3 (stating that assignee was entitled to payments from lessee); Citibank, N.A. v. Plapinger, 495 N.Y.S.2d 309, 310 (finding, in case involving nonpayment of a loan, that "language of disclaimer . . . is sufficiently specific to foreclose as a matter of law . . . defenses and counterclaims.")

  The impact of the waiver of defenses clause in the Contract is strengthened by the presence of an identical clause in the Certificate. See Credit Alliance Corp., 470 F. Supp. at 492 (declaring that waiver clause in delivery certificate serves as a basis for enforcing lessee's obligation wholly independent of the underlying contract). Courts have upheld the rights of assignees to accept at face value the representations of lessees on such certificates,*fn14 regardless of whether the underlying saleleasebacks are characterized for UCC purposes as leases under Article 2-A or as security interests under Article 9. See Leasetec Corp. v. Orient Sys., Inc., 85 F. Supp. 2d 1310, 1317 (S.D. Fla. 1999) (upholding sale-leaseback transaction and recognizing that waiver clause in delivery certificate prevented lessee from stating claims against assignee in case interpreted under Article 2-A); Benedictine Coll., 853 F. Supp. at 1323 (finding under Article 9 that assignee was entitled to enforce contract against lessee).

  BrooksAmerica offers no challenge to the legitimacy of Terminal's assignment of the Contract to Wells Fargo. According to UCC Article 9, an assignee such as Wells Fargo may enforce a waiver of defenses clause if the assignment was taken in good faith, for value, and free of knowledge of any claims or defenses. N.Y.U.C.C. § 9-403 (McKinney 2001). That Wells Fargo paid value for the assignment is a matter of record, see supra, page 4. BrooksAmerica does not overtly attack Wells Fargo's assertion that it took the assignment in good faith and without knowledge of claims or defenses, but rather insinuates that Wells Fargo may have been "ignorant and lazy" in taking the assignment (Def. Mem. Opp. Pl. Summ. J. at 5), and that Wells Fargo should have been more diligent in verifying the accuracy of the representations of Terminal and BrooksAmerica in the Contract and Certificate. Such conclusory assertions are somewhat imprudent in light of Brooks' admission that he knowingly signed documents containing falsehoods because he was "desperate to get financing" and "trying to make things happen." (Brooks Dep. 106:17-19.) I agree with Wells Fargo that it is "absurd [for BrooksAmerica to claim that] Wells Fargo should be charged with ferreting out Mr. Brooks' misrepresentations." (Pl. Reply Supp. Summ. J. at 6.) BrooksAmerica's vague allegations lack a factual basis and are insufficient to prevent Wells Fargo from meeting the standard of Section 9-403. As I ruled in Nassau in similar circumstances, Wells Fargo acted in a commercially reasonable matter in relying on the facially valid representations in the Contract and Certificate as it accepted assignment from Terminal. Nassau, 2003 U.S. Dist. LEXIS 18285, at *9. See also Midlantic Nat'l Bank, 1994 WL 163957, at *3 (finding no basis for contesting validity of assignment in sale-leaseback case where assignee relied on representations of facially valid instruments). Again, characterizing the Transaction as a lease and interpreting the Contract accordingly under Article 2-A does not change the result. See Great Am. Leasing Corp. v. Star Photo Lab, Inc., 672 N.W.2d 502, 506 (stating that lessee "is without a remedy against [lessor]" in a case where the contract explicitly stated that Article 2-A controlled.) Thus, BrooksAmerica makes no showing that would deny the waiver clauses in the Contract and Certificate their full force and effect. BrooksAmerica's various arguments, including that the Contract is void as criminally usurious or as an illegal loan are proscribed by the workings of the waiver clauses. First Interstate Credit Alliance, Inc. v. Brown, 88 Civ. 1558, 1988 U.S. Dist. LEXIS 14759, at *12 (S.D.N.Y. Dec. 28, 1988) ("The terms of the waiver, as expressed and assented to in those documents, are clear, simple and suspectable to only one meaning: defendants waived any claims, defenses and off-sets against plaintiff.") Therefore, I find that BrooksAmerica and Brooks must honor their respective obligations under the Contract and Guaranty.

  III. CONCLUSION

  For the foregoing reasons, Wells Fargo's motion for summary judgment is granted, and BrooksAmerica's is denied. Wells Fargo is awarded all rental payments past due under the Contract, with pre-judgment interest thereon, and all present and future rent payments as they become due and owing. Wells Fargo is also awarded attorneys' fees for this action (to be briefed separately) as provided for under the Contract. However, late fees are not awarded.*fn15 The Clerk of the Court is instructed to calculate the interest (if the parties do not do so themselves) and close these motions and remove this case from my docket.

  IT IS SO ORDERED.


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