Leasecomm Corp. v Long Is. Cellular Ltd.
Annotate this CaseDecided on June 27, 2005
District Court, Suffolk County
LEASECOMM CORPORATION, PLAINTIFF
against
LONG ISLAND CELLULAR LTD. IARROBIND, BARBARA AKA IARROBINO, BARBARA, DEFENDANTS
SMC 10333-04
Stephen Hackeling, J.
The plaintiff, Leasescomm Corp. (hereinafter "Leasecomm") seeks to recover upon a commercial lease pursuant to complaint dated August 19, 2004. The individual co-defendant Barbara Iarrobino interposed an answer dated October 6, 2004. A default judgment was previously entered against the non-appearing defendant Long Island Cellular Ltd. on December 14, 2004. On May 9, 2005, the Court granted the defendant's application to compel discovery and conditionally precluded the plaintiff from introducing into evidence any written documents which were not produced at least 10 days prior to the trial of the matter.
The Undisputed Facts
The defendant, Long Island Cellular Ltd. (hereinafter "Long Island Cellular") entered into a three page fine print commercial lease for an ATM machine with Leasecomm on October 19, 2001. Mrs. Iarrobino executed the financing agreement on behalf of her corporation which also included a personal guaranty. The lease included a "loss or destruction waiver" clause. Mrs. Iarrobino mistakenly thought that the "loss or destruction waiver", which she was paying extra for, was a loss or destruction insurance payment. The subject clause provides:
Loss or Destruction Waiver: You will waive my responsibility for loss or destruction of the equipment and for keeping the equipment fully insured during the lease term. After loss or destruction of the equipment, you will provide for its replacement with equipment of comparable value at the time to the extent that I took reasonable care in preventing the loss or destruction of the equipment. I will promptly notify you of the loss. I will cooperate with you in making any claim with respect to the equipment, including providing police and fire report documents to sustantiate the claim. If I do not provide proof of insurance, I am deemed to have chosen to buy the Loss or Destruction Waiver at current rates, and I will pay you for such waiver.
Emphasis added.
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On May 19, 2003 Leasecomm entered into a Court Ordered Consent Decree with the Commonwealth of Massachusetts which mandated terms and conditions running to the benefit of a class of lessees inclusive of the defendant.
The ATM machine was destroyed in a fire in June of 2003 and Leasecomm now seeks to recover $4,000 of outstanding lease payments, together with invoicing fees, loss/damage waiver fees and attorneys and collection fees of approximately $2, 600.
Discussion
The Leasecomm Contract
Plaintiff's Exhibit 1 is the subject financing contract executed by the parties. There is no dispute that this is a commercial lease with a personal guarantee and that the lease provisions provide that Massachusetts Law applies. Leasecomm correctly asserts that Massachusetts Law provides that "business people are charged with knowing the content of the documents they sign." See plaintiff's memo of law citing to Mayflower Seafoods Inc. v. Integrity Credit Corp., 519 N.E.2d 1355, 1359 ( Mass. App. Ct. 1988). [FN1]
However, the "no interference with commercial leases policy" is a double edge sword that cuts both ways. The defendant has an equal expectation and right to demand that Leasecomm will be bound by its lease provisions. In this case the choice of law provision also includes as exclusive choice of forum when its states:
The parties hereby agree that this agreement is made in, governed by, to be performed in, and shall be construed in accordance with the laws of the Commonwealth of Massachusetts. They further consent and submit to the jurisdiction of the Courts of the Commonwealth of Massachusetts and expressly agree to such exclusive forum for the bringing of any suit, action or other proceeding arising out of their obligations hereunder, and expressly waive any objection to venue in any such Courts and waive any right to a jury so that trial shall be by and only to the Court. It is further agreed and understood that the corporate headquarters of Leasecomm Corporation is located within the venue of the District Court Department of Trial Court, within Middlesex County. Emphasis added.
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Fraudulent Business Practice Consent Decree
Leasecomm has advanced the argument that it is free to circumvent its contract with the defendant as it entered into a Court Ordered Consent Decree on May 19, 2003 with the Commonwealth of Massachusetts; wherein it agreed not to bring this action in the State of Massachusetts. The approximate 50 page consent agreement was not introduced into evidence at trial but was forwarded to the Court as an exhibit to Leasecomm's Memorandum of Law. The document was not provided to the defendant as directed by this Court's oral discovery / preclusion directive of May 9, 2005.
The Court can fully appreciate why the plaintiff would not want to disclose this Consent Decree to its defendants or to place same before the Court in evidence. If this document were in evidence, the matter would be quickly disposed of upon the merits. The voluminous agreement and judgment places dozens of preconditions and limitations upon Leasecomm's ability to enforce leases of the type involved in this case. Even under the best scenario, it would be plaintiff who would have the burden of proving inapplicability of, or compliance with, the Decree before it could seek judgment upon the lease. The record before the Court does not do so.[FN2]
Equitable Estoppel/Unclean Hands
The Court is deeply troubled by Leasecomm's failure to fully honor its directive to disclose all contracts and/or billing statements and/or documents concerning its allegation that the defendant is liable in breach of contract. The existence of the Consent Decree was only acknowledged in response to the Court's inquiry as to why the matter was being litigated in New York in contravention of the contract's exclusive choice of forum clause. It is undisputed that the defendant is part of the protected class of individuals who inured to additional rights as a result of the Decree. At the very least, New York law recognizes her as a third party beneficiary of a contract between Leasecomm and Massachusetts. See Cal. Pub. Emples. Ret. Sys. vs. Sherman & Sterling, 95 NY2d 427, 435 (NY 2000); Burns, Jackson, Miller, Summit & Spitzer vs. Linder, 59 NY2d 314 336 (NY 1983). It can only surmised that Leascomm sought to take tactical advantage [*4]of the informal oral nature of the discovery directive; figuring a document it wanted to conceal anyway would be precluded from evidence.
Having placed both the original contract and Consent Decree at issue; Leasecomm can not have only the best of both documents. The law does not allow a proponent of a contract to only introduce into evidence the clauses beneficial to it. To recover for an alleged breach, a party must introduce the "entire contract. See generally, Rentways, Inc. v. O'Neill Milk & Cream Co. 308 NY 342. (1955); William C. Atwater & Co. v. Panama R. Co. 246 NY 519 (1927).
A written contract should be read as a whole and every part should be interpreted with reference to the whole, and if possible it should be so interpreted as to give effect to its general purpose.
William Press, Inc. v. State of New York , 37 NY2d 434 ( 1975); Sunrise Mall Assocs. V. Import Alley, 211 AD2d 711 (NY App. Div. 2d Dept. 1995). Each portion of a contract is qualified by other portions which are relevant thereto, and has no separate existence apart from them. Madawick Contracting Co. V. Travelers Ins. Co., 307 NY 111, (NY 1954). In the instant case, the entire contract includes the Consent Decree.
When the contract was admitted into evidence the Court and defendant were unaware of the Consent Decree. Had the existence of the Consent Decree been timely disclosed, the Court would only have allowed the contract's introduction into evidence as a business record if the Decree was admitted with it. The Court was initially tempted to change its evidentiary ruling and disallow the contract standing by itself. It will not do so as the prejudice to Leasecomm would be immediately fatal to its case.
New York CPLR Sec. 3126(2)
On the other hand, there exists no sustainable basis to consider the Decree in evidence. The Court is mindful of the fact that contractual choice of forum is a defense which is waivable. Bussanich v. United States Lines, Inc., 74 AD2d 510 (NYAD 1st Dept. 1980). The defendant entered a general denial in this case without expressly raising any affirmative defenses. However, the defendant was prejudiced by Leasecomm's failure to disclose the Decree. Had it done so when requested , defendant would have been in a position to see that she had defenses and could have sought leave to assert same. Based on the plaintiff's conduct in failing to disclose this relevant document to defendant prior to trial; it is this Court's finding that Leasecomm is estoppel from advancing a defense of "waiver" of Massachusetts as its exclusive forum. See New York CPLR 3126(2), which allows the Court to prohibit "the disobedient party from supporting or opposing designated claims or defenses", as a discovery sanction.
The parties' contract, complete with an exclusive choice of forum clause, is in evidence. A similar Leasecomm lease has already been reviewed by a sister Court which held that its choice law and forum selection clauses are valid and enforceable. See Leasecomm Corp. v. Datalink Resources Corp. 2002 NY Slip Op 40401U (NY Civ. Ct. , Queens 2002). The Court is not inclined to adopt Leasecomm's argument that if it is held to its agreement it will [*5]
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have no judicial forum to enforce its leases. This self inflicted limitation was entered into two years after the lease agreement between the parties to this action. There is no privity with the defendant and no sustainable legal or equitable theory which would allow Leasecomm to amend its contract with the defendant by contracting with an unrelated entity.
Just as Leasecomm asserts that the law presumes a party to a contract understands its import; it can be assumed that Leasecom understood that it may be limiting enforcement of some of its leases when it accepted whatever advantages the State of Massachusetts was offering in its Consent Decree in lieu of prosecution for alleged illegal business practices. In any event, the defendant is entitled the benefit of her bargained for choice of forum.
Accordingly, the Court dismisses this plaintiff's complaint, without prejudice to Leasecomm's right to seek relief in the Commonwealth of Massachusetts.
_____________________________
J.D.C.
DATED: JUNE 27, 2005
HUNTINGTON, NY
Decision to be published____yes____no.
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Footnotes
Footnote 1: Had this been a consumer lease, the Court is confident that Massachusetts Law would be similar to New York Law which would have either barred its introduction into evidence as the result of its microscopic print (CPLR Sec. 4544) or voided it a violative of plain language (Gen. Oblig. L. 5-702) and deceptive business practice (GBL Sec. 349) statutes.
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Footnote 2: A nonexhaustive list of examples of the Consent Decree limitations are as follows:
Page 5. "All future contracts must be month to month and cancelable without penalty.
Page 6. Leasecomm must disclose maximum loss/damage waiver charge
Page 11. Leasecomm must discontinue collection suits.
Page 12. Leasecomm enjoined from seeking to recover loss/damage waiver fees.
Page 15 Limit collection, attorneys and late fees.
Page 28. Keep written records of compliants Send all lessee's (defendants) a lease termination and release agreement.
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