IFG LEASING COMPANY v SCHULTZ

Annotate this Case

Download PDF

No. 85-56 I N THE SUPREME COURT O F THE STATE O F MONTANA 1985 I F G LEASING COMPANY, a Minnesota Corporation, P l a i n t i f f and R e s p o n d e n t , JOHN SCHULTZ, J R . , ESTHER SCHULTZ, K.O. DEK LAND COMPANY, LELAND T R A I L E R AND EQUIPMENT, D e f e n d a n t s and A p p e l l a n t s . APPEAL FROF4: D i s t r i c t C o u r t of t h e T h i r t e e n t h 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 Y e l l o w s t o n e , T h e H o n o r a b l e C h a r l e s L u e d k e , Judge p r e s i d i n g . COUNSEL OF RECORD: For Appellants: B e r g e r Law F i r m ; C h r i s Nelson, Billings, Montana C h a r l e s W. Hingle, For Respondent: Lynaugh, Fitzgerald & H i n g l e ; B i l l i n g s , Montana S u b m i t t e d on B r i e f s : Decided: Filed: ~ u t 2i ;j 1985 Clerk May 9 , 1 9 8 5 A u g u s t 29, 1985 Mr. Justice John Conway Harrison delivered the Opinion of the Court. This is an appeal from a judgment of the Thirteenth Judicial District Court, in and for the County of Yellowstone which found Schultz in debt to IFG Leasing Company for failure to pay monies owed on the lease of certain equipment. We affirm. John Schultz, Jr. and Esther Schultz were partners doing business as K.O. Dek Land Company. On June 28, 1978, Schultz leased a combine from I F G Leasing Company. The lease called for five annual payments in the amount of $12,150.72, the first payment being due on June 27, 1978, and subsequent payments due on June 25th of each year thereafter. Appellants failed to pay the rental due on June 25, 1979, and all subsequent payments. IFG obtained judgment against appellant in the principal amount of $57,596.29 plus interest at the rate of 10% per annum from the date of default. The combine remains in the possession of the appellant because respondent has not been able to locate it. The parties entered into a second lease on February 27, 1979, for refrigerated trailer. Leland Trailer and Equipment, the vendor, guaranteed the performance of Schultz. The lease called for five annual rental payments in the amount of $7,536.34, the first payment being due on February 13, 1979, and subsequent payments due on March 25th of each year. Schultz failed to make required under the lease. four installment payments As a consequence, the trailer was sold by Leland for the amount of $17,500. I F G and Leland entered into an agreement whereby Leland would pay I F G the sum of $17,500 for the ownership of the trailer. IFG credited Schultzls $17,500. A judgment amount o f $15,553.46 was plus account obtained in the against interest a t of amount Schultz in the 1 0 % p e r annum. The D i s t r i c t C o u r t d e t e r m i n e d t h e i n t e r e s t r a t e by t h e t e r m s o f b o t h l e a s e a g r e e m e n t s which p r o v i d e d f o r i n t e r e s t on d e f a u l t to be paid the highest contractual and S 31-1-107 (1), MCA law," per "at annum. The total e q u a l l e d $29,745.80 rate permitted by (1979) which p r o v i d e d f o r 1 0 % interest due on said obligations f o r t h e p e r i o d between J u l y 5 , 1 9 7 9 , and t h e d a t e o f t r i a l , November 5 , 1984. Two i s s u e s a r e r a i s e d on a p p e a l : (1) Whether r e s p o n d e n t f a i l e d t o m i t i g a t e h i s damages r e g a r d i n g t h e d i s p o s i t i o n o f t h e Leland T r a i l e r . (2) Whether is respondent entitled to prejudgment i n t e r e s t a t a r a t e o f 10% p e r annurn. Initially, issue is not t h i s Court recognizes governed Commercial Code. by the that provisions the dispute a t of the Uniform I n c i r c u m s t a n c e s where t h e p u r p o r t e d l e a s e g i v e s t h e l e s s e e t h e o p t i o n t o a c q u i r e t h e l e a s e d goods upon expiration of the lease, the lease is commercially i n d i s t i n g u i s h a b l e from a n i n s t a l l m e n t s a l e s c o n t r a c t , and i s governed by 30-1-201(37), Springs the MCA; (Mont. Uniform Commercial Code. Section F i r e S u p p l y and S e r v i c e , I n c . v. C h i c o Hot 1982), 639 P.2d 1160, 39 St.Rep. 231. However, t h e f a c t s o f t h i s c a s e i n d i c a t e t h a t t h e lessee d i d n o t have t h e o p t i o n t o o b t a i n t i t l e t o t h e p r o p e r t y a t no f u r t h e r charge a t t h e termination of t h e lease. Therefore, we find t h e characterization of the transaction i n t h e matter b e f o r e u s was a l e a s e o f equipment. 1 9 8 3 ) , 661 P.2d 838, 40 S t . Rep. 394. D i e d e v. Davis (Mont. Appellants argue t h a t t h e respondent f a i l e d t o m i t i g a t e T h i s amount i s damages by a c c e p t i n g $17,500 f o r t h e t r a i l e r . alleged to less be i t s market than value. Schultz Mr. t e s t i f i e d t h a t a t t h e t i m e t h e t r a i l e r was t a k e n , its value was between $20,000 and $22,000. The r u l e i n Montana i s t h a t a n o n d e f a u l t i n g p a r t y i n a contractual arrangement circumstanc~s so as c a u s e d by d e f a u l t . Diteman not to act reasonably unnecessarily under enlarge the damages Diede v . D a v i s , s u p r a ; Town Pump, I n c . v . 1981), (Mont. must 622 P.2d 212, 38 St.Rep. 54. The sufficiency of t h e e f f o r t t o mitigate is a determination f o r trier o f the fact. Bronken's Brown and A s s o c i a t e s (Mont. Good Time Company v . 1 9 8 3 ) , 661 P.2d 861, J. W. 40 St.Rep. 549. This matter respondent to was recover l e a s e s which were in initiated rent upon default. as collection a appellants' The a c t i o n by two e q u i p m e n t Court District in its f i n d i n g s o f f a c t found t h e a p p e l l a n t s had d e f a u l t e d on t h e i r obligation t o pay t h e r e n t a l due o n t h e two l e a s e s . consequence, the t r a i l e r was s o l d and t h e p r o c e e d s As a of s a l e w e r e c r e d i t e d a g a i n s t t h e d e b t due t o respondent. the The c o u r t a l s o determined t h a t both l e a s e s r e q u i r e d i n t e r e s t t o be paid on delinquent Court's findings of ordered appellant payments. f a c t and Based upon conclusions of t o pay r e s p o n d e n t the District law t h e c o u r t s p e c i f i c amounts, less t h e amount c r e d i t e d a s r e p r e s e n t e d by t h e s a l e o f t h e t r a i l er, representing agreements. principal and interest on the two lease From o u r r e v i e w o f t h e r e c o r d , we c o n c l u d e t h a t t h e r e was s u b s t a n t i a l e v i d e n c e i n t h e r e c o r d t o s u p p o r t t h e $17,500 value for which the trailer amount was c r e d i t e d t o t h e a c c o u n t o f was sold, and t h e appellants. which We hold t h a t the respondent's e f f o r t s t o m i t i g a t e i t s damages w e r e reasonable under t h e circumstances. A p p e l l a n t n e x t a r g u e s t h a t t h e l e g a l r a t e of i n t e r e s t , 6 % p e r annum, s h o u l d h a v e been a s s i g n e d t o t h e o b l i g a t i o n s i n question rather than the contractual rate, 10% p e r annum. The D i s t r i c t C o u r t i n i t s f i n d i n g s o f f a c t and c o n c l u s i . o n s o f law stated that each lease entered into by the parties provided t h a t : interest to be paid on delinquent payments a t " t h e h i g h e s t c o n t r a c t u a l r a t e p e r m i t t e d by law." S e c t i o n 3 1 - 1 - 1 0 7 ( 1 ) , MCA (1979) f i x e s t h a t r a t e a t 1 0 % p e r annum, and i s a p p l i c a b l e u n d e r t h e f a c t s and c i r c u m s t a n c e s of t h i s c a s e . The a p p e l l a n t s m a i n t a i n b e c a u s e t h e l e a s e s d o n o t s t a t e t h e amount o f i n t e r e s t t o b e c h a r g e d on t h e s e o b l i g a t i o n s , the l e g a l r a t e , 6% should be applied. S e c t i o n 31-1-107 (1), MCA (1979) , t h e s t a t u t e i n e f f e c t a t t h e t i m e o f t h e e x e c u t i o n o f t h e two l e a s e s p r o v i d e d t h a t : [ t h e ] p a r t i e s may a g r e e i n w r i t i n g f o r t h e payment o f a n y r a t e o f i n t e r e s t n o t more t h a n 1 0 % p e r annum o r more t h a n 4 percentage points in excess of the d i s c o u n t r a t e on 90-day commercia 1 p a p e r i n e f f e c t a t t h e f e d e r a l reserve bank i n the ninth federal reserve district, w h i c h e v e r i s g r e a t e r , and s u c h i n t e r e s t s h a l l be allowed according t o t h e t e r m s o f t h e agreement. Section 31-1-107(1, Kont.Laws, MCA, prior C h a p t e r 275, S e c . 8; to amendment by (1981) (1983) Mont. Laws, C h a p t e r 9 , S e c . 1; (1983) Mont. Laws, C h a p t e r 567, Set. 1. A p p e l l a n t s p r i m a r i l y r e l y on B i g Sky L i v e s t o c k , I n c . v . Herzog involved (1976), interest veterinary reversed 1 7 1 Mont. drugs. 409, based upon The jury's 558 an P.2d action award 1107. on of an.d t h e l e g a l r a t e was i n s t a t e d . an The account 10% p e r case for annum was However, i n the summary reversal, agreement In the or an this Court did interest rate matter, the present agreement delinquent permitted which payments terms by law" 10% a s e s t a b l i s h e d Accordingly, required at "the clearly by the of Justices the interest. interest highest any the written of the / I lease The p r o v i s i o n of to be paid contractual S 31-1-107 (1) , MCA order written parties. required the contractual affirmed. W e concur: address e s t a b l i s h e d by agreement addressed t h e r a t e of the not on rate rate a t (1979), t o apply. District Court is

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.