Wells Fargo Bank Minn., Natl. Assn. v CD Video, Inc.

[*1] Wells Fargo Bank Minn., Natl. Assn. v CD Video, Inc. 2004 NY Slip Op 51707(U) Decided on June 30, 2004 Supreme Court, New York County Edmead, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on June 30, 2004
Supreme Court, New York County

WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, Indenture Trustee, Plaintiff,

against

CD VIDEO, INC., a California Corporation, and MINH T. NGUYEN, an individual, Defendants.



603790-2002



Kutak Rock LLP

by Jeffrey S. Jacobovitz

100 Park Avenue - 33rd Floor

New York, NY 10017

(212) 829-9602

and

1101 Connecticut Avenue, Suite 1000

Washington, D.C. 20036

(202) 828-2400

Counsel for Defendants CD Video, Inc. and Minh T. Nguyen

The Law Offices of Lord Chester So

135-21 Coolidge Avenue, Suite 2A

Kew Gardens, NY 11435

(917) 860-8685

Carol R. Edmead, J.

MEMORANDUM DECISION

In this action for a judgment declaring monies due under a certain contract and breach thereof, and to enforce a personal guaranty, plaintiff Wells Fargo moves for summary judgment in its favor and against defendant CD Video, Inc., ("defendant Video") and defendant Minh T. Nguyen ("defendant Nguyen") (collectively "defendants"). Defendants oppose the motion and cross-move pursuant to CPLR 3212 for summary judgment dismissing the complaint on the ground that they have not breached the subject contract or guaranty. The Court grants plaintiff summary judgment and denies defendants' cross-motion for summary judgment.

Defendant Video, of which defendant Nguyen is Chief Executive Officer, is in the business of high-speed replication of compact discs and videotapes. Defendant Video, as Lessee, and Terminal Marketing Co., Inc., as Lessor ("the Lessor"), which is not party to this action, entered into Lease No. 3970, whereby the Lessor agreed to lease certain equipment (the "Equipment") to defendant Video for thirty-six monthly payments of $4,833.00 with one up front payment of $9,666.00 to be applied to the first and last months (the "Equipment Lease"). The Equipment Lease contains the following relevant provisions: "Rent will be due and payable in advance with respect to each item of Equipment on the first day of each month, commencing on the Commencement Date, and shall continue until the return of such item of Equipment by Lessee to Lessor in accordance with the terms of this Lease . . . . Lessee acknowledges and agrees (i) that this is a net lease and all costs, expenses and liabilities in connection with the equipment shall be borne by the Lessee, (ii) that Lessee's obligation to pay Lessor all amounts due hereunder is absolute and unconditional, and (iii) Lessee shall not be entitled to any abatement, reduction, set-off, counterclaim, defense or deduction with respect to any Rent or other sum payable hereunder."[*2]

(¶ 5). "Commencement Date" - with respect to each item of Equipment, the date specified on page one this Lease as the "Commencement Date."[FN1] (¶ 19 Definitions)"This Lease may be assigned by the Lessor without notice to the Lessee in which case the assignee shall be entitled to exercise all rights and powers, but shall not be chargeable with any obligations and liabilities of the Lessor hereunder and all references to the Lessor shall instead refer to the assignee. Lessor or Lessee's assignee may also grant a security interest in the Equipment and this Lease. Assignee's rights or the rights of a holder of a security interest in this Lease shall be free of all defenses, setoffs or counterclaims which Lessee may be entitled to assert."(¶ 14)."This Lease contains the entire agreement among the parties and may not be changed or modified orally, but only in writing, signed by the Party to be charged."(¶ 18).

In connection with the Equipment Lease, defendant Video also executed a "Delivery and Acceptance Certificate" ("Acceptance Certificate"), wherein it agreed to the following: Lessee [defendant Video] hereby certifies that the Equipment . . . has been (i) delivered to and accepted by Lessee at the location set forth above, (ii) inspected by Lessee and found to be in good order and condition and (iii) installed and ready for use and is hereby accepted pursuant to the Lease Agreement described above (the "Lease").Lessee hereby acknowledged and agrees that (i) Lessor has fully and satisfactorily performed all covenants and conditions required to be performed by Lessor under the Lease and (ii) Lessee has no counterclaims or set-offs against Lessor.Lessee hereby consents and agrees to Lessor's assignment of the Lease to a third-party assignee ("Assignee") in reliance hereon and Lessee agrees (i) that Lessee's obligation to pay rent to Assignee under the Lease 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, set-off or counterclaim whatsoever. . . .

Defendant Video also granted the Lessor a security interest in the Equipment Lease and Equipment, which is evidenced and perfected by the signing and filing of a UCC-1 financing statement. In addition, defendant Nguyen executed a "Guaranty Lease No. 3970," dated June 26, 2000, which provided the following: "To induce [Terminal] as lessor . . . to enter into and accept a lease. . . with CD Video, [*3]Inc. . . . the undersigned hereby jointly, severally, and unconditionally guarantee to Lessor . . . the prompt and due payment and performance by Lessee of all of Lessee's obligations pursuant to the Lease and all other documents and agreements entered into by Lessee in connection therewith. . . ."

According to the affidavit of Aaron Mowbray, account manager of plaintiff, plaintiff is the assignee of the Equipment Lease.[FN2] In connection with the assignment of the Equipment Lease to plaintiff, and as required under the Indenture, the Acceptance Certificate was delivered to plaintiff. Plaintiff also became the assignee of the Guaranty.

In support of its motion for summary judgment, plaintiff argues that (1) by the clear and unambiguous express terms of the Equipment Lease, and as confirmed by the Acceptance Certificate, defendants' obligation to make the required payments is absolute and unconditional, and not subject to any contract defenses or conditions precedent; (2) the Lease must be enforced notwithstanding any allegation of good faith or knowledge of any alleged defense; and (3) defendant is bound by its representations in the Acceptance Certificate that the Equipment was delivered and that it had no defenses under the Equipment Lease. Plaintiff further argues that public policy and fairness support enforcement of the Equipment Lease, in that (1) lenders must be able to rely on promises that the lessee makes in the lease documents, and allowing lessees to go back on those promises would defeat the lender's expectations and disrupt lease financing transactions; and (2) the virtual equivalent of a "hell or high water clause" has been inferred into every financing lease under Article 2-A of the UCC. Plaintiff also points out that defendants' remedy, if any, may be a claim against Terminal, the Lessor, and any potential losses incurred by defendants are caused solely because of the actions of Terminal. It is further argued that plaintiff and the Noteholders are at least as innocent as defendants, and unlike defendants, plaintiff and the Noteholders took steps to protect themselves from this very risk; defendants knew the signed Acceptance Certificate was going to be used to obtain financing, and that they were assuming the risk of Terminal not delivering the equipment.

Defendants oppose the motion, and cross-move for summary judgment, arguing that plaintiff has failed to demonstrate as a matter of law that defendants breached the Equipment Lease, since plaintiff cannot show that defendants' obligation to make payments under the Equipment Lease ever commenced.

According to defendant Ningh, the Equipment Lease represents only part of defendant [*4]Video's agreement with the Lessor, Terminal. Defendants claim that defendant Video and Terminal agreed that the Lessor, Terminal, would loan defendant Video $150,000 for general purposes, to be secured by a "VHS Duplicator" owned by defendant Video. The parties agreed to structure the transaction as a "sale/leaseback" arrangement, in which defendant Video agreed to sell the Lessor the "VHS Duplicator" for $150,000 and Terminal agreed to lease the Equipment back to defendant Video. This arrangement was memorialized in a letter agreement, also dated June 26, 2000 (the "Letter Agreement"), which provided that the "terms for financing equipment to be installed on your [defendant Video's] premises" are as follows: 1) Lessee: CD Video, Inc. [.] 3) Equipment: Per Attached List [.] 4) Amount to Finance: $150,000.00 [;] 5) Lessee owns equipment at end of lease term for $100.00 . . . 10) we [Terminal] need proof of payment for the equipment . . .We shall require $9,666.00 at the signing of this letter, which will be applied to the first and last least payments, after which 34 payments remain. The next lease payment is due 30 days after delivery of any of the equipment or disbursement of any funds, if the equipment has already been delivered. The $9,666.00 is not refundable if you decide not to execute lease documents after this letter has been signed.

Defendants argue that the Letter Agreement and the Equipment Lease were executed as part of the same transaction, and thus, must be interpreted together to understand the parties' agreement. Defendants allege that under the Equipment Lease, defendant Video's obligation to begin monthly lease payments did not commence until the Commencement Date, as defined as the date "on page one of this Lease." Defendants point out that the Commencement Date was left blank on both the Equipment Lease and the Acceptance Certificate, and therefore plaintiff knew that defendant Video's payment obligation may not have commenced when plaintiff purchased the Equipment Lease. It is further argued that the omission of the Commencement Date was intentional since the obligation to begin monthly lease payments would not arise until after 30 days had passed after the Lessor paid for the Equipment, under the Letter Agreement. Therefore, since defendant Video was not obligated to begin payments until 30 days after it received payment of $150,000 from the Lessor, and the Lessor never made such payment to defendant Video, defendant Video did not breach the Equipment Lease, in that its obligation to make monthly payments never commenced. Defendants also assert that the Lessor acknowledged that the Equipment Lease had never commenced, as indicated on an e-mail message from the Lessor, dated November 16, 2000.

Defendants also argue that none of the documents represent that defendant Video's obligation to make monthly lease payments commenced. The "hell or high water clause" of the Equipment Lease does not apply to establish any breach. Since such clause only makes absolute and unconditional defendant Video's obligation to pay all amounts due under the Lease, and there are no amounts due, defendant Video's obligation never matured. Further, the Acceptance Certificate only acknowledges that as of the date it is signed, June 26, 2000, the Lessor had performed all covenants and conditions it was required to perform under the Equipment Lease, which did not obligate the Lessor to make the $150,000 payment as required under the Letter Agreement. Additionally, defendant Video's acknowledgment in the Acceptance Certificate of [*5]its absolute and unconditional obligation to make monthly lease payments to the assignee is simply an acknowledgment that to the extent the Equipment Lease imposed an obligation on it to make payments, that obligation would be absolute and unconditional.

Defendants also contend that the "statutory hell or high water" clause, inferred from UCC 2-A-407 applies only to a "finance lease" and not the "security interest" transaction herein. Furthermore, no legitimate public policy is served by requiring defendant Video to pay twice for the same equipment, where plaintiff elected to acquire a lease with uncertain effect and without confirming that defendant Video's lease payment obligation ever commenced.

In reply, plaintiff argues that the fact that the Commencement Date is omitted is irrelevant, since it was the consistent practice of Terminal to omit such date in its multi-media leases. According to the affidavit of plaintiff's account manager, Mowbray, his review of the "Terminal-originated" multi-media leases in plaintiff's vault of which plaintiff was the assignee reveals that only six out of 1,482 such leases had precise dates written as Commencement Dates on page one of the lease. Defendant Video had at least two other "Terminal-originated" leases prior to the subject lease that are in exactly the same format as the subject lease, with no commencement dates written in, and defendant Video made rental payments on these leases, never claiming that they were invalid or had not commenced. Plaintiff further argues that Letter Agreement should not be considered as part of the Equipment Lease, where the letter does not constitute an instrument or contract itself, and is not annexed to or referred to in the Equipment Lease or Acceptance Certificate. Thus, plaintiff is not bound by any side deals the defendant Video and the Lessor may have made.

In any event, assuming the blank "Commencement Date" coupled with the Letter Agreement support a finding that the Equipment Lease did not commence, defendant Video waived any such arguments or defenses based on its representations in the Acceptance Certificate that the Lessor fully performed on the Equipment Lease.

Further, the e-mail lacks legal significance. Since the e-mail was limited to the knowledge of the author, and sent after the assignment, the assertion therein that the customer decided not to commence the subject lease does not constitute an unqualified statement that the Equipment Lease did not commence.

Additionally, assuming the Equipment Lease is a security interest under Article 9 of the UCC rather than a finance lease under UCC Article 2-A, defendant Video agreed not to assert defenses against any assignee. Moreover, Article 9, governing security interests, renders enforceable an agreement not to assert defenses where the assignee takes the assignment for value, good faith, and without knowledge of any defenses.

In response and in further support of their cross-motion, defendants, among other things, reiterate points made in their earlier brief, and add that since defendant Video never breached the Equipment Lease, defendant Nguyen never became obligated under the Guaranty. Defendants also contend that the thousands of leases referred to by plaintiff to which defendant Video is not a party are irrelevant. Also, the cases upon which plaintiff relies are inapposite since they deal with waiver of affirmative defenses, not the curing fatal flaws in plaintiff's prima facie case. Since plaintiff cannot establish the date on which defendant Video became obligated to make lease payments, plaintiff cannot establish that defendant Video failed to make a lease payment when due. [*6]

Defendants also point out that plaintiff failed to submit the two leases involving defendant Video with blank commencement dates. In any event, defendants assert that the issue is not whether a lease with a blank commencement date is enforceable, but whether defendant Video's lease payment obligation began. Defendants posit that perhaps their obligation to pay rent under the other agreements had matured, unlike here. Further, one can assume from the Lessor's routine omission of commencement dates that the Lessor had some other mechanism for determining when rental obligations commenced, thereby putting plaintiff on notice that the parties' transaction herein was not confined to the four corners of the Equipment Lease. It is also argued that unlike the other leases cited by plaintiff which contained no commencement dates, the Equipment Lease here was never "performing." Furthermore, the Letter Agreement was not a "side deal," but an integral part of the transaction.

Analysis

To obtain summary judgment, the movant must establish its cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment in its favor (CPLR § 3212 [b]). Where a defendant is the proponent of a motion for summary judgment, the defendant must establish that the "cause of action . . . has no merit" (CPLR § 3212 [b]), sufficient to warrant the court as a matter of law to direct judgment in his or her favor (Bush v St. Claire's Hosp., 82 NY2d 738, 739 [1993]; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; Wright v National Amusements, Inc., 2003 NY Slip Op. 51390(U) [Sup Ct New York County, Oct. 21, 2003]). In establishing entitlement to judgment as a matter of law, the proponent must advance sufficient "evidentiary proof in admissible form" to demonstrate the absence of any material issues of fact (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; Silverman v Perlbinder, 307 AD2d 230, 762 NYS2d 386 [1st Dept 2003]; Thomas v Holzberg, 300 AD2d 10, 11, 751 NYS2d 433, 434 [1st Dept 2002]). Alternatively, to defeat a motion for summary judgment, the opposing party must show facts sufficient to require a trial of any issue of fact (CPLR §3212 [b]). Thus, where the proponent of the motion makes a prima facie showing of entitlement to summary judgment, the burden shifts to the party opposing the motion to demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action, or to tender an acceptable excuse for his or her failure to do so (Vermette v Kenworth Truck Co., 68 NY2d 714, 717 [1986]; Zuckerman v City of New York, supra, 49 NY2d at 560, 562; Forrest v Jewish Guild for the Blind, 309 AD2d 546, 765 NYS2d 326 [1st Dept 2003]).

The principle issues raised are whether defendants' obligations the Equipment Lease have commenced, and if so, whether an issue of fact exists as to defendants' obligations thereunder.The Equipment Lease provides that defendant Video's obligation to make lease payments thereunder is absolute and unconditional, and not subject to any counterclaim or defense. However, the lack of a "Commencement Date" in the Equipment Lease would appear to render the Equipment Lease upon which defendant Video's obligation to make lease payments allegedly arises, ambiguous as to a material term (see Rhythm & Hues, Inc. v The Terminal Marketing Co., 2002 WL 1343759 [documents, as wells as the lack of a commencement date on the face of a certain lease and delivery and acceptance certificate "inject an element of ambiguity" as to lessee's obligations under the purported "line of credit" or "equipment lease"thereby rendering summary judgment inappropriate]). Nevertheless, any ambiguity arguably created by the [*7]omission of the Commencement Date is clarified by the Letter Agreement, which expressly provides a mechanism by which defendant Video's obligation to commence monthly lease payments may be determined.

Under New York law, all writings forming part of a single transaction and are designed to effectuate the same purpose, even where they are not executed between the same parties, are to be read together (Rhythm & Hues v The Terminal Marketing Co., supra at 6; Williams v Mobil Oil Corp., 83 AD2d 434 [2d Dept 1981]; Sea Spray Holdings, Ltd. v Pali Financial Group, Inc., 269 FSupp2d 356 [SDNY 2003]; This Is Me, Inc. v Taylor, 157 F3d 139 [2d Cir 1998]). Although the rule has been applied where one document is referred or annexed to the other (see Mayo v Royal Ins. Co. of America, 242 AD2d 944]), the rule also applies where one contract does not refer in terms to the other, or even where in one of the contracts it is stated that there are no other contracts between the parties (see Williams v Mobil Oil Corp., 83 AD2d 434, 439, 445 NYS2d 172, 175). Thus, at the outset, consideration of the Letter Agreement as part of the Equipment Lease does not violate the integration clause.

Here, the Equipment Lease and the Letter Agreement were executed by the same parties, on or about the same date, during the course of the same transaction, and more importantly, concern the lease payments to be made by defendant Video to Terminal for the same equipment. None of the terms of the Letter Agreement are inconsistent with the Equipment Lease. In most respects the terms of the Letter Agreement are consistent with those contained in the Equipment Lease. Notably, the Letter Agreement also refers to defendant Video's option to execute "lease documents." Therefore, as argued by defendant Video, the Equipment Lease and Letter Agreement form a single transaction and constitute one agreement between defendant Video and the Lessor, Terminal.

Contrary to plaintiff's contention, consideration of the Letter Agreement as part of the Equipment Lease does not violate the parol evidence rule. The parol evidence rule barring extrinsic evidence does not apply to intrinsic evidence (see Rhythm & Hues, supra at 6 [a document considered part of the underlying contract, cannot, by definition, be extrinsic or parol]). Further, the parol evidence rule, which bars oral agreements which contradict a written integrated agreement, has no application to the matter at hand, since (1) the agreement extraneous to the Equipment Lease is written, and does not contradict the Equipment Lease, but rather complements it by providing a term which is omitted in the Equipment Lease (cf. Bank Leumi Trust Co. of New York v Wulkan, 735 F Supp 72 [SDNY 1990] [reasserting rule that a guarantor cannot enforce an oral agreement reached prior to the execution of a guaranty if it contradicts the provisions of a negotiated and integrated guaranty]; Bekhor v Josephthal Group, Inc., 2000 WL 1521198 [SDNY 2000] [declining to consider parties' oral agreement to a term not contained in their written contract where it contradicted the express terms of the integration clause of the written contract]).

Therefore, the Court finds that the Letter Agreement and Equipment Lease are not ambiguous, and that their meaning may be discerned within their collective "four corners." As such, there is no need for this Court to refer to any extrinsic or parol evidence in order to determine their meaning. Reading the Letter Agreement and the Equipment Lease together as a whole, the Court determines that defendant Video's unconditional obligation to make monthly lease payments was undertaken in the context of a sale-lease back agreement, wherein defendant [*8]Video agreed to sell the Equipment to Terminal in exchange for $150,000, and defendant Video would make monthly lease payments for the use of the Equipment. The Court further determines that it was the expressed intention of Terminal and defendant Video that defendant Video's obligation to make such payments would commence 30 days after receipt of the Equipment, or if the Equipment was already delivered, 30 days after Terminal disbursed the $150,000 to defendant Video.

Defendant Video insists that its obligation to make monthly lease payments under the Equipment Lease never commenced because the condition precedent to its payment, to wit: Terminal's disbursement of the $150,000, never occurred.

On the one hand, defendants argue that the Letter Agreement is an integral part of the Equipment Lease, and should be read together with the terms of the Equipment Lease to determine the true agreement between it and the Lessor, Terminal. Continuing, defendant Video argues that the Letter Agreement provides the unripened commencement date of its obligation to tender monthly lease payments. On the other hand, it argues that its waiver of all defenses and acknowlegement of Terminal's satisfaction of all conditions, as expressed in the Acceptance Certificate, pertain solely to the Equipment Lease, and not the Letter Agreement. Contrary to defendants' contention, they are precluded from raising any claim concerning Terminal's nonperformance as a defense to its payment obligations to an assignee, the plaintiff herein.

A written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms (see e.g. R/S Assoc. v New York Job Dev. Auth., 98 NY2d 29, 32, 744 NYS2d 358, rearg denied 98 NY2d 693, 747 NYS2d 411 [2002]; W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162, 565 NYS2d 440 [1990]). Courts must interpret a contract "to avoid inconsistencies and to give meaning to all of its terms" (Barrow v Lawrence United Corp., 146 AD2d 15, 18), remaining "consistent[ ] with the over-all manifest purpose of the . . . agreement." If the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity (see e.g. Teichman v Community Hosp. of W. Suffolk, 87 NY2d 514, 520, 640 NYS2d 472 [1996]; First Natl. Stores v Yellowstone Shopping Ctr., 21 NY2d 630, 638, 290 NYS2d 721, rearg denied 22 NY2d 827, 292 NYS2d 1031 [1968]). Ultimately, the aim is a practical interpretation of the language employed so that there be a realization of the parties' "reasonable expectations" (see Sutton v East River Sav. Bank, 55 NY2d 550, 555, 450 NYS2d 460 [1982]).

Foremost, defendant Video expressly agreed in the Equipment Lease that its obligation to pay Lessor, Terminal, all amounts due thereunder is absolute and unconditional, and that it "shall not be entitled to any abatement, reduction, set-off, counterclaim, defense or deduction with respect to any Rent or other sum payable hereunder." Defendant Video further agreed that the assignee's rights "in this Lease shall be free of all defenses, setoffs or counterclaims which Lessee may be entitled to assert." Under New York law, the plain meaning of a Lessee's "absolute and unconditional" promise to make rental payments must be given full force and effect as a matter of law (see In re OPM Leasing Services, Inc. v Hassett, 21 B.R. 993, 1005). This "absolute and unconditional" agreement to make payments regardless of any defenses that may be raised and under any circumstance, otherwise known as a "hell or high water" clause, is common to equipment leases, and has uniformly been given force and effect by the courts (see In re OPM Leasing Services, Inc. v Hassett, supra at 1007). "To deny this clause its full force and [*9]effect would effectively reconstruct the contract contrary to the intent of the parties, which reconstruction would be impermissible" (see In re OPM Leasing Services, Inc. v Hassett, supra at 1006).

More importantly, under the Acceptance Certificate, defendant Video acknowledged and agreed that (i) Terminal has fully and satisfactorily performed all covenants and conditions required to be performed by Terminal under the Lease and (ii) defendant Video had no counterclaims or set-offs against Terminal. Defendant Video also represented in the Acceptance Certificate that its obligation to make lease payments to Assignee was absolute and unconditional whether or not the Lease is terminated by operation of law or otherwise and notwithstanding any defense, set-off or counterclaim whatsoever.

The terms of the Equipment Lease and Acceptance Certificate are clear, simple, and susceptible to only one meaning: that defendant Video waived any claims and defenses against plaintiff as assignee. Under these circumstances, the representations in the Acceptance Certificate cannot be voided unless for fraud, mistake, duress or some like cause (Credit Alliance Corp v David O. Crump Samd & Fill Co., 470 F Supp 489 [SDNY 1979]). Defendant Video has not advanced, and there is no indication in the record of any facts to support any claim for fraud, mistake, or duress. Thus, any refusal by the Court to recognize the express representations made by defendant Video in the Acceptance Certificate concerning the fulfillment of Terminal's obligations would effectively amount to a rewriting of the Acceptance Agreement, contrary to the express intent of the parties. That the Acceptance Certificate also omits the "Commencement Date" is of no moment, since there is no performance due under the Acceptance Certificate for which any commencement date would apply. As the Acceptance Certificate is dated and executed, it constitutes a representation made by defendant Video that Terminal has complied with all obligations and conditions under the Equipment Lease, which includes the Letter Agreement, and that defendant Video waived all claims, as well as defenses to payment. Thus, defendant Video is foreclosed from raising a claim that the amounts were never due since Terminal never disbursed any funds as required.

Therefore, based upon the representations in the Acceptance Certificate, defendant CD Video expressed that Terminal performed all that was required in order to trigger the so-called Commencement Date or the obligations that constituted the agreement itself, including the absolute and unconditional obligation to make monthly payments for the Equipment.

Furthermore, based upon defendant Video's representation in the Acceptance Certificate that Terminal complied with all conditions in the Equipment Lease (which this Court finds includes the Letter Agreement), the $150,000 has presumably been disbursed, and the obligation to pay ostensibly arose, and such obligation cannot be rebutted in light of the unconditional agreement to pay (see First Interstate Credit Alliance, Inc. v Sokol, 179 AD2d 583, 579 NYS2d 653 [1st Dept 1992] [finding no issues of fact as to lessees' liability where lessor submitted a copy of delivery and acceptance receipt and invoice in reply to lessee's contention that the equipment pursuant to the equipment lease was never received and thus the lease never commenced]; see also Northside Savings Bank v Sokol, 183 AD2d 816, 584 NYS2d 77 [2d Dept 1992] [upholding summary judgment in favor of the lessor where lessees' unsupported allegations that they hadn't received the equipment under the lease were contradicted by evidence that they signed a receipt acknowledging delivery of the subject equipment "fully installed and in [*10]good working order," and that they made payments pursuant to the lease for the equipment]).

Although not binding upon this Court, the Court of Appeals of Texas has found that the lessee's execution of a Certificate of Acceptance constitutes prima facie proof that performance had been fulfilled and that lessor is entitled to judgment as a matter of law (see Stewart v United States Leasing Corp., 702 SW2d 288, 288 [upholding summary judgment in favor of the lessor where the lessee made an initial payment for equipment under an equipment lease agreement, but made no subsequent payments; based upon the lessee's execution of the Certificate of Acceptance, which expressly stated that the lessee was accepting the equipment "as satisfactory in all respects" of the lease, the Court rejected the lessee's argument that because he did not actually receive the equipment, the consideration forming the basis of the lease agreement between himself and the lease agreement failed]).

Finally, in light of defendant Video's waiver of defenses in both the Equipment Lease and the Acceptance Certificate, the Court does not reach the merits of the parties' arguments as to whether the transaction between defendant Video and the Lessor, Terminal, constituted a "finance lease" or a "security interest." Although the "statutory hell or high water clause" makes a lessee's obligation under a "finance lease" irrevocable upon the acceptance of goods under the Uniform Commercial Code §2-A-103, even if the Equipment Lease constitutes a "security interest," as claimed by defendants, defendant Video's agreement not to assert defenses in still enforceable. Regardless of whether the agreement is a finance lease or a security interest, a waiver of defenses in itself is dispositive (see Benedictine College, Inc. v Century Office products, Inc., 853 F Supp1315, 1319 [D. Kan 1994]). Under the UCC §9-206, which applies to security interests, an agreement not to assert defenses against an assignee is enforceable by an assignee who takes the assignment for value, in good faith, and without notice of a claim or defense, except as to defenses that may be asserted against a holder in due course.

In sum, the terms of defendant Video's express agreement in both the Equipment Lease as well as the Acceptance Certificate, are clear, simple and susceptible of only one meaning: that defendant Video waived any claims, defenses and off-sets against plaintiff (see Credit Alliance Corp. v David O. Crump Sand and Fill Co., 470 F Supp 489, 492 [SDNY 1979]; First Interstate Credit Alliance, Inc. v Brown, 1988 WL 142488, 2). Accordingly, plaintiff is entitled to the lease payments from defendants, as well as costs of this action including attorneys' fees pursuant to the terms of the Equipment Lease and Guaranty.

This constitutes the decision [FN3] and order of the court.

_________________________

Dated: June 30, 2004Hon. Carol R. Edmead, J.S.C. Footnotes

Footnote 1: It is uncontested that the Commencement Date is left blank.

Footnote 2: Terminal "sold and assigned its entire right, title and interest in certain . . .equipment leases, underlying equipment and associated security interests to [Terminal Finance Corp. II] . . . for value." (¶5). Terminal Finance Corp. II, a "special purpose corporation," obtained funds to purchase from Terminal the equipment leases and other interests by borrowing funds from certain investors or "Noteholders." In order to secure payment from Terminal Finance Corp. II to the Noteholders, Terminal Finance Corp. II assigned to plaintiff, in its capacity as indenture trustee for the Noteholders, its entire right, title and interest in the equipment and the equipment leases purchased from Terminal. Consequently, plaintiff obtained all of the Lessor's (Terminal's) rights and interests in the equipment leases and equipment sold by Terminal to Terminal Finance Corp. II.

Footnote 3: This decision has been modified for publication.