What's New in the Law

C & J Vantage Leasing Co. v. Wolfe, 2011 WL 7434633 (Iowa Sup. Ct. March 4, 2011)

In another of a line of cases involving financing of golf course beverage carts (see “What's New in the Law” in the January 2011 issue of LJN's Equipment Leasing Newsletter), the Iowa Supreme Court reverses a lower court grant of summary judgment in favor of the assignee of the lease used for the financing. When Royal Links, the company that was paying the lessee for advertising on the cart (in the same amounts owed by the lessee under the lease), stopped making those payments, the lessee ceased making payments under its lease. After determining that the $1 option lease was a security agreement under the law, the court holds that the hell-or-high-water provision in the agreement is nevertheless enforceable ' rejecting any notion that such provisions are only enforceable in the context of a true lease. The court then notes that the lease did not have a waiver-of-defenses provision, but then considers whether an assignee must be a holder in due course to enforce a hell-or-high-water payment obligation. Though perhaps not as clearly stated as it could have been, the court's position is that such is not necessary (these two types of provisions, recognized as distinct by the court, are quite different with respect to the requirements on the parties seeking to enforce them ' if there is no waiver of defenses provision, the question of holder in due course status simply does not arise). Since the assignee in this case could only stand in the shoes of the original lessor, when the court concludes 1) that there are material issues of fact regarding whether Royal Links was acting as an agent for the original lessor when Royal Links allegedly misled the lessee, and 2) that an integration clause in the lease does not preclude the introduction of evidence of such misrepresentations by Royal Links, the court finds that it must deny the assignee summary judgment. It should be noted that the outcome would likely have been different had the lease contained a waiver of defenses.