Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Philadelphia Savings Fund Society v. Deseret Management Corp.

October 23, 1985

THE PHILADELPHIA SAVINGS FUND SOCIETY
v.
DESERET MANAGEMENT CORPORATION



The opinion of the court was delivered by: Raymond J. Broderick, District Judge.

MEMORANDUM AND OPINION

This diversity action concerning the interpretation of a computer equipment lease agreement is before the Court on cross-motions for summary judgment. The essential dispute is whether the documents evidencing the agreement provide for a lease term of sixty full calendar months or a term of sixty months from the commencement date of the lease. The Philadelphia Savings Fund Society (PSFS), the assignee of the lessor's right to payments, brought suit against Deseret Management Corporation (Deseret), the delegatee of the lessee's duties, alleging that Deseret's failure to pay the full amount of the last monthly rental payment constitutes a default by Deseret.

The Court may grant a motion for summary judgment only if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Hollinger v. Wagner Mining & Equipment Co., 667 F.2d 402, 504 (3d Cir.1981). The parties are in agreement that there are no genuine issues of material fact. For the reasons discussed below, the Court has determined that the plaintiff PSFS is entitled to judgment as a matter of law.

On or about February 28, 1978, O.P.M. Leasing Services, Inc. (OPM) as lessor entered into a computer equipment lease with Management Systems Corporation (MSC) as lessee. The agreement is evidenced in a "Master Agreement of Lease" (Master Lease or ML) and "Equipment Schedule No. 1" (Equipment Schedule or E.S.), which is incorporated by reference into the Master Lease. Annex I to the Equipment Schedule describes the equipment subject to Equipment Schedule 1, and Annex II to the Equipment Schedule sets forth a table of Stipulated Loss Values to be considered in the event of default by MSC on Equipment Schedule No. 1.

Section 2 of the Master Lease provides that the lease term is controlled by the period during which the particular incorporated Equipment Schedule remains in effect. Section 2 also provides that the "Commencement Date" of each Equipment Schedule is the earlier of the date that MSC executed an Equipment Acceptance Form or the completion date of the equipment installation.

Further, section 2 states that the "lease term for (the) Equipment Schedule ... shall expire at the end of the last full payment period set forth in the Equipment Schedule."

The Equipment Schedule provides for 60 monthly payment periods. (E.S. § 2) For months 1-36, the rental payment is $41,000.00. For months 37-60, the rental payment is $39,000.00. (E.S. § 2).

The Master Lease provides that payment of rent is to take place in the following manner:

Lessee shall pay to Lessor ... the monthly rent set forth in the Equipment Schedule, which shall be due and payable in advance on the first day of each calendar month during the term thereof. (M.L. § 3).

The Master Lease also provides for the proration of the initial rental payment in the event the lease does not "commence" on the first day of a calendar month:

If the Commencement Date of any Equipment Schedule shall be other than the first day of the month, Lessee shall make an initial payment on the Commencement Date in an amount equal to one-thirtieth of the monthly rent set forth in the Equipment Schedule for each day from the Commencement Date (including the Commencement Date) through the last day of the month (including that day). (M.L. § 3)

There is no dispute that MSC executed an Equipment Acceptance Form on April 11, 1978, making that date the "Commencement Date" under the Master Lease. It is also agreed that MSC made an "initial payment" of $25,966.66 for April 1978.

Section 5.3 of the Master Lease provides that "Lessee acknowleges and understands that the term and conditions of each Equipment Schedule have been fixed by Lessor in anticipation of its being able to assign its interest under each Equipment Schedule." On May 12, 1978, PSFS entered into a security agreement with OPM in which PSFS purchased a note executed by OPM which provided for monthly payments of interest and principal. The note was secured by OPM's assignment of all of its right, title and interest in the Equipment Schedule, including the computer equipment and the rental stream thereunder, as of July 1978. At the closing of this security agreement, MSC delivered to PSFS its "Consent and Agreement" to the assignment of rights by OPM to PSFS. The Consent and Agreement provides that:

Management Systems agrees until payment in full of [the "Moneys" payable to OPM under the Equipment Schedule] (i) to remit and deliver all Moneys directly to PSFS, at the above [Philadelphia] address, without abatement, reduction, counterclaim or offset, notwithstanding any rights which Management Systems may have had or may hereafter have in the absence of this Consent and Agreement to any such abatement, reduction, counterclaim or offset pursuant to any of the terms of the Equipment Schedule or as a result of any breach of any obligation of OPM under the Equipment Schedule or as a result of any breach arising out of any action or omission of the owner of the equipment subject to the Equipment Schedule....

In February, 1980, MSC requested PSFS to approve the assignment by MSC of its rights and obligations under the Master Lease and Equipment Schedule to Deseret, and the assumption by Deseret of MSC's rights and obligations. PSFS executed a consent to the assignment and delegation and released MSC of its obligations.

The monthly rental payments made with respect to the Master Lease and Equipment Schedule may be summarized as follows:

DATESPAYMENT BYRECEIVED BYAMOUNT April 11, 1978MSCOPM$25,966.66 May 1, 1978-June 1, 1978MSCOPM$41,000/mo. July 1, 1978-Feb. 1, 1980MSCPSFS (Pltf.)$41,000/mo. March 1, 1980-March 1, 1981DESERET (Def)PSFS$41,000/mo. April 1, 1981DESERETPSFS$39,733.34 May 1, 1981-Nov. 30, 1981DESERETPSFSNo Payments December 1, 1981DESERETPSFS$312,000.00 (8 X 39,000) Jan. 1, 1982-March 1, 1983DESERETPSFS$39,000/mo.

Finally, on April 1, 1983, Deseret tendered a final payment of $14,300.00 to PSFS. PSFS rejected this tender and demanded $39,000.00, which Deseret refused to pay. PSFS brought suit on the ground that Deseret defaulted on its obligation to make the 60th monthly rental payment required by the Equipment Schedule in the full amount of $39,000.00.

The first determination which the Court must make is whether or not Deseret's tender of $14,300.00 on April 1, 1983 and refusal to pay $39,000.00 constitutes a default or breach within the terms of the Master Lease and Equipment Schedule. This depends upon the length of the lease term. If the lease was to run from April 11, 1978 until April 10, 1983, as Deseret contends, the $14,300.00 payment would be justifiable as a prorated payment for April 10, 1983. However, if the lease was to run for a term of 60 full calendar months regardless of whether or not there was an initial rental period of less than a month, then Deseret's failure to make the 60th monthly rental payment in full is a breach of the lease agreement.

Section 19.05 of the Master Lease provides that the lease documents are to be construed in accordance with New York law. Both parties have taken the position that there are no conflicts between the law of Pennsylvania and the law of New York on the contract issues raised in this case.

Both PSFS and Deseret assert that the provisions in the lease documents relating to lease terms are not ambiguous. Therefore, the Court will look to the documents as the objective manifestation of the parties' intention with respect to lease ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.