Equico Lessors, Inc. v. Mines

Opinion

HALVONIK, J.

Appellants Robert Mines and William Jenkins are medical doctors who signed leases for oil well drilling equipment with International Medical Leasing, Inc. (IML). Appellants entered the agreement for the purpose of obtaining a tax shelter. They paid rent on the leases until their tax deductions were disallowed, then they stopped. Respondent Equico Lessors, Inc., assignees of IML, brought this action to recover unpaid rent. Appellants’ principal defense was that there had been a failure of consideration because the equipment had not been

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delivered. The trial court held that Commercial Code section 9206 made such a defense untenable.

The leases appellants executed stated: “The rights of any assignee shall be free from all defenses, setoffs, or counterclaims of any kind or character which Lessee may be entitled to assert against Lessor . . . .”

Section 9206 of the Commercial Code provides that an agreement by a lessee that he will not assert against any assignee any claim or defense that he might have against a lessor is enforceable by an assignee who takes his assignment for value, in good faith and without notice of a claim or defense, except as to the kind of defenses which may be asserted against a holder in due course.

Appellants urge that section 9206 is inapplicable because respondent failed to prove that the leases were assigned to it. The trial court, however, found to the contrary and the finding is supported by substantial evidence including appellants’ admission of assignment in certain delivery and installation certificates.

Appellants say that section 9206 is inapplicable because the assignment and waiver of defenses portion of the lease “does not require IML to transfer its interest to a third party.” That is a non sequitur.

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This is a section 9206 case all right and the critical issue is whether its strictures may be avoided with a plea of failure of consideration. We conclude that they may not.

American Nat. Bk.