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Heller & Co. v. Convalescent Home





APPEAL from the Circuit Court of Cook County; the Hon. GEORGE E. DOLEZAL, Judge, presiding.


Defendants, Convalescent Home of the First Church of Deliverance (Convalescent Home) and First Church of Deliverance (First Church), appeal from a judgment on the pleadings in plaintiff's favor in the amount of $7,137.82 plus interest for rent due on an equipment lease. They contend (1) the complaint was defective because it failed to comply with section 22(1) of the Civil Practice Act (Ill. Rev. Stat. 1975, ch. 110, par. 22(1)) concerning suits by assignees and because it misjoined the principal obligor, Convalescent Home, and its guarantor, First Church, in the same action; (2) the equipment lease was unconscionable, lacked mutuality and contained inconspicuous disclaimers of warranties, and (3) plaintiff, as lessor Mutual Leasing Associates, Incorporated's assignee, was subject to defenses assertable against its assignor.

Plaintiff's verified complaint alleged that Convalescent Home entered into a lease for computers with Mutual Leasing Associates, Inc., as lessor, on or about April 1, 1972. Incorporated into the complaint was the lease which provided:

"4. Warranties. Lessor will include as a condition of its purchase order that the supplier authorize Lessee to enforce in its own name all warranties, agreements, and representations, if any, which may be made by the supplier to Lessee or Lessor, but Lessor makes no express or implied warranties as to any matter whatsoever, including, without limitation, the condition of the equipment, its merchantability or its fitness for any particular purpose. No defect or unfitness of the equipment shall relieve Lessee of the obligation to pay rent or of any other obligation under this Lease. Lessor shall not be liable for any damages caused by defects or breakdown of the equipment.

26. Assignment * * *

Lessor may assign or sell this Lease and/or mortgage the equipment, in whole or in part, without notice to Lessee, and its assignee or mortgagee may reassign this Lease and/or such mortgage, without notice to Lessee. Each such assignee and/or mortgagee shall have all of the rights but none of the obligations of Lessor under this Lease. Lessee shall not assert against the assignee and/or mortgagee any defense, counterclaim or offset that Lessee may have against Lessor. Subject to the foregoing, this Lease inures to the benefit of and is binding upon the heirs, legatees, personal representatives, survivors and assigns of the parties hereto.


To Walter E. Heller & Company, Inc.

To induce you to purchase the within Lease Agreement, undersigned warrants that it is genuine and represents a valid obligation of a bona fide lessee (hereafter called `Lessee'), all names, addresses, amounts, dates, signatures and other statements and facts contained therein are true and correct, the Equipment described therein has been previously duly delivered or installed, as applicable, and accepted by Lessee, the Lease Agreement and any guaranty in connection therewith are and will be legally enforceable by you as the assignee thereof in the State(s) where the Lessee and Equipment covered thereby are located; the Lease Agreement evidences a valid reservation of title to the described Equipment effective as against all persons, the Lease Agreement is and will be free from any liens, setoffs, counterclaims and other defenses, undersigned has properly and timely filed or recorded said Lease Agreement as required under all applicable filing and recording statutes: undersigned has the right to assign the Lease Agreement, and this Assignment conveys good title to the Lease Agreement and Equipment described therein, free and clear of any other liens and encumbrances whatsoever.

For value received, the undersigned hereby sells, transfers and assigns to you all its rights, title and interest in and to said Lease Agreement and Equipment described therein, and all undersigned's rights and remedies thereunder, including without limitation the right to collect any installment due thereon and to take any action thereunder which undersigned might otherwise take.

All the terms of any existing written agreements between the undersigned and you are made a part hereof by reference and undersigned understands that you rely upon the above warranties and upon said agreements in purchasing said instrument."

The assignment was dated June 1, 1972, and signed by a vice-president. First Church guaranteed the lease and payment obligations of Convalescent Home in a separate guaranty instrument which was also incorporated into the complaint and provided "This guaranty shall bind our respective heirs, administrators, personal representatives, successors and assigns, and shall ensure to your successors and assigns." The complaint further alleged that since September 1, 1974, Convalescent Home failed to pay its monthly rental despite plaintiff's demands. It prayed for judgment against defendants jointly and severally in the amount of $7,137.82 plus interest, attorney's fees and costs.

Defendants' initial answer alleged that the computers were inadequate for their needs and that Burroughs Corporation, the supplier of the computers, had unsuccessfully attempted to insert a suitable computer program to meet defendants' needs. Attached to the answer was a letter, dated August 15, 1974, from defendant Convalescent Home to Burroughs Corporation notifying them of a termination of "our contract" in 30 days.

Defendants also filed a third-party complaint against plaintiff, Mutual and Burroughs alleging reliance upon Burroughs' representations as to the computer's capabilities and a "reprehensible scheme" by cross-defendants whereby defendants would be ...

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