## Facts

- Quick-Trip Printers, Inc., through its principals Linda and William McNatt, selected an Itex computer printing system based on supplier representations.
- Quick-Trip entered into equipment finance leases with Burnham Leasing Company, which agreed to buy the selected equipment and lease it to Quick-Trip for monthly payments.
- Burnham immediately assigned its interests in the leases to Colonial Pacific Leasing Corporation and Datronic Rental Corporation.
- The leases disclaimed warranties by the lessor/assignees, waived defenses and counterclaims against assignees, and required payment “come hell or high water” regardless of equipment defects.
- Quick-Trip alleged the equipment failed to perform as represented and made no lease payments; the assignees eventually repossessed the equipment.
- Quick-Trip and the McNatts sued (among others) the assignees seeking rescission and asserted that supplier fraud should be attributable to the assignees through agency.
- The assignees counterclaimed for unpaid rent and enforcement of an alleged personal guaranty.

## Issues

1. Whether a finance-lease “hell or high water” clause and waiver-of-defenses provisions bar a lessee’s fraud-based rescission claim against a lessor’s assignees when the alleged fraud was committed by the supplier and may be imputable to the assignees through agency.
2. Whether the lessee may maintain a tort claim against the assignees for negligent release of funds to the supplier after notice of performance problems.
3. Whether summary judgment for the assignees was proper on the lessee’s rescission claim and on the assignees’ counterclaims for rent and guaranty liability.

## Decision

- The Supreme Court of Georgia held that a “hell or high water” clause does not insulate a lessor’s assignee from a fraud claim if an agency relationship can be established between the assignee and the perpetrators of the fraud.
- The court held that genuine issues of material fact remained on whether the supplier acted as the assignees’ agent, making summary judgment improper on the fraud-based rescission theory and related enforcement claims.
- The court rejected the lessee’s negligent-release-of-funds theory, holding the assignees owed no independent tort duty to the lessee to withhold payment to the supplier under these circumstances.
- The court approved the Court of Appeals in part (allowing fraud/agency issues to proceed) and disapproved in part (eliminating the negligence claim), and remanded for further proceedings consistent with those rulings.

## Legal Principles

- “Hell or high water” clauses in equipment finance leases are generally enforceable to make payment obligations absolute and unconditional, particularly for finance-company assignees not involved in the underlying sale.
- Contractual waivers and unconditional-payment provisions do not bar fraud-based claims or defenses when the fraud is chargeable to the party seeking enforcement, including by proof of agency.
- Whether a supplier acted as an assignee’s agent for purposes of imputing misrepresentations is typically a fact-dependent inquiry that can preclude summary judgment when the record permits competing inferences.
- A financing lessor/assignee does not, without more, assume an independent tort duty to the lessee regarding the timing or propriety of payments to the supplier; the lessee’s remedies lie in contract and fraud/agency doctrines.

## Conclusion

The court held that finance-lease unconditional-payment and waiver provisions are not absolute: if the lessee can prove the supplier acted as the assignees’ agent in committing fraud, the lessee may seek rescission and resist enforcement despite a “hell or high water” clause, but the lessee cannot proceed on a separate tort theory for negligent release of funds.


Colonial Pac. Leasing Corp. v. McNatt, 486 S.E.2d 804 (Ga. 1997)