Facts
- A physician leased a computerized energy management system for his office building under an equipment lease with the original lessor.
- The lease included a waiver-of-defenses clause stating that any assignee would take free of the lessee’s defenses and claims against the lessor.
- The lessor assigned the lease and the lessee’s personal guaranty to an equipment-financing company shortly after execution using pre-printed assignment language.
- Before execution, the assignee performed a credit check on the lessee, set financial terms, and provided the pre-printed lease/assignment forms; it expected assignment based on prior dealings, but there was no binding pre-assignment commitment.
- The system allegedly failed to perform as represented, could not be repaired, and was removed; the lessee stopped making payments.
- The assignee sued for the remaining amounts due; the lessee asserted misrepresentation and failure of consideration, and counterclaimed for breach of warranty to recover payments already made.
- After an earlier appeal required trial on whether a “close connection” defeated the waiver clause, the trial court found a sufficiently close connection and entered judgment for the lessee, denying the assignee recovery and awarding the lessee restitution of prior payments.
Issues
- Whether the assignee’s relationship to the lessor and the transaction was sufficiently “closely connected” to prevent enforcement of the lease’s waiver-of-defenses clause against the lessee.
- Whether, absent a sufficient close connection, the lessee’s defenses and warranty-based counterclaim were barred as against the assignee.
Decision
- The appellate court reversed the judgment for the lessee.
- The court held the evidence did not establish a sufficient close connection to deny the assignee the protection of the waiver-of-defenses clause.
- The court ruled the waiver-of-defenses clause was enforceable by the assignee, barring the lessee’s asserted defenses and counterclaim against the assignee.
- The case was remanded for proceedings consistent with enforcing the assignee’s rights under the lease.
Legal Principles
- Under Florida’s UCC policy, waiver-of-defenses clauses in commercial lease/financing contracts are generally enforceable in favor of an assignee, functioning similarly to holder-in-due-course protection.
- The “close connection” doctrine is a narrow exception; it can bar assignee enforcement only when the assignee is sufficiently intertwined with the lessor or the underlying misconduct.
- An assignee’s credit check, setting of financial terms, supplying standardized forms, and history of prior assignments—without more—does not constitute a sufficient close connection.
- When a valid waiver-of-defenses clause is enforceable, the lessee’s contract defenses and warranty-based claims arising from the lessor’s performance are not assertable against the assignee.
Conclusion
The court enforced the lease’s waiver-of-defenses clause for the assignee and rejected the trial court’s close-connection finding, holding that the assignee’s preparatory financing activities did not justify allowing the lessee to assert misrepresentation, failure of consideration, or warranty claims against the assignee.