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AT&T Credit Corporation v. Transglobal Telecom Alliance, Inc.

966 F. Supp. 299 (D. N.J. 1997)

EQUIPMENT LEASES; GUARANTIES—After finding that the equipment lease in question was a “finance lease” under UCC Article 2A, the Court enforced the lessor’s right to be paid “come hell or high water.” Lessee’s complaints against the actual seller (who was not the lessor) are unavailing.

A company entered into a lease for the use of telephone equipment. A principal of the lessee personally guaranteed payment under the lease. Lessor acquired the equipment from one of its affiliate companies strictly for the purpose of leasing it to the lessee. The lessee stopped making payments, asserting that the affiliate breached a separate agreement it had with the lessee. Lessor brought suit against the lessee and the guarantor asserting breach of the lease.

The United States District Court held that the separate agreement with lessor’s affiliate was irrelevant to the issue of breach of the equipment lease. Without explanation, the Court stated that the controlling issue was whether the lease was a “finance lease”, as defined under the Uniform Commercial Code (UCC). A finance lease is one in which the lessor does not select, manufacture or supply the goods, but only acquires them in connection with a lease and notifies the lessee: (a) of the identity of the supplier of the goods, or (b) that the lessee is entitled to any promises or warranties provided by the supplier to the lessor, or (c) that the lessee may receive from the supplier an accurate and complete statement of the promises and warranties given to the lessor. The Court concluded that the lessor only acquired the goods in connection with the lease and that the lessee was made aware of the promises and warranties given by the supplier to the lessor. Accordingly, the District Court held that under the UCC, the lease agreement was a finance lease and that the lessee was liable for breach of it. Summary judgment enforcing the personal guaranty was also granted, since the guaranty clearly stated that guarantor would unconditionally guarantee performance of the obligations under the lease, as well as full and prompt payment in the event of breach of the lease by the lessee.


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