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Canon Financial Services, Inc., v. Oak Park River Forest Civic Theater, Inc.

A-5960-01T2 (N.J. Super. App. Div. 2004) (Unpublished)

LEASES; REJECTION—Making equipment lease payments and retaining use of the leased equipment is inconsistent with a claim that a leasing company’s representative misrepresented the terms of the lease.

A company leased a copy machine. It then accepted an offer by the copy machine company to replace the existing copier with an upgraded model and to substitute a new lease for the old one. The new lease contained essentially the same terms and conditions, but provided for larger monthly payments. After two months, the lessee stopped making payments because of a cash flow problem. It continued to use the copier, and never sought to rescind or cancel the lease and never tried to return the equipment. The copier company then brought suit.

The lessee claimed that it was assured by the copier company that it was only upgrading the model and that the only difference in the terms of the lease would be that the new lease would contain a purchase option. Instead, it increased the monthly payment. The lessee also claimed that the employee who signed the agreement lacked the authority to do so.

In addressing the fraud and misrepresentation defense, the lower court held that the employee’s statements were not in line with those of his company. The company claimed that the employee was told that the monthly rental for the upgraded copier would be the same as the rental copier. However, the employee himself stated that he was told the only change was that the new lease had an option to buy, and that this change resulted in an increase in the monthly rates.

In response to the claim that the employee lacked authority, the lower court held that the employee’s statements once again proved detrimental to the leasing company’s claim. Specifically, the employee stated that he had the authority to upgrade the copier under the new conditions, which included the option to buy.

The Appellate Division affirmed the decision of the lower court. The Court also noted that the lessee paid for two months and retained the full benefit of the lease without rejecting the obligation, despite claiming its defenses. Therefore, the Court held that the lessee was responsible for the payments owed to the copy machine company.

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