small claims help

What is the name of your state? Arizona


I work for a business equipment leasing co in AZ. My boss asked me to help with a collection situation for one of our lessees who lives in Ohio. They have made all of their lease payments but are refusing to pay the FMV residual to purchase the equipment or the rental pmts, or return the equip. The residual is around $2,000 if they want to purchase it, and they owe around $1,000 in back rental pmts. We give our lessees the option to make minimal rental pmts until they can purchase the equipment or they can return the equipment if they do not want to purchase it.

We have spoke with the lessee numerous times and they refuse to pay because the equipment never worked correctly and they have spent a lot of money on repair bills. There are no provisions in our lease documents for deducting repair bills. As a matter of fact, the lessee completes a "delivery and acceptance" agreeing that the equip is in good working order before the lease is funded.

We contacted a collection agency last month who finally made contact with the lessee. She said "I am looking forward to my day in court" and refused to pay him as well.

My boss is interested in small claims court, but we are Arizona and the lessee is in Cleveland, Ohio. What is our best course of action? And if we decide to file a claim, can we file in AZ? Any help that you can provide would be greatly appreciated. Thank you.

[I AM ALWAYS LIABLE]

My response:

You asked - -

"And if we decide to file a claim, can we file in AZ?"

I don't know. You didn't provide any real salient portions of the contract; e.g., is there a "Forum" clause? Also, you never mentioned if there is a "remedies" clause for breach of the contract. In short, you'd need to print the contract for us to read; otherwise, we can't really help you. Have the contract reviewed by your company attorney.

The bottom line is this - -

Going after $2,000.00, especially when dealing with someone from out of State, is like spending dollars to get pennies - - when you factor in all of your time, costs and expenses.

How about this - -

You merely report the debt to the credit reporting agencies and watch how fast the customer gets their crap together when next they need credit?

IAAL

Thank you for your reply. We actually did report the collection on the lessee's bureaus. However, they don't seem to care.

And unfortunately, we are a small co. of 6 employees. It would be a dream to have a co. attorney to consult with!

Here is the language verbatim from the purchase option portion of the contract:

For good and valuable consideration, receipt of which is hereby acknowledged, the undersigned does hereby guarantee to (Lessee name), its successors and assigns, the option to purchase from (my co. name) the leased equipment, hereinafter "EQUIPMENT", described on that Lease No. xxxxx , hereinafter "LEASE", by and between (My co. name) as Lessor, hereinafter "LESSOR", and (Lessee name) as Lessee, hereinafter "LESSEE"), at the termination of the LEASE for its then FAIR MARKET VALUE, plus all applicable sales taxes.
LESSEE shall execute its lease end purchase of the EQUIPMENT by giving to
(My Co. Name) 30 DAYS PRIOR NOTICE of its intent to purchase the EQUIPMENT.

( My Co. Name) hereby agrees to sell the EQUIPMENT to LESSEE at lease end for its FAIR MARKET VALUE, provided that all of the rental payments on the LEASE are paid, and that all of the terms and conditions of the LEASE are fully satisfied. Upon proper exercising of this purchase option, title and ownership of all of the EQUIPMENT will be transferred to LESSEE on an "AS IS, AND WHERE IS" basis.

The remedies portion of the lease contract basically states that upon default, the lessee must return the equip (surrender the equip upon demand), or that we can re-sell the equip, or "lessor may pursue any other remedy at law or in equity".
We have all the documents signed as well as the personal guarantee of the owners, and several other documents including the whole lease contract, insurance provision, UCC filing, landlord waiver, etc. I hope this helps to clarify our position a bit. And frankly, at this point, it is becoming a matter of principal. Thank you again for your help.

I just wanted to add this to my last post. The lessee is obstinate and will not pay or return our equipment. If anyone knows how the process works when the parties are in different states, I would appreciate your reply. We would appreciate any additional advice about going to small claims court over this that anyone can offer. Thank you.

[JETX]

This is not an uncommon problem when equipment is leased. Did you file a UCC form in the appropriate state (where the property is located)??

If so, then the UCC filing will protect your right of ownership and you can use that to 'repossess' YOUR property.

If not, then your case is moderately harder to make. For example, do you know if the lessee still owns the property or if he might have sold it??

Further, there is NOTHING in your lease extract regarding what liability the lessee has in the event of breach.

Some random questions about the lease:
1) Is there anything in the lease regarding the expenses of recovering your property?
- Is there anything in the lease about legal costs incurred in recovery?
- Is there anything in your lease as to jurisdiction (what state laws will be used to apply the lease)?
- Your lease says that the lessee has the OPTION to purchase. Have you sent him a written demand letter (certified RRR) asking him whether he will exercise the option or return the equipment?
- Since this is interstate, is there anything in your lease regarding who will pay the cost of shipping to return?
- Have you hired a moving or packing company to go to the location and retrieve your property??
- What HAVE you done to try to retrieve?

In summary, it looks like your lease is lacking sufficient details to cover your assets.

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