Colonial Pacific Leasing Corporation v. McNatt and Datronic Rental Corporation

In 1991, Linda and William McNatt (plaintiffs) of Quick-Trip Printers, Inc. (Quick-Trip) selected equipment they wanted for Quick-Trip from Itex Systems Southeast, Inc. (Itex). The McNatts based their selections on representations made by Itex’s employees. Later that year, Quick-Trip entered into finance leases with Burnham Leasing Company (Burnham) for the equipment. The leases disclaimed all express and implied warranties by Burnham or its assignees, prohibited Quick-Trip from asserting against Burnham’s assignees any defense or counterclaim that Quick-Trip might have against Burnham, and required Quick-Trip to make the lease payments regardless of any defect or unfitness of the equipment (the hell-or-high-water clause). Burnham assigned the leases to Colonial Pacific Leasing Corporation (Colonial) and Datronic Rental Corporation (Datronic) (defendants). Quick-Trip notified Colonial and Datronic that the equipment was not functioning. Colonial and Datronic initially withheld payment to Itex for the equipment, but later paid for the equipment. Quick-Trip never made lease payments to Colonial or Datronic. Quick-Trip sued Colonial and Datronic, seeking rescission of the leases based on Itex’s fraudulent representations and damages for Colonial and Datronic’s negligent release of funds to Itex. Colonial and Datronic counterclaimed for unpaid rent. The trial court granted summary judgment in favor of Colonial and Datronic on all claims. The court of appeals reversed, holding that the hell-or-high-water clause could not be enforced if Itex fraudulently induced Quick-Trip to acquire the equipment and that there were material issues on Quick-Trip’s claim that Colonial and Datronic negligently released funds. The Georgia Supreme Court granted a writ of certiorari.