Neilson Business Equipment Center, Inc. v. Monteleone

Dr. Italo Monteleone (Dr. Monteleone), a neurologist, used to have record-keeping that was entirely manual. In 1982, he began investigating computer-information systems to automate his record-keeping, and he tasked Toni Reed, his bookkeeper and officer manager, with acquiring a suitable computer system. Reed, who had no prior experience in such acquisitions, initially considered four computer dealers, including Neilson Business Equipment Center, Inc. (Neilson) (defendant). After Neilson sent two representatives to study Dr. Monteleone’s manual billing system, Dr. Italo V. Monteleone, P.A. (Monteleone) (plaintiff) and Neilson signed a lease/purchase option agreement (the agreement) covering computer hardware and software. Monteleone opted for a lease, so Nielson sold the equipment and software to a third party that, in turn, leased the items to Monteleone. Neilson did not design the software, but it altered the software on certain occasions to meet Dr. Monteleone’s needs. The computer was delivered in July 1982, and various problems ensued. For instance, patient information was not as detailed as required, and incorrect balances appeared in Monteleone’s accounts-receivable register. Monteleone terminated the lease for cause in February 1983. As permitted by the agreement, Neilson took possession of Dr. Monteleone’s computer and made modifications in an attempt to try to resell it. Neilson later returned the computer system to Dr. Monteleone’s office. Dr. Monteleone never used that system following its return but continued to make lease payments under the agreement. Monteleone ultimately sued Neilson for breaches of the implied warranties of merchantability and fitness for a particular purpose. After a nonjury trial in the Delaware Superior Court, the court entered a judgment in Monteleone’s favor, awarding $34,983.42 in damages. Neilson appealed.