Summary of a Recent
Judicial Development in
Commercial Transactions

Court Grants Lessor Summary Judgment
for Breach of Tractor Lease

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Wooten Tractor Co. v. Arcon of Tennessee, LLC, No. W2008-01650-COA-R3-CV, 2009 WL 1492227 (Tenn. Ct. App. May 28, 2009), the Tennessee Court of Appeals held that a lessor of farm equipment was entitled to summary judgment on its breach of contract claim because it had established five separate reasons why the lessee had breached its lease.

Background

The defendant-appellant contracted to lease a tractor from Wooten Tractor Company (Wooten) for twelve months, from August 2006 to August 2007. Id. at *1. Under the lease agreement, the lessee "assumed the risk of loss; agreed to keep the tractor in good condition, in operating order, properly serviced, repaired and maintained during the rental agreement; and was responsible for paying these maintenance costs." Id. The contract also provided that Wooten had the right to terminate the lease if the lessee failed to make the scheduled payments or became insolvent, and gave the lessee the right to purchase the tractor outright at any time during the lease so long as the lessee was not in default. Id. The lessee subsequently failed to make the scheduled payments, and Wooten brought this action against it for breach of contract, alleging that it owed $49,139 on the lease, plus $2,526 for necessary repairs and maintenance. Id. at *2. The lessee denied that it had damaged the tractor and claimed that the engine needed repairs despite the fact that the lessee provided daily maintenance; it asserted that "the failure of the engine notwithstanding proper maintenance entitled it to stop payments or, in the alternative, excused its default," and sought to exercise its option to purchase the tractor. Id. at *2-3. The trial court granted Wooten's motion for summary judgment, holding that the lessee was in default and therefore had lost the option of purchasing the tractor, and the lessee appealed. Id. at *3.

Arguments

The appellant-lessee argued that the trial court erred when it granted summary judgment to Wooten on a basis not sought by Wooten in its motion for summary judgment; specifically, it argued that Wooten's motion sought summary judgment for the purchase price of the tractor, while the trial court held that the appellant had lost its right to purchase the tractor and granted summary judgment for the unpaid rental plus repair costs. Id. It asserted that because the trial court granted summary judgment on the basis of unpaid rental rather than the purchase price, it had no notice that it should challenge the amount of rentals being claimed by Wooten. Id.

Analysis and Holdings

The appellate court explained that the appellant's argument erroneously focused on the amount of relief sought rather than whether basis for relief existed; Wooten had alleged that the appellant had breached the lease agreement in several ways: default, insolvency, failure to repair and maintain the tractor in good condition, and failure to maintain insurance on the tractor. Id. at *4. The court held that Wooten had clearly established that it was entitled to relief, and the appellant "had more than sufficient notice that Wooten was seeking damages for [its] breach of contract"; therefore, it affirmed the trial court's grant of summary judgment to Wooten. Id. at *5.

The case was decided on May 28, 2009.