In the Matter of Financial Computer Systems, Inc., a California Corporation, Debtor. Equitable Leasing Co. v. Richard Clements, Trustee-Appellee

Equitable Leasing Company sought reclamation, in bankruptcy proceedings, of two air conditioning units in the possession of the bankrupt’s trustee under an alleged lease agreement. The trustee refused to turn over the two units, claiming contrary to the express provisions of the written contract, that the alleged lease was a security agreement, and, as such, void because of the failure of Equitable to file a financing statement with the Secretary of State. Cal. Comm.Code § 9302.

At the referee’s hearing the trustee was allowed, over strenuous objection by Equitable, to introduce oral evidence that clearly contradicted the written terms of the otherwise complete and unambiguous lease agreement. The contested evidence suggested that an oral option had been granted by Equitable to Financial (the bankrupt) enabling the now bankrupt lessee to purchase the air conditioning units upon termination of the lease for $1,094.00.

Equitable objects that this oral evidence was inadmissible under the provisions of the California Commercial Code § 2201 and the parol evidence rule. Equitable also contends, secondly, that it was error to conclude that the written agreement was a conditional sales…