West Virginia, Department of Finance & Administration v. Hassett (In Re O.P.M. Leasing Services, Inc.)

DECISION ON LASALLE NATIONAL BANK’S MOTION FOR SUMMARY JUDGMENT AND FOR JUDGMENT ON LA SALLE’S COUNTERCLAIM

This matter is before the Court on the Motion of LaSalle National Bank (“La-Salle”) for Summary Judgment pursuant to Bankruptcy Rule 756 1 and Rule 56 of the Federal Rules of Civil Procedure to dismiss the claim of the State of West Virginia, Department of Finance and Administration (“West Virginia”), and to recover judgment as to liability on LaSalle’s counterclaim for accelerated rents.

I. STATEMENT OF FACTS

The instant adversary proceeding within this Chapter 11 case concerns a set of 22 leases of computer equipment (the “Equipment Schedules”) by O.P.M. Leasing Services, Inc. (“OPM”), the debtor herein, to plaintiff West Virginia. Pursuant to three *998 security agreements (the “Security Agreements”) and three agreements captioned “Consent and Agreement”, 19 of these leases are now pledged to defendant LaSalle as security for OPM’s indebtedness under three notes held by LaSalle.

West Virginia commenced this adversary proceeding on August 19, 1981 against James P. Hassett as Reorganization Trustee of OPM (“the Trustee”), OPM, LaSalle, International Business Machines Corporation (“IBM”) and Computer Equipment Services Corporation (“CES”). The complaint seeks a turnover of $107,252.36, plus accrued interest, from the OPM estate to IBM and CES (“the Maintenance Providers”) for maintenance payments which OPM is alleged to have failed to provide, a declaration that the Equipment Schedules have been terminated and an order of the Bankruptcy Court enjoining the Maintenance Providers from terminating maintenance on the hardware pending resolution of the adversary proceeding. 2

The basis which West Virginia has asserted for this relief is OPM’s alleged breach of the Equipment Schedules in its failure to make monthly payments of maintenance fees directly to defendants IBM and CES on 20 of the 22 Equipment Schedules (the “Maintenance Providers”). According to West Virginia’s pleadings, this breach by OPM terminates LaSalle’s rights as assign-ee to receive lease payments. Alternatively, West Virginia asserts in its pleadings that LaSalle’s purported knowledge of OPM’s breach prevents it from claiming that the Equipment Schedules have not terminated.

LaSalle’s answer denies all of the material allegations of the complaint and alleges as an affirmative defense that the terms of the Consent and Agreements executed by West Virginia bar West Virginia’s claim. LaSalle also asserts in a counterclaim that beginning in March, 1981, West Virginia failed to make the full amount of lease payments under the Equipment Schedules assigned to LaSalle. LaSalle gave written notice of West Virginia’s default and of its election to accelerate the balance of assigned lease payments pursuant to Section 12.2 of the Master Lease. Accordingly, La-Salle seeks judgment herein on its counterclaim in the amount of $2,116,388.30, although LaSalle’s present motion seeks judgment on liability only.

The reply of West Virginia to LaSalle’s counterclaim denies all its material allegations and asserts nine affirmative defenses. These defenses include sovereign immunity under the Tenth and Eleventh Amendments and under West Virginia law, waiver by LaSalle of its right to accelerate rent payments, full payment of all rentals due to LaSalle and that LaSalle is bound by its assignor’s default in making maintenance payments.

The Trustee has also contemporaneously moved to reject the 19 leases which were assigned to LaSalle. 3 LaSalle opposes this motion to reject based on its concern that its security interest in the lease payments will not be adequately protected if West Virginia’s absolute and unconditional promise to pay rents is not fully enforced.

The Agreements Governing the Transactions at Issue

The rights and duties of each of the three parties to the computer leases at issue herein are specified in the Master Lease as well as in the Equipment Schedules, the Security Agreements and the Consents and Agreements.

West Virginia, as lessee, and OPM, as lessor, are parties to the Master Lease dat *999 ed March 28, 1980. Each Equipment Schedule incorporates all of the terms and conditions of the Master Lease. The Master Lease and each Equipment Schedule are to be construed in accordance with New York law.

Section 5.3 of the Master Lease between OPM and West Virginia contains detailed provisions regarding assignments of Equipment Schedules by OPM. Section 5.3(ii) provides that OPM’s “assignee shall not be obligated to perform any of the obligations of (OPM) under any Equipment Schedule other than [OPM’s] obligation not to take any action to disturb Lessee’s quiet and peaceful possession of the Equipment.” In Section 5.3(iii) the parties agree that “(lessee's obligation to pay directly to such as-signee the amounts due from lessee under any Equipment Schedule ... shall be absolutely unconditional and shall be payable whether or not any Equipment Schedule is terminated by operation of law, any act of the parties or otherwise.” (emphasis added) (“the hell or high water clause”). In Section 5.3(iv), OPM and West Virginia agreed that West Virginia is to pay all amounts due under any Equipment Schedule to OPM’s assignee “notwithstanding any defense, offset or counterclaim whatever whether by reason of breach of such Equipment Schedule or otherwise which it may or might now or hereafter have as against Lessor (Lessee reserving its right to have recourse directly against Lessor on account of any such counterclaim or offset).” (“the waiver of defenses clause”). Section 14 of the Master Lease provides that the lessee’s unconditional obligation to an assignee continues “until all amounts ... shall have been paid in full.”

Each Equipment Schedule obligates OPM to reimburse West Virginia for monthly maintenance charges actually paid by West Virginia under West Virginia’s separate maintenance agreements with the Maintenance Providers for the leased equipment. However, Paragraph 4(a) of each Equipment Schedule provides that OPM’s obligation to pay for maintenance of the equipment leased to lessee “shall in (no) manner diminish, impair or otherwise affect any of Lessee’s obligations under this Equipment Schedule, including, without limitation, the payment of all monthly rental payments...” Thus, by the terms of these Schedules, West Virginia specifically agreed that any breach of OPM’s maintenance obligations shall not affect West Virginia’s duty to make monthly lease payments.

The three Security Agreements, identical in form, assign as security to LaSalle OPM’s interest in 19 of OPM’s 22 Equipment Schedules. 4 Each Security Agreement provides for the assignment of all of West Virginia’s monthly lease payments to La-Salle. 5 According to these Security Agreements, LaSalle may demand payment or delivery of and shall receive and collect all money under the assigned Equipment Schedules and apply the funds to OPM’s indebtedness. Furthermore, according to Section 1.08 of these Security Agreements, upon a default by West Virginia under the Master Lease, LaSalle is entitled to exercise all of OPM’s rights under the assigned Equipment Schedules, but is not thereby to assume any of OPM’s obligations to West Virginia.

In each Consent and Agreement, West Virginia acknowledges and consents to OPM’s assignment of Equipment Schedules to LaSalle. West Virginia also agrees *1000 therein to make all monthly lease payments to LaSalle “without abatement, reduction, counterclaim or offset ... as a result of any breach of any obligation of OPM.” See Affidavit of Ray H. Camp in support of LaSalle’s Summary Judgment Motion (“Camp Affidavit”), Exhibits 9,10 and 11 at 2.

In addition, opinions from the office of the highest legal officer of West Virginia as to the enforceability of the Equipment Schedules were provided on two occasions. The Deputy Attorney General wrote that the Equipment Schedules and Consents and Agreements each constituted “a legal, valid and binding instrument enforceable in accordance with its terms against (West Virginia)”. He qualified this opinion only by asserting: “My opinion is qualified to the extent that the remedies available to enforce your rights under the Transactional Documents may be limited by bankruptcy, insolvency and other laws respecting creditors’ rights and remedies generally.” See Camp Affidavit, Exhibit 5, at 3, Exhibit 7 at 13.

West Virginia concedes having made no monthly lease payments during March, April, May and June 1981. Following these four successive months of default, on July 3, 1981, LaSalle gave West Virginia written notice of its default and of LaSalle’s election to accelerate the balance of lease payments. It was not until after LaSalle’s notice of acceleration in July 1981 that West Virginia made lease payments on the assigned Equipment Schedules totalling $160,125.00 for the months of March, April and May 1981. LaSalle contends that this amount was less than the properly corresponding amount of West Virginia’s lease obligation. 6

II. ISSUES PRESENTED

The issues presented by LaSalle’s motion for summary judgment on its counterclaim and by West Virginia’s crossmotion to dismiss LaSalle’s counterclaim are:

(1) Whether West Virginia can validly assert that it is immune from LaSalle’s counterclaim for accelerated rents because it chooses to invoke its sovereign immunity;

(2) Whether there remain any material issues of fact in dispute so as to preclude summary judgment in favor of LaSalle or whether LaSalle may be granted judgment as a matter of law on its counterclaim for accelerated rentals;

(3) Whether the clause in the Master Lease between OPM and West Virginia creating West Virginia’s “absolutely unconditional” obligation to pay rents to OPM’s assignee (LaSalle) shall be given full force and effect as a matter of law despite OPM’s breach of its maintenance payments obligation.

For the reasons hereinafter stated we grant LaSalle summary judgment on its counterclaim for accelerated rentals and deny West Virginia’s motion to dismiss this counterclaim.

III. DISCUSSION OF LAW

A. Waiver of Sovereign Immunity

West Virginia contends that LaSalle’s counterclaim is not cognizable in this Court because it chooses to invoke its sovereign immunity to this counterclaim. For the reasons hereinafter stated, this Court holds that West Virginia has irrevocably waived its sovereign immunity by initiating these proceedings.

The Eleventh Amendment to the United States Constitution provides:

The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

*1001 One well-established exception to the general sovereign immunity of states conferred by the Eleventh Amendment is where Congress has conditioned a state’s participation in a federally regulated activity upon an abrogation of sovereign immunity. Participation by the state thus amounts to a consent to jurisdiction and a waiver of Eleventh Amendment immunity. See, e.g., Fitzpatrick v. Bitzer, 427 U.S. 445, 452-53, 96 S.Ct. 2666, 2669-70, 49 L.Ed.2d 614 (1976) (damage suits against state under Title VII for employment discrimination not barred); Parden v. Terminal Railway, 377 U.S. 184, 190-92, 84 S.Ct. 1207, 1211-12, 12 L.Ed.2d 233 (1964) (suit under Federal Employers’ Liability Act permitted against state operating a railroad); Petty v. Tennessee-Missouri Bridge Commission, 359 U.S. 275, 278-82, 79 S.Ct. 785, 788-93, 3 L.Ed.2d 804 (1959) (damage action against state allowed by Congressional proviso to interstate compact).

Similarly, by means of Section 106(a) of the Bankruptcy Reform Act (“the Code”), 11 U.S.C. § 106(a) (Supp. IV 1980), Congress has expressly conditioned West Virginia’s commencement of litigation in the bankruptcy court on the abrogation of its sovereign immunity.

Bankruptcy Code Section 106(a) provides: A governmental unit is deemed to have waived sovereign immunity with respect to any claim against such governmental unit that is property of the estate and that arose out of the same transaction or occurrence out of which such governmental unit’s claim arose.

11 U.S.C. § 106(a) (Supp. IV 1980).

The legislative history of this section demonstrates Congress’ intent to abrogate a state’s sovereign immunity when to do otherwise would be contrary to bankruptcy policy. Congress stated:

Section 106 provides for a limited waiver of sovereign immunity.... Congress does not . .. have the power to waive sovereign immunity completely with respect to claims of a bankrupt estate against a State, though it may exercise its bankruptcy power through the supremacy clause to prevent or prohibit State action that is contrary to bankruptcy policy.

There is, however, a limited change in the result from the result that would prevail in the absence of bankruptcy.... First, the filing of a proof of claim against the estate by a governmental unit is a waiver by that governmental unit of sovereign immunity with respect to compulsory counterclaims, as defined in the Federal Rules of Civil Procedure, that is, counterclaims arising out of the same transaction or occurrence.

H.R.Rep.No.595, 95th Cong., 1st Sess. 317 (1977); S.Rep.No.989, 95th Cong., 2d Sess. 29 (1978) U.S.Code Cong. & Admin.News 1978, pp. 5787, 5815, 6274 (emphasis added).

This bankruptcy provision was thus promulgated by Congress out of a desire to prohibit a governmental unit from receiving “distribution from the estate without subjecting itself to any liability it has to the estate within the confines of a compulsory counterclaim rule.” See id. The legislative history continues: “Any other result would be one-sided. The counterclaim by the estate against the governmental unit is without limit.” See id.

LaSalle argues that the instant case presents exactly the kind of situation which this bankruptcy section was promulgated to cover. West Virginia contends that because LaSalle’s counterclaim is not “property of the estate” and because West Virginia is not asserting a “claim” against the OPM estate, this section providing a waiver of sovereign immunity does not apply here. 7 West Virginia asserts no opposi *1002 tion to LaSalle’s allegation that the counterclaim arises out of the same transaction or occurrence as does West Virginia’s main claim. West Virginia further contends that even if it is deemed to have waived its sovereign immunity herein, it can only be held liable on LaSalle’s $2 million counterclaim up to the amount of its main claim or as a setoff to the extent of approximately $107,000. 8 This court agrees with LaSalle and finds that the counterclaim by LaSalle for accelerated rents should properly be designated as “property of the estate” and that West Virginia has asserted a “claim” against the OPM estate by filing its complaint to initiate the instant adversary proceeding. This court further holds that under Section 106(a), LaSalle can assert its counterclaim against West Virginia without limit.

West Virginia’s main claim in the instant action constitutes a “claim” within the meaning of Section 106(a). The term “claim” is defined in Section 101(4) of the Bankruptcy Code as;

(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or

(B) right to an equitable remedy for breach of performance if such breach gives rise to a right of payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. 9

11 U.S.C. § 101(4) (Supp. IV 1980).

West Virginia’s complaint asserts a “right to payment” out of the OPM estate *1003 on behalf of the Maintenance Providers, to which providers West Virginia is indebted. This is so because the contract by which the Maintenance Providers are paid is solely between West Virginia and the Maintenance Providers. OPM has merely agreed in Paragraph 4(a) of the Equipment Schedules that it will reimburse all monies expended by West Virginia for maintenance. Thus, since OPM has no direct obligation to the Maintenance Providers, the “right to payment” belongs to West Virginia.

In addition, West Virginia has moved this court to fix a sum for the continued use of the leased computer equipment if the Equipment Schedules are rejected by the Trustee. Because rejection of the Equipment Schedules would be equivalent to their breach, see 11 U.S.C. § 365(g), (Supp. IV 1980), West Virginia’s motion to set a sum for “use and occupancy” asserts a claim under Section 101(4)(B) of the Bankruptcy Code in asserting a right to an equitable remedy for breach of performance. Even though this asserted right is both “contingent” and “disputed”, it nevertheless qualifies as a “claim” under Section 106(a). See 11 U.S.C. § 101(4)(B) (Supp. IV 1980).

Moreover, the counterclaim asserted by LaSalle is properly viewed as “property of the (OPM) estate” as that term is defined in the Code. Section 541 of the Code defines “property of the estate” expansively as did its predecessor Act provision, Section 70(a)(5). 10

Collier on Bankruptcy Section 541.06 describes the scope of this Code provision as pervasive, stating:

Because the scope of Section 541(a)(1) is so broad and all encompassing, the discussion in the following paragraphs cannot be considered exhaustive. It is important to keep in mind therefore that the underlying theory of Section 541(a)(1) is to bring into the estate all interests of the debtor in property as of the date the ease is commenced. Thus, as a general rule, the estate created under Section 541 will include all legal or equitable interests of the debtor in property both tangible and intangible...

4 Collier on Bankruptcy § 541.06 (15th Ed. 1981). 11

The court in In re Community Hospital, 5 B.R. 7, 5 B.C.D. 1115, 1 C.B.C.2d 216 (Bkrtcy.S.D.N.Y.1979), aff’d, 5 B.R. 11, 5 B.C.D. 1172, 1 C.B.C.2d 291 (D.C.S.D.N.Y.1980), a bankruptcy case involving sovereign immunity cited by West Virginia, 12 echoed this expansive definition of property of the estate. Judge Schwartzberg therein stated that Code Section 541 is no longer concerned with who has title or possession of property of the estate because the estate includes all legal or equitable interests of the debtor in property as of the commencement of the case. See Community Hospital, *1004 5 B.R. at 10, 5 B.C.D. at 1117, 1 C.B.C.2d at 220. See also In re Greer Stump Plumbing, 9 B.R. 181, 4 C.B.C.2d 139 (Bkrtcy.D.Ariz.1981) (holding that the concept of property of the estate has been greatly broadened by the Code).

Most recently, the bankruptcy court in the Western District of Kentucky in In re Hurricane Elkhorn Coal Corp. II, 19 B.R. 609, 8 B.C.D. 1243 (Bkrtcy.W.D.Ky.1982), held that an assignment which is in substance an assignment for security to a bank does not divest a debtor of all interest in those accounts receivable and that the debt- or’s interest in these funds is enough to bring the funds themselves into the estate under Code Section 541(a)(1). The court, citing the “expansive definition” of property of the estate under Section 541, 19 B.R. at 617, 8 B.C.D. at 1247, thus compelled the turnover directly to the Bank-assignee of funds which had been held by the creditor as a setoff of its claim against the debtor based on the creditor’s pre-petition overpayment to the bank of money it owed the debtor.

The court in Hurricane Elkhorn found support for its holding in cases holding that a debtor may compel the turnover of property which was levied on pre-petition by a governmental taxing authority. See, e.g., In re Whiting Pools, 674 F.2d 144 (2d Cir. 1982); Bristol Convalescent Home, Inc. v. IRS, 12 B.R. 448, 7 B.C.D. 1151, 4 C.B.C.2d 1167 (Bkrtcy.D.Conn.1981); In re Hudson Valley Ambulance Service, Inc., 11 B.R. 860 (Bkrtcy.S.D.N.Y.1981). The rationale in these cases for turnover to the debtor of property out of his possession is that the prepetition levy by the taxing authority does not completely divest the debtor’s estate of all interest in the property. Thus the court in Hurricane Elkhorn reasoned:

(T)he (tax levy cases) approach creates a presumption of includability in the estate leaving it to the property claimant to rebut the presumption and retrieve the property interest from the estate. That is a view compatible with the broadened definition of “property” and the expanded jurisdiction of this Court under the Bankruptcy Code, and we adopt that view.

In re Hurricane Elkhorn, 19 B.R. at 618, 8 B.C.D. at 1248.

The court in Hurricane Elkhorn found further support in the “long standing rule that property subject to liens or encumbrances is not precluded from becoming property of the estate, but becomes an estate asset subject to any existing liens.” Id., citing, e.g., In re National Grain Corp., 9 F.2d 802 (2d Cir. 1926).

In the instant case as In re Hurricane Elkhorn, the agreements among the parties require the conclusion that LaSalle’s counterclaim for rentals, which counterclaim was assigned to it as security for OPM’s debt to LaSalle, is property of the estate. As the court declared in In re Hurricane Elkhorn, the counterclaim must be presumed to be part of the estate until such presumption is rebutted. West Virginia has not succeeded in rebutting this presumption.

It is without question that OPM assigned its right to lease payments from West Virginia as security for OPM’s debt to LaSalle (See Camp Aff. Ex. 1, p. 1). These lease payments flowing from West Virginia to LaSalle were designed to decrease on a gradual basis OPM’s debt to LaSalle which these payments secured. Thus, the enforcement by LaSalle of its right to receive the full amount of lease payments from West Virginia benefits not only LaSalle, but also the OPM estate in vitiating OPM’s debt to LaSalle by discharging LaSalle’s lien on the equipment. Accordingly, OPM’s assignment of the right to receive rentals from West Virginia to LaSalle does not completely divest the debtors’ estate of all interest in the property. See In re National Grain Corp., (2nd Cir.) 9 F.2d 802; In re Hurricane Elkhorn, (Bkrtcy.W.D.Ky.) 19 B.R. 609, 8 B.C.D. 1243.

Moreover, Master Lease Section 8 provides that the equipment is to be returned to OPM upon the expiration of the lease term. Thus, OPM clearly has a residual interest in the equipment it leased to West Virginia.

*1005 In addition, it is well-settled that a promisee as well as a contract’s third party beneficiary may sue the promisor to enforce the contract. See, e.g., In re Spong, 661 F.2d 6 (2d Cir. 1981); Associated Teachers v. Board of Education, 33 N.Y.2d 229, 234, 306 N.E.2d 791, 794, 351 N.Y.S.2d 670, 674 (1973). Thus, OPM, as the promisee of West Virginia’s promise to pay rents to LaSalle, had the right to sue West Virginia to enforce this right for the third party beneficiary, LaSalle. This right of action possessed by OPM against West Virginia, whether acquired before or after commencement of the Chapter 11 case, is “property of the estate”. See 11 U.S.C. § 541(a)(1), (7) (Supp. IV 1980).

Moreover, Section 1.08 of Security Agreements between LaSalle and OPM (e.g. Camp Affidavit, Ex. 1) also provides that upon the occurrence of any event of default, including a default by West Virginia, LaSalle is entitled to exercise all of OPM’s rights under the Equipment Schedules. (See id. at 5).

Under this analysis, it is without question that LaSalle’s counterclaim fits well within Section 541’s broad definition of property of the estate. In addition, LaSalle’s counterclaim is cognizable not merely to the extent of West Virginia’s main claim, but without limit. See H.R. Rep.No.595, 95th Cong., 1st Sess. 317 (1977), S.Rep.No.989, 95th Cong., 2nd Sess. 29 (1978); In re Community Hospital, Bkrtcy. S.D.N.Y., 5 B.R. 7, 5 B.C.D. 1115, 1 C.B.C.2d 216 aff’d, (D.C.S.D.N.Y.) 5 B.R. 11, 5 B.C.D. 1172, 1 C.B.C.2d 291. Accordingly, this Court finds that Section 106(a) applies in the instant case to waive West Virginia’s sovereign immunity to the full extent of LaSalle’s counterclaim. 13

B. Merits of LaSalle’s Counterclaim

1. Hell and High Water Clause

LaSalle contends that it is entitled to summary judgment as to West Virginia’s liability on LaSalle’s counterclaim for accelerated rental payments 14 pursuant to Rule 56 of the Federal Rules of Civil Procedure as adopted in bankruptcy matters by Bankruptcy Rule 756. West Virginia contends that LaSalle is not entitled to judgment as a matter of law because there are material issues of fact in dispute as to whether La-Salle took its assignment of rents from OPM in good faith without notice of claims or defenses. For the reasons hereinafter detailed, we grant summary judgment to LaSalle on its counterclaim as to West Virginia’s liability.

This holding is based on our view that under New York law, which applies pursuant to the terms of the Master Lease, the plain meaning of West Virginia’s absolutely unconditional promise to make rental payments to OPM must be given full force and effect as a matter of law. See, e.g., Breed v. Insurance Co. of North America, 46 N.Y.2d 351, 385 N.E.2d 1280, 413 N.Y.S.2d 352 (1978); Laba v. Carey, 29 N.Y.2d 302, 277 N.E.2d 641, 327 N.Y.S.2d 613 (1971); Luna Park Housing Corp. v. Besser, 38 A.D.2d 713, 329 N.Y.S.2d 332 (2d Dep’t 1972).

This “hell or high water” provision contained in Section 5.3(iii) of the Master Lease provides:

*1006 (iii) (West Virginia’s) obligation to pay directly to such assignee the amounts due from Lessee under any Equipment Schedule (whether as rent or otherwise) shall be absolutely unconditional and shall be payable whether or not any Equipment Schedule is terminated by operation of law, any act of the parties or otherwise ... (emphasis added). 15

In essence, this unequivocal provision mandates that regardless of any remedies West Virginia may invoke against OPM, including a defense or claim as to OPM’s default in paying the Maintenance Providers, West Virginia may not terminate La-Salle’s unconditional right to payment. West Virginia was well aware of this unconditional right to payment of rentals when it executed the Consent and Agreements to the assignments by OPM to La-Salle. See Camp Affidavit, Exhibits 9, 10 and 11. In addition, the Attorney General of West Virginia gave his express written approval to the content of the Master Lease between OPM and LaSalle, including this hell and high water clause. See Camp Affidavit, Exhibit 5 at 3, and Exhibit 7 at 3.

To deny this clause its full force and effect would effectively reconstruct the contract contrary to the intent of the parties, which reconstruction would be impermissible. See, e.g., Rodolitz v. Neptune Paper Products, Inc., 22 N.Y.2d 383, 386, 239 N.E.2d 628, 630, 292 N.Y.S.2d 878, 881 (1968).

Moreover, it is a well-settled principle that “parties to a contract are given broad latitude within which to fashion their own remedies for breach of contract .... It follows that contractual limitations upon remedies are generally to be enforced unless unconscionable”. 16 Wilson Trading Corp. v. David Ferguson, Ltd., 23 N.Y.2d 398, 404, 244 N.E.2d 685, 687, 297 N.Y.S.2d 108, 111-112 (1968).

More specifically, courts have uniformly given full force and effect to “hell and high water” clauses in the face of various kinds *1007 of defaults by the party seeking to enforce them. National Equipment Rental v. J. & I. Carting, Inc., 73 A.D.2d 666, 423 N.Y.S.2d 205 (2d Dep’t 1979); Dixie Groceries, Inc. v. Albany Business Machines, 156 Ga.App. 36, 274 S.E.2d 81, 83 (1980). See also First National Bank of Atlanta v. Harrison, 408 P.Supp. 137, 140 (N.D.Ga.1975), aff’d, 529 F.2d 1350 (5th Cir. 1976). 17

The courts in all of the above-cited cases held that clauses containing unconditional promises are strictly enforceable as a matter of law. In so doing, they have found summary judgment in favor of the lessor or its assignee because no facts submitted or to be submitted by the lessee opposing summary judgment are in any way relevant to the lessee’s unequivocal liability based on these hell and high water provisions. 18

In National Equipment Rental, supra, the court, faced with a lessor’s failure to file a criminal complaint against an alleged thief of the equipment at issue, held that the lessor’s inaction did not constitute a defense as a matter of law to the lessee’s obligation to pay rent unconditionally. Similarly, in Dixie Groceries, supra, the Georgia court held that such a clause in an equipment lease remains inviolate as a matter of law, even where facts submitted by the lessee show a failure by the lessor to repair or maintain the equipment. 19

The essential practical consideration requiring liability as a matter of law in these situations is that these clauses are essential to the equipment leasing industry. To deny their effect as a matter of law would seriously chill business in this industry because it is by means of these clauses that a prospective financer-assignee of rental payments is guaranteed meaningful security for his outright loan to the lessor. Without giving full effect to such clauses, if the equipment were to malfunction, the only security for this assignee would be to repossess equipment with substantially diminished value. See Contino, supra, at 87; B. Fritch and A. Reitman, Equipment Leasing-Leveraged Leasing, 131-32 (1977).

Further justification for giving full force and effect to the hell and high water clause herein is found in the fact that OPM is a finance lessor, not a merchant lessor. Courts have distinguished between these two types of equipment lessors in determining whether a lessor’s obligation to make payments is separate and apart from the maintenance and performance of the equipment. In the instant case, the lessor involved is a finance lessor whose only service is to provide funds and who is not merchant lessor. A merchant lessor is one who deals in goods and holds itself out as having specialized knowledge about the design, operation and repair of the chattel leased. See Patriot General Life Insurance v. CFC Investment Co., - Mass.App. -, 420 N.E.2d 918 (1981). Since OPM only provided the financing for the lease to West Virginia and thus is a finance lessor, West Virginia had no independently justifiable reason to rely upon OPM for any technical *1008 judgment or to hold OPM responsible for the making of maintenance payments on its behalf. See id.

Accordingly, whether a bad faith assignment or an assignment on notice of default in maintenance payments took place is irrelevant in deciding this summary judgment motion because of the inclusion of a hell and high water clause in the Master Lease. Thus, under Rule 56(c), as applied in bankruptcy matters by Rule 756, West Virginia has failed to demonstrate a genuine issue of material fact and the case is ripe for summary judgment. See Leasing Services Corporation v. Justice and Childers,