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In re Grubbs Construction Company
United States Bankruptcy Court for the Middle District of Florida
319 Bankr. 698, 55 U.C.C. Rep. Serv. 2d 501 (2005)
Grubbs Construction Company (Grubbs) (debtor) purchased equipment with financing from Banc One (creditor). Grubb’s agreement with Banc One was titled “Master Lease Agreement,” and it contained only general terms. Specific terms regarding the purchases were on lease schedules. Four lease schedules contained three early-buyout or renewal-purchase options at the end of the lease. An analysis of these options revealed that the risk of loss was borne by Grubbs. It was clear from the inception of the agreements that early buyout would be the only option that made financial sense. No matter which option was chosen, Banc One would receive the full amount financed plus interest plus various lease charges. If Banc One needed to repossess and sell the equipment upon Grubb’s default, Banc One would credit Grubbs for any excess funds received above expenses and could seek any deficiency amount from Grubbs. Grubbs later filed for bankruptcy and argued that Banc One’s lease agreement was actually a security agreement under which Banc One had an unperfected security interest. Banc One argued that the lease was a true lease and not a secured transaction.
Rule of Law
Holding and Reasoning (Williamson, J.)
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