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In re Kentuckiana Medical Center LLC

United States Bankruptcy Court for the Southern District of Indiana
455 B.R. 694 (2011)

Written by Angela Patrick, JD

Facts

In 2009, the Leasing Group (creditor) purchased approximately $2.38 million of medical equipment and leased it to Kentuckiana Medical Center LLC (KMC) (debtor) under three leases governed by Kentucky law. The leases required KMC to pay $2.9 million in rent over a five-year term and did not allow KMC to end the leases early. The equipment was expected to function longer than five years. At the end of the initial lease term, KMC had three options: (1) purchase the equipment for $238,612; (2) renew the leases for a short term and then purchase the equipment for $238,612; or (3) return the equipment by paying to have it removed, shipped, and stored, as well as the sales commission to resell it and any difference between the actual sale price and $238,612. One year into the leases, KMC was behind on the lease payments and filed for bankruptcy. In the bankruptcy proceeding, KMC filed an adversary action against the Leasing Group, seeking a declaration that the leases were disguised security agreements. The Leasing Group insisted they were true leases. Both sides moved for summary judgment. The bankruptcy court considered the motions.

Rule of Law

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Holding and Reasoning (Lorch, J.)

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