In re San Francisco Industrial Park
United States District Court for the Northern District of California
307 F. Supp. 271 (1969)
San Francisco Industrial Park, Inc. (SF) (debtor) purchased land on which to develop an industrial park. SF needed approximately $4 million to develop the land, which was worth approximately $2 million. SF entered into financing negotiations with John Hancock Mutual Life Insurance Company (Hancock). The parties negotiated a sale and leaseback transaction. Hancock purchased the land from SF for $1 million and leased it back to SF for 50 years. SF had an option to repurchase the land after 25 years. Additionally, Hancock extended $3 million in construction loans to SF. After approximately eight years, SF filed for bankruptcy in violation of its lease agreement with Hancock. At the bankruptcy court, SF sought a judgment that the purported sale and leaseback transaction with Hancock was actually a mortgage. SF argued to the bankruptcy referee that SF’s president never intended to sell the property but merely to secure construction financing. The referee ruled that the transaction was a sale and a leaseback, as purported, and not a mortgage. SF sought review of the referee’s decision.
Rule of Law
Holding and Reasoning (Levin, J.)
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