Snow Machines, Inc. v. South Slope Development Corporation

In 1999 Snow Machines, Inc. (plaintiff) entered into an installment sales contract with Song Mountain Resort, LLC (Song Mountain) for the purchase of three snow-making machines for Song Mountain’s ski resort. Song Mountain used the machines as collateral, and Snow Machines was to keep the title to the machines until full payment was received. Subsequently, Song Mountain defaulted on its obligation to make payments with $51,360 still owed on the contract. In September 2000, Song Mountain’s owner, Tully Recreation, LLC (Tully), entered into an agreement with South Slope Development Corporation (South Slope) (defendant) to purchase Song Mountain Ski Resort. The contract of sale was dated September 2000 and anticipated a closing date of May 2001. During the interim, the contract provided for South Slope to lease the resort and operate it from October 2000 to March 2001, while it secured financing. During this period, South Slope was required to pay rent to Tully, which would be deducted from the sales price at closing, and to cover taxes and insurance on the resort. In December 2000, Snow Machines notified South Slope by letter that it had an interest in the three machines. However, when Tully and South Slope closed on the sale in May 2001, possession of the machines was transferred to South Slope. In June 2001, Snow Machines secured a court order to seize the three machines, but it learned that possession of the machines was transferred to South Slope at closing. Snow Machines then filed suit against South Slope, seeking either payment of the outstanding balance or possession of the machines. Snow Machines also requested permission to seize the machines prior to judgment and a temporary restraining order, which the New York Supreme Court granted. South Slope appealed, arguing that the supreme court erred in holding that South Slope did not take free of Snow Machine’s interest because South Slope had notice of Snow Machine’s security interest prior to South Slope giving value for and taking delivery of the three machines.