Summerhill Neighborhood Dev. Corp. v. Telerent Leasing Corp.

Parties' agreement for defendant's use of telephone equipment installed by plaintiff was a lease, not a secured transaction, since it clearly stated that defendant had no property interest in the equipment and that plaintiff would remove the equipment upon the agreement's termination.

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

On June 18, 1996, Summerhill Neighborhood Development Corporation, under a written agreement, had installed a telephone system and other equipment from Telerent Leasing Corporation to be paid for monthly for sixty months. However, on August 1, 1997, Summerhill stopped making payments. Telerent recovered all of its equipment in November 1997 and re-leased or sold the personal property. Upon suit, Summerhill contended that the agreement was a purchase agreement with a secured transaction worded as a lease with the option to buy to provide security for Telerent; Telerent contended that the agreement constituted a valid lease and not a secured transaction agreement. On summary judgment the trial court found that the agreement constituted a valid lease. In de novo examination of the evidence, we find that the agreement constituted a lease and affirm.

Summerhill contended that the option to purchase at the end of the lease was for $1.00, a nominal price that indicated a security agreement under OCGA § 11-1-201 37, but Telerent countered that the addendum signed by Summerhill on August 3, 1996, before the system had been installed, required purchase at fair market value and provided consideration as a true lease. Summerhill, however, argued that no consideration was given for the addendum and argued that it had to make a down payment, to have automatic renewal, to pay applicable taxes and insurance, and to make repairs on the telephone system. Telerent filed a UCC-1 financing statement. However, the trial court looked to the provisions for the option to purchase at the fair market value at the termination of the lease period to find a true lease.

Summerhill Neighborhood Dev. Corp. v. Telerent Leasing Corp.

Parties' agreement for defendant's use of telephone equipment installed by plaintiff was a lease, not a secured transaction, since it clearly stated that defendant had no property interest in the equipment and that plaintiff would remove the equipment upon the agreement's termination.

Share with Email

Thank you for sharing!

Trending Stories

More From ALM

Subscribe to Daily Report