Equico Lessors, Inc. v. Wetsel

576 F. Supp. 13, 1983 U.S. Dist. LEXIS 18444
CourtDistrict Court, W.D. Oklahoma
DecidedMarch 18, 1983
DocketCIV-82-1137-E
StatusPublished
Cited by5 cases

This text of 576 F. Supp. 13 (Equico Lessors, Inc. v. Wetsel) is published on Counsel Stack Legal Research, covering District Court, W.D. Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Equico Lessors, Inc. v. Wetsel, 576 F. Supp. 13, 1983 U.S. Dist. LEXIS 18444 (W.D. Okla. 1983).

Opinion

FINDINGS OF FACT AND CONCLUSIONS OF LAW

■EUBANKS, District Judge.

Introduction

This action to recover a deficiency judgment against the debtors under a lease agreement and against the guarantors of the agreement was heard by the court on February 16, 1983. Both parties have filed proposed findings of fact and conclusions of law. The court finds and concludes as follows.

The issues to be determined are:

1. Whether the agreement here in question is a lease intended as security within the definition of Title 12A Oklahoma Statutes, § 1-201(37).

2. If so, whether plaintiff may recover a deficiency judgment where defendants failed to receive notice of the time after which a private sale would occur as required by Title 12A Oklahoma Statutes, § 9-504(3).

In Oklahoma, “whether a lease is intended as security is to be determined by the facts of each case.” Title 12A Oklahoma Statutes, § 1-201(37); Tulsa Port Warehouse Co. Inc., 690 F.2d 809, 811 (10th Cir.1982). The factors to be considered in determining the character of a transaction as a true lease or a security interest have been identified on numerous occasions by the courts. See: In re Tulsa Port Warehouse Co., 690 F.2d 809 (10th Cir.1982); In re Fashion Optical, Ltd., 653 F.2d 1385 (10th Cir.1981); United States v. Federal Insurance Co., 634 F.2d 1050 (10th Cir.1980); Citicorp Leasing, Inc. v. Allied Institutional Distributors, Inc., 454 F.Supp. 511 (W.D.Okl.1977); Percival Construction Co. v. Miller & Miller Auctioneers, Inc., 387 F.Supp. 882 (W.D.Okl. 1973), aff'd as to this part, 532 F.2d 166, 172 (10th Cir.1976). Each of the factors identified for consideration does not automatically eliminate the possibility of a true lease or the intention to create a secured interest. The essence of an agreement is to be determined by its total effect, not by its form. Commissioner v. P.G. Lake, Inc., 356 U.S. 260, 266-67, 78 S.Ct. 691, 695, 2 L.Ed.2d 743 (1958). Thus, the controlling factor is the legal effect of the instrument as gathered from all its provisions, Percival, supra, 387 F.Supp. at 884; e.g., the undisputed économic realities of the transaction. United States v. Federal Insurance Co., supra, at 1054; In re Fashion Optical, supra, at 1389.

Findings of Fact

1. The plaintiff is a Delaware corporation with its principal place of business in Minneapolis, Minnesota.

2. The defendants are citizens of the State of Oklahoma.

3. The matter in controversy exceeds the sum of $10,000 exclusive of interest and costs.

4. Plaintiff is a subsidiary of The Equitable Life Assurance Society of the United States. The commercial leasing of equipment is a major business activity of plaintiff, which claims ownership of its leased equipment for tax purposes such as depreciation allowance.

5. Defendants operate the family-owned Farmers Equipment Company, Inc., an Allis-Chalmers farming equipment dealership, with its principal place of business in Man-gum, Oklahoma.

(a) Farmers Equipment Company started its business July 1, 1969, does approximately one million dollars worth of business in a year, employed 10 to 12 persons in 1979, and deals with sales representatives from equipment manufacturers and with contracts for the sale of farming equipment.

(b) Defendant Charles Wetsel has a college degree with a major in marketing and psychology.

6. The defendants decided to obtain a computer to be used in their business, de *16 siring to lease the equipment in order to claim the costs as a business expense for tax purposes and to avoid the effect a sale would have on their credit line at their bank.

7. Defendants Charles and Steven Wetsel selected the items of computer equipment from Sure Data Systems of Greeley, Colorado.

8. In response to defendants’ expressed desire to obtain “outside financing” for the transaction, Sure Data Systems contacted plaintiff in accordance with an established business relationship and proposed that plaintiff purchase the equipment for subsequent leasing to defendants.

9. Plaintiff’s standard equipment lease form was mailed to defendants and was executed by Charles and Steven Wetsel on October 25, 1979. A personal guaranty of the payment obligation contained in the lease agreement was executed by Oma Mae and Everett C. Wetsel on October 25,, 1979.

10. The price and time terms applicable to the agreement are contained in a modification agreement executed by Charles and Steven Wetsel on October 25, 1979, providing for an initial payment of $2,000 due August 30, 1979, and quarterly payments of $1,845.78 beginning September 30, 1979, and ending June 30, 1984; a total of one (1) payment of $2,000 and a string of twenty (20) payments of $1,845.78 over approximately a five-year period of time.

11. Equico paid Sure Data Systems $27,494.10 for the computer equipment and expected to receive $38,915.60 from defendants pursuant to the agreement.

(a) Where the equipment cost was $27,-494.10, the down payment of $2,000 left a remaining balance of $25,494.10. Thereafter, the string of 20 quarterly payments at $1,845.78 results in a negative cash flow through the 13th payment, with a positive cash flow of $346.82 occurring in the 14th payment. On the occasion of the 20th payment, a total positive cash flow of $11,-421.50 occurs, resulting in an internal rate of return or effective annual interest rate of 17.525% on the overall transaction between the parties. 1

(b) Using interest amortization tables, the quarterly payment required to amortize a $1,000 loan at 15.25% for 5 years is $72.37. Jack C. Estes, Interest Amortization Tables (1976). There are 25.4941 units of one thousand in $25,494.10. Rounding the quarterly payment per $1,000 to $72.40 and multiplying by 25.4941 reveals that a quarterly payment of $1,845.7728 (or $1,845.78) is required to amortize a loan of $25,494.10 at 15.25% for 5 years. These figures are indicative of a sale at $27,-494.10 with a down payment of $2,000 and the remaining balance financed at 15.25% for 5 years.

12. No option granting lessee the right to purchase the equipment at the termination of the lease period is contained in the agreement.

(a) Because of discussions with the representative^) of Sure Data Systems, Charles Wetsel believed defendants would own the equipment without being required to pay any additional consideration at the end of the lease term.

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Bluebook (online)
576 F. Supp. 13, 1983 U.S. Dist. LEXIS 18444, Counsel Stack Legal Research, https://law.counselstack.com/opinion/equico-lessors-inc-v-wetsel-okwd-1983.