On March 23, 2017, the bankruptcy lifted the automatic stay for Peak Leasing with regard to one of four trailers Mr. Price had obtain from Peak and took under advisement whether the remaining claims were “true leases” or disguised PMSIs. To determine such the bankruptcy court applied the UCC “Bright-Line” Test, which provides as follows:
A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee, and:
(1) The original term of the lease is equal to or greater than the remaining economic life of the goods;
(2) The lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;
(3) The lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; or
(4) The lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement.
N.C. Gen. Stat. § 25-1-203(b) (2006).
Finding that Mr. Price had no express rights to terminate the contracts the first part of the test was satisfied and then the $1.00 final purchase price met the fourth criteria. Accordingly, the claims were held to be disguised PMSIs.
As such, the bankruptcy court held that under Rule 60(b)(5) it was appropriate to reconsider its previous order regarding payments due under the “lease”.
For a copy of the opinion, please see: