905 F.2d 1541
NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.
In re Gary W. OLDHAM and Catherine L. Oldham, husband and
wife, d/b/a Oldham Associates, Debtors.
Gary W. OLDHAM, Catherine L. Oldham, Plaintiffs-Appellants,
AMERICAN LEASING, INC., Defendant-Appellee.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted June 6, 1990.
Decided June 28, 1990.
Before EUGENE A. WRIGHT, WALLACE and KOZINSKI, Circuit Judges.
The Oldhams are debtors in possession in a Chapter 11 bankruptcy who leased a motor home and boat from American Leasing. They appeal the bankruptcy court's determination that the leases were true leases, rather than disguised sales with security interests. We have jurisdiction under 28 U.S.C. Sec. 158(d), and we affirm.
In July 1986, American Leasing purchased a boat and motor home at the Oldham's request. It purchased the boat from Exclusive Leasing, a company in which Mr. Oldham has an interest, and purchased the motor home from the Oldhams.
Washington law required an inspection of the vehicles before American could apply for new title certificates. Because there was a delay in obtaining the inspection certificates, title on the motor home was registered on February 13, 1987, and title on the boat was registered on April 21.
Immediately after buying the boat and motor home, American leased them to the Oldhams. Sometime prior to May 1987, the Oldhams ceased making lease payments and, on May 7, they filed a bankruptcy petition.
American sought to compel in bankruptcy court an acceptance of the leases under 11 U.S.C. Sec. 365. The Oldhams objected, arguing that the leases were actually disguised security agreements, so the boat and motor home were assets of the bankruptcy estate.
The bankruptcy court found that the leases were true leases rather than disguised sales with security interests. It said that American was entitled to retain the proceeds of the sale of both items of equipment, and could claim a deficiency of $59,720 as an unsecured claim. The district court affirmed.
I. Standard of Review
We review de novo the bankruptcy court's decision. Ragsdale v. Haller, 780 F.2d 794, 795 (9th Cir.1986). We review the bankruptcy judge's findings of fact for clear error, id., and the ultimate determination whether the leases are true leases de novo. Cf. Swift Dodge v. Commissioner, 692 F.2d 651, 652 (9th Cir.1982) ("Whether the agreement is a 'sale' or a 'lease' for federal tax purposes is a question of law and is therefore fully reviewable on appeal").
II. True Lease Versus Security Interest
The Oldhams argue that the bankruptcy judge erred in determining that the leases were true leases rather than disguised security interests. Under Washington law, Article 9 of the UCC applies to any transaction which is intended to create a security interest in personal property. See Wash.Rev.Code Sec. 62A.9-102(1)(A). Security interest is defined as follows:
"Security interest" means an interest in personal property or fixtures which secures payment or performance of an obligation.... Unless a lease or consignment is intended as security, reservation of title thereunder is not a "security interest" but a consignment is in any event subject to the provision on consignment sales (RCW 62A.3-326). Whether a lease is intended as security is to be determined by the facts of each case; however, (a) the inclusion of an option to purchase does not of itself make the lease one intended for security, and (b) an agreement that upon compliance with the terms of the lease the lessee shall become or has the option to become the owner of the property for no additional consideration or for a nominal consideration does make the lease one intended for security.
Wash.Rev.Code Sec. 62A.1-201(37) (emphasis added).
In applying this provision, the Washington courts have listed factors which should be considered in determining whether a lease was intended as security. See Courtright Cattle Co. v. Dolsen Co., 94 Wash.2d 645, 619 P.2d 344, 350 (1980); Rainier Nat'l Bank v. Inland Mach. Co., 29 Wash.App. 725, 631 P.2d 389, 394-95, review denied, 96 Wash.2d 1009 (1981).1
The bankruptcy judge held that this transaction was a true lease rather than a disguised sale. He based this conclusion on these facts: (1) there was no option to purchase at any price; (2) the equipment had to be returned at the end of the lease period; (3) the equipment would have a substantial value at the termination of the leases; and (4) although the leases contained a provision allowing the debtor equity in the equipment in the case of loss or damage, the Oldhams never acquired any such equity.2 These findings were not clearly erroneous.
We hold that the transactions were true leases rather than sales with a security interest.3 See 1 R. Anderson, Uniform Commercial Code Sec. 1-201:268, at 320 (3d ed. 1981) ("When a lease of personal property requires the lessee to return the property to the lessor at the expiration of the lease and does not give the lessee any right to renew the lease or purchase the property, the transaction is a lease and not a secured transaction."); In re Marhoefer Packing Co., Inc., 674 F.2d 1139, 1145 (7th Cir.1982) ("An essential characteristic of a true lease is that there be something of value to return to the lessor after the term.").
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3
These factors include: (1) whether the lessee is given an option to purchase the equipment, and if so, whether the option price is nominal; (2) whether the lessee acquires any equity in the equipment; (3) whether the lessee is required to bear the entire risk of loss; or (4) pay all charges and taxes imposed on ownership; (5) whether there is a provision for acceleration of rent payments; (6) whether the property was purchased specifically for lease to this lessee; (7) whether the lessor disclaimed all warranties as to the leased property; (8) whether the lessee agreed to hold the lessor harmless from all liability; (9) whether a security interest has been extended to other equipment of the lessees; and (10) whether the lessee treats the lease as a lease for tax purposes. Rainier, 631 P.2d at 394-95
The court also found that the lease contained provisions (1) placing the risk of loss on the lessee; (2) requiring all taxes and other similar charges to be paid by the lessee; and (3) for the acceleration of rent payments. The Washington court of appeals, however, has refused to give much weight to these factors. Rainier, 631 P.2d at 395
The bankruptcy judge apparently took into account the subjective intent of the parties, a factor which he felt was implicit in the Washington cases. We need not decide whether consideration of subjective intent was erroneous because we find that the leases were true leases even if this factor is ignored