“Hell or High Water” Obligations of Lessees in Finance Leases
In Walker v. Frontier Leasing Corp., 2010 WL 1221413 (Tenn. Ct. App. Mar. 30, 2010), the Court held that it could not rescind a finance lease based solely on fraud on the part of the supplier, even if the supplier fraudulently induced the lessee to sign the Finance Lease, because lessees must perform finance leases “come hell or high water.” This ruling was based on “unique law applicable to finance leases,” as defined in T.C.A. § 47-2A-103(g). This result encourages entities to acquire and finance machinery and equipment without worrying that the lessee will be able to stop paying and blame it on the equipment.
By Negative Equity = PMSI
In March, the Sixth Circuit Court of Appeals became the eighth circuit to hold that negative equity financing satisfies the definition of a purchase money security interest (PMSI). See In re Westfall, 2010 WL 1050265 at *4 (6th Cir. Mar. 24, 2010).
Consumer Consignments Are No Longer a Commercial Matter
In In Re Music City RV, LLC, the Bankruptcy Court for the Middle District of Tennessee certified to the Tennessee Supreme Court the question of whether a consumer’s consignment of a recreational vehicle (RV) to a dealer for the purpose of selling the RV is a transaction covered under the UCC. Nine individuals, including Dudley King, consigned their RV to Music City for sale. Thereafter, an involuntary Chapter 7 bankruptcy was filed against Music City. The Chapter 7 Trustee argued that the RVs on the Music City consignment lot were property of the bankruptcy estate.
