Gibraltar Financial Corp. v. Prestige Equipment Corp.
Supreme Court of Indiana
949 N.E.2d 314 (2011)
Key Equipment Finance paid Vitco $243,000 for a punch press and leased it back to Vitco for six years, with an early-buyout option letting Vitco purchase the press after five years for $78,464.70 or, if not exercised, buy it at fair market value, renew, or return it; Vitco separately granted Gibraltar (plaintiff) a security interest in its property under loan agreements. After Vitco defaulted, Key repossessed and sold the press to Prestige (defendant), and Gibraltar sued Prestige, arguing the transaction was really a sale subject to its security interest rather than a true lease; the trial court and court of appeals both found it was a lease, and Gibraltar appealed.
Whether a lease agreement creates a security interest if the lessee has the option to become the owner of the goods for nominal additional consideration upon completion of the lease agreement.