## Facts

- Vitco Industries, Inc. purchased a punch press for $243,000.
- Vitco later sold the press to Key Equipment Finance, Inc. for $243,000 and immediately leased it back under a six-year lease requiring monthly payments of $3,591.91.
- The lease included an early buyout option after 60 months for $78,464.70 and, at the end of the term, allowed purchase at fair market value, renewal, or return of the press.
- Under separate lending arrangements, Gibraltar Financial Corp. obtained and perfected a security interest in substantially all of Vitco’s personal property, including equipment.
- After Vitco defaulted under the lease, Key repossessed the press and sold it to Prestige Equipment Corp. and/or National Machinery Exchange, Inc.
- Gibraltar sued Prestige, National Machinery Exchange, Key, and Chikol Equities, Inc. asserting conversion, replevin, and monetary relief, alleging its security interest attached to the press.

## Issues

1. Whether the sale-leaseback transaction, though in the form of a lease, created a security interest rather than a true lease under Colorado’s enactment of U.C.C. § 1-203.
2. Whether summary judgment was proper where the record did not establish the transaction’s economic character, including whether the early buyout price was nominal in relation to anticipated residual value.

## Decision

- The Indiana Supreme Court reversed the trial court’s grant of summary judgment for the defendants.
- The court held the record showed genuine issues of material fact on whether the agreement was a true lease or a secured transaction.
- The court remanded for further proceedings to develop evidence bearing on the transaction’s economic substance.

## Legal Principles

- Characterization of a transaction styled as a lease turns on its economic substance under U.C.C. § 1-203, not solely the document’s labels or form.
- In applying U.C.C. § 1-203, evidence relevant to anticipated residual value and the economic effect of any purchase option may be necessary to determine whether an option price is nominal and whether a security interest was created.
- On summary judgment, the moving parties must show the absence of genuine issues of material fact; courts must draw reasonable inferences in favor of the non-movant.

## Conclusion

Because the record lacked evidence of the parties’ economic expectations—especially the punch press’s expected residual value when the buyout option could be exercised—the court could not resolve, as a matter of law, whether the transaction was a true lease or a financing arrangement creating a security interest; summary judgment for defendants was therefore improper.


Gibraltar Fin. Corp. v. Prestige Equip. Corp., 949 N.E.2d 314 (Ind. 2011)