The creditor, a leasing and financing company, entered into a “Master Lease Agreement” with another company, under which the creditor would lease bitcoin kiosks to the company. Alongside the lease agreement with the company, the creditor also entered into a Personal Guaranty agreement with the guarantor which provided that the guarantor would be held liable for “full, complete and prompt payment, performance and observance of all payment and other obligations of Lessee under each Lease," "resulting from Lessee's breach or non-performance thereof and all of Lessor's collection costs and legal expenses and reasonable attorney fees related to any and all of the foregoing.” On the penultimate month of the lease, the company filed for Chapter 11 bankruptcy, which led the creditor to file a proof of claim asserting it was owed $1,314,335. However, the bankruptcy court instead had the kiosks auctioned off, which only gave $273,733.50 to the creditor. This prompted the creditor to sue the guarantor for breach of contract so that the creditor could recover the remaining stipulated loss value and interest. The guarantor countered that the creditor breached first by filing a UCC financing statement, which went against the parties’ intent of creating a true lease instead of a financing arrangement.
In AVT Nevada, L.P. v. McAlary, No. 2:23-cv-594-TS-DBP, 2025 WL 1517693, 2025 U.S. Dist. LEXIS 101453 (D. Utah May 28, 2025) (opinion not yet released for publication), the district court rejected the guarantor’s argument for breach of contract and found that he was liable to pay the stipulated loss value. The court first addressed the guarantor’s claim for breach of contract and determined it was unfounded because the lease agreement specifically permitted the creditor to file a UCC financing statement and create a security interest in the kiosks. Likewise, the court also found that the damages provision in the lease agreement was enforceable because the bankruptcy court did not treat the creditor as the owner of the kiosks; rather, it was just a secured creditor. Therefore, the creditor was entitled to the lease’s stipulated collateral.
By Conor Doris [email protected]
Edited By Jace Brown [email protected]
Edited By Hayden Mariott [email protected]