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Automobile Lease Did Not Create Security Interest in Security Deposit
Description Lessee of car sued GMAC for failure to pay interest on $350 security deposit on leased car. Alabama high court held that UCC 9-207 does not apply because it requires a security interest to be expressly specified in the financing agreement, which was not the case.
Topic Negotiable Instruments/Commercial Paper
Key Words Security Interest, Secured Transaction, Lease
C A S E   S U M M A R Y
Facts Yeager leased a car from an Alabama Chevrolet dealership. The lease, which required a $350 security deposit, was assigned to GMAC. A year later, Yeager sued on his own behalf and all others similarly situated, alleging that GMAC violated an Alabama law that required interest payments on security deposits. Trial court granted GMAC summary judgment, holding that the UCC does not apply to the lessor of an automobile such that it must pay the lessee interest on a security deposit under the lease agreement. Yeager appealed.
Decision Affirmed. UCC 9-207(2)(c) "does not apply to security deposits made pursuant to an automobile lease agreement." To create a security interest in reserve funds, the retail financing agreement must specifically spell out such an interest. When not specifically expressed, then no security interest is created. Since the lease agreement did not indicate creation of a security interest, none exists.
Citation Yeager v. General Motors Acceptance Corp., 1998 WL 544933 (Slip Copy, Sup. Ct., Ala.)
719 So.2d 210 (Sup. Ct., Ala., 1998)

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