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5. Southern Pacific
On December 28, 1984, Southern Pacific agreed to purchase
vending machine leases between Pac-Tech and various third
parties. Monthly rentals were to be collected by Pac-Tech, which
would in turn remit them to Southern Pacific. In early 1985,
Southern Pacific, pursuant to the agreement, purchased
assignments to approximately 40 leases. Each lease was for a
term of 5 years and provided for $437 monthly rental payments.
Each lease provided that, in the event of default, the entire
balance due under the lease could be accelerated. Mr. Bowden
guaranteed the payment of the leases.
On June 30, 1986, Southern Pacific lent $554,417.61 to Pac-
Tech. The revenue from the vending machines, however, was not
sufficient to make the monthly lease payments. Consequently, the
deficiency grew each month. At some point, the leases went into
default.
Subsequently, Southern Pacific renegotiated the debt,
including the pledge of approximately 100 vending machines as
collateral. Southern Pacific filed a security interest for each
vending machine.
Christopher Forman (Mr. Forman), then acting president of
Southern Pacific, believed that it had purchased a stream of
payments on individual leases. Mr. Forman thought that Southern
Pacific was entitled to collect all or a portion of the payments
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