Wells Fargo Foothill Canada ULC v. Big Eagle Hydro-Vac Inc. et al., [2015] A.R. TBEd. SE.003

• Judge: Yamauchi, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: August 20, 2015
• Citations: [2015] A.R. TBEd. SE.003;2015 ABQB 546

Wells Fargo v. Big Eagle Hydro-Vac, [2015] A.R. TBEd. SE.003

MLB being edited

Currently being edited for A.R. - judgment temporarily in rough form.

Temp. Cite: [2015] A.R. TBEd. SE.003

Wells Fargo Foothill Canada ULC (plaintiff) v. Big Eagle Hydro-Vac Inc., Big Eagle Limited Partnership, Big Eagle Hydro-Vac (North) Inc., and Big Eagle (North) Limited Partnership (defendants)

(1501 06320; 2015 ABQB 546)

Indexed As: Wells Fargo Foothill Canada ULC v. Big Eagle Hydro-Vac Inc. et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Yamauchi, J.

August 31, 2015.

Summary:

Wells Fargo Foothill Canada ULC held a perfected security agreement over the defendants personal property "whether now owned or hereafter acquired or arising and wherever located", including goods, equipment and fixtures. The defendants entered into equipment lease agreement with Gator Frac Heating and Rentals LLC. The leases were not registered with the Alberta Personal Property Registry. Gator Frac and the defendants exercised their rights under the leases to terminate the leases early. Before the leased equipment was returned to Gator Frac, an order issued placing the defendants into receivership. By virtue of the definitions in the Personal Property Security Act, the leases created security interests as they were leases for a term of more than one years. Section 3(2)(a) of the Act provided that it applied to "every transaction that in substance creates a security interest, without regard to its form and without regard to the person who has title to the collateral." The receiver applied for directions as to whether Wells Fargo's security agreement or Gator Frac's leases had priority. Gator Frac asserted that the termination of the leases took the matter out of the priority and enforcement provisions contained in the Act. It further asserted that the leased units were "serial number goods" as defined in the Personal Property Security Regulation.

The Alberta Court of Queen's Bench held that the leased equipment arguable fell within the definition of "serial number goods". However, registration as serial number goods was not required for Wells Fargo to maintain its priority position. Gator Frac did not register notice of its security interest. Therefore, it did not perfect it security interest by serial number or otherwise. Accordingly, there was no "competition". Neither did Gator Frac perfect its security interest through possession under s. 24 of the Act. The defendants had "rights in the collateral" the moment it took possession of the leased equipment. It was at that moment that Wells Fargo's security attached. Anything that happened thereafter as between the defendants and Gator Frac could not affect Wells Fargo's security interest. Whether they terminated either of the lease agreements or one expired by its terms did not affect Wells Fargo's perfected security interest. By using the leases' termination provisions, the defendants and Gator Frac were attempting to defeat Wells Fargo's interest and circumvent the Act. That type of contracting out was not permitted. The receiver was entitled to dispose of the leased equipment in accordance with the receivership order and distribute the proceeds of sale in accordance with the terms of the distribution order.

Personal Property - Topic 6012.1

Security interests - General - Perfection of security interest - See paragraphs 34 to 62.

Personal Property - Topic 6209.1

Security interests - Priorities - After acquired property - See paragraphs 34 to 62.

Personal Property - Topi 6216

Security interests - Priorities - Lessor's interest - See paragraphs 34 to 62.

Personal Property - Topic 6220.1

Security interests - Priorities - Registered v. unregistered interest - See paragraphs 34 to 62.

Personal Property - Topic 6220.2

Security interests - Priorities - Serial number goods - See paragraphs 34 to 62.

Counsel:

Caireen E. Hanert (McMillan LLP), for the plaintiff/applicant, Wells Fargo Foothill Canada ULC;

Dean A. Hutchison (MacPherson, Leslie & Tyerman LLP), for the respondent, Gator Frac Heating and Rental, LLC;

Jeffrey Oliver (Gowling LaFleur Henderson), for the Receiver-Manager, Deloitte Restructuring Inc.

This application was heard on August 20, 2015, by Yamauchi, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following reasons for decision on August 31, 2015.