Carlson v. Giacchetti Case Brief Summary | Law Case Explained

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Carlson v. Giacchetti, 616 N.E.2d 810 (1993)
Theoretically, the distinction between a security interest and a lease is clear. A security interest secures payment or performance of an obligation. In a lease, the lessee gives consideration for the temporary use of property. But sometimes, the line gets blurry, as in the case of Carlson versus Giacchetti.
John Carlson produced, sold, and leased machines used in auto repair. Carlson contracted to lease a chassis liner, used to remove dents, to Richard King, who owned a body shop. The contract called for King to make payments over 60 months. During the lease term, King was responsible for repairs to the machine. Title remained with Carlson. King was to return the machine at the lease’s end.
King defaulted after making the two required advance payments. He then went out of business and sold the chassis liner to Louis Giacchetti. Carlson didn’t file a financing statement giving public notice of his interest in the machine until after the sale, so Giacchetti lacked notice of Carlson’s interest.
Carlson sued Giacchetti for conversion in Massachusetts state court. The trial court found for Giacchetti. The court reasoned that Carlson’s arrangement with King wasn’t a true lease, but rather a sale to King with Carlson retaining a security interest. Further, because Carlson waited too late to file the financing statement, Giacchetti took the liner free of Carlson’s interest. Carlson appealed to the Massachusetts Court of Appeals.
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