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Banking Law Keyed to Carnell, 7th Ed.
Brown v. AVEMCO Investment Corp.
Citation:
603 F.2d 1367 (1979)Facts
In 1972, Robert Herriford borrowed $6,500 from AVEMCO, executing a promissory note secured by an airplane. The security agreement prohibited leasing the plane without AVEMCO’s written consent and contained an acceleration clause allowing AVEMCO to demand full payment upon breach. In 1973, Herriford leased the plane to the plaintiffs with an option to purchase one-fourth ownership each for $1 upon full payment of the mortgage. Plaintiffs became co-insureds on the airplane, and copies of the policy were sent to AVEMCO. For two years, regular payments continued on the note. In July 1975, plaintiffs advised AVEMCO they had exercised their option and tendered $4,859.93 to pay off the debt. AVEMCO refused this offer and instead accelerated the loan, demanding $5,078.97. When plaintiffs maintained their offer, AVEMCO repossessed the plane and sold it for $7,000. Plaintiffs then sued for conversion, but the jury found for AVEMCO. The district court’s instructions allowed the jury to find AVEMCO’s acceleration lawful based solely on the technical breach of leasing without consent, without requiring a good faith belief that the security was impaired.
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