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Sustainable Energy Fund v. Hacag, LLC

United States District Court, M.D. Pennsylvania

July 27, 2015

SUSTAINABLE ENERGY FUND, Plaintiff,
v.
HACAG, LLC and ZORM, LLC, Defendants.

MEMORANDUM

A. RICHARD CAPUTO UNITED STATES DISTRICT JUDGE

Presently before the Court is Defendant Zorm 2009, LLC’s (“Zorm”) Motion for Summary Judgment on Plaintiff Sustainable Energy Fund’s (“SEF”) replevin claim and on Zorm’s declaratory judgment counterclaim against SEF (Doc. 25). Zorm seeks a finding that it has a superior security interest in a particular solar panel system, and therefore SEF does not have the right to replevy the solar panel system. Also before the Court is Plaintiff SEF’s Motion for Summary Judgment against Defendants HACAG, LLC (“HACAG”) and Zorm (Doc. 31). Plaintiff SEF seeks judgment in its favor on the requests contained in its complaint (Doc. 2): replevin and possession of the solar panels at issue. Because the material facts underlying whether the solar panels are fixtures or personal property remain in dispute, summary judgment is not warranted in favor of either party, and both motions for summary judgment will be denied.

I. Background

A. Factual Background

Plaintiff is Sustainable Energy Fund (“SEF”), a fictitious name for the PP&L Sustainable Energy Fund, a nonprofit organization with a principal place of business in Allentown, Pennsylvania. (Doc. 32, ¶ 1; Doc. 38, ¶ 1.) Defendant HACAG is a limited liability corporation, which until 2014 was the owner of real estate located at 22 Faith Drive, Hazleton, Pennsylvania (“Hazleton Property”). (Doc. 32, ¶ 2; Doc. 38, ¶ 2.) Defendant Zorm 2009 (“Zorm”) is a New Jersey limited liability company whose sole member is Oritani Bank. (Doc. 25-2, ¶ 3; Doc. 30, ¶ 3.)

The dispute giving rise to this action concerns a 55.5 kw photovoltaic solar electric generation panel system (“solar panels”) located at the Hazleton Property. (Doc. 32, ¶ 4; Doc. 38, ¶ 4.)

On April 28, 2008, Oritani Bank (which is the sole member of Zorm 2009, LLP) extended a loan to HACAG in the amount of $1, 920, 000. (Doc. 25-2, ¶ 4; Doc. 30, ¶ 4.) A copy of this note is attached to Zorm’s Statement of Facts as Exhibit C. (Doc. 38, Ex. C.) In exchange for this loan, HACAG executed a mortgage in favor of Oritani Bank on the Hazleton Property. (Doc. 32, ¶ 6; Doc. 38, ¶ 6.) A copy of this mortgage is attached to Zorm’s Statement of Facts as Exhibit D. (Doc. 38, Ex. D.) The mortgage was recorded in the Luzerne County Recorder of Deeds on May 5, 2008. (Doc. 32, ¶ 7; Doc. 38, ¶ 7.)

The mortgage was assigned from Oritani Bank to Zorm effective November 13, 2013, and recorded on December 18, 2013. (Id.) The mortgage is attached to Zorm’s Statement of Facts as Exhibit E. (Doc. 38, Ex. D.)

On or about December 15, 2010, Plaintiff SEF made a loan to Defendant HACAG, which HACAG used to finance the purchase and construction of the solar panels. (Doc. 32, ¶ 8; Doc. 38, ¶ 8.) A copy of this loan agreement is attached to Zorm’s Statement of Facts as Exhibit 1. (Doc. 32, Ex. 1.) Prior to executing the loan agreement, HACAG submitted an application for the loan to SEF, which SEF approved. (Doc. 32, ¶ 10; Doc. 38, ¶ 10.) The loan application, loan approval, and commitment letter are attached to the SEF Statement of Facts as Exhibits 2, 3, and 4, respectively. (Doc. 32, Exs. 2, 3, 4.)

The parties dispute the purpose of the SEF loan. SEF asserts that the purpose of this loan was “to provide a first lien on the Solar Panels.” (Doc. 32, ¶ 10.) Zorm asserts that the purpose of the loan “was to provide financing for HACAG to install the Solar Panels on the property.” (Doc. 38, ¶ 10.) Furthermore, Zorm states that the document that allegedly grants SEF a lien on the solar panels is unsigned. (Id.) SEF contends that HACAG granted SEF a security interest in the solar panels to induce SEF to make the loan. (Doc. 32, ¶ 10.) SEF maintains that it filed a UCC-1 with the Pennsylvania Department of State to perfect its interest in the solar panels. (Doc. 32, ¶ 12.) A copy of this form is attached as Exhibit 6 to SEF’s Statement of Facts. (Id., Ex. 6.)

Zorm asserts that this form does not demonstrate that SEF perfected its interest in the solar panels. (Doc. 38, ¶ 12.) Rather, Zorm contends that SEF did not perfect its interest in the solar panels. (Id.) In order to perfect its interest, SEF would have had to record its interest in the real property records, which it failed to do. (Id.)

SEF and Zorm agree that SEF did not file the UCC-1 form with the Luzerne County Recorder of Deeds. (Doc. 32, ¶ 13; Doc. 38, ¶ 13.) SEF asserts that it did not need to do so in order to perfect its interest.

Sometime after receiving the SEF loan, HACAG installed the solar panels on the Hazleton property. (Doc. 32, ¶ 14; Doc. 38, ¶ 14.)

In 2014, Zorm became the owner of the Hazleton Property, when HACAG delivered a deed-in-lieu-of foreclosure. (Doc. ...


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