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Bulletin Board Complaint
Balboa Capital, Irvine, California

"Evergreen Lease"

“Everything I see with regards to this transaction is above board...standard operating procedure."

Balboa Capital spokesman

e-mail on May 31st:

"In March of 01, my partner and I signed a leasing agreement with Balboa Capital to pay for the purchase and installation of two Capstone Micro-turbine Generators to be installed in our mobile home park. The cost of the turbines, installation, and ancillary equipment was to be $127,627. We subsequently spent another $80,000 of our park income to effect the installation.

"We were scammed. Our intention was to use the leasing mechanism to pay for the outright purchase and installation, which is how the lease was sold to us by Balboa.

"We made the 48th and last payment in March and two subsequent payments by mistake: a total of 50 payments of $3298 or $164,900.

"On May 15, we got a letter from Michele Miller at Balboa: 'The lease is a fair market value lease that allows the lessee to purchase or return the equipment at the end of the term.” “Per the terms of the agreement, the lessee is required to send written notice of intent via certified mail to our corporate office'.”

John Byk, partner, Reche Canyon Mobile Estates, a California Partnership

Colton, California

Balboa Contract, Lease paragraph 3, page 1 : “Each lease may be terminated by lessee at end of the base term if one hundred and twenty (120 days) prior to the end of the base term, written notice of such termination is delivered to lessor (by certified mail). Each lease may be terminated by lessor at the end of the base term if at least 60 days prior to the end of the base term, written notice of such termination is delivered to the lessor by certified mail. Otherwise the term of the lease shall automatically be extended for six months following the initial term at the rent stated in the respective schedule, and shall renew thereafter for successive three month periods until notice of termination is provided by lessee.”

Mr. Byk explained they were not counting the lease payments, and made the two "extra" payments in error. He was originally told by the Balboa salesman the purchase option was $1.00.

Leasing News asked him to provide copies of the contracts, plus the invoices, and any information he might have to substantiate his complaint.

After receiving the documents, there was no purchase option provided, and we explained this was an "Evergreen Lease." The 48 month factor was .0258479. The California use/sales tax was charged monthly, so there was no difference in payment 49 and 50 from the others, nor any notation on the invoice as to the payment number or outstanding balance of the initial contract.

In obtaining the two copies of two invoices, the property management person that actually issued the checks, Lewis Lee of LML Property Management Company, said, “The previous 48 payments were sent directly to Wells Fargo Equipment Finance:”

Leasing News explained that "Evergreen Contracts" were not uncommon at Balboa Capital ( see Balboa Capital spokesman comments), that Balboa Capital salesmen were often remunerated for the "Evergreen" clause or "Fair Market Value" or "guaranteed purchase upon terms (PUT)." We thought the only possibility he might have is a case regarding with the Balboa Capital salesman and his presentation, and to discuss it with an attorney; in the meantime, we would see if we could negotiate a compromise on the matter.

Leasing News contacted Patrick Byrne, CEO of Balboa Capital on June 2.

On June 8th, a "Balboa Capital spokesman" replied by e-mail after receiving the material from Mr. Byrne, stating the salesman involved "... wrote a FMV lease and was paid upfront for a portion of the assumed residual as per our compensation policy. He also might not have mentioned the evergreen aspect of the lease but it is clearly spelled out in the agreement. It is also unfortunate that a disgruntled salesman is pulled into this and his one sided comments reflect adversely on Balboa.

"Secondly, our policy is to send a certified, signature required, letter to the lessee 9 months prior to the expiration of the lease asking the lessee to confirm his end of term option in writing as per our agreement...99.9% of the lessees respond to this certified letter and they are reminded of the need to send us notice as per the agreement. This lessee received the letter but did not issue the notice.

"We can debate evergreen all day but its existence in the marketplace is fairly standard to some level. You might argue that a 6 month renewal is too harsh but I have looked at some documents that have it for 12 months. CPL (Colonial Pacific Leasing) had it and like Balboa (they) did everything (they) could to make the lessee aware of his need for notification... The point being, it exists in the lease financing marketplace and is more wide spread than you may be aware.

"What I am trying to understand with regard to your communication to Pat is what you are asking us to do? Everything I see with regards to this transaction is above board...standard operating procedure."

At this time, Mr. Byk had spoken to an attorney, who confirmed that there was no purchase option in the lease, and with the news that the salesman was paid for the "extra payments," it was discussed that Mr. Byk would help sell the unit, and Leasing News would try to resolve the matter and perhaps apply the two payments made to the automatic renewal of six payments, as per the contract.

In the course of e-mail, Mr. Byk wrote: "In that the 30KW has been uneconomic and was disconnected more than two years ago and that the 60KW has not been turned on (not operating) for over a year (however, both turbines are operational), and because we have no intention of reactivating them, we are not interested in buying the equipment."

During the next few weeks, Leasing News attempted to negotiate, starting off with a four more payment offer, then six months, and nine months, basically our idea and not discussed with Mr. Byk, as the goal was to get some dialogue going. Nothing from Balboa's end. We suggested Mr. Byk may be able to help sell the equipment, so Balboa Capital could re-coop the money they were claiming was due. He was able to get the unit on eBay and demonstrate their value, which the sale would go full to Balboa, as he understood he could not legally sell them. Three management personnel, including Patrick Byrne, were included in the e-mails.

June 21, the Balboa spokesman wrote, "To be clear on what our lessee is communicating to you, "He states he is willing to let Balboa keep the two extra payments and the equipment, which he says Balboa can sell via eBay.

"He has not declared that to us and not return the assets or made arrangements to return the assets. His message to our portfolio team is quite a bit different. Can you please have him put his intent in writing to us, as we have asked all along, so that I can at least have a clear understanding of his intent?"

June 21, Mr. Byk responded by e-mail, including sending overnight:

"Dear ******

"If you will acknowledge the following in a letter to me, tell us where you want the equipment listed on the Valley Detroit Diesel invoice date of 02/19/02 to be delivered, and return the two leasing payments we made after the lease expired; we will hire the contractor who installed the equipment to disconnect it for shipping and a shipping company that Capstone Turbine recommend to transport the equipment to you. Last Friday, I called our contractor who will go to the Park to price the job for us.

"Both turbines have been inoperative for several years. We turned off the system when the cost of natural gas was so high as to generate a loss. I think that the 30KW unit was replaced by Capstone over two years ago and has had little if any use.

"My address is:

Jon Byk


"Jon Byk"

Leasing News received this from Balboa Capital:

“All communication whether written or verbal regarding this matter as of today, June 21, 2006 at 12:15pm est, is considered to be "Confidential and Off the Record". It is our policy at Balboa to restrict "On the Record" communication to news sources or news reporters unless and until the response has been reviewed and approved by our legal counsel”

June 28th the law firm of Darling & Robertson send the following:


Leasing News has attempted since July 5, after receiving the "demand" letter to obtain a "formal statement" from Balboa Capital on the matter. Follow-up was made the next week, noting that Leasing News would be printing the complaint. No response has been made to date.

Copy of documents sent by Reche Canyon Mobile Estates

(Note there are 21 pages and this may be a long download on your system:)