Opinion ID: 783128
Heading Depth: 4
Heading Rank: 1

Heading: The Tire Replacement Reserve

Text: The Tire Replacement Reserve provides: 50 During the term of this Lease, You agree to place in a Tire Replacement Reserve an amount equal to 1.5 cents per mile that the Tractor travels. You shall authorize the Tire Replacement Reserve amount to be deducted from Your weekly Settlement by any carrier You lease the Tractor to and remitted to Success, and You and Success will require that carrier to provide You with an accounting of the deductions or Success will do so as it receives the payments. You may demand an accounting of the amounts paid by You to the Tire Replacement Reserve at any time. 51 The Tire Replacement Reserve shall be used to purchase tires for the Tractor while the Lease is in effect. During that time, Success shall pay to You interest equal to the average yield on Ninety-One-Day Thirteen Week Treasury Bills as established in the weekly auction by the Department of Treasury. Interest shall be paid to You quarterly. Upon termination of this Lease, Success shall retain out of the Tire Replacement Reserve an amount equal to the cost attributable to the amount of wear on the tires which occurred during the time this Lease was in effect. The calculation of such costs shall be based on the wear of each tire measured in one thirty-seconds of an inch of useable tire remaining at the time of termination. Because the types of tires and their costs vary the resulting calculations may also vary and it is not possible to include an exact calculation of cost in this Lease. However, Success will make available to You upon request, all information necessary to calculate the cost to You attributable to wear on your tires at any given time. The balance of the Tire Replacement Reserve, less amounts set off as provided in paragraph 21, shall be paid to You. In the event You exercise Your option to purchase, all amounts accumulated in the Tire Replacement Reserve, less amounts set off as provided in paragraph 21, shall be paid to You. All amounts to be returned to You from the Tire Replacement Reserve, after authorized deductions, shall be returned within forty-five (45) days following termination of this Lease Agreement. 52 Am. Lease Agreement, Appellants' App. at 413-14. 53 OOIDA argues that the Tire Replacement Reserve is an escrow account subject to the Set-Off provision, and that allowing the offset of certain expenses against those escrow funds before they are returned violates § 376.12(k)(2) and (6) because it turns that escrow into an all-purpose general fund. We agree that the Tire Replacement Reserve is an escrow fund; however, we disagree that the Set-Off provision turns the escrow into an all-purpose general fund or in any way violates the Truth-in-Leasing regulations. 54 Section 376.12(k)(2) requires that a lease agreement specify the items to which the escrow fund can be applied. § 376.12(k)(2). The Amended Lease Agreement provides that these funds will be applied to tire expenses during the life of the lease. In addition, the Amended Lease Agreement expressly identifies those debts that an Owner-Operator may incur during the lease period that may offset items owed to the Owner-Operator at the termination of the lease. These debts include advances for the following items: the Qualcomm unit, maintenance and repairs, licenses, permits, taxes, insurance, loss or damage to the tractor, missing or damaged equipment, and costs associated with securing possession of the tractor unit. 55 We also find that the Set-Off provision does not violate § 376.12(k)(6), which requires the return of remaining escrow funds within forty-five days. The Tire Replacement Reserve funds are required, under the provisions of the Amended Lease Agreement, to be returned to the Owner-Operator within forty-five days. The fact that certain specifically enumerated items may offset the funds returned in no way violates this provision. For these reasons, we agree with the district court that the Tire Replacement Reserve in the Amended Lease Agreement does not violate the Truth-in-Leasing regulations. 56