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UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA In re NFC FINANCIAL,                                                                                      No. 97-13825      Debtor(s). ______________________________________/ Memorandum of Decision I. Introduction
     Prior to its Chapter 11 filing, debtor NFC Financial was in the business of leasing communications equipment. Working closely with Nextel, Inc., NFC would purchase the equipment from Nextel and lease it to the customers. NFC obtained the funds for the transaction from Unistar Leasing or other leasing companies, to whom NFC would assign the leases. NFC was in essence a middle man between Nextel and funding sources such as Unistar who purchased the leases.      The matter now before the court is the determination of debt between NFC and Unistar. The latter, asserting that it is a creditor of NFC, filed a large claim. NFC agrees that it owes Unistar a considerable sum, but argues that Unistar owed it much more. Pursuant to FRBP 3007, the matter is heard as an adversary proceeding.      Prior to the trial, the parties stipulated that Unistar has a claim against NFC in the amount of $286,000.00, of which $41,000.00 is entitled to priority. The sole remaining issue is whether Unistar owes anything to NFC. For the reasons stated herein, the court concludes that it does, and that the amount is greater than Unistar's claim.
II. Issues
     The dispute between NFC and Unistar is over the sharing of insurance charges. When customers signed the lease agreement with NFC, they agreed that they would either provide proof of insurance or pay a fee to cover the risk of loss. A surprising number of customers either failed to obtain proof of insurance or affirmatively asked NFC to provide insurance.      NFC takes the position that it had an agreement with Unistar whereby the fees paid by customers who did not provide proof of insurance would be collected by Unistar (to whom NFC assigned the lease) and shared with NFC. Unistar makes the following arguments:
     1. There was never any such agreement.
     2. If there was such an agreement, it covered only those customers who affirmatively requested coverage, and not those who failed to provide proof of their own insurance.
     3. If there was such a contract, it was illegal.
III. Existence of a Contract
     On or about October 22, 1996, an agreement was reached between Glen Fagerlin, President of NFC, and David Leone, President of Unistar, whereby Unistar would charge customers who did not provide proof of their own insurance at the rate of .0088, or $6.16 per unit per month.⁽¹⁾ [2] Unistar would keep .0025, or $1.75 per month, and would pay NFC the difference.      Incredibly, Unistar disputes this fundamental fact despite the following:
     1. Both Fagerlin and Leone agree that there was such an agreement. Leone, who no longer works for Unistar and appears to have no axe to grind, testified clearly:
     Q. Did you reach a final agreement regarding the sharing of insurance premiums?      A. Yes, we implemented a program.
     2. On October 22, 1996, Fagerlin sent Leone a written memo documenting the terms of the agreement and ending: "Let me know if there are any problems with the above." Unistar raised no problems.
     3. On February 12, 1997, Fagerlin sent Leone a detailed memo noting that "[o]ur agreement is that you will pay NFC for the difference between your normal insurance charge and the actual charge billed. I have estimated the difference on the report at $3.25/unit/month." The very next day, far from repudiating anything, Leone sent a reply to Fagerlin saying, " Got your package today. $5.00 per unit billed, $3.25 split to you on all monies collected." The reply also noted that Unistar would be hiring a "temp" to calculate the amount due to NFC.
     There is considerable other evidence, all completely consistent with the agreement. There is nothing in the documentary record which questions the existence of the agreement. The court has no trouble at all finding the agreement exactly as alleged by NFC.      The court believes that the current dispute is the result of two factors. First, Unistar terminated Leone's employment and appears to be in denial as to his acts while he was its president, even though both his superior, Unistar's chairman, and his subordinates were either informed or actively involved in his dealings with NFC.      Second, and more significant, Unistar's computer was unable to identify how much money was being generated from insurance charges or identify what insurance charges were the result of leases purchased from NFC. Leone acknowledged this when he noted that a "temp" was necessary to figure out how much was owed to NFC. This accounting defect created a situation where nobody could keep track of what was due to NFC while the amount kept growing. If Unistar had been able to produce good contemporaneous records, it could have tried to renegotiate the agreement if it seemed too lucrative for NFC. Instead, it allowed the amount to grow to the point where its only alternative to paying a large amount to NFC was to deny the existence of the agreement. None of this was NFC's fault.
IV. Scope of the Contract
     As a fallback position, Unistar argues that the agreement was that NFC would only share in the insurance revenue for those leases where NFC obtained the customer's request for insurance and not those cases where the customer was charged in accordance with the lease terms due to its failure to provide proof of insurance. Again, the court sees abundant evidence to support NFC's postition and no evidence to support Unistar's version. Fagerlin's memo to Leone of February 12, 1997, estimates an amount due where it obtained the customer's request for insurance and then notes, "I expect that an amount equal to or greater than this would reflect the insurance you added to customers that did not provide proof of insurance." Leone's response confirmed "$3.25 split to you on all monies collected."
V. Damages
     The much-delayed accounting was finally done last month. It shows that from October 1, 1996, to March 20, 1999⁽²⁾ [3], Unistar received $723,521.16 in insurance revenue on leases purchased from NFC. According the their agreement, NFC is entitled to 65% ($3.25 divided by $5.00 = .65). Unistar therefore owes NFC $470,288.75, less the amount NFC owes it. NFC is also entitled to 65% of all future insurance revenue, and costs of suit.
VI. Legality
     The court finds unpersuasive Unistar's defense that the contract was illegal. The fees involved are not truly an insurance premium, but rather a risk-sharing agreement between lessee and lessor incidental to the lease. Insurance statutes are not intended to regulate this sort of arrangement. 20^th Century Ins. Co. v. Liberty Mut. Ins. Co., 965 F.2d 747, 752n2 (9^th Cir.1992); Truta v. Avis Rent A Car System, Inc. (1987) 193 Cal.App.3d 802, 814.
VII. Conclusion
     For the reasons stated above, NFC shall have judgment as set forth in section V above. This memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a) and FRBP 7052. Counsel for NFC shall submit an appropriate form of judgment forthwith.
Dated: April 1, 1999                                                                                      ________________________________                                                                                                                                  Alan Jaroslovsky                                                                                                                                  U.S. Bankruptcy Judge
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1. The parties later agreed that the charge would be $5/unit/month.

2. The declaration of Cynthia Cook erroneously identifies this latter date as March 20,