857 F.2d 4 (1st Cir. 1988), 87-2068, Fischer v. Bar Harbor Banking and Trust Co.
|Citation:||857 F.2d 4|
|Party Name:||Dr. E.G. FISCHER, Plaintiff, Appellant, v. BAR HARBOR BANKING AND TRUST COMPANY, Defendant, Appellee.|
|Case Date:||September 09, 1988|
|Court:||United States Courts of Appeals, Court of Appeals for the First Circuit|
Heard May 2, 1988.
Gilbert P. Verbit, Boston, Mass., for plaintiff, appellant.
Thomas M. Brown with whom John F. Barnicle and Eaton, Peabody, Bradford & Veague, Bangor, Me., were on brief, for defendant, appellee.
Before CAMPBELL, Chief Judge, COFFIN, Circuit Judge, and FUSTE, [*] District Judge.
FUSTE, District Judge.
Plaintiff-appellant, Dr. E.G. Fischer ("Fischer"), appeals from a summary judgment of the district court dismissing his diversity action for slander of title against the defendant-appellee Bar Harbor Banking and Trust Company ("Bank"). Fischer v. Bar Harbor Banking & Trust Co., 673 F.Supp. 622 (D.Me.1987). Fischer contends the Bank committed this misdeed in asserting a lien on a sailboat being constructed for him by Ocean Cruising Yachts of Maine, Inc. ("OCY"). For the reasons set forth below, we affirm.
In 1983, Fischer entered into a contract with OCY for the construction of a custom-built sailboat at a total cost of $172,000. Under the terms of the contract, which required periodic progress payments, title would not pass from OCY to Fischer until Fischer paid the full purchase price and until OCY made delivery to him. At the time of contracting, Fischer was neither aware of any loan arrangements between OCY and the Bank, nor of any lien or security interests the Bank held against OCY property. We note that Fischer did not require OCY to provide a performance bond, a requirement often imposed by commercially sophisticated customers in similar circumstances.
By March 27, 1984, Fischer had made $112,125 in progress payments to OCY. Nonetheless, OCY, whose operations were financed by the Bank since 1979, was experiencing financial difficulties, particularly with its cash flow. To deal with this, in February 1984, the Bank consolidated two existing $100,000 loans to OCY into one loan. As guarantee for this new single obligation, OCY executed in favor of the Bank a promissory note for $200,000 and entered into a security agreement over four hulls in progress, including Fischer's sailboat hull. See Me.Rev.Stat.Ann. tit. 11, Secs. 9-101-113. On March 12, 1984, the Bank filed with the Maine Secretary of State the financing statement in order to perfect its security interest. 1
Fischer remained unaware of OCY's relation with the Bank and its financial troubles until the spring of 1984. In May, the president of OCY, Henry R. Hinckley III, informed Fischer that OCY was in serious financial trouble, its loan payments to the Bank were overdue, and the Bank claimed a lien on four sailboats, including his craft-in-progress. On May 19, 1984, Fischer, Hinckley, and the president of the Bank, Mr. Avery, met in an effort to resolve the situation. At that meeting, the Bank would not agree to release its security interest on the four boats unless OCY made a $200,000 loan payment. The Bank confirmed this position in writing, with a June 13, 1984 letter to Fischer from its vice-president and treasurer, John Reeves, stating the Bank would release its lien on Fischer's craft only upon a $50,000 payment. The Bank also sought $50,000 payments from each of the other three boat owners. The attorney for OCY, reacting to OCY's financial troubles, in a May 21, 1984 letter to the four prospective boat owners proposed a payment plan, and agreed that the Bank's lien was superior to their interests in the hulls.
Fischer later responded with a letter to the Bank drafted by his lawyer, contending that he was a "buyer in ordinary course of business" and, therefore, took free and clear of any security interest held by the Bank. Me.Rev.Stat.Ann. tit. 11, Sec. 9-307(1). Thereafter, in July 1984, Hinckley informed Fischer that OCY was terminating operations. Fischer requested the removal of his boat to another shipyard, which was accomplished without the Bank's interference. Construction was completed in August of 1984. In the same month, Hinckley signed a bill of sale transferring title in the boat from OCY to Fischer that contained the following proviso: "Manufacturers Warranty and Title is Given Subject to Bank Lien." This condition was included at the advice of the attorney for OCY. The Bank was not aware of this inclusion.
On May 24, 1985, Fischer filed suit in federal court. On October 25, 1985, the Bank filed termination statements with the Maine Secretary of State regarding the UCC secured interest on the four boats. On June 5, 1986, the Bank filed with the district court a release of its lien on Fischer's boat.
The focus of Fischer's case for damages was that the Bank's March 12, 1984 UCC financing statement covering his hull and its continued assertion of a lien constituted slander of title to the sailboat. He contended that the Bank should have known that he was a buyer in ordinary course, and that the Bank was only trying to extract or extort $50,000 from him. Fischer also sought a declaration that the Bank had no valid lien. The Bank answered that the lien was asserted in good faith and before title passed to Fischer, or, in other words, that it possessed the...
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