Evans v. Yegen Associates, Inc.

• Decision Date: 11 January 1983
• Docket Number: Civ. A. No. 81-3070-K.
• Citation: 556 F. Supp. 1219
• Parties: Kenneth R. EVANS, Plaintiff, v. YEGEN ASSOCIATES, INC., Defendant.
• Court: U.S. District Court — District of Massachusetts

556 F. Supp. 1219

Kenneth R. EVANS, Plaintiff, v. YEGEN ASSOCIATES, INC., Defendant.

Civ. A. No. 81-3070-K.

United States District Court, D. Massachusetts.

October 13, 1982.

Order January 11, 1983.

COPYRIGHT MATERIAL OMITTED

Judith K. Wyman, James R. DeGiacomo, Roche, Carens & DeGiacomo, Boston, Mass., for plaintiff.

Robert Y. Murray, Peter M. Zuk, Ramsey, Serino, Murray, & Harrington, Boston, Mass., for defendant.

Opinion

KEETON, District Judge:

This is an action for breach of contract (Count I), negligence (Count II), fraud (Count III), and unfair and deceptive acts as defined in Mass.Gen.Laws ch. 93A, § 2, for which multiple damages and attorney fees are provided in id., § 11 (Count IV). The claims arise in the context of boat-building and financing contracts. First, CSY Yacht Corporation ("CSY") and plaintiff Evans entered into a contract (the CSY-Evans contract) for CSY to build at its boat yard in Tampa, Florida, and Evans to purchase, a CSY 44-foot Walk-through Cutter. Second, Yegen Associates, Inc. ("Yegen") and plaintiff Evans entered into a contract (the Yegen-Evans contract) by which Yegen agreed to provide financing in return for a note secured by a mortgage on the boat. Later, Yegen and Evans entered into a supplemental agreement regarding closing (the Yegen-Evans closing agreement).

The case was tried before the court without a jury. Findings of fact are stated in parts I-X of this opinion. Evaluative findings and conclusions of law are stated in parts I, III-X.

I.

This case is within the diversity jurisdiction of the court, under 28 U.S.C. § 1332. Plaintiff is a citizen of Massachusetts. Defendant is a corporation formed under the laws of the State of New Jersey with its principal place of business at Mack Center Drive, Paramus, New Jersey. The original complaint named the defendant as Yegen Marine Corporation. An amendment, filed with leave of court, correctly named the defendant as Yegen Associates, Inc.

II.

The CSY-Evans contract was entered into on October 14, 1980 at a price of $183,872. On January 23, 1981, the contract was amended by "Addendum # 1" to add a roll-a-furl staysail, a jib, and a propane grill, and the price was amended to $186,566.77. The typewritten schedule of payments set forth in Addendum # 1 was this:

                  Deposit         Paid        $5,000
                  Molding         Paid       $40,000
                  Decking        2/16/81     $74,950
                  Balance        3/10/81     $66,616.77
                

Addendum # 1 acknowledged payment of $45,000, leaving a balance to be paid of $141,566.77. General Terms and Conditions of Sale of Addendum # 1, in printed form, included a provision on payments (¶ 3), which in relevant part was as follows:

The purchaser shall pay to the Builder ... in the following manner:

* * * * * *

(c) 7 days prior to the bonding and bolting of the deck to the hull, no less than 80% of the base price of the boat;

(d) Upon notification to the Purchaser, by the Builder that the boat is ready for launching, the balance of the total purchase price is due; ....

The Builder shall give prompt notice to the purchaser on the happening of the above events. The Purchaser shall have 10 days from the date of such notice to tender the appropriate payment.

Of the original price of $183,872, the amount of $33,972 was for the ABACO package. See Ex. 3. Thus the following comparison may be made:

                  Final price                              $186,566.77
                  ABACO package                              33,972.00
                                                             _________
                  Final price without ABACO package        $152,594.77
                  Addendum # 1 (staysail, jib, grill)         2,694.77
                                                              ________
                  Original price without ABACO package      149,900.00
                                                      80%  $119,920.00
                                                           ___________
                  Deposit     $5,000
                  Molding     40,000
                  Decking     74,950
                              ______
                                                            119,950.00
                                       Balance               66,616.77
                                                             _________
                                                           $186,566.77
                

This comparison supports the inference that the "base price" referred to in the provision on payments in Addendum # 1 was meant to be the original price without the ABACO package — $149,900 — 80% of which was $119,920. The sum of the payments through decking was just $30 higher — $119,950. This comparison supports also the inference that substantial additional work was to be done between the time of "bonding and bolting of the decking of the boat to the hull" and the time when "the boat is ready for launching." This inference is relevant to the meaning of "ready for launching" and "ready for commissioning," considered in part V infra.

Paragraph 7 of the printed provisions of Addendum # 1 was as follows:

Expected Delivery Date. The Builder shall deliver the subject boat, completed in accordance with the specifications to the Purchaser by the date identified as the Expected Delivery Date on the reverse side of this page, but in the event of completion being delayed through amendments or additions to the specification or any cause beyond the exclusive control of the Builder, the above Expected Delivery Date shall be reasonably deferred.

The relevant typewritten provision on the reverse side stated the expected delivery date as "March, 1981."

The typewritten notation "ABACO" gave notice that the boat was intended for leasing to ABC Limited, a Bahamas charter operation, and that it was intended that the boat meet the standard specifications of the charter company. Included in the contract price was the cost, to be borne by CSY, of delivering the boat to the Bahamas and paying the duty required on delivery.

III.

Negotiations leading to the Yegen-Evans contract commenced with Evans' application to Yegen, through its Boston office, for a loan to finance the purchase of the boat. In December, 1980, Yegen approved a loan of $137,904, at 16.75% interest over a 15-year term, to be secured by a mortgage on the boat.

Before the decking payment became due on February 16, 1981, under the CSY-Evans contract, Evans approached Yegen about temporary financing, which Yegen declined to provide. Evans borrowed from Old Colony Bank and Trust Company of Middlesex County, on a short-term basis at an interest rate one percent above prime rate, to enable him to make the decking payment of $74,950 on or about February 16, 1981.

The boat was not ready for delivery in March, 1981, the "expected delivery date" stated in the CSY-Evans contract. By April, 1981, because of cash-flow problems, CSY was pressuring Evans to make the final payment on the boat, even though it was far from complete. About April 8, 1981, Evans telephoned Paul Arvidson in Yegen's Boston office to report the pressure for payment and to discuss closing. Arvidson told Evans that Yegen would not make the loan proceeds available for closing until the boat was "complete," which Arvidson explained as "in the water and ready for commissioning."

On April 16, 1981, Arvidson sent a letter to John Van Ost, Jr. ("Van Ost") with copies to Evans and to John Lipman, who was in charge of Yegen's Tampa office, including the statement:

We will be prepared to close when the boat is completed which I understand will be later this month or early May. We will handle all the paperwork including the documentation for Mr. Evans prior to closing ....

Evans testified to an oral agreement made in April between Evans and Arvidson, acting within the scope of agency on behalf of Yegen, that Evans need not and would not go to Tampa for the closing and that Yegen would inspect the boat before closing to make certain that it was "complete" and was "in the water and ready for commissioning." Evans' testimony is strongly supported by circumstantial evidence, including memoranda made in Yegen's Tampa file regarding a telephone call from Arvidson in Boston to Yegen's Tampa office. These memoranda include entries "we inspect boat," "Evans closes in Boston," "We close w/CSY final finish stage next week," and "We to inspect 4/15/81." Also a note was made on April 13, 1982 by William Kramer, John Lipman's assistant in Tampa:

Paul A. says Evans won't close until boat is 100% complete. Boston will have documentation papers completed and signed.

I do not take this note as evidence of an agreement that all CSY's work on the boat was to have been done before closing. I do take it, however, as confirmatory of the understanding that Yegen was not to relax to any degree whatsoever the requirement that the boat be "complete" in the sense of being "in the water and ready for commissioning."

I find that Arvidson, acting within the scope of his agency on behalf of Yegen, entered into an oral agreement with Evans in April 1981 that Yegen would inspect the boat before closing and would not close until it was "complete" in the sense of being "in the water and ready for commissioning."

IV.

CSY had begun to experience financial difficulties, including cash-flow problems, in 1980 or earlier. By February 17, 1981, these problems had become so severe that after a cutback on that date, the employees remaining were about half the number that had been employed at the peak of good times for CSY (about 300). The fact that CSY was having cash-flow problems was no secret in the community. Indeed, many of the survivors of the February cutback acquired and wore red shirts on which were exhibited the CSY logo and the inscription, "I survived 2-17-81." Confessore Deposition at 49-50.

When the impact of cash-flow problems began to be felt, CSY changed its practices and placed boats in the water for the first time at an earlier stage of production than before. As expressed by Van Ost, whose testimony on this point is not contradicted and is entirely creditable, "We were putting boats into the water for probably six months before Mr. Evans' boat...