USCA1 Opinion UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT ____________________ No. 93-1136 EVERGREEN MARINE CORPORATION, Plaintiff, Appellant, v. SIX CONSIGNMENTS OF FROZEN SCALLOPS, IN REM, ET AL., Defendants, Appellees. ____________________ APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Robert E. Keeton, U.S. District Judge] ___________________ ____________________ Before Torruella, Selya and Cyr, Circuit Judges. ______________ ____________________
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7/26/2019 Evergreen v. Six Consignments, 1st Cir. (1993)
Gloucester's after-acquired inventory. The district c
entered summary judgment for the Banks on Evergreen's clai
conversion. As we conclude on the present record that Ever
held a superior claim to the scallops, we vacate the judgment
remand for further proceedings.
I I
FACTS FACTS _____
On various dates in 1991, Evergreen contracted
Towamarin, Ltd. to carry six consignments of frozen scallops
Tokyo, Japan to Port Elizabeth, New Jersey. Evergreen there
issued order bills of lading, designating Gloucester as "No
Party."1 When the scallops arrived at Port Elizabeth, Glou
____________________
1An order bill of lading is a negotiable instrument, is by the carrier to the shipper at the time goods are loaded ab ship, which serves "as a receipt that the carrier has rece [the] goods for shipment; as a contract of carriage for t goods; and as documentary evidence of title to those goo
ter represented that it held title to the scallops but that
bills of lading were still in transit. For present purposes,
7/26/2019 Evergreen v. Six Consignments, 1st Cir. (1993)
(under Rule 56(c), all reasonable inferences must be drawn
favor of party opposing summary judgment).
Evergreen released the scallops to Gloucester, wit
taking up the original bills of lading, upon Gloucester's ex
tion of certain indemnity and guarantee agreements ("letter
guaranty"). The letters of guaranty included Gloucest
representations of title to the scallops under the bill
lading; its promise to produce the bills of lading "as soo
[the bills] shall have arrived and/or come into [Glouceste
possession;" and its agreement to defend and indemnify Ever
____________________
Fuentes v. Sea-Land Services, 665 F.Supp. 206, 209 (S.D. _______ __________________ 1987). The shipper sends the bill of lading to the inte recipient of the goods (consignee); upon notification that
goods have arrived, the consignee presents the bill tocarrier at the delivery port, and receives the goods in ret
Because an order bill is negotiable, however, the consignee"notify party" designated on the bill of lading is not necess
ly the holder of the bill at the time and place of deli Under these circumstances, subject to extremely limited ex tions, a carrier which delivers to a "notify party," or to
other person, without taking up and canceling its order"remains liable to anyone who has purchased the bill for valugood faith, before or after the improper delivery." G. Gilmo
C. Black, Admiralty 110-12 (2d ed. 1975). See also Al _________ ___ ____ _ Chemical Intl. Corp. v. Companhia de Navegacao Lloyd Brasile ____________________ ___________________________________ 775 F.2d 476, 481-82 (2d Cir. 1985) (discussing obligation
7/26/2019 Evergreen v. Six Consignments, 1st Cir. (1993)
carrier in maritime documentary transaction), cert. denied,_____ ______
U.S. 1099 (1986).
3
against third party claims.2 Shortly after issuing the let
of guaranty and removing the scallops to its Massachusetts
house, Gloucester became insolvent; the scallops were seize
the Banks pursuant to their security interests in Gloucest
after-acquired inventory.
On February 7, 1992, a third party, Raiffeisen
Lekkerkerk Holland ("Dutch Bank"), notified Evergreen tha
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2The executed letters of guaranty provided:
The above goods were shipped on [the listed vessel] by . . . TOWAMARIN, LTD. . . . (and consigned to us) but the relevant Bill(s) of Lading have not arrived. We hereby request you to deliver such goods to THE GLOU- CESTER CORPORATION (us) without production of the Bill(s) of Lading. In consideration of your complying with our above request we hereby agree as follows:
1. To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability loss or damage of whatsoever nature which you may sustain by reason of delivering the goods to US . . .
7/26/2019 Evergreen v. Six Consignments, 1st Cir. (1993)
2. In the event of any proceedings being commenced against you or any of your servants or agents in con- nection with the delivery of the goods as aforesaid to provide you or them from time to time with sufficient funds to defend the same.
* * * *
4. As soon as all original Bill(s) of Lading for the above goods shall have arrived and/or come late into our possession, to produce and deliver the same to you whereupon our liability hereunder shall cease.
* * * *
/s/ THE GLOUCESTER CORPORATION
4
held the true bills of lading for the six consignments of s
lops.3 Facing liability to Dutch Bank, Evergreen sued
Banks, Gloucester, and the scallops, seeking recovery of
scallops or tort damages for their value.4 See Evergreen Ma ___ ___________
Corp. v. Six Consignments of Frozen Scallops, 806 F. Supp._____ ____________________________________
(D. Mass. 1992). The district court denied admiralty juris
tion and dismissed Evergreen's Rule D claim against the scal
in rem. Upon affirming its diversity jurisdiction, however,__ ___
court applied Massachusetts law to Evergreen's remaining cla
7/26/2019 Evergreen v. Six Consignments, 1st Cir. (1993)
3Lekkerkerk is identified as "Lekkekerk" in the Ba brief, and as "Lekkerrerk" in Gloucester's complaint and
district court opinion. See 806 F. Supp. at 293. The B ___ assert, without contradiction, that "although [Lekkerkerk]
somewhat similar name, [it] is an entirely different bank"defendant-appellee Cooperative Centrale Raiffeisen-Boeren
Bank.
4Evergreen's amended complaint included counts (1) aga Gloucester, for misrepresentation and breach of contr (2) against the scallops, in rem, under Supplemental Admir
__ ___ Rule D; and (3) against the Banks, for conversion and reple A default judgment was entered against Gloucester on December
1992, for failure to defend the action.
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7/26/2019 Evergreen v. Six Consignments, 1st Cir. (1993)
its temporary release of possession, pending a consign
promised production of the bills of lading, is not a "sale"
an entrustment. See Mass. Gen. L. ch. 106, 2-403(3) (" ___________ ___
trusting' includes any delivery and any acquiescence in reten
of possession regardless of any condition expressed between
parties to the delivery or acquiescence and regardless of whe
the procurement of the entrusting or the possessor's disposi
____________________
7Indeed, the summary judgment record in the presentindisputably demonstrates that there can have been no "contra
within the meaning of Article 2: "In this Article unlesscontext otherwise requires 'contract' and 'agreement' are li
to those relating to the present or future sale of goods."Gen. L. ch. 106, 2-106(1). Moreover, not only does a fu
sale of goods require a contract of sale, id., but a "'pre ___ sale' means a sale which is accomplished by the making of
contract," id. (emphasis added). Since the express terms of________ ___
letters of guaranty flatly belie Evergreen's capacity to ef ________ either a present or future sale of scallops in which Glouce already purportedly held title by virtue of its claim to
negotiable bills of lading in transit, there could be no cont or agreement of sale of any kind between Evergreen and Glou ter. See also id. 1-201(3),(11). ___ ____ ___
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7/26/2019 Evergreen v. Six Consignments, 1st Cir. (1993)
title, nor did she have authority to pass title," and puta
____________________
8The Banks do not benefit from U.C.C. 2-403(2),provides that "any entrusting of goods to a merchant who dealgoods of that kind gives [the merchant] power to transferrights of the entruster to a buyer in the ordinary coursbusiness." It is well settled that U.C.C. 2-403(2) prot
only "persons who buy in the ordinary course out of invento See U.C.C. 2-403(2) cmt. 3. The holder of a security inte ___ in a merchant's inventory is not "a buyer in the ordinary cou of goods entrusted to the merchant's possession as a resul
7/26/2019 Evergreen v. Six Consignments, 1st Cir. (1993)
the merchant's fraud. See U.C.C. 1-201(9) (defining "buye___
the ordinary course of business" as excluding a "transfer .as security for . . . a money debt"); see also, e.g., Si
___ ____ ____ _ Smelting, 639 F.2d at 1213; Robert A. Hillman et al., Common
________ __ __ _____ and Equity Under the Uniform Commercial Code (1985 & Supp. 19
____________________________________________ at 18.03[2][b].
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purchaser from bailee "acquired no interest" in bailed proper
In re Sitkin Smelting & Refining Inc., 639 F.2d 1213, 121 _______________________________________
(5th Cir. 1981) (similar); Robert A. Hillman et al., Common__ ___ _____
and Equity Under the Uniform Commercial Code (1985 & Supp. 19 ____________________________________________
at 18.03[2] (collecting cases).9
Finally, on similar reasoning, we cannot credit
Banks' reliance on the Uniform Commercial Code provisions go
ing "consignment sales":
Where goods are delivered to a person for _________ __ _ ______ ___ sale and such person maintains a place of ____
business at which he deals in goods of the kind involved, under a name other than the name of the person making delivery, then with ____ respect to claims of creditors of the person
7/26/2019 Evergreen v. Six Consignments, 1st Cir. (1993)
_______ __ ______ __ _________ __ ___ ______ conducting the business the goods are deemed __________ ___ ________ ___ _____ ___ ______ to be on sale or return. The provisions of __ __ __ ____ __ ______ this subsection are applicable even though an agreement purports to reserve title to the person making delivery until payment or re-
sale or uses such words as 'on consignment' or 'on memorandum.'
Mass. Gen. L. ch. 106, 2-326(3) (emphasis added). Thus,
assuming that Gloucester "dealt in goods" like these (
cannot be conclusively determined from the appellate record),
scallops were not subject to the claims of Evergreen's credi
unless delivered "for sale" or "for resale," id. 2-326.___
both parties well recognize, Evergreen lacked both the intent
the legal capacity to empower Gloucester either to resell,
id. at 2-326(1)(b), or to sell, see id. at 2-326(3), t ___ ___ ___
scallops so long as title remained exclusively in the holde
____________________
9Of course, restrictions on a "seller's" reclamation ri see, e.g., Mass. Gen. L. ch. 106 2-507, 2-702(3), are
___ ____ applicable for the same reason.
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7/26/2019 Evergreen v. Six Consignments, 1st Cir. (1993)