In re Carman - 399 B.R. 158 (Bankr. D. Md. 2009)

Rule:

Md. Com. Law Code, sec. 2-501(1) provides in relevant part: (1) The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers even though the goods so identified are nonconforming and he has an option to return or reject them. Such identification can be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement identification occurs: (a) When the contract is made if it is for the sale of goods already existing and identified; (b) If the contract is for the sale of future goods, when goods are shipped, marked or otherwise designated by the Seller as goods to which the contract refers.

Facts:

In July, 2005, Gordon Lee Bonner signed a written contract with Carman Boats, Inc. to build a motorboat. There were no specific provisions regarding delivery. Over the next two years and 10 months the boat was under construction, changes were made, and total progress payments. However, a portion of the contract price remained unpaid. The boat was not completed. Mr. Bonner became unsatisfied with delays, and at some point, early in 2008 he decided to have another company finish the boat. Also in 2008, before these bankruptcy cases were filed, paperwork was initiated by Carman Boats to register the boat with the U.S. Coast Guard in Mr. Bonner's name but the Coast Guard rejected and returned it. The paperwork was neither signed by Mr. Carman or Carman Boats, nor was it resubmitted by Carman Boats to the Coast Guard before Mr. Carman and Carman Boats filed their bankruptcy cases. When these bankruptcy cases were filed, the boat was still located at Carman Boats' boatyard. The Trustee proposed to sell the 46' Carman boat at auction. Mr. Bonner argued that § 2-401(3)(b) applied because his written contract with the debtors was silent as to the debtors' delivery obligations and the parties had not agreed that the debtors were to deliver documents of title.

Issue:

Was Md. Code Ann., Com. Law § 2-401(3)(b) applicable in this case?

Answer:

No.

Conclusion:

For Section 2-401(3)(b) to apply, there must be goods and the goods must be identified. Identification as argued by Mr. Bonner, was controlled by Md. Com. Law Code, sec. 2-501(1). Md. Com. Law Code, sec. 2-501(1) provides in relevant part: (1) The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers even though the goods so identified are nonconforming and he has an option to return or reject them. Such identification can be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement identification occurs: (a) When the contract is made if it is for the sale of goods already existing and identified; (b) If the contract is for the sale of future goods, when goods are shipped, marked or otherwise designated by the Seller as goods to which the contract refers. Although the written contract was silent as to those matters, at the time of contracting, the boat to be built had not been identified under Md. Code Ann., Com. Law § 2-501(1) where there was no explicit agreement as to identification of existing goods, the contract was not for the sale of goods already existing, and there was no boat in existence at the time of contracting. At best, the boat was a future good at the time the debtors and individual entered into the contract. Thus, the boat was not a good under Md. Code Ann., Com. Law § 2-105(2). At the time of contracting there was no good in existence, i.e., no boat, and no good had been identified, title did not pass to the individual at the time and place of contracting under Md. Code Ann., Com. Law § 2-401(3)(b).