Barclays Bank PLC v. Poynter

United States Court of Appeals
For the First Circuit
No. 11-2289
BARCLAYS BANK PLC,
Plaintiff, Appellee,
v.
THOMAS A. POYNTER, individually and as
Trustee of the Leningrad Cowboys Trust,
Defendant, Appellant,
SIMPLY INTERACTIVE, INC.; THE TRANSITIONS GROUP, INC.;
TRANSITIONS CAPITAL, INC.; TRANSITIONS INTERNATIONAL, INC.;
TRANSITIONS CAPITAL INVESTORS, LLC; TRANSITIONS CAPITAL
MANAGEMENT LLC; WAINWRIGHT BANK AND TRUST COMPANY; BANK OF
AMERICA, N. A.; FIDELITY BROKERAGE SERVICES, LLC; CITIBANK, NA;
BOSTON PRIVATE BANK AND TRUST COMPANY,
Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Boudin,* Hawkins,** and Thompson, Circuit Judges.
Edmund Polubinski, Jr., with whom Lyne, Woodworth & Evarts
LLP was on brief, for appellant.
*
Judge Boudin heard oral argument in this matter and
participated in the semble, but he did not participate in the
issuance of the panel's opinion. The remaining two panelists issue
this opinion pursuant to 28 U.S.C. § 46(d).
**
Of the Ninth Circuit, sitting by designation.
Michael D. Vhay, with whom Lauren Ann H. Pond and DLA PIPER
LLP were on brief, for appellee.
March 13, 2013
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THOMPSON, Circuit Judge. With the help of a loan from
Barclays Bank, PLC ("Barclays"), Dr. Thomas Poynter bought a
custom-made yacht. When he stopped making payments on the loan,
Barclays repossessed the yacht and sold it. Barclays got less than
what Poynter owed and so it sued him for the deficiency. Poynter
moved for summary judgment arguing that Barclays was not entitled
to collect because it had not provided him with proper notice of
the sale. The district court was not convinced; it denied
Poynter's motion and sua sponte granted summary judgment in favor
of Barclays. Poynter now appeals. Discerning no merit to his
argument, we affirm.
BACKGROUND
We state the facts in the light most favorable to
Poynter, the party contesting summary judgment, drawing all
reasonable inferences in his favor. Pagano v. Frank, 983 F.2d 343,
347 (1st Cir. 1993).
In November 2005, Barclays loaned Poynter 1.4 million
Euros toward the purchase of a 2005 Oyster 62 Yacht called the Blue
Beach. Poynter granted Barclays a first preferred ship mortgage on
the vessel (the "mortgage"), which provided that Poynter would pay
only interest for the first twenty-four months of the loan and
installments of principal plus interest after that. Poynter signed
the mortgage in Massachusetts, his place of residence and the
location of the yacht.
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A few years later, in 2008, Poynter sought to renegotiate
the loan terms to allow him to continue paying only interest.
Barclays agreed that Poynter could make interest-only payments for
September through November of that year but said that was it. But
when his first principal/interest payment came due in December,
Poynter failed to pay. He was issued a formal notice of default
sometime around March of 2009.
Rather than repossess the yacht, Barclays decided to work
with Poynter to sell it and, hoping to fetch a good price, they
moved the Blue Beach from Boston, Massachusetts to Newport, Rhode
Island. But, after several months without a successful sale,
Barclays repossessed the yacht. Barclays moved it to Florida and
listed it for sale with National Liquidators, a boat liquidation
company.
On February 5, 2010, Barclays sent Poynter a "Notice of
Our Plan to Sell Property." Citing provisions of Florida's Uniform
Commercial Code ("UCC")1 that relate to a secured party's rights
after a debtor's default, the notice stated: "Further to the
repossession of your 2005 Oyster 62, Hull ID #OYM0160KL505 in
November this year, we herby [sic] provide notice of our intention
to sell the vessel pursuant to Florida Statues [sic]: F.S. 679.609;
679.610; 679.612, and 679.613. The vessel . . . will be sold by
way of private sale sometime after the date of this letter." The
1
See Fla. Stat. Ann. § 671.101 et seq.
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notice did not include a date, time, or place of sale. The notice,
which indicated what Poynter still owed in principal and interest,
went on to state that any remaining balance was Poynter's
responsibility. It also said that Poynter had the right to settle
up his debts and if he did, the Blue Beach would be released.
Poynter responded the same day by email to Barclays's
Marine Risk and Recoveries Co-ordinator, stating: "thank you for
your note." Just about two months later, on March 31, 2010,
Barclays sold the yacht for 986,019 Euros. On April 22, Barclays
informed Poynter of the sale and that the residual balance Poynter
owed was 683,297 Euros. Poynter ignored Barclays's balance
request.
And so, a short time later, Barclays sued Poynter in
Massachusetts federal district court.2 Barclays filed suit
pursuant to the Commercial Instruments and Maritime Liens Act (the
"Ship Mortgage Act"), 46 U.S.C. § 31301 et seq., which provides a
means for enforcing preferred mortgages in admiralty. Citing
Poynter's default, Barclays sought to recover the deficiency.
Poynter, after answering the complaint, moved for summary judgment.
He claimed that Barclays was barred from recovering the deficiency
because, in violation of the mortgage's terms, it did not provide
Poynter with proper notice of the sale. Barclays, focusing on a
2
Barclays also sued several reach and apply defendants, a
practice allowed under Massachusetts law, Mass. Gen. Laws ch. 214,
§ 3(6), who are not parties to this appeal.
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different mortgage provision than Poynter (more on who was relying
on what to come), asserted that it did provide proper notice. The
district court sided with Barclays. The court denied Poynter's
motion and sua sponte granted Barclays summary judgment on the
issue of liability. Poynter now appeals the grant of summary
judgment.
STANDARD OF REVIEW
We review orders for summary judgment de novo, assessing
the record "in the light most favorable to the nonmovant and
resolving all reasonable inferences in that party's favor."
Landrau-Romero v. Banco Popular De P.R., 212 F.3d 607, 611 (1st
Cir. 2000); Houlton Citizens' Coal. v. Town of Houlton, 175 F.3d
178, 184 (1st Cir. 1999). A district court may grant summary
judgment where "there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law." Fed.
R. Civ. P. 56(a).
ANALYSIS
As we alluded to, Poynter and Barclays have different
ideas about what kind of notice of sale Barclays was required to
give under the mortgage. To remind the reader of the more salient
facts: Barclays sold the yacht pursuant to the Florida UCC; the
February 5th notice of intent to sell was the only advance notice
Poynter received of the sale; this notice did not specify where and
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when the sale would be; the yacht was sold about two months after
the notice issued. We proceed to the arguments.
To support his stance, Poynter relies on Section 4.05 of
the mortgage, which provides in pertinent part that in the event of
default Barclays may repossess the yacht and then sell it "at any
place and at such time as Mortgagee may specify and in such manner
as Mortgagee may deem advisable . . . after first giving Owner
notice thereof ten (10) days in advance of the time and place of
sale."3 Poynter reads this language to mean that ten days notice
as to the time and date of a sale is required in all sales deemed
advisable by Barclays including sales conducted under a UCC.4 Thus
Poynter claims that the February 5th notice of intent to sell,
which lacked a time and place, was insufficient. The second half
3
In its entirety, Section 4.05 indicates that Barclays may in
the event of default: "Take and enter into possession of the Vessel
subject to this Mortgage, at any time, wherever the same may be,
without legal process, and if it seems desirable to Mortgagee and
without being responsible for loss or damage, sell the Vessel, at
any place and at such time as Mortgagee may specify and in such
manner as Mortgagee may deem advisable, free from any claim by
Owner in admiralty, at law or by statute, after first giving Owner
notice thereof ten (10) days in advance of the time and place of
sale."
4
Poynter does not dispute (though he took a different
position below) that Barclays was allowed to sell the yacht using
the self-help repossession and sale remedies of Florida's UCC. Nor
would such an argument be sound. Following a circuit split, the
Ship Mortgage Act was amended in 1996 to provide that federal
courts were not the exclusive means for enforcing a preferred ship
mortgage and instead, the mortgagee could use state law self-help
remedies (such as UCC remedies) to enforce the mortgage. See 46
U.S.C. § 31325(b)(3).
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of Poynter's argument is that because the notice was substandard,
Barclays should not be allowed to collect the deficiency. For
support Poynter relies on what he calls "the analogous area of real
estate mortgages," claiming that Massachusetts law prohibits a real
estate mortgagee that does not comply with statutory notice
requirements from collecting a deficiency. Poynter thinks this
rule should apply to Barclays.
Barclays counters that it was not in fact required to
comply with Section 4.05's notice proviso.5 Barclays claims that
it sold the yacht under Section 4.06 of the mortgage, which
provides that Barclays may exercise any "rights, privileges and
remedies granted by applicable law" - the applicable law here being
the Florida UCC.6 Barclays argues that Sections 4.05's notice
5
Poynter professes that Barclays should be estopped from
taking this position. He argues that paragraph 28 of the
complaint, which stated that Barclays repossessed the yacht "having
given Poynter ten (10) days notice as required under the Preferred
Mortgage," constituted an admission on Barclays's part that the
requirements of Section 4.05 applied. We can make quick work of
this argument and so dispose of it now. Barclays did not reference
Section 4.05 anywhere in the complaint. Further nothing in the
complaint contradicts Barclays's assertion to this court that
paragraph 28 referred to notice as required under the Florida UCC,
which states that notification of disposition sent ten days or more
before the earliest time of disposition is reasonable. See Fla.
Stat. Ann. § 679.612(2).
6
As a whole, 4.06 indicates that in the case of default
Barclays may: "Exercise all rights, privileges and remedies in
foreclosure or otherwise given the Mortgagee by this Mortgage, or
by any other instrument evidencing the indebtedness or the
Obligations or securing performance thereof, as well as such other
rights, privileges and remedies granted by applicable law."
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requirements, according to the mortgage's plain language, do not
apply to every sale as Poynter says, including 4.06 sales.
Barclays also throws about a few alternative arguments should we
disagree about 4.05's applicability, such as: Poynter's actual
notice of the sale waives any procedural defaults and there is no
basis for extending Massachusetts statutory real estate law to this
case.
In the end, we are tasked with answering one central
question: does Section 4.05 impose an umbrella notice requirement
on all post-default sale procedures as Poynter argues, or does
Section 4.06 provide a stand-alone remedy free of Section 4.05's
procedural dictates as Barclays contends? We think, based on the
clear language of the mortgage, that Barclays has it right. We
explain, starting with some general contract interpretation
principles.
To start with, we forgo embarking on a choice of law
analysis. Instead we simply elect to interpret the mortgage under
Massachusetts law because both parties agree that it applies and
because there is at least a reasonable relationship between this
dispute and Massachusetts. See Merchants Inc. Co. of N.H., Inc. v.
U.S. Fid. & Guar. Co., 143 F.3d 5, 8 (1st Cir. 1998) (taking the
same approach in a diversity case).
When interpreting a contract, courts must assess whether
the contract at issue (here the mortgage) is ambiguous, Bank v.
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Thermo Elemental Inc., 888 N.E.2d 897, 907 (Mass. 2008), a question
of law in Massachusetts, Lass v. Bank of Am., N.A., 695 F.3d 129,
134 (1st Cir. 2012). To answer the ambiguity question, we examine
"the language of the contract by itself, independent of extrinsic
evidence concerning the drafting history or intention of the
parties." Bank, 888 N.E.2d at 907. Language is only ambiguous "if
it is susceptible of more than one meaning and reasonably
intelligent persons would differ as to which meaning is the proper
one." Lass, 695 F.3d at 134 (internal quotation marks omitted).
Ambiguity, however, is not created just because the parties
disagree about the contract's meaning. Farmers Ins. Exch. v. RNK,
Inc., 632 F.3d 777, 783 (1st Cir. 2011).
Contracts found free from ambiguity are interpreted
according to their plain terms; we construe all words according to
"their usual and ordinary sense." Gen. Convention on New Jerusalem
in the U.S., Inc. v. MacKenzie, 874 N.E.2d 1084, 1087 (Mass. 2007);
Farmers Ins. Exch., 632 F.3d at 784. We take the words within the
context of the contract as a whole, rather than in isolation. Gen.
Convention on New Jerusalem in the U.S., Inc., 874 N.E.2d at 1087.
Summary judgment is appropriate when the contract's plain terms
unambiguously favor either side. Farmers Ins. Exch., 632 F.3d at784 (citing Bank v. Int'l Bus. Machs. Corp., 145 F.3d 420, 424 (1st
Cir. 1998)).
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Here there is no ambiguity in the mortgage's language; it
is only susceptible to one meaning. And, taking this language at
face value, the mortgage's plain terms favor Barclays's reading of
things. We start with Section 4.00 of the mortgage, titled "RIGHTS
AND REMEDIES ON DEFAULT," which spells out how Barclays may proceed
upon a debtor's default. It states: "If any such Event or Default
occurs and is continuing, Mortgagee may, at its option, do any one
or more of the following:" (emphasis added). Seven different
rights and remedies then follow in subsections 4.01 through 4.07,
including the all important sections 4.05 and 4.06. Each of these
subsections contains an independent, complete thought and each ends
with a period for punctuation. The language "any one or more of
the following" is not ambiguous. To the contrary its meaning is
quite plain. Barclays had seven distinct options and could elect
to employ a single one of those options or a combination thereof.
Poynter's argument asks us to give no effect to the critical phrase
"any one or more of the following" and we will not do this. See
Farmers Ins. Exch., 632 F.3d at 785 (cautioning that no part of the
contract is to be disregarded); J.A. Sullivan Corp. v.
Commonwealth, 494 N.E.2d 374, 378 (Mass. 1986) (holding that
"[e]very phrase and clause must be presumed to have been designedly
employed, and must be given meaning and effect, whenever
practicable, when construed with all the other phraseology
contained in the instrument") (internal quotation marks omitted).
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Furthermore, nothing in the mortgage indicates that these
seven distinct subsections under 4.00 are interconnected. The fact
that each remedy is a separate subsection and is a complete
thought, ending with a period and not a comma or a semicolon in
fact compels the opposite conclusion. Lunt v. Aetna Life Ins. Co.,
149 N.E. 660, 662 (Mass. 1925) (holding, in the analogous insurance
policy-interpretation context, that "[p]unctuation may be resorted
to as an aid in construction when it tends to throw light on the
meaning") (internal quotation marks omitted).
Also significant, Section 4.05 does not reference any
other subsection within Section 4.00, nor does Section 4.05 state
that it applies to all sales pursuant to the mortgage. No other
remedy within Section 4.00, including Section 4.06, makes reference
to Section 4.05. This is unsurprising given that Section 4.05 and
Section 4.06 serve different purposes. Section 4.05 is a
contractual self-help remedy, whereas Section 4.06 allows the
lender to use statutory remedies, which typically have their own
notice and procedural requirements, making it unnecessary to
restate them in the contract itself.
Had Barclays in fact intended to incorporate Section
4.05's notice requirements into other mortgage provisions, it could
have done so just as it incorporated certain provisions into others
elsewhere in the mortgage. For instance, Section 1.03 of the
mortgage, which dictates that other liens cannot be placed on the
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vessel, specifically references Section 2.04 and its minimum
insurance limitations. Similarly, Section 3.09 (contained in the
"EVENTS OF DEFAULT" portion of the mortgage) incorporates other
parts of the mortgage. It provides: "Any Guarantor or other
Obligor under the Obligations accured [sic] hereby shall take any
action as outlined in Paragraph (3.07) above or shall have
instituted against such person any action as outlined in Paragraph
(3.08) above."7
Further undermining Poynter's position is the following.
Section 5.00, named "OTHER AGREEMENTS ON DEFAULT OR OTHERWISE,"
contains ten subsections which further describe the parties' rights
and responsibilities. Subsection 5.09, "Powers and Remedies
Cumulative," explains the breadth of remedial rights the mortgage
confers on Barclays. It states: "Each power or remedy herein given
to the Mortgagee . . . shall be cumulative and in addition to every
other power or remedy specifically given in this Mortgage or
existing in admiralty, in equity, at law, or by statute." Thus,
according to Section 5.09, Barclays had at its disposal all rights
afforded to it by law, whatever the source, which it could exercise
singularly or in conjunction with its other rights.
Here all roads lead to the same conclusion. Sections
4.01 through 4.07 gave Barclays multiple stand-alone options upon
7
Section 3.07 relates to the yacht owner being required to
apply for bankruptcy. Section 3.08 explains when an involuntary
bankruptcy case will be filed against the owner.
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default and, given these choices, it opted to conduct a sale under
the Florida UCC pursuant to Section 4.06. The mortgage's plain,
unambiguous terms make clear that 4.05's specific notice
requirements do not extend to such sales under 4.06.8 To interpret
the mortgage otherwise would be to interpret it "in a way contrary
to the plain and obvious meaning of its terms," which is something
courts may not do. John Hancock Life Ins. Co. v. Abbott Labs., 478
F.3d 1, 7 (1st Cir. 2006) (internal quotation marks omitted).
CONCLUSION
Since we find no merit to Poynter's claim that Barclays
was required to comply with Section 4.05's notice proviso, we have
no need to decide his follow-up contention that Barclays's failure
to provide such notice should render it unable to collect the
deficiency. For the above reasons, we affirm the district court's
grant of summary judgment.
8
Our finding that Barclays did not have to comply with
Section 4.05's dictate brings our notice analysis to a close. We
do not need to get into whether Barclays's sale, or specifically
the notice it provided, complied with Florida's UCC. Poynter
specifies in his brief that he does not question the mechanics of
the actual sale but only contests Barclays's failure to give notice
under 4.05. Though Poynter says he reserves the right to challenge
the propriety of the sale, we are not sure where or when he is
reserving it for since the district court granted summary judgment
on liability and this is his appeal from that grant. But it
suffices to note that Poynter has not raised the issue here and
therefore we will not address it.
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