Maryland National Bank v. Traenkle

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
MARYLAND NATIONAL BANK, 
Plaintiff-Appellee,
v.
 No. 00-1746
ROBERT H. TRAENKLE; CHRISTINE D.
TRAENKLE,
Defendants-Appellants.

Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Catherine C. Blake, District Judge.
(CA-90-2731-CCB)
Argued: April 4, 2001
Decided: June 1, 2001
Before WILLIAMS, MICHAEL, and MOTZ, Circuit Judges.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: David F. Gould, III, GOULD LAW ASSOCIATES, P.C.,
Doylestown, Pennsylvania, for Appellants. David McIntosh Williams,
GORMAN & WILLIAMS, Baltimore, Maryland, for Appellee. ON
BRIEF: Charles L. Simmons, Jr., Christopher C. Bosley, GORMAN
& WILLIAMS, Baltimore, Maryland, for Appellee.
2 MARYLAND NATIONAL BANK v. TRAENKLE
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Robert H. Traenkle and Christine D. Traenkle (the Traenkles)
appeal the district court’s judgment awarding Maryland National
Bank (MNB) $772,049.68 on MNB’s suit to recover amounts owed
to it by the Traenkles on a loan and denying the Traenkles’ counter-
claims. Finding no reversible error, we affirm.
I.
In August 1989, MNB loaned $850,000 to the Traenkles for the
purchase of a fifty-eight foot yacht known as the Honey Bear. In con-
sideration for the credit extended by MNB, the Traenkles executed
and delivered a Marine Promissory Note (the note), a Marine Security
Agreement (security agreement), and a power of attorney authorizing
a first preferred mortgage on the yacht. The note and security agree-
ment provided for the repayment of the loan principal plus interest,
at a rate of 10.990%, over a twenty year period. The note further pro-
vided that MNB had the right to be paid all of its costs, including
court costs and attorney’s fees, in enforcing the note. A provision in
the security agreement required the Traenkles to pay charges on the
vessel, including repair and storage costs, and authorized MNB to pay
those costs if the Traenkles did not. The Traenkles defaulted on the
note in October 1990.
On October 18, 1990, MNB initiated this action in the United
States District Court for the District of Maryland to collect the
remaining balance owed under the note. On October 31, 1990, a for-
mer captain of the Honey Bear, J.D. Tubbs, brought an admiralty
action against the Honey Bear in the United States District Court for
the Southern District of Florida for the payment of wages. Pursuant
to 46 U.S.C.A. § 31325, MNB filed an intervening complaint in the
Florida action against the Honey Bear in rem and against the Traenk-
MARYLAND NATIONAL BANK v. TRAENKLE 3
les in personam for the loan deficiency balance. MNB sought both
foreclosure of the mortgage on the Honey Bear and the loan defi-
ciency from the Traenkles. On December 12, 1990, MNB personally
served the Traenkles with a summons and a copy of the intervening
complaint at their residence in Pennsylvania.
The Florida district court later dismissed Tubbs’ claim and MNB
became the sole plaintiff in the admiralty action. The Traenkles failed
to appear and did not file an answer on their own behalf or on behalf
of the Honey Bear. As a result, the Florida district court entered
default against the Traenkles and the Honey Bear on February 12,
1991. On March 23, the Florida district court entered a final judgment
against the Honey Bear in rem and against the Traenkles in personam
for the balance due on the note. The United States Marshal also was
directed to sell the Honey Bear. Copies of the judgments and notice
of the impending sale were sent to the Traenkles.
MNB entered the highest bid at a marshal’s sale on April 23, 1991
and purchased the Honey Bear for $550,000. The Florida district
court entered an order confirming the sale on April 30. After crediting
the proceeds of the sale against the in personam judgment, the Florida
district court entered a final deficiency judgment of $406,035.59
against the Traenkles on August 2, 1991. MNB then attempted to
enforce the final in personam deficiency judgment against the
Traenkles in Pennsylvania, where they own property. MNB recorded
the final deficiency judgment with the Court of Common Pleas for
Bucks County, Pennsylvania on June 10, 1991. On October 21, 1991,
the Traenkles filed a petition with the Pennsylvania court asking it to
strike the final deficiency judgment on the ground that the Florida dis-
trict court lacked personal jurisdiction over the Traenkles and, there-
fore, the final deficiency judgment was not entitled to full faith and
credit.
Meanwhile, MNB’s action to collect on the note remained pending
in the Maryland district court. The Traenkles filed counterclaims that
alleged breach of duty of good faith and fair dealing, conversion,
punitive damages, and breach of fiduciary duty. The Maryland district
court deferred ruling on MNB’s motion to dismiss aspects of the
counterclaims pending resolution of the Pennsylvania action. Accord-
ingly, the case was closed administratively on February 11, 1992. On
4 MARYLAND NATIONAL BANK v. TRAENKLE
September 17, 1993, the Pennsylvania court entered an order striking
the in personam portion of the final deficiency judgment. The Mary-
land district court then reopened the case at MNB’s request.
On December 28, 1995, MNB filed a motion for summary judg-
ment in the Maryland District court on both its deficiency claim and
the Traenkles’ counterclaims. On August 7, 1996, the Maryland dis-
trict court entered an order granting MNB’s motion for summary
judgment as to the deficiency on the note and on the conversion, puni-
tive damages, and breach of fiduciary duty counterclaims. See Mary-
land Nat’l Bank v. Traenkle, 933 F. Supp. 1280, 1289-90 (D. Md.
1996). MNB’s motion for summary judgment was denied as to the
breach of duty of good faith and fair dealing counterclaim. See id. at
1288-89.
On January 14, 1997, MNB again filed a motion for summary
judgment in the Maryland district court as to the Traenkle’s breach of
duty of good faith and fair dealing counterclaim. The Traenkles con-
tended that MNB breached its duty of good faith and fair dealing by
damaging the Honey Bear and allowing its condition to deteriorate
while the boat was in MNB’s possession prior to its sale. On August
29, 1997, the Maryland district court denied the motion for summary
judgment on the grounds that Maryland Code Annotated, Commercial
Law § 9-207 (1997) governed the Traenkles’ counterclaim and that
the Traenkles had presented sufficient evidence to create a genuine
issue of material fact on MNB’s liability under that section. See
Maryland Nat’l Bank v. Traenkle, No. 90-2731 (D. Md. Aug. 29,
1997).
Beginning March 3, 1999, the Maryland district court held a five
day bench trial. The district court (1) considered the issue of liability
and damages under § 9-207 with respect to the Traenkles’s duty of
good faith and fair dealing counterclaim and (2) determined the
amount of the deficiency owed by the Traenkles on the loan. Follow-
ing post-trial briefing, the Maryland district court issued a Memoran-
dum Opinion on April 18, 2000. See Maryland Nat’l Bank v.
Traenkle, No. 90-2731 (D. Md. April 18, 2000). The district court
found that MNB exercised reasonable care, pursuant to § 9-207, while
in possession of the Honey Bear. See id.
MARYLAND NATIONAL BANK v. TRAENKLE 5
In determining the amount of the deficiency owed on the loan by
the Traenkles, the district court rejected the Traenkles’ arguments that
MNB’s failure to give notice under Maryland Code Annotated, Com-
mercial Law § 9-504(3) (1997) bars MNB from obtaining a defi-
ciency judgment and that MNB should be deemed to have accepted
the Honey Bear in full satisfaction of the Traenkle’s obligation pursu-
ant to Maryland Code Annotated, Commercial Law § 9-505 (1997).
See id. The district court found that the notice provision of § 9-504(3)
did not apply because the Honey Bear was sold pursuant to the Ship
Mortgage Act, 46 U.S.C.A. §§ 31301-31343 (West Supp. 2000), a
federal statute governing the rights of the parties and that § 9-505 did
not apply because the district court did not find that MNB conducted
itself in an unfair or unreasonable manner. See id.
On appeal, the Traenkles’ argue that the Maryland district court
erred in several respects. Initially, the Traenkles argue that the district
court erred in its August 5, 1996 Memorandum Opinion in dismissing
their defense to MNB’s claim that the Traenkles were liable for the
deficiency on the note. Specifically, the Traenkles assert that the dis-
trict court erred by rejecting their claim that they were fraudulently
induced to sign the loan documents by an alleged oral agreement pur-
suant to which MNB promised that they would not be held personally
liable on the loan. This oral agreement, the Traenkles argue, super-
cedes the loan provisions holding them personally liable. The Traenk-
les also raise three issues on appeal relating to their duty of good faith
and fair dealing counterclaim. First, the Traenkles argue that the dis-
trict court erred in its August 29, 1997 Memorandum and Order when
it ruled that the Traenkles bore the burden of proof under § 9-207 in
establishing that the disposition of the Honey Bear was commercially
unreasonable. Second, they argue that the district court’s factual find-
ings with respect to the district court’s April 18, 2000 Memorandum
opinion were clearly erroneous. Finally, they argue that the district
court erred when it concluded that MNB’s compliance with the Ship
Mortgage Act preempted the notice requirement of § 9-504(3).
II.
We have reviewed the record, briefs, and pertinent case law on this
matter, and we have had the benefit of oral argument. Our careful
6 MARYLAND NATIONAL BANK v. TRAENKLE
review persuades us that the rulings of the district court were correct.*
See Maryland Nat’l Bank v. Traenkle, No. 90-2731 (D. Md. April 18,
2000); Maryland Nat’l Bank v. Traenkle, No. 90-2731 (D. Md. Aug.
29, 1997); Maryland Nat’l Bank v. Traenkle, 933 F. Supp. 1280 (D.
Md. 1996). Accordingly, we affirm the judgment in favor of MNB on
the reasoning of the district court.
AFFIRMED
*See United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (holding
that, on summary judgment, inferences drawn from the underlying facts
must be viewed in the light most favorable to the nonmoving party);
Foreman v. Melrod, 263 A.2d 559, 562 (Md. 1970) (holding that where,
as in this case, there is no fraud, duress, or mistake, "parol evidence of
conversations or alleged oral agreements made before or at the time of
the integration of the contract into the writing must be excluded from
evidence"); FDIC v. Floyd, 854 F. Supp. 449, 452 (N.D. Texas 1994)
(interpreting a statutory provision identical to Md. Ann. Code, Comm.
Law § 9-207(1) (1997) to require that the debtor bear the burden of
establishing that the creditor failed to use "reasonable care in the custody
and preservation of collateral in his possession"); Scrimgeour v. Internal
Revenue, 149 F.3d 318, 324 (4th Cir. 1998) (refusing to set aside find-
ings of fact on appeal from a bench trial where the trial court’s factual
findings were not clearly erroneous); J. Ray McDermott & Co., Inc. v.
Vessel Morning Star, 457 F.2d 815, 818 (5th Cir. 1972) (holding that
"[t]he Ship Mortgage Act, when read together with the statutes delineat-
ing the judicial sale procedure in the federal courts forms a comprehen-
sive procedure for the foreclosure of a preferred ship’s mortgage, the sale
of the vessel and any resulting deficiency adjudged against the debtor in
personam").