
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.                                   ______________                                 ____________________             Joseph  F. De  May, Jr.  with whom  Cichanowicz, Callan  & Keane,             _______________________             ____________________________        Thomas  J. Muzyka,  and  Clinton &  Muzyka,  P.C.  were on  brief  for        _________________        ________________________        appellant.             Evan Slavitt with whom Hugh  J. Gorman III and Hinckley,  Allen &             ____________           ___________________     __________________        Snyder were on brief for appellees.        ______                                 ____________________                                  September 17, 1993                                 ____________________                    CYR, Circuit  Judge.   Appellant Evergreen Marine  Cor-                    CYR, Circuit  Judge.                            _______  _____          poration, an ocean carrier, was fraudulently induced to discharge          six consignments  of frozen scallops, valued at  $1.2 million, to          Gloucester Corporation, without taking up possession of the bills          of  lading.   After Gloucester  became insolvent,  the discharged          scallops were seized by appellees Fleet National Bank and Cooper-          ative   Centrale  Raiffeisen-Boerenleenbank   B.A.  (hereinafter,          collectively,  "the  Banks"),  holders of  security  interests in          Gloucester's   after-acquired  inventory.    The  district  court          entered summary judgment  for the Banks on Evergreen's  claim for          conversion.   As we conclude on the present record that Evergreen          held a superior claim to the scallops, we vacate the judgment and          remand for further proceedings.                                          I                                          I                                        FACTS                                        FACTS                                        _____                    On various  dates in  1991,  Evergreen contracted  with          Towamarin, Ltd. to carry six consignments of frozen scallops from          Tokyo, Japan to  Port Elizabeth, New Jersey.  Evergreen thereupon          issued order  bills of lading, designating  Gloucester as "Notify          Party."1  When the  scallops arrived at Port Elizabeth,  Glouces-                                        ____________________               1An order bill of lading is a negotiable  instrument, issued          by the carrier to the shipper at the time goods are loaded aboard          ship,  which serves "as a  receipt that the  carrier has received          [the] goods for  shipment; as  a contract of  carriage for  those          goods; and  as  documentary evidence  of title  to those  goods."          ter represented that  it held title to the  scallops but that the          bills of lading were still in transit.  For present purposes, the          circumstantial  evidence,  infra,   compels  the  inference  that                                     _____          Gloucester's  representations of title  were false and fraudulent          at  the time  made.   See Continental  Grain Co.  v. Puerto  Rico                                ___ ______________________     ____________          Maritime  Shipping Auth.,  972 F.2d  426, 429-30 (1st  Cir. 1992)          ________________________          (under Rule 56(c),  all reasonable  inferences must  be drawn  in          favor of party opposing summary judgment).                    Evergreen released the  scallops to Gloucester, without          taking up the original bills of lading, upon Gloucester's  execu-          tion of  certain indemnity and guarantee  agreements ("letters of          guaranty").    The  letters  of  guaranty  included  Gloucester's          representations  of  title to  the  scallops under  the  bills of          lading;  its promise to  produce the bills of  lading "as soon as          [the bills]  shall have  arrived and/or come  into [Gloucester's]          possession;" and its agreement  to defend and indemnify Evergreen                                        ____________________          Fuentes  v. Sea-Land  Services,  665 F.Supp.  206, 209  (S.D.N.Y.          _______     __________________          1987).   The shipper  sends the  bill of  lading to the  intended          recipient of  the goods  (consignee); upon notification  that the          goods  have  arrived,  the consignee  presents  the  bill  to the          carrier at the delivery  port, and receives the goods  in return.          Because an order  bill is negotiable,  however, the consignee  or          "notify party" designated on the bill of lading is not necessari-          ly the  holder of the  bill at  the time and  place of  delivery.          Under these  circumstances, subject  to extremely  limited excep-          tions, a  carrier which delivers  to a "notify party,"  or to any          other person,  without  taking up  and canceling  its order  bill          "remains liable to anyone who has purchased the bill for value in          good faith, before or after the improper delivery."  G. Gilmore &          C.  Black, Admiralty  110-12  (2d ed.  1975).   See  also  Allied                     _________                            ___  ____  ______          Chemical Intl. Corp. v.  Companhia de Navegacao Lloyd Brasileiro,          ____________________     _______________________________________          775 F.2d  476, 481-82 (2d  Cir. 1985) (discussing  obligations of          carrier in  maritime documentary transaction),  cert. denied, 475                                                          _____ ______          U.S. 1099 (1986).                                          3          against third  party claims.2  Shortly after  issuing the letters          of guaranty and removing the  scallops to its Massachusetts ware-          house, Gloucester  became insolvent; the scallops  were seized by          the Banks  pursuant to  their security interests  in Gloucester's          after-acquired inventory.                    On  February 7,  1992,  a third  party,  Raiffeisenbank          Lekkerkerk  Holland ("Dutch  Bank"), notified  Evergreen  that it                                        ____________________               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 . . .               in accordance with our request.               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 scal-          lops.3    Facing liability  to  Dutch  Bank, Evergreen  sued  the          Banks,  Gloucester, and  the  scallops, seeking  recovery of  the          scallops  or tort damages for their value.4  See Evergreen Marine                                                       ___ ________________          Corp.  v. Six Consignments of  Frozen Scallops, 806  F. Supp. 291          _____     ____________________________________          (D. Mass. 1992).   The district court denied admiralty  jurisdic-          tion and dismissed Evergreen's Rule D  claim against the scallops          in  rem.  Upon affirming its diversity jurisdiction, however, the          __  ___          court applied Massachusetts law  to Evergreen's remaining claims.          Id. at 293-94.  The court dismissed Evergreen's claim against the          ___          Banks for  tortious interference with  contract, see id.  at 296,                                                           ___ ___          and entered summary judgment for the Banks on Evergreen's conver-          sion and replevin claims, on the ground that the Banks' perfected          security  interest in  Gloucester's  inventory  was  superior  to          Evergreen's  reclamation rights.  See id. at 297.  As Evergreen's                                            ___ ___          brief on appeal is expressly limited to its conversion claim, its          other claims are deemed  waived.  See Washington Legal  Found. v.                                            ___ ________________________          Massachusetts Bar Found., 993  F.2d 962, 970 n.4 (1st  Cir. 1993)          ________________________                                        ____________________               3Lekkerkerk is  identified  as  "Lekkekerk"  in  the  Banks'          brief,  and as  "Lekkerrerk"  in Gloucester's  complaint and  the          district  court opinion.  See  806 F.  Supp.  at 293.  The  Banks                                    ___          assert, without contradiction, that "although [Lekkerkerk]  has a          somewhat  similar name, [it] is  an entirely different bank" from          defendant-appellee  Cooperative   Centrale  Raiffeisen-Boerenleen          Bank.               4Evergreen's amended  complaint included counts  (1) against          Gloucester,   for  misrepresentation  and   breach  of  contract;          (2) against  the scallops, in  rem, under  Supplemental Admiralty                                     __  ___          Rule D; and  (3) against the Banks, for  conversion and replevin.          A default judgment was entered against Gloucester on December 10,          1992, for failure to defend the action.                                          5          (claims not raised on appeal are deemed abandoned); Sheinkopf  v.                                                              _________          Stone, 927 F.2d 1259, 1263 (1st Cir. 1991) (similar).          _____                                          II                                          II                                    GOVERNING LAW                                    GOVERNING LAW                                    _____________                    As  an  initial  matter,  Evergreen  asserts  that  its          conversion claim  was subject  to the district  court's admiralty          jurisdiction.   Although  the  Banks do  not challenge  diversity          jurisdiction,  see 806  F. Supp. at  295, they  contest admiralty                         ___          jurisdiction,  apparently  to avoid  the application  of maritime          law.  See, e.g., Austin v. Unarco Inds., Inc., 705 F.2d 1, 6  n.1                ___  ____  ______    __________________          (1st Cir.), cert. dismissed, 463 U.S. 1247 (1983) ("once admiral-                      _____ _________          ty jurisdiction is established, then all of the substantive rules          and precepts peculiar to  the law of the sea  become applicable")          (quoting Brance v. Shumann,  445 F.2d 175, 178 (5th  Cir. 1971)).                   ______    _______          The  parties  have  identified  no  material  difference  between          maritime  law  and Massachusetts  law governing  these conversion          claims.  Compare Goodpasture, Inc. v. M/V Pollux, 602 F.2d 84, 87                   _______ _________________    __________          (5th Cir. 1979), cert. denied, 460 U.S. 1084 (1983)  (identifying                           _____ ______          elements of conversion claim in admiralty), with, e.g., Joseph R.                                                      ____  ____          Nolan & Laurie J. Santorio, 37 Massachusetts Practice:  Tort Law,                                         _________________________________            55 (2d  ed. 1989),  at 65  (identifying elements of  conversion          claim  under Massachusetts  law).    Assuming differences  exist,          however,  see Furness  Withy (Chartering),  Inc. v.  World Energy                    ___ __________________________________     ____________          Sys.  Assoc., 854 F.2d 410,  412 (11th Cir.  1988), cert. denied,          ____________                                        _____ ______                                          6          489  U.S.  1013 (1989),  we agree  with  the district  court that          Massachusetts law governs Evergreen's claim.                    The  admiralty  jurisdiction test  for  tort  claims is          "clearly established."  Shea v. Rev-Lyn Contracting Co., 868 F.2d                                  ____    _______________________          515, 517 (1st Cir. 1989).  It comprises two functional inquiries:          first,  the traditional  "situs" analysis determines  whether the          tort was committed  or the alleged  injury occurred on  navigable          waters, see  id. (citing The Plymouth,  70 U.S. (3 Wall.)  20, 33                  ___  ___         ____________          (1866)); and, second, the  more recently developed "nexus" analy-          sis  determines  whether the  alleged  tort  bears a  significant          relationship  to traditional maritime  activities.   See Foremost                                                               ___ ________          Ins. Co.  v.  Richardson,  457  U.S. 668  (1982);  Executive  Jet          ________      __________                           ______________          Aviation,  Inc. v. Cleveland, 409  U.S. 249 (1972).   The "situs"          _______________    _________          and  "nexus"  requirements  must  both be  met  before  admiralty          jurisdiction  can attach.    See, e.g.,  Shea,  868 F.2d  at  517                                       ___  ____   ____          (noting dual nature of  test); Carey v. Bahama Cruise  Lines, 864                                         _____    ____________________          F.2d 201,  207 n.4 (1st  Cir. 1988)   (same); accord,  Cochran v.                                                        ______   _______          E.I. DuPont  de Nemours  & Co.,  933 F.2d 1533,  1537 (11th  Cir.          ______________________________          1991) ("The Court in Executive Jet did not replace the tradition-                               _____________          al locality test,  but instead  added a second  prong, the  nexus          test"), cert. denied, 112 S.Ct. 881 (1992).                  _____ ______                    The present  conversion claim  founders on  the "situs"          prong of the Executive  Jet analysis.  In the  admiralty context,                       ______________          as elsewhere,  conversion is  simply an intentional  and wrongful          exercise of dominion or  control over a chattel,  which seriously                                           ____ _ _______          interferes   with  the  owner's  rights  in  the  chattel.    See                                                                        ___                                          7          Goodpasture, 602 F.2d at 87; Berry v. Boat Giannina B., Inc., 460          ___________                  _____    ______________________          F.  Supp. 145, 150 (D. Mass. 1978); Restatement (Second) of Torts                                              _____________________________            222A (1965).   Admiralty  jurisdiction over a  conversion claim          accordingly  depends on  whether  the chattel  was "on  navigable          waters" at the time of the alleged wrongful exercise of dominion.          See,  e.g., Leather's Best, Inc. v. S/S Mormaclynx, 451 F.2d 800,          ___   ____  ____________________    ______________          808 (2d  Cir. 1971) (no admiralty  jurisdiction over warehouseman          whose  loss of  property,  entrusted by  ocean carrier,  occurred          while goods were on land); cf. Schoening v. Shipment of  102 Jute                                     ___ _________    _____________________          Bags,  132 F. Supp. 561, 562 (E.D. Pa. 1955) (no admiralty juris-          ____          diction over ocean  carrier for shipment of  goods converted from          onshore warehouse;  "the conversion was completed  when the goods          were removed  from the  warehouse"); see  generally The Lydia,  1                                               ___  _________ _________          F.2d 18, 23 (2d Cir.) cert. denied, 266 U.S. 616 (1924) ("conver-                                _____ ______          sion is a tort, . . . and  if that tort is committed on navigable          waters, admiralty has jurisdiction").  In  the present case, long          before  the Banks asserted  dominion over the  scallops under the          terms of  their security  agreements, Gloucester had  removed the          scallops  to its  storage warehouse  in Massachusetts,  some four          hundred miles  from the point of  Evergreen's disaffreightment in          Port Elizabeth,  thereby severing any conceivable maritime situs.          Compare Leather's Best, 451 F.2d at 808.          _______ ______________                    Evergreen bases its assertion of admiralty jurisdiction          on  the  ground  that  the district  court's  decision  "directly          affects the integrity of order bills of lading."  Thus, apparent-          ly Evergreen would  extend the so-called "impact" test  for admi-                                          8          ralty jurisdiction,  applicable to claims for  intentional inter-          ference  with contractual  relations,  to the  present claim  for          conversion.   See Carroll v.  Protection Maritime  Ins. Co.,  512                        ___ _______     _____________________________          F.2d  4, 8 (1st Cir. 1975) (articulating "impact" test); see also                                                                   ___ ____          Pino v. Protection  Maritime Ins.  Co., 599 F.2d  10, 12-13  (1st          ____    ______________________________          Cir.) cert.  denied, 444  U.S. 900 (1979)  (reaffirming Carroll's                _____  ______                                     _______          "extension  of location test").  We agree with the district court          that  the Carroll  "impact test"  does not  apply to  the present                    _______          transaction.                    Carroll was an  action for  tortious interference  with                    _______          contractual relationships, brought by various seamen  and commer-          cial fishermen, against marine insurers whose "blacklist" of past          claimants allegedly  interfered with  the  claimants' efforts  to          contract  for employment  on marine  vessels.    Although  it was          alleged  that the  blacklist  prevented the  claimants, while  on                                                                  _____  __          land,  from securing  contracts  of employment,  its purpose  and          ____          effect was  to prevent their employment  aboard seagoing vessels.                                       __________  ______ ________ _______          512 F.2d at 6.  On these facts, the Carroll court concluded, "the                                              _______          critical  focus should not be 'where the wrongful act or omission          has its inception,  but where the  impact of the act  or omission          produces [the] injury," id. at 8  (citing O'Connor & Co. v.  City                                  ___               ______________     ____          of  Pascagoula, 304 F. Supp. 681, 683 (S.D. Miss. 1969)).  Apply-          ______________          ing this principle, Carroll held that "the  impact of defendants'                              _______          alleged actions, at least where existing employment was terminat-          ed, was felt in the  operations of the affected vessels at  sea,"          id., and was  "so interwoven with present and  potential maritime          ___                                          9          contractual relationships    traditional concerns of admiralty             as to fall within [the admiralty] jurisdiction," id. at 8-9.                                                           ___                    Unlike  the  Carroll  claim  for  interference  with  a                                 _______          contract,  Evergreen's conversion claim alleges interference with          ________          chattels.    A  chattel  has a  determinate  location;  hence the          ________          "situs" of the tort of conversion is more readily identified, and          does not  depend solely on an assessment of its impact upon mari-          time activities.  Furthermore, the relevant purposeful act in the          tort  of conversion is the  exercise of dominion  over a chattel,                                      ________ __ ________          which may  entail liability  even though the  defendant initially          acted on a good-faith,  non-maritime claim of right.   See, e.g.,                                                                 ___  ____          Restatement (Second)  of Torts   244  (1965) ("actor  is not  re-          ______________________________          lieved  of liability . . . for  conversion by his belief, because          of a  mistake of law or  fact not induced  by the other,  that he          . . . is entitled to . . . immediate possession [of the converted          chattel]").  In these  circumstances, the "maritime nexus," found          "dominant" in Carroll, see 512 F.2d at 6, is sufficiently attenu-                        _______  ___          ated that  a Carroll-based "impact" analysis  would invite "open-                       _______          ended  expansion  of  admiralty  jurisdiction," id.    Thus,  the                                                          __          district  court correctly  concluded that  Evergreen's conversion          claim implicated its diversity jurisdiction, rather than admiral-          ty jurisdiction, and that     to the extent differences  exist             the conversion  claim was  governed by Massachusetts  law, rather          than maritime law.                                         III                                         III                                          10                                      DISCUSSION                                      DISCUSSION                                      __________                    A   plaintiff  asserting   a  conversion   claim  under          Massachusetts law must  show that:  (1) the  defendant intention-          ally  and  wrongfully  exercised  control or  dominion  over  the          personal property, (2) the plaintiff  had an ownership or posses-          sory interest in the property at the time of the alleged  conver-          sion; (3) the  plaintiff was damaged by  the defendant's conduct;          and (4) if the defendant  legitimately acquired possession of the          property  under  a good-faith  claim  of  right, the  plaintiff's          demand for its  return was refused.5  See 806  F. Supp. at 296-97                                                ___          (citing Magaw v. Beals, 272 Mass. 334, 172 N.E.  347 (1930)); see                  _____    _____                                        ___          also In re Halmar Distributors, Inc., 968 F.2d 121, 129 (1st Cir.          ____ _______________________________          1992);  MacNeil v. Hazelton, 306  Mass. 366, 367,  28 N.E.2d 477,                  _______    ________          478 (1940).   Since the evidence establishes  beyond dispute that          the  Banks  asserted  dominion  over the  scallops,  and  refused          Evergreen's demands for their return, see 806 F. Supp. at 295-97,                                                ___          the principal issue before us is whether any rights the Banks may          have acquired  by  virtue of  their security  interests in  Glou-          cester's  after-acquired inventory  were superior  to Evergreen's                                        ____________________               5Federal courts sitting in diversity apply the choice-of-law          rules of the  forum state.  See Klaxon Co.  v. Stentor Elec. Mfg.                                      ___ __________     __________________          Co., 313 U.S. 487,  496 (1941).   Since the parties have  ignored          ___          choice-of-law issues on appeal,  we indulge their assumption that          Massachusetts would  apply its own  substantive law.   See Carey,                                                                 ___ _____          864 F.2d at 206 (given  "reasonable relation" between dispute and          forum  whose  law is  invoked by  parties,  court of  appeals may          "forego independent analysis" of  choice-of-law issue); Borden v.                                                                  ______          Paul  Revere Life  Ins. Co.,  935 F.2d 370,  375 (1st  Cir. 1991)          ___________________________          (similar).                                          11          reclamation rights  as bailee  of  the scallops  under the  order          bills of lading.                    We review summary judgments  de novo, affirming only if                                                 __ ____          it  appears      after  considering all  competent  evidence  and          reasonable  inferences in the  light most  favorable to  the non-          moving party    that there is no genuine issue as to any material          fact and the moving party is entitled to judgment as  a matter of          law.    See, e.g.,  Continental Grain  Co.,  972 F.2d  at 429-30;                  ___  ____   ______________________          National Expositions,  Inc. v.  Crowley Maritime Corp.,  824 F.2d          ___________________________     ______________________          131, 134 (1st Cir. 1987).          A.   Evergreen's Interest          A.   Evergreen's Interest               ____________________                    The district court likened  Evergreen's interest in the          scallops to  that of  a seller  of goods,  and Gloucester  to "an                                  ______          insolvent buyer", see  806 F.  Supp. at 297;  hence the  putative                            ___          "sale," though  voidable, was not void  until Evergreen disavowed                          ________          ____          it  and moved to reclaim  the goods.   See Mass. Gen.  L. ch. 106                                                 ___            2-702(2) ("seller  [who] discovers that the  buyer has received          goods  on credit while insolvent . . . may reclaim the goods upon                                                 ___                   ____          demand") (emphasis added).  Under this analysis, since an Article          ______          9  secured party is a "purchaser" of the debtor's interest in the          collateral, see id.  at    1-201(32), 1-201(33); Burk  v. Emmick,                      ___ ___                              ____     ______          637 F.2d  1172, 1174 (8th  Cir. 1980); In  re Samuels &  Co., 526                                                 _____________________          F.2d  1238, 1242 (5th Cir.),  cert. denied, 429  U.S. 834 (1976),                                        _____ ______          Evergreen's  failure to  disavow  the sale  prior  to the  Banks'          "purchase" through foreclosure subordinated  Evergreen's interest          to the Banks' security interests in the scallops.  See Mass. Gen.                                                             ___                                          12          L. ch. 106,    2-702(3) ("the seller's right  to reclaim . . . is          subject  to the rights of . . . [a]  good faith purchaser or lien          creditor under  this Article"); see  also id.  at   2-403(1)  ("A                                          ___  ____ ___          purchaser of goods acquires all title which his transferor had or          had power to  transfer . . . .  A person with  voidable title has                                                         ________ _____          power to transfer good title to a good faith purchaser for value.          Where goods have been  delivered under a transaction  of purchase          the purchaser has such a power even though . . . (d) the delivery          was procured through fraud") (emphasis added).                    The difficulty with the district  court's analysis lies          in its  fundamental premise,  viz., that Evergreen,  in releasing                                        ____          the  scallops to Gloucester pursuant to  the letters of guaranty,          was a "seller," and Gloucester, in thus acquiring possession, was          a "buyer."  Rather, we think the transaction was one of "entrust-          ment," see Mass. Gen. L. ch. 106,   2-403(2),(3), whereby neither                 ___          Gloucester nor the  Banks acquired  an interest  in the  scallops          superior to Evergreen's limited right to their possession.                    Under  the Uniform  Commercial Code,  a "seller"  is "a          person who sells or  contracts to sell goods," id  at   2-103(1)-                                                         __          (d), and  a "buyer" one "who buys or contracts to buy goods," id.                                                                        ___          at    2-103(1)(a).   A  "sale," by  definition, "consists  in the                                                           ________  __ ___          passing  of title from the seller to  the buyer for a price (sec-          _______  __ _____          tion 2-401)," id. at   2-106(1) (emphasis added), and a "contract                        ___          for sale"  means "a present sale  of goods or a  contract to sell          goods at a future time." Id.  Accordingly,  though U.C.C.   2-401                                   ___          does  not define "title,"  noting simply that  "each provision of                                          13          . . . Article  [2] with  regard  to the  rights, obligations  and          remedies of  the seller,  the buyer,  purchasers and  other third          parties  applies irrespective of title to  the goods except where                           ____________ __ _____               ______ _____          the provision refers  to such title,"6  id. at   2-401  (emphasis          ___ _________ ______  __ ____ _____     ___          added), no "sale" of goods occurs, within the meaning of   2-106,          without a present or future capacity on the part  of the "seller"                                      ________          to convey  title to the "buyer."  See generally William L. Tabac,                     _____                  ___ _________          The Unbearable  Lightness of  Title Under the  Uniform Commercial          ___ __________  _________ __  _____ _____ ___  _______ __________          Code, 50 Md. L. Rev. 408 (1991) (noting contradictions in Article          ____          Two references to  title; concluding that  "title under the  Code          means ownership," and that "title  principles are still firmly in          place, if not in sight, as the framework for today's commerce  in          goods").  We return  to the present transaction with  these prin-          ciples in mind.                    It is well settled  that an ocean carrier possesses  no          title  or  other  ownership interest  in  goods  carried under  a          negotiable  bill of lading; title is  vested in the holder of the          bill of lading, whose interests the carrier represents, under the          contract  of carriage  and maritime  law, as  "a special  type of          bailee."   See Commercial Molasses  Corp. v. New  York Tank Barge                     ___ __________________________    ____________________          Corp., 314 U.S. 104,  109 (1941); Schnell v. The  Vallescura, 293          _____                             _______    _______________          U.S.  296,  303 (1934);  C-ART, Ltd.  v.  Hong Kong  Islands Line                                   ___________      _______________________          America,  S.A.,  940 F.2d  530, 533  n.2  (9th Cir.  1991), cert.          ______________                                              _____          denied, 112 S.Ct. 1762  (1992); see also Baker Oil Tools, Inc. v.          ______                          ___ ____ _____________________          Delta  S.S. Lines, Inc., 562  F.2d 938 (5th  Cir. 1977) (bailment          _______________________                                        ____________________               6See, e.g., Mass. Gen. L. ch. 106,   2-403(1),(2),(3).                ___  ____                                          14          relationship  under contract  of  carriage  continues before  and          after termination of voyage); cf. U.C.C.   2-705(1) (referring to                                        ___          "goods  in  possession of  a carrier  or  other bailee").   Thus,          absent extraordinary circumstances,  such as rapid  deterioration          of the cargo, see T.J.  Stevenson & Co. v. 81,193 Bags  of Flour,                        ___ _____________________    _____________________          449  F. Supp. 84, 123 (S.D. Ala. 1979), aff'd. in pertinent part,                                                  ______ __ _________ ____          629 F.2d 338, 383 (5th Cir. 1980), the carrier has neither actual          nor  apparent authority  to "sell"  the goods  it carries.7   The          carrier's sole legitimate  interest is its limited  right to pos-                                                                       ____          sess the goods, pending  presentment of the bills of  lading; and          ____          its  temporary  release  of  possession,  pending  a  consignee's          promised production of  the bills of lading, is  not a "sale" but          an entrustment.   See Mass.  Gen. L. ch.  106,   2-403(3)  ("'En-             ___________    ___          trusting' includes any delivery and any acquiescence in retention          of possession  regardless of any condition  expressed between the          parties to the delivery or acquiescence and regardless of whether          the procurement of the  entrusting or the possessor's disposition                                        ____________________               7Indeed,  the summary  judgment record  in the  present case          indisputably demonstrates that there can have been no "contract,"          within the  meaning of Article  2:  "In  this Article unless  the          context otherwise requires 'contract' and 'agreement' are limited          to those relating to the present or future sale of goods."  Mass.          Gen. L.  ch. 106,   2-106(1).   Moreover, not only  does a future          sale of  goods require a  contract of sale, id.,  but a "'present                                                      ___          sale'  means a sale  which is accomplished  by the making  of the          contract,"  id. (emphasis added).  Since the express terms of the          ________    ___          letters of  guaranty flatly belie Evergreen's  capacity to effect                                                         ________          either a present or  future sale of scallops in  which Gloucester          already  purportedly held  title by  virtue of  its claim  to the          negotiable bills of lading in transit, there could be no contract          or agreement of sale  of any kind between Evergreen  and Glouces-          ter.  See also id.   1-201(3),(11).                ___ ____ ___                                          15          of the goods have been such as to be larcenous under the criminal          law.").8                    On  similar analysis,  although  "purchase" is  defined          more broadly than "sale," without reliance on "title" principles,          see id.    1-201(32) ("'purchase'  includes taking by  sale, dis-          ___ ___          count,  negotiation, mortgage,  pledge, lien, issue  or re-issue,          gift or any other  voluntary transaction creating an  interest in          property"),  under a  "transaction of  purchase" a  "purchaser of          goods acquires [only the]  title which his transferor had  or had                                                     __________ ___  __ ___          power to transfer . . .  [and] a purchaser of a  limited interest          _____          acquires rights  only to the  extent of the  interest purchased,"          id.    2-402(1).  Thus, a  person who knowingly  obtains goods             ___          subject  to an outstanding negotiable  bill of lading     from an          ocean carrier  with  a mere  possessory  interest in  the  goods,          ordinarily "purchases"  no "title"  (even voidable title)  in the          goods.  See generally,  e.g., Kimberly & European  Diamonds, Inc.                  ___ _________   ____  ___________________________________          v. Burbank,  684 F.2d 363,  366 (6th Cir.  1982) (bailee  "had no             _______          title,  nor did she have  authority to pass  title," and putative                                        ____________________               8The  Banks do  not  benefit from  U.C.C.   2-403(2),  which          provides that "any entrusting of goods to a merchant who deals in          goods of that  kind gives  [the merchant] power  to transfer  all          rights  of the  entruster to  a buyer  in the ordinary  course of          business."   It is well  settled that U.C.C.    2-403(2) protects          only "persons who buy  in the ordinary course out  of inventory."          See U.C.C.   2-403(2) cmt. 3.  The holder of  a security interest          ___          in a merchant's inventory is not "a buyer in the ordinary course"          of  goods entrusted to the  merchant's possession as  a result of          the merchant's  fraud.  See U.C.C.   1-201(9) (defining "buyer in                                  ___          the ordinary course  of business" as excluding a "transfer  . . .          as  security for  . . .  a money  debt"); see  also, e.g., Sitkin                                                    ___  ____  ____  ______          Smelting, 639 F.2d at 1213; Robert A. Hillman et al.,  Common Law          ________                                      __ __    __________          and Equity Under the Uniform Commercial Code (1985 & Supp. 1991),          ____________________________________________          at   18.03[2][b].                                          16          purchaser from bailee "acquired no interest" in bailed property);          In re Sitkin  Smelting &  Refining Inc., 639  F.2d 1213,  1215-17          _______________________________________          (5th Cir. 1981) (similar);  Robert A. Hillman et al.,  Common Law                                                        __ ___   __________          and Equity Under the Uniform Commercial Code (1985 & Supp. 1991),          ____________________________________________          at   18.03[2] (collecting cases).9                    Finally, on  similar reasoning,  we  cannot credit  the          Banks' reliance on the Uniform Commercial Code provisions govern-          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                    _______ __ ______ __  _________ __ ___ ______                    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, even          assuming  that  Gloucester "dealt  in  goods"  like these  (which          cannot be conclusively determined from the appellate record), the          scallops were not subject to the claims of Evergreen's  creditors          unless delivered "for  sale" or "for  resale," id.    2-326.   As                                                         ___          both parties well recognize, Evergreen lacked both the intent and          the legal capacity  to empower Gloucester  either to resell,  see                                                                        ___          id. at    2-326(1)(b), or to  sell, see id. at    2-326(3), these          ___                                 ___ ___          scallops so long as  title remained exclusively in the  holder of                                        ____________________               9Of course, restrictions on a "seller's" reclamation rights,          see,  e.g., Mass.  Gen. L.  ch. 106     2-507, 2-702(3),  are in-          ___   ____          applicable for the same reason.                                          17          the negotiable bills  of lading.10   Thus, we  join those  courts          which have  held that temporary  entrustments of possession  by a          bailee, without more, are not "sales on consignment,"  within the          meaning of U.C.C.   2-326.  See Sitkin Smelting, 639 F.2d at 1218                                      ___ _______________          (delivery  of waste film,  for processing  and extraction,  not a          "delivery  for  sale"  under U.C.C.    2-326);  cf.  e.g.,  In re                                                          ___  ____   _____          Zwagerman, 115 B.R.  540 (Bankr.  W.D. Mich.  1990) (delivery  of          _________          cattle, for  "feeding," not  a "delivery for  sale"), aff'd,  125                                                                _____          B.R. 486 (W.D.  Mich. 1991); In  re Key Book  Service, Inc.,  103                                       ______________________________          B.R. 39 (Bankr.  D. Conn.  1989) (delivery of  books, merely  for          shipping, billing,  warehousing, not a "delivery  for sale"); see                                                                        ___          generally Hillman,  supra, at   18.03-[2][c]  & n.126 (discussing          _________           _____          meaning of "delivery for sale").                    Finally, under  Mass. Gen.  L. ch. 106,    9-203(1)(c),          "[a] security interest is  not enforceable against the debtor  or          third  parties with respect to the collateral and does not attach          unless . . . the debtor has rights in the collateral."  (Emphasis                           ______ ___ ______ __ ___ __________          added.)   Although  the term  "rights in  the collateral"  is not          defined in  the Code, and  has been  viewed broadly by  courts on          occasion, see,  e.g., Kinetecs  Technology Int'l Corp.  v. Fourth                    ___   ____  ________________________________     ______          Nat'l Bank, 705 F.2d 396 (10th Cir. 1983) ("the Code clearly does          __________                                        ____________________               10The  letters of  guaranty are  not phrased  in terms  of a          delivery  for sale or resale, but of an entrustment of possession          pending Gloucester's  presentment of  the order bills  of lading.          See  supra note  2.   Thus, the  letters of  guaranty evince  (1)          ___  _____          Gloucester's acknowledgement  that title  to the scallops  was in          the  holder  of the  order bills  of  lading, not  Evergreen, and          (2) Gloucester's  representation that  it was  the holder  of the          bills.                                          18          not  require that  a  debtor  have  full ownership  rights"),  it          clearly contemplates  some property  interest in goods,  not mere                                     ________  ________          bare possession  acquired from a  bailee under  a transaction  of          entrustment.  Sitkin Smelting,  639 F.2d at 1217-18; Northwestern                        _______________                        ____________          Bank v. First Virginia  Bank, 585 F. Supp. 425, 428-29  (W.D. Va.          ____    ____________________          1984) ("Mere possession by  the debtor is insufficient to  estab-          lish a  right in  the collateral  upon which to  base a  security          interest . . . . The debtor  must acquire some ownership interest          in the collateral before a  valid security interest arises"); see                                                                        ___          generally James J. White & Robert S. Summers, Uniform  Commercial          _________                                     ___________________          Code   23-5 (3d ed. 1988), at  263 ("if the transaction [endowing          ____          debtor  with possession]  were  merely a  bailment . . .  the law          would  be  clear:   the bailed  goods  would be  returned  to the          owner"); Hillman, supra, at   18.03[1].  Since mere possession of                            _____          goods under a transaction of entrustment clothes a debtor with no          "rights  in  the collateral"  to  which a  security  interest can          attach, within  the meaning of  Mass. Gen. L. ch.  106,    9-203-          (1)(c), the Banks acquired no enforceable lien in the scallops by          virtue of their security interests in Gloucester's after-acquired          inventory.11                                          II                                          II                                      CONCLUSION                                      CONCLUSION                                      __________                                        ____________________               11 As  Dutch Bank is  not a  party to these  proceedings, we          take  no position on  any potential claim  it may  have for Ever-          green's entrustment  of possession of the  scallops to Gloucester          without first taking up  possession of the bills of  lading.  But                                                                        ___          see supra n.1.          ___ _____                                          19                    Evergreen  was not  a  "seller," Gloucester  was not  a          "buyer,"  and  the temporary  entrustment  of  possession of  the          scallops  to Gloucester was neither  a "sale" nor  a delivery for          sale or resale.   Thus, as a bailee, Evergreen  retained reclama-          tion rights to the scallops under  a common law claim for conver-          sion.   See Restatement (Second)  of Torts,   225  & cmt.  b; see                  ___ ______________________________                    ___          also id. at   222A, illustr. 9.  As the Banks' Article 9 security          ____ ___          interests in Gloucester's after-acquired inventory did not attach          to the entrusted scallops,  Evergreen retained a possessory claim          sufficient to overcome the Banks' motion for summary judgment.12                    The district court judgment is  vacated and the case is                    ___ ________ _____ ________ __  _______ ___ ___ ____ __          remanded for further proceedings consistent herewith; each  party          ________ ___ _______ ___________ __________ ________  ____  _____          to bear its own costs on appeal.           __ ____ ___ ___ _____ __ ______                                        ____________________               12Evergreen  filed no  cross-motion  for  summary  judgment,          however.   Accordingly, the case must be remanded to the district          court  for such further  proceedings as are  consistent with this          opinion.                                          20
