Clem Perrin Marine Towing, Inc. v. Panama Canal Co.
United States Court of Appeals for the Fifth Circuit
730 F.2d 186 (1984)
Clem Perrin Marine Towing, Inc. (Clem) (plaintiff) owned a boat that was encumbered by two mortgages. Clem leased the boat to Panama Canal Co. (Panama) (defendant). The lease agreement included an option to purchase the boat at the end of the lease. After Panama signed the lease agreement, Clem took out a third mortgage on the boat. Clem then fell behind on payments on the first mortgage. A person involved in brokering the transaction between Clem and Panama notified Panama that Clem had stopped paying the first mortgage. Panama contacted Clem, requesting Clem’s assurance that Clem could provide clear title to the boat when the lease-purchase option became exercisable. Panama withheld further lease payments pending Clem’s assurance. Instead of responding with an assurance, Clem sued Panama for the withheld lease payment. A few months later, the holders of the first and second mortgages gave notice of foreclosure, and Panama purchased those mortgages. Panama counterclaimed for damages, arguing that Clem breached the agreement by failing to provide clear title to the boat. The district court held that Panama breached the lease agreement, and Panama appealed.
Rule of Law
Holding and Reasoning (Higginbotham, J.)
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