In re Aquamarine USA

Aquamarine USA, Inc. (Aquamarine) (debtor) sold boats and related equipment. Aquamarine primarily used consignments for its sales, which involved frequent dealing with institutional lenders, such as SunTrust Bank of Central Florida, N.A. (SunTrust) (creditor). Thomas Moran financed the purchase of a boat and related equipment (collectively, the boat) through SunTrust and gave SunTrust a lien interest in the boat as security. SunTrust perfected its lien interest by notating the lien on the boat’s certificate of title and filing a financing statement covering the related equipment. Further, the loan documents prohibited Moran from transferring the boat without SunTrust’s consent. Moran then entered into a consignment agreement with Aquamarine regarding the boat. Although Moran informed Aquamarine of SunTrust’s lien, Moran did not immediately inform SunTrust of the consignment. Aquamarine communicated with SunTrust’s employees several times to obtain the payoff and title information for the boat, including two fax communications and a telephone call. Thereafter, Aquamarine sold the boat to Walter Koetter in the ordinary course of its business. Koetter paid the full purchase price for the boat, and Aquamarine delivered possession of the boat to Koetter. Although Aquamarine advised Koetter that it did not have all of the necessary paperwork to transfer the boat’s title to Koetter at that time, Aquamarine did not inform Koetter of SunTrust’s lien on the boat. Aquamarine subsequently filed for bankruptcy and failed to pay the amount set forth in the consignment agreement to Moran or SunTrust. SunTrust moved for relief from the automatic stay to assert its interest in the boat and argued that it had not been advised of the consignment.