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REPORTED

IN THE COURT OF SPECIAL APPEALS

OF MARYLAND

NO. 1104

September Term, 1999

ON MOTION FOR RECONSIDERATION

HEK PLATFORMS AND HOISTS, INC.

v.

NATIONSBANK, ET AL.

Eyler, Adkins, Smith, Marvin H. (Retired, Specially Assigned) JJ.

Opinion by Smith, J.

Filed: September 8, 2000

- 3 HEK Platforms and Hoists, Inc. ("HEK") appeals from a judgment of the Circuit Court for Baltimore County adverse to its claims against ORIX Credit Alliance, Inc. ("ORIX"). We

shall affirm the judgment of the trial court ---- and resist the temptation to dismiss the appeal because of a totally inadequate record extract. We explain. FACTS HEK manufactures and markets scaffolding equipment for use by the construction industry. While it has an office in

Baltimore County, its principal place of business is in Georgia. On May 10, 1994, HEK entered into a sales contract ("the 1994 transaction") which was with the Proceres in by Companies, Inc. ("Proceres"), The

headquartered memorialized

Howard a

County,

Maryland. Sales

contract

was

"Conditional

Contract

Note," which reflected that Proceres agreed to pay HEK or any assignee exchange of for HEK $230,112.00 in 36 and monthly "all installments attachments in and

seven

"platforms"

accessories thereto."

By the terms of the note, HEK or its

assignee was to retain title to the equipment until the note was paid in full. Proceres executed a guaranty of the note, as did

Proceres's president, J. Wickham Zimmerman, and vice president, James V. Blimmel.

- 2 The purchase by Proceres was financed by ORIX. when Proceres executed the "Conditional Sales Contract Thus, Note"

payable to HEK, HEK simultaneously executed an "Assignment" of the note to ORIX. to pay Under the terms of the "Assignment," ORIX was to HEK upon delivery of the scaffolding

$200,000.00

equipment to Proceres. HEK purported to deliver the equipment to Proceres on May 23, 1994. money On June 1, 1994, in order to perfect its purchase interest and in the equipment, checks for ORIX filing prepared with the

security

financing

statements

drafted

Maryland State Department of Assessments and Taxation ("SDAT") and the Clerk of the Circuit Court for Howard County. The

financing statement filed with SDAT was stamped "RECORDED" on June 1, 1994. Howard 1994. Sometime after May 23, 1994, Proceres informed both HEK and ORIX that some of the equipment that had been delivered was damaged, and that HEK had failed to deliver 300 of the "mast bolts" that were necessary to the construction of the County, The statement filed with the Circuit Court for however, was not date-stamped until June 17,

scaffolding.

ORIX refused to pay HEK the $200,000.00 due on the

"Assignment" until the situation was rectified, and HEK agreed to repair or replace the damaged parts and to deliver the 300

- 3 bolts. Although Proceres was able to construct some of the

scaffolding immediately upon the delivery of May 23, 1994, all of the scaffolding could not be constructed until late June or early July, when the additional bolts were delivered and the damaged parts were repaired or replaced. "Assignment" by check dated July 5, 1994. In October and November of 1996, Proceres failed to make payments to ORIX. ORIX therefore believed it had the right Rather than do so branch manager, ORIX paid HEK for the

to "repossess" the scaffolding equipment. itself, however, ORIX, through its

Baltimore

John Frank, contacted HEK's sales manager, Dennis Morgan, and later HEK's president, Eric Schmidt. The men negotiated a deal

("the 1996 transaction") whereby HEK was to pay ORIX $73,926.00 -- the remaining amount owed to ORIX by Proceres -- in exchange for ORIX's right to the equipment. In a November 19, 1996

letter to Frank, Schmidt summarized the agreement as follows: I would like to confirm the following information that has been related to me through communications between ORIX Credit Alliance and HEK Platforms & Hoists regarding reassignment of the May 10, 1994, Conditional Sale Contract Note from The Proceres Companies, Inc. (Buyer) to HEK Platforms & Hoists, Inc. (Seller). This contract note had been assigned to ORIX Credit Alliance, Inc., on May 10, 1994. 1. ORIX Credit Alliance is reassigning the contract note to HEK Platforms & Hoists

- 4 at a discount rate because the note is in default. 2. The Proceres Companies have been notified of the default status of the note. 3. The Proceres Companies have failed to correct the default. Therefore, the note has been accelerated, the balance is due and payable, and the equipment is subject to repossession by the terms of the agreement. 4. The Proceres Companies have communicated to ORIX Credit Alliance that ORIX should come and get the equipment as it is on the wall 75 ft in the air. 5. ORIX Credit Alliance has a secured interest in the equipment by the terms of the contract note. HEK wired the $73,926.00 to ORIX on November 22, 1996. On Sunday, November 24, 1996, HEK work crews went to Proceres's job site in Tyson's Corner, Virginia and retrieved the

scaffolding equipment.

The work crews immediately transported

the equipment to HEK's office in Atlanta, Georgia. On received a Monday, phone November and, 25, later, however, a counsel for HEK from

call

telefaxed

letter

counsel for Nationsbank.

Counsel for Nationsbank asserted that

Nationsbank had "a blanket lien on all of Proceres' assets," that ORIX had failed to properly perfect its purchase money

security interest in the scaffolding equipment in question, and that Nationsbank therefore had the superior claim. Counsel for

- 5 Nationsbank asserted that Nationsbank had a buyer for the

equipment and demanded that HEK return it immediately. That same day, HEK's president, Schmidt, received, via Federal Express, a writing from ORIX's Baltimore branch manager, Frank, that memorialized the transaction that had occurred the previous week. consisted of a The writing, which was captioned "Assignment," preprinted It stated: form dated November 22, 1996 and

signed by Frank.

THE UNDERSIGNED, ORIX CREDIT ALLIANCE, INC., Assignor, hereby assigns to HEK Platforms and Hoists, Inc. (hereinafter called "Assignee"), without recourse and without any representations and warranties, express, implied, or statutory, all of its right, title and interest in and to the following contract or agreement: CONDITIONAL SALE CONTRACT NOTE, dated

May 10, 1994 with HEK Platforms & Hoists, Inc. As Seller and The Proceres Companies, Incorporated As Buyer. It is a condition of this Assignment, and Assignee by accepting this Assignment hereby agrees that Assignor and its respective successors shall be and are hereby unconditionally released by Assignee, its successors and assigns from any and all claims, liabilities and obligations arising out of and/or in connection with the above described contract or agreement.

- 6 Schmidt contacted Frank about Nationsbank's claim, and Frank told him that "there must be some mistake" and that he "would have to check into it." letter to ORIX and to its Subsequently, Proceres sent a creditors, expressing its

other

apparent belief that "Nationsbank . . . has a first priority blanket lien on all assets of [Proceres]." Nationsbank,

meanwhile, continued to press for the return of the scaffolding equipment. In February of 1997, before Frank or anyone else

connected with ORIX responded to Schmidt's concerns regarding the superiority of ORIX's purchase money security interest, HEK filed suit in the Circuit Court for Baltimore County against Nationsbank and ORIX. HEK sought, inter alia,

- a declaratory judgment that Orix's purchase money security interest in the equipment was superior to Nationsbank's blanket lien, - in the event that Nationsbank had the superior interest, a determination that ORIX breached the warranty of title in the "assignment and sale" of the scaffolding equipment to HEK, - in the event that Nationsbank had the superior interest, a determination that ORIX breached the "assignment and sale" contract with HEK "by selling goods that were not free of any such security interest," and - in the event that Nationsbank had the superior interest, a determination that ORIX negligently misrepresented that it had the superior interest.

- 7 In March of 1997, HEK amended its complaint. counts set forth in the original complaint, the To the amended

complaint added, inter alia, a count against ORIX for fraud.1 In April of 1997, before trial commenced, HEK

transported the scaffolding equipment from Atlanta to Maryland, where it was to be sold at auction by Nationsbank. to the auction, for however, $75,000.00 HEK and purchased agreed to the Just prior from

equipment

Nationsbank

dismiss

Nationsbank

from the case.

HEK did file a document on April 16, 1999, by

which it dismissed, with prejudice, Nationsbank as a defendant.2 HEK then transported the equipment back to Atlanta and sold it for $140,000.00.

HEK also named Blimmel and Zimmerman as defendants in the original complaint, and Proceres, Blimmel and Zimmerman as defendants in the amended complaint. HEK sought to recover against the three on the written guaranties they executed in connection with the 1994 transaction. Those three defendants did not participate in the trial below, however, and judgment was not entered at that trial as to the counts against them. HEK moved for summary judgment against Proceres, Zimmerman, and Blimmel in February of 1999, after this Court dismissed HEK's initial appeal from the judgment in favor of ORIX on the ground that that judgment did not dispose of all of the claims against all of the defendants. The trial court subsequently learned that defendant Zimmerman had filed a petition in bankruptcy. It dismissed, without prejudice, the case against him. The court entered summary judgment against defendants Proceres and Blimmel and in favor of HEK for $173,504.96. Those matters are not at issue in this appeal. We are thus at a loss to explain why Nationsbank is named as an appellee in this case.
2

1

- 8 A court trial took place on March 3 and 4, 1998.

Despite what it had urged in its amended complaint, HEK posited that Nationsbank, rather than ORIX, had the superior security interest in the equipment and that HEK was therefore entitled to recover against ORIX. At the close of HEK's case in chief, the

trial court granted ORIX's motion for judgment as to the counts alleging fraud and negligent misrepresentation. At the close of

the entire case, the court entered judgment in favor of ORIX as to the remaining counts as well. ORIX, rather than Nationsbank, it was not The court determined that had the superior under the security amended

interest.

Although

necessary,

complaint, for the court to make any further findings, the court added that the breach of warranty of title count was not

supported by Nationsbank's claim that it had a superior lien, and that the breach of contract count must fail because the count assumed that there had been a sale of equipment when what had really occurred was a reassignment of contract rights. HEK

timely moved to revise the judgment, but the court denied the motion without comment. ISSUES In this appeal, HEK argues, in essence, that: I. The trial court erred in finding that ORIX had a security interest superior to that of Nationsbank,

- 9 II. The trial court erred in granting judgment in favor of ORIX as to negligent misrepresentation, III. The trial court erred in determining that the 1996 transaction was an assignment of chattel paper rather than a sale of goods, and in determining that the breach of contract count could not stand if the transaction was an assignment, and IV. The trial court erred in determining that Nationsbank's claim of a superior interest could not support the breach of warranty of title count. We find no merit in any of these arguments and affirm the judgment of the trial court. Because HEK's arguments as to

negligent misrepresentation and breach of contract are premised on the assumption that Nationsbank held the superior security interest, and because we affirm the trial court's determination that the superior interest was held by ORIX, we need not and shall not address HEK's second and third address HEK's contention that the 1996 arguments. We shall was a

transaction

contract of sale rather than an assignment of chattel paper in our discussion as to the breach of warranty of title claim. DISCUSSION RECORD EXTRACT The record extract supplied in this case is woefully deficient. Maryland Rule 8-501(c) states, in pertinent part,

that "[t]he record extract shall contain all parts of the record

- 10 that are reasonably necessary for the determination of the

questions presented by the appeal . . . ."

It will quickly be

perceived by reference to the questions presented that for a determination of the issues presented we need a substantial part of that which was before the trial judge. Nevertheless, the It likewise

record extract in this case contains no testimony. contains none of the pleadings.

It contains no docket entries.

It does not contain the judgment appealed from except on the motion to exercise of revisory preparing power a over the record judgment. extract The rests

responsibility

proper

squarely on the appellant. HEK's failure to shoulder

See Md. Rule 8-501(a). its responsibility, we

In light of are sorely

tempted to dismiss its appeal.3 Dismissal of this appeal would be well within the proper exercise of this Court's discretion. Prior to July 1,

1993, section (l) of Rule 8-501 authorized appellate courts to "dismiss the response extract. dismissed to appeal an or make any other to appropriate file a order" in

appellant's

failure

proper

record

Both this Court and the Court of Appeals "repeatedly appeals where an appellant's record extract or

We note that one member of the panel that heard oral argument would dismiss the appeal. The appellate bar should take note of this and our discussion and govern itself accordingly.

3

- 11 appendix was patently insufficient for a determination of the questions raised." Prime Contractors, Inc. v. M. & C.C. of We made

Baltimore, 241 Md. 55, 57, 215 A.2d 214, 216 (1965).

clear that we were "not required to ferret out from the record those materials which counsel should have printed in the

[extract]."

Eldwick Homes Assoc. v. Pitt, 36 Md. App. 211, 212,

373 A.2d 957, 957, cert. denied, 281 Md. 736 (1977). Effective transferred section July (l) 1, of 1993, Rule the to Court of Appeals (m), and

8-501

section

softened it to read: Ordinarily, an appeal will not be dismissed for failure to file a record extract in compliance with this Rule. If a record extract is not filed within the time prescribed by Rule 8-502, or on its face fails to comply with this Rule, the appellate court may direct the filing of a proper record extract within a specified time and, subject to Rule 8-607, may require a non-complying attorney or unrepresented party to advance all or part of the cost of printing the extract. The appellate court may dismiss the appeal for non-compliance with an order entered under this section.[4] See 20 Md. Reg. 665, 698-99 (Issue 8, April 16, 1993) (emphasis added). The Court added to section (c), which sets forth the

required contents of a record extract, the sentence: "The fact that a part of the record is not included in the record extract The word "ordinarily" is used by the Court of Appeals from time to time as a "safety valve."
4

- 12 shall not preclude Id. a party or the appellate court from

considering it."

These changes were expressly "directed at reducing the voluminousness of record extracts and at alleviating problems caused by . . . over inclusion . . . of material in record extracts." 19 Md. Reg. 2249, 2266 (Issue 26, December 23, 1992)

(One Hundred Twenty-Second Report of the Standing Committee on Rules of Practice and Procedure). In short, the Court hoped to

deter over-inclusion of materials by lessening the chances of dismissal for under-inclusion. as revised, to suggests dismiss that an an Nothing in Rule 8-501(c) or (m), appellate for court is no longer the

entitled

appeal

under-inclusion

where

omissions are egregious, however.5

Indeed, minutes of the Court

As explained by Chief Judge Ogle Marbury for the Court in Strohecker v. Schumacher & Seiler, 185 Md. 144, 146-47, 43 A.2d 208, 209 (1945), Maryland appellate rules did not always require a record extract or appendix: When we passed Rule 36 of this Court, doing away with the necessity of printing the record on appeal, it was done with the intention of decreasing the cost of appellate litigation. For that reason the only things required by that rule to be printed were the judgments, decree or order appealed from, and any opinion or charge of the Court. But by Rule 39, it was stated that the appendix to the appellant's brief, in addition to the above requirements, should contain such part of the record as appellant desired the Court to read. In the (continued...)

5

- 13 -

(...continued) case before us, as will subsequently appear, the most important contention of appellant is the lack of adequate evidence to take the case to the jury. Yet he nowhere prints in the appendix to his brief the evidence bearing on the question he raises. This Court would be entirely justified in not deciding this question at all, because the appellant has not indicated by printing it, that he desires us to read this evidence and we could not pass upon the point without examining the testimony. We will not take such a drastic step in this case because the rule is new in this Court, although it has been in effect in the Federal Court for a number of years. However, in the future, we do not intend to pass the one typewritten copy of the record from member to member of this Court so that each one may hunt up for himself what the appellant is discussing in his brief. The parties are each required to print those parts of the record they want the Court to consider, and they should not be surprised if, in the future, the Court examines only the record printed in the appendices and decides cases on these printed portions alone. It is not our desire to limit ourselves to this, and we hope it will not become necessary, but we do not intend to permit counsel to impose upon us the burden of work, which should have been done by them. (Emphasis added.) The then new Rule 36 was the predecessor to our present Rule 8-501. Later, in Brown v. Fraley, 222 Md. 480, 483, 161 A.2d 128, 130 (1960), Chief Judge Brune said for the Court in commenting upon another predecessor of Rule 8-501: "The Rules are established to promote the orderly and efficient administration of justice and are to be read and followed." Judge Charles C. Marbury in State Roads Comm'n v. Sharper, 231 (continued...)

- 14 of Appeals' Standing Committee on Rules of Practice and

Procedure -- which recommended the 1993 changes to Rule 8-501 to the Court -- reflect that the Committee believed that an appeal could still be dismissed if the omission of materials was the result of bad faith or if the appellant could not have

reasonably believed that the omitted materials were unnecessary. Moreover, Rule 8-602(a)(8) continues to provide, as it provided prior to the 1993 revision of Rule 8-501, that "[o]n motion of on its own initiative, the Court may dismiss an appeal [if]

(...continued) Md. 411, 413, 190 A.2d 647, 649 (1963), in discussing yet another predecessor to the present Rule 8-501, said for the Court: "Maryland Rule 828 b 1 specifies that the printed extract shall contain such parts of the record reasonably necessary for the determination of questions presented on appeal. It is noted that this section is a mandatory requirement." (Emphasis in original.) No useful purpose would be served by our quoting or citing the numerous cases over the period of the last fifty odd years which have expressed the thoughts we have set forth above, including, specifically, that the Court did not intend to pass the record around from member to member. Lawyers should understand that in this State, an appellate opinion represents the collective judgment of those judges who heard the case. Short of passing the record around from judge to judge or reproducing parts of the record and circulating such parts, as we have done in this case (something which should not be our burden), there is no way under the sun that the collective judgment of those hearing a case can be brought to bear on the matter before the Court unless counsel comply with the appellate rules. That has not changed with the softening of Rule 8-501(c) and (m).

- 15 . . . the . . . content . . . of a . . . record extract does not comply with Rule . . . 8-501 . . . ." We are convinced that it was not reasonable for HEK to believe that it was unnecessary to include in the record extract those portions of the trial transcript concerning facts in

dispute and the decision of the trial judge.

Nor could HEK have

reasonably believed that it was unnecessary to include a copy of the amended complaint. We are satisfied, in light of counsel's

comments at oral argument, that the under-inclusion by HEK was not the result of bad faith, however. We recognize, moreover,

that the under-inclusion might have been rectified had counsel for ORIX either informed HEK that the omitted items should be included in the extract or unilaterally included the items in the appendix to ORIX's brief. See Md. Rule 8-501(a) and (e).

Likewise, the under-inclusion might have been rectified by order of this Court had this Court had the luxury of reviewing the briefs and record extract sufficiently in advance of argument. See Md. Rule 8-501(m). the transcript. of reproducing HEK has provided numerous citations to

Thus, while this Court must shoulder the burden and distributing to the judges the relevant

transcript pages, the relevant pages can, at least, be readily located. We shall therefore entertain the appeal despite the We caution the appellate bar that

violation of Rule 8-501(c).

- 16 we may not be so accommodating in the event of future

violations. SUPERIOR SECURITY INTEREST HEK sought, in the amended complaint, a declaratory judgment that ORIX's security interest in the scaffolding

equipment was superior to that of Nationsbank.

All of the other

counts in the amended complaint were contingent upon a finding by the trial court that Nationsbank's interest was superior. HEK nevertheless dismissed Nationsbank from the case prior to trial. Although HEK did not amend the amended complaint, it

then argued at trial that Nationsbank had the superior interest. HEK is now in the awkward position of appealing the trial

court's determination that the security interest of ORIX was superior -- the determination that, with its amended complaint, HEK requested that the trial court make. Thus, for the purpose,

we hope, of ending this controversy, we shall assume arguendo that HEK is entitled to appeal from the exact determination that it sought in its amended complaint, and shall conclude that the determination was proper. We do not consider whether HEK may be Cf.

estopped by its own pleading from arguing as it does. Cloverfields Inc., 280 Improvement Assoc., Inc. Md. 382, 403-04, 374

v. Seabreeze Properties, 906, 907-09 (1977)

A.2d

(discussing binding nature of judicial admissions in per curiam

- 17 denial of motion to reconsider opinion reported at 280 Md. 382, 374 A.2d 906). At the time of the transaction,

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