USCA1 Opinion

UNITED STATES COURT OF APPEALS

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
____________________
No. 93-2040
DENNIS G. BEZANSON, TRUSTEE OF THE ESTATE OF UNITEX, INC.,
Plaintiff, Appellant,
v.
FLEET BANK - NH,
Defendant, Appellee.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Paul J. Barbadoro, U.S. District Judge]
___________________
____________________
Before
Torruella, Cyr and Boudin,
Circuit Judges
______________
____________________
Graydon G. Stevens with
___________________

whom Kelly, Remmel & Zimmerman was

___________________________

brief for appellant.

Francis L. Cramer with whom Valerie A. Walsh and
__________________
__________________
Gregg, P.A. were on brief for appellee.
___________

Sullivan
________

____________________
July 14, 1994
____________________

BOUDIN, Circuit Judge.

______________
Corporation,

Unitex, Inc., a

made graphics equipment

and magazine publishers.

In

owed to

$3 million

("the

bank loan

bank").1

The

assets and on March

Unitex'
Unitex
reduced

as an

Indian Head
secured

The

activities

providing spare parts.

to

A number

bank's object
but for

National Bank

by all

8, 1985, Indian Head took

ongoing business,

Unitex'

purchased by newspaper

March 1985, Unitex defaulted on

loan was

entire operation.

New Hampshire

of

possession of
was

the time

servicing

Unitex'

to sell
being it

customers

of Unitex' customers

and
told

the bank that

they would

cease using Unitex

as a

supplier

unless Unitex acquired new management by June 1985.

In late

May 1985,

after soliciting

buyers, the bank received

Inc. ("GTI").
principals

GTI was

in order

considerable

an offer from Graphics Technology,

a start-up company

to purchase

experience

in

money

formed by
Two of

technology

three

them had
and

the

plant and spoke with employees

GTI aimed to purchase Unitex with borrowed

and retained

capital:

Unitex.

graphics

principals visited the Unitex

and distributors.

unsuccessfully for

two firms

to assist

R Technology, Inc., a

it in

raising the

financial consultant, and

Parker Benjamin, Inc., a regional investment banker.

____________________
1Fleet Bank-NH
Indian Head at some
this case.

("Fleet") succeeded to the interests of

time after the transactions at issue in
-2-2-

On May 22, 1985, GTI made a written offer to Indian Head

to

purchase the

assets of

Unitex

for $3,250,000.

Ronald

Cote, the bank officer primarily

for

the assets,

several times

spoke to

and was

confidence [the] deal

representative
Parker

involved in seeking a buyer

a Parker

told that
can be

Benjamin representative

it had

"high level

of

quickly."

done and rather

of A R Technology, Inc. also told the bank of

Benjamin's optimism.

The bank

drafted but

did not

transmit a letter dated May 27 accepting GTI's May 22 offer.

On

May 29, 1985, the

the bank's president

GTI principals met

with Cote and

to discuss the May 22 offer.

The bank

presented a draft proposal calling for a July 12 closing date

and a $200,000 nonrefundable deposit to be made when the bank
accepted the

offer.

GTI

furnished a proposed

interim plan

for GTI to take over operation of Unitex prior to the closing

(the bank

having expressed a desire

management).

Indian

interim operation
balked

at

the

to surrender day-to-day

Head objected

plan and

to two

aspects of

GTI offered modifications.

$200,000 deposit

and

this

the
GTI

issue was

left

unresolved.
On June 1, 1985,
detail about
GTI

offer

the interim
to

$3,400,000.

customers, contacted
expressed an

GTI sent Cote a letter

operating plan and
The

letter

said

by GTI, were enthusiastic

interest in

offering

-3-3-

providing more
increasing the
that

Unitex

and some had

financial assistance

to

GTI, if required; also,

Unitex employees were
was no mention

according to the letter,

key former

willing to rejoin the company.

of the nonrefundable deposit,

There

but the letter

said that GTI was "rapidly reviewing the remaining few

[open

points] for a final solution."

On June
made

the

3, 1985, Chorus Data

bank a

competing

Systems, Inc. ("Chorus"),

proposal.

In

proposed a joint venture between Chorus and

toward

the operation of Unitex

substance,

it

the bank looking

for a period,

followed by a

public offering of a

rebuilt Unitex a year or

so hence; the

bank's expected gain

was projected to be between

$3 million

and $8 million, depending on the price obtained in the public

offering.

The bank was attracted by the prospect of sharing

in the value of a revived Unitex.

In a June 4 meeting

with

GTI representatives, the bank rejected GTI's offer.

On June 5,
met.

1985, representatives of the bank and Chorus

Cote rejected the joint venture approach on grounds of

unspecified

regulatory problems;

Fleet take a note

he suggested

instead that

for $3 million from a proposed new company

(which would own the Unitex assets) and convert the note into
equity four

months later.

An agreement in

principle along

these lines was reached either then or the next day.

On June

6, GTI was told that

another bidder.

the bank had decided to sell

Unitex' customers were

Unitex to

advised that Unitex

would soon be operating under new ownership headed by Chorus.

-4-4-

On June 20, 1985,

agreement.

Chorus and the bank signed

The details

are complicated but

a written

in substance a

new corporation--called Cuneiform--was to purchase the Unitex

assets.

A $3

to the bank
120

million interest bearing note would

by Cuneiform, and the note would be exchanged in

days for convertible preferred

bank.

If, as

stock to be

the parties anticipated, the new

ultimately offered to the public or sold

the

be issued

held by the
company were

to another company,

preferred stock would be converted to common stock at an

agreed upon ratio and the bank would obtain 49 percent of the
business
was

and thereby share in the upside profit.

required from Chorus or

the new entity,

No deposit

nor did Chorus

provide any guarantee of the $3 million note.

In

July

1985,

Unitex

filed

for

bankruptcy.

In

bankruptcy,
exceeded
trustee

the

claims

$3,700,000.

of
On

unsecured creditors
March 7,

of

1990, Dennis

Unitex

Bezanson,

of the estate of Unitex, filed the present action in

district court against Fleet as the successor to Indian Head.

The complaint, so far as pertinent

here, charged that Indian

Head had violated its duty under New Hampshire law by failing
to dispose of the Unitex

assets in a commercially reasonable

manner.
The case
found

in

was tried to a

favor

of

the

jury in March 1993.

trustee

and

awarded

The jury
damages

of

-5-5-

$379,779.21,

effectively

the $3,400,000

offer made

by GTI

less the amount Unitek owed the bank.2

Fleet filed post-trial motions
of
both
27,

law or for a new trial,

liability and damages.
1993,

the

district

supported the jury's

for judgment as a matter

attacking the jury verdict as to

In a decision
court

found

that

filed on August
the

evidence

finding of liability but that Fleet was

entitled to judgment as

a matter of law because

had not provided evidence

reasonable jury to

of damages sufficient to permit

find that

"reasonable certainty."

the trustee

damages had

The new trial

been proved

with

motion was dismissed

as moot.
The
judgment

trustee
in

judgment but
entitled to
liability.
to defend
take

has

favor of

Fleet.

argues, in the
judgment as

Fleet

the

district

not only

alternative, that

a matter

of law

on

Fleet has not cross-appealed, but

the district

nothing--on

district

appealed from

court.

any

court's
ground

defends the
it was
the issue

also
of

it is entitled

judgment--that the
properly

court's

preserved

trustee
in

the

See Martin v. Tango's Restaurant, Inc., 969

___ ______
_______________________

F.2d 1319, 1325 (1st Cir. 1992).

____________________
2Although the original loan to Unitex had been for $3
million, Indian Head was owed $3,020,220.79 in June 1985,
apparently because of expenses incurred by the bank for which
Unitex was responsible.
-6-6-

We address the issue of liability first and then turn to

the issue
part

of damages.

The applicable law in this case is in

state and in part

had to

be proved, by whom and

Federal

law determines

jury, including
find

federal.

law determines what

to what degree of persuasion.

the relationship

between

the standard--that no reasonable

otherwise-- for

verdict.

State

granting judgment

Our review of

such a

Biggins v. Hazen Paper Co.,

_______
_______________

judge and
jury could

notwithstanding the

judgment is de novo.
________

953 F.2d 1405,

1409 (1st

See
___
Cir.

1992).
1.

The

Uniform

Commercial

Code,

adopted

by

New

Hampshire, provides that sale of collateral to satisfy a debt

must be "commercially reasonable" in "every aspect" including
"method, manner,
Ann.

382-A:9-504(3).

concise

gloss on

commercial
all

time, place

the

collateral;

the

We

and terms."
agree with the

"commercially

and in

surrounding

general "no

the

a secured party's actions."3

____________________

language:

on evaluation of
disposition

single factor,

will conclusively determine the commercial

Rev. Stat.

district court's

reasonable"

reasonableness normally depends

circumstances

N.H.

of

even price,

reasonableness of

3See generally, e.g., C.I.T. Corp v. Lee Pontiac, Inc.,

_____________ ____ ____________
_________________
513 F.2d 207, 209 (9th Cir. 1975); Georgia Pacific Corp. v.
______________________
First Wisconsin Financial Corp., 805 F. Supp. 610, 617 (N.D.
________________________________
Ill. 1992); 7 A.L.R. 4th 309 (1981) (collecting cases).
-7-7-

Fleet

argues

on appeal

that

the

party disposing

collateral can never

be deemed unreasonable if it

lower firm
____

offer in

preference to

one.

argument need not

This

a higher

detain us long.

of

accepts a

but contingent
Common sense

alone suggests that in some circumstances a higher contingent

offer will be

far more

The proverb says that a

bush; it

valuable than a

lower certain

one.

bird in the hand is worth two in the

does not say that a bird in hand is worth more than

any number of birds in the bush.

Even
which

if there were a rule such as that urged by Fleet--

there is not--it is doubtful that it would apply here.

The $3 million offer by Chorus appears to have been "certain"

only in a formal sense.
million

note obtained

In substance, nothing secured the $3

from

Cuneiform

beyond the

original

Unitex assets.
one from the

This does not

mean that the deal

bank's point of view

offer Indian Head accepted

but only that

was a bad
the "firm"

gave it no more security

than it

already had.
Whether

the

action

of

was

judged

interesting

question.

Unitex as a

going company would have made it

to

prefer

resuscitated.

an

all

bank

unreasonable

actual owner of the

by

the

commercially

the circumstances

Perhaps

the

is

stake

while

more

apparent prospects

of

prudent for an

assets to reject a $3,400,000

equity

the

offer and

business

was

Similarly, a security holder, owed $5 million,

-8-8-

who in good

faith held

well have been able

out for more

than $3,400,000

to defend this judgment as

might

a reasonable

one, even if the strategy turned out badly.4

We need not pursue these issues because Indian Head
not the owner of the property,

and its actions as a

creditor were tainted by bad faith, or

found.

One who possesses

was

secured

so the jury must have

collateral for a

loan in default

cannot walk away with the collateral if it is worth more than

the debt.

Rather, the

value of the collateral

debt.
borrower
behalf of

balance belongs

is

then bankrupt,

to
to

the other creditors.

to the

Partners, Ltd.
______________

(absent

entitled to

up to the amount of

The

382-A:9-504(2)
account

lender normally is

the
the

debtor for

the outstanding

borrower

or, if

the

bankruptcy trustee

See N.H. Rev.

___

agreement

the

"the

Stat. Ann.

secured

any surplus");

on

party must

Contrail Leasing
________________

v. Consolidated Airways, Inc.,

__________________________

742 F.2d 1095

(7th Cir. 1984).

In this case, the
than

the

balance

$3,400,000 offer by GTI was

owed the

bank.

If the

bank

for more
had been

seriously concerned about the reliability of the offer or had

feared

that customers

would desert

Unitex before

the deal

could be completed, it might have rejected GTI's proposal

on

____________________
4Apparently in the event Unitex' technology proved to be
rapidly outmoded by developments in computerization. In this
respect, both GTI and Indian Head apparently were deceived in
thinking that Unitex had a bright future.
-9-9-

those grounds.

But what happened

the bank doubted

debt but
But

that it could recover its

that it became

full outstanding

interested in obtaining

anything more belonged to

bank.

strongly suggests not that

even more.

the creditors and

not to the

The jury probably thought that the bank's conduct was

deplorableandin nosensea"commercially reasonable"disposition.

In fairness to Indian

Head, we note that there

some evidence consistent with its

good faith.

is also

position that it acted

in

For example, notes made by Cote say that on June

6 Cote spoke to Parker Benjamin "to clarify" its expectations

and was told that
the

money

Unitex'
was

but

there was "a high probability"

that

the financing

assets and this would

depended

of raising

on

verifying

take three weeks.

Still, it

up the jury to weigh the conflicting inferences from all

the evidence and to conclude, as it apparently did, that Cote

was protecting the record after the decision had been made.
2.

The question

damages is closer.
that

In

this case, the

New Hampshire law required

"reasonable certainty."
reasonable
would

whether evidence is

have

transaction

jury could
been
if

able
its

adequate to show

district court

the damages be

held

proved to a

The district court concluded that no

find it
to
offer

reasonably certain

finance
had

and

been

Benjamin's expressions of confidence

carry

that GTI

through the

accepted.

Parker

"that [the] deal can be

done and rather quickly" were, the court found, "nothing more

-10-10-

than speculation . . . ."

debtor

may

recover as

secured party's

Under
damages

413

F.2d 899

rejected offer).
as

"any

Hampshire law,
loss

unreasonable disposition of

N.H. Rev. Stat. Ann. 382-A:9-507.

Wilson,
______

New

In

elsewhere, the

(4th

Cir.

caused" by

the collateral.

See A to Z Rental, Inc. v.

___ ___________________
1969) (damages

burden of

proof of

based

on

damages is

upon the

"a preponderance" of the

evidence

both the extent and amount of such damages.5

these propositions,

further conclusion

the

commercial litigation in New Hampshire,

claimant who must show by

not with

the

but with the

that New Hampshire law

Our concern is
district court's
required that the

damages be established with "reasonable certainty."

The district court
standard

from

requirement
contract

two

New

borrowed its "reasonable

Hampshire cases

on the computation of lost

cases.

Great

Lakes

that

certainty"
impose

this

profits in breach of

Aircraft

Co.

v.

City

of

___________________________

________

Claremont, 608 A.2d 840 (N.H. 1992); Hydraform Products Corp.

_________
________________________
v. American Steel, 498 A.2d 339 (N.H. 1985).
______________
ones

These cases are

in which the claimant argued that a business would have

been profitable in a
contract or

specified amount but for the

other wrongful conduct

breach of

of the wrongdoer.

Lost

____________________
5See Baley v. Sommovigo, 631 A.2d 913, 917 (N.H. 1993)
___ _____
_________
("The party seeking to recover damages has the burden of
proving by a preponderance of the evidence the extent and
amount of such damages."); Grant v. Town of Newton, 370 A.2d
_____
______________
285, 287 (N.H. 1977) (claimant must show by preponderance
causation of "and extent and amount of such damages.").
-11-11-

profits of this kind are often quite speculative; they depend

upon how

variety

of

variables

affecting

stream

of

revenues and expenses would have played out over time, if the
wrongdoing had not occurred.
Our

case does

not require

such a

complex conjectural

judgment:

the

only

question

transaction

in question--a

is

whether

$3,400,000

the

purchase

specific
of

Unitex

assets by GTI in or around June 1985--would have gone forward

if

the

bank

had

pursued

this

transaction

rather

diverting its efforts to securing an equity stake.

matter

of prophesy,

to be

policy and nothing in

sure, but

we see

than

This is a

no reason

the New Hampshire case law

in

to suggest

that the trustee needed to show anything more than the "morelikely-than-not"

prospect

usually

associated

with

preponderance of the evidence standard.6

The New

Hampshire

UCC pertinently

provides

that

its

remedies shall be liberally administered "to the end that the

aggrieved party
other

party

provision

may be put in

had fully

notes:

approximate:
definiteness

as good a position

performed"

and the

"Compensatory damages
they

have

and accuracy

to

be

the facts

comment

are often

proved

as if the

with

permit, but

to the
at best
whatever

no more."

____________________
6The phrase "lost profits" is too mutable to provide a
hard-edged test for when reasonable certainty is required;
but we doubt that the label well suits the claim of the
trustee to have an estate asset sold in good faith for as
close to fair value as circumstances permit.
-12-12-

N.H. Rev. Stat.

even

382-A:1-106(1)

if "reasonable

certainty"

and comment
were the

1.

Finally,

standard in

this

case, there is marked inclination to relax the test where the

defendant's conduct is willful.

See A. Farnsworth, Contracts

___
_________

12.15, at 920-21 (2d ed. 1990).

Resolving

credibility

issues

and

all

reasonable

inferences in favor of the jury verdict, see Putnam Resources

___ ________________
v. Pateman, 958 F.2d
_______
the

448, 459 (1st Cir. 1992), we think that

evidence is adequate to support the jury's view that the

GTI transaction would more likely than not have succeeded but
for the bank's misconduct.

In considering whether financing

would have been secured, the jury was entitled to rely on the
rather

general

but

also

quite

confident

attributed to GTI's investment banker.

hearsay

because they appeared in

predictions

These statements were

the form of

notes made by

the

bank representative who

conferred with Parker Benjamin.

But

there was

to admission

no objection

of the

notes and

recorded statements may therefore be considered for the truth

of

the matter asserted.

witness might

have been

For all

we know, a Parker Benjamin

summoned if an

objection had

been

made.
Of course, such predictions
if

the

Parker

Benjamin

would carry far more weight

representative

had provided

more

detail to underpin his conclusion--for example, by describing

preliminary

efforts

to

raise

the

money,

similar

past

-13-13-

transactions, or

the commercial

promise of Unitex.

Still,

experts are allowed to testify to their bare conclusions, see

___
Fed.

R. Evid.

703, and

the bare

favorable to the trustee.

down the

$3,400,000 offer

stake might be
assets were

viewed as

worth

at

conclusion here

is quite

Further, the bank's action turning

in favor

of retaining

a judgment

by the

least $3,400,000

thought so, the jury might suppose that

and,

an equity

bank that
if

the

the
bank

potential lenders to

GTI would reach the same conclusion.

The district
banker could

court expressed doubt

make a

that the investment

well grounded judgment

about financing

when GTI itself had still not received all of the information
about

Unitex that

GTI wanted from

the bank.

Based on the

testimony, there is no reason to believe that GTI was seeking

anything

more

than

detailed

verification

about

matters

represented in the offering

"package" that the bank provided

to potential bidders.

mere fact that

The

additional information or
to show

that Parker

GTI was

seeking

confirmation is not

itself enough

Benjamin's prediction of

financing was

irresponsible.
The bank points to a
attended the GTI
financing,

number of other uncertainties that

proposal.

GTI requested

In addition to
a substantial

evaluate Unitex; the question

GTI's need

period in

for

which to

of management of Unitex during

the transition and before closing remained to be settled; and

-14-14-

the

issue

resolved.
to

of

the

nonrefundable

downpayment

was

never

Fleet's brief tries to develop these uncertainties

furnish sound reasons why Indian Head would in good faith

have been justified in rejecting GTI in favor of Chorus.

The
bank

jury, however,

did not

make

enthusiastic about

such

was entitled
a

good

to conclude

faith

the GTI proposal until

judgment

that the
but

was

its attention was

diverted

by the lure of improper gain.

GTI's own enthusiasm

for

transaction is

and

the

secure financing
assessed.

Thus, a

was

likely

more

unquestioned,

were underway and

had been

its efforts

optimistically

reasonable jury could have found

than

not

that

the

GTI

to

proposal

that it
would

ultimately have been accepted, and financing for it achieved,

but for the bank's bad faith rejection of the GTI proposal.
_______
The
matter

judgment of the district court

is remanded for
________

is reversed and the

________

further proceedings

this opinion.

-15-15-

consistent with