Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-02747/USCOURTS-cand-4_06-cv-02747-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Petition for Removal

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United States District Court

For the Northern District of California

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 These allegations are taken from the Complaint.

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

JOSEPH GONSALVES,

Plaintiff,

 v.

HAROLD MONTGOMERY, ET AL.,

Defendants. /

No. C 06-2747 SBA

ORDER

[Docket No. 5]

This matter is before the Court on Plaintiff's Motion for Recovery of Boat from Defendants

Pursuant to California Commercial Code Section 2502 [Docket No. 5]. Having read and considered

the arguments presented by the parties in the papers submitted to the Court, the Court finds this

matter appropriate for resolution without a hearing. 

BACKGROUND

A. Factual Allegations1

Plaintiff Joseph Gonsalves ("Plaintiff") is an individual who is and, at all times relevant to

this action, was a resident of the County of Sonoma in the state of California. Complaint at ¶ 1.

Defendants Harold Montgomery and Frannie Montgomery (collectively, "Defendants") are

individuals who do business in Bandon, Oregon, as H&F Custom Boats. Id. at ¶ 2.

On about December 3, 2004, Plaintiff and Defendants entered into a written contract ("Sales

Contract") for Defendants to construct a twenty-five by nine foot boat with hull number

RAB25142A105 (the "Boat"), pursuant to the terms of the Sales Contract, and to deliver the Boat to

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Plaintiff for a purchase price of $70,000. Id. at ¶ 7. The Boat is for personal, family, or household

purposes. Id. at ¶ 19.

According to Plaintiff, Plaintiff and Defendants modified the Sales Contract on numerous

occasions in the following respects: 1) the Sales Contract included an engine, and since Plaintiff

separately purchased and delivered an engine to Defendants, the parties orally agreed to reduce the

purchase price by $26,090; 2) the parties orally agreed to certain extras for the Boat, including a

trailer, that total $10,868.54; and 3) the parties orally agreed to delete certain items from the Sales

Contract, including cleats, a Sampson Post, a steering wheel, a horn, a compass, a bow roller, hand

rails, a bilge blower system, and a center fuel tank, for a total reduction of $3,226.83. Id. at 7. As

modified, the purchase price, according to Plaintiff, is $51,551.71 ($70,000 minus $26,090, plus

$10,868.54, minus $3,226.83) ("Modified Purchase Price"). Id. Plaintiff tendered and Defendants

accepted the following payments toward the purchase price, totaling $54,000: $2,000 on November

11, 2004; $26,000 on December 7, 2004; $2,000 on February 14, 2005; and $24,000 on May 26,

2005. Id.

Plaintiff alleges that he has performed all conditions, covenants, and promises required to be

performed by Plaintiff in accordance with the terms of the modified Sales Contract and is owed a

refund of $2,448.29, for his payments in excess of the Modified Purchase Price. Id. at ¶ 8.

Plaintiff has delivered to Defendants items for installation on the Boat that Plaintiff

purchased from third parties. Id. at ¶ 9. These items, which were purchased for $50,650.09, include

the engine, engine accessories, cleats, a steering wheel, electronics equipment, a helm chair, a

compass, a horn, an electronic position indicating radio beacon, a bow roller, a swim step, a deck

wash pump, a fresh water pump, a teak utility rack, an anchor and anchor rode, deck lines, a radio

and speakers, fishing rod holders, a head, an anchor wench, a stove, trim tabs, antennas, life vests, a

spear gun rack, and an anchor light. Id. 

Plaintiff alleges that Defendants refuse to deliver the completed Boat to Plaintiff without

further payment in excess of the Modified Purchase Price. Id.

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B. Procedural History

On March 14, 2006, Plaintiff filed a Complaint in the Superior Court of California, Sonoma

County, stating claims against Defendants for breach of contract, fraud, and recovery of goods.

On April 21, 2006, Defendants filed a Notice of Removal, removing the case to this Court,

pursuant to 28 U.S.C. § 1441.

On April 28, 2006, Defendants filed their Answer.

On June 29, 2006, Plaintiff filed the instant Motion for Recovery of Boat from Defendants

Pursuant to California Commercial Code Section 2502 ("Plaintiff's Motion").

On August 22, 2006, Defendants filed their Opposition to Plaintiff's Motion.

On August 29, 2006, Plaintiff filed a Reply.

LEGAL STANDARD

A. Recovery

California Commercial Code § 2502 states, in pertinent part,

(1) Subject to subdivisions (2) and (3), and even though the goods have not been

shipped, a buyer who has paid a part or all of the price of goods in which he or she

has a special property under the provisions of the immediately preceding section [Cal.

Com. Code. § 2501] may on making and keeping good a tender of any unpaid portion

of their price recover them from the seller if either:

(a) In the case of goods bought for personal, family, or household purposes,

the seller repudiates or fails to deliver as required by the contract.

 (b) In all cases, the seller becomes insolvent within 10 days after receipt of

the first installment on their price.

(2) The buyer's right to recover the goods under paragraph (a) of subdivision (1) vests

upon acquisition of a special property, even if the seller had not then repudiated or

failed to deliver.

(3) If the identification creating his or her special property has been made by the

buyer, he or she acquires the right to recover the goods only if they conform to the

contract for sale.

Cal. Com. Code § 2502. According to the California Supreme Court, "[R]epudiation may be express

or implied. An express repudiation is a clear, positive, unequivocal refusal to perform; an implied

repudiation results from conduct where the promisor puts it out of his power to perform so as to

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make substantial performance of his promise impossible." Taylor v. Johnston, 15 Cal. 3d 130, 137

(Cal. 1975). The California Commercial Code explains repudiation as follows:

It is not necessary for repudiation that performance be made literally and utterly

impossible. Repudiation can result from action which reasonably indicates a rejection

of the continuing obligation [to perform] . . . . Under the language of this section, a

demand by one or both parties for more than the contract calls for in the way of

counter-performance is not in itself a repudiation nor does it invalidate a plain

expression of desire for future performance. However, when under a fair reading it

amounts to a statement of intention not to perform except on conditions which go

beyond the contract, it becomes a repudiation.

Cal. Com. Code § 2610 cmt. 2.

The right of recovery provided by California Commercial Code § 2502 applies to goods in

which the buyer has a special property interest, pursuant to California Commercial Code § 2501,

which states, in pertinent part:

The buyer obtains a special property and an insurable interest in goods by

identification of existing goods as goods to which the contract refers even though the

goods so identified are nonconforming and he has an option to return or reject them.

Such identification can be made at any time and in any manner explicitly agreed to by

the parties. In the absence of explicit agreement identification occurs

 (a) When the contract is made if it is for the sale of goods already existing

and identified;

 (b) If the contract is for the sale of future goods other than those described in

paragraph (c), when goods are shipped, marked or otherwise designated by

the seller as goods to which the contract refers.

 (c) If the contract is for the sale of unborn young or future crops, when the

crops are planted or otherwise become growing crops or the young are

conceived.

Cal. Com. Code § 2501(1).

ANALYSIS

A. Choice of Law

As a preliminary matter, the Court finds that California law applies to this case. First,

because this is a diversity jurisdiction case, the Court must apply California choice of law rules: "It

is well-settled that in diversity cases federal courts must apply the choice-of-law rules of the forum

state." Estate of Darulis v. Garate, 401 F.3d 1060, 1062 (9th Cir. 2005). Under California choiceof-law rules, the Court applies California state law, unless the parties raise an objection:

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The fact that two states are involved does not in itself indicate that there is a

"conflict of laws" or "choice of law" problem. . . . "Only 'when it is suggested that

the law of a foreign state should furnish the rule of decision' must the forum

determine the governmental policy of its own and the suggested foreign laws,

preparatory to assessing whether either or both states have an interest in applying

their policy to the case." In short, generally speaking the forum will apply its own

rule of decision unless a party litigant timely invokes the law of a foreign state.

Hurtado v. Superior Court, 11 Cal. 3d 574, 580, 581 (Cal. 1974) (citations omitted). None of the

parties object to the application of California law. To the contrary, both parties raise arguments

based exclusively on California state law. Thus, the Court finds that California state law applies in

determining the merits of the instant motion.

B. Recovery

1. Introduction

Plaintiff argues that, pursuant to California Commercial Code § 2502 ("section 2502"),

Plaintiff has the right to "immediately . . . recover the Boat from defendants." Plaintiff's Motion

("Plaintiff's Mot.") at 1-2. Plaintiff's Motion requests that the Court order Defendants to

"immediately release the Boat to plaintiff." Id. In order to satisfy the standard for this relief,

Plaintiff requests that the Court "confirm the following": 1) Plaintiff fully paid Defendants for the

Boat; 2) Defendants refuse to release the Boat to Plaintiff; 3) the Boat is a specially manufactured

movable thing and, consequently, is a "good" that is subject to the California Commercial Code,

pursuant to California Commercial Code § 2102; 4) the Boat is existing and identified and,

therefore, is capable of being transferred, pursuant to California Commercial Code § 2105; 5) since

the Boat is a good capable of being transferred, Plaintiff has a special property interest in the Boat,

pursuant to California Commercial Code § 2501; 6) Plaintiff purchased the Boat for personal,

family, or household purposes; and 7) pursuant to California Commercial Code § 2502, because

Plaintiff has a special property interest in the Boat; purchased it for personal, family, or household

purposes; and fully paid Defendants for the Boat, Plaintiff is entitled to recover the Boat from

Defendants now. Plaintiff's Mot. at 2.

Plaintiff "vigorously disputes that [Defendants are] owed anything more for the Boat." 

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Reply at 1. Plaintiff argues, however, that "the Court may delay resolution of that dispute in a way

that protects [Defendants] while ordering that [Defendants] turn the Boat over to Plaintiff pursuant

to [California] Commercial Code section 2502." Id. Specifically, Plaintiff offers to place

$26,558.82, the amount that Defendants claim that they are owed by Plaintiff, in an escrow account. 

Id. If the result of this action is that Defendants are entitled to those funds, then the escrow account

funds will be released to Defendants. Id. In the meantime, Plaintiff requests, pursuant to section

2502, that the Court either order Defendants to a) immediately complete the Boat and release it to

Plaintiff or b) release the Boat to Plaintiff in its current unfinished state. Id. at 1-2.

In their Opposition, Defendants dispute that California Commercial Code § 2502 permits the

recovery sought by Plaintiff. Opp. at 2. Defendants argue that recovery of the boat by Plaintiff

would constitute unjust enrichment. Opp. at 2. 

The analysis below is arranged in order of the seven inquiries presented by Plaintiff. For the

reasons stated below, the Court DENIES Plaintiff's Motion.

2. Payment for the Boat

Plaintiff requests that the Court "confirm" that Plaintiff fully paid Defendants for the Boat. 

Plaintiff's Mot. at 2. The Court is unable to "confirm" this fact and must defer this factual inquiry to

the jury. As noted above in the Factual Allegations section, Plaintiff argues that, following a series

of oral modifications to the Sales Contract between Plaintiff and Defendants, the purchase price of

the Boat was reduced from $70,000 to $51,551.71. Complaint at ¶ 7; Gonsalves Decl. at ¶ 5;

Plaintiff's Mot. at 3-4. Plaintiff claims that he has paid Defendants $54,000 to date. Complaint at ¶

7; Gonsalves Decl. at ¶ 4. Defendants confirm that Plaintiff has paid $54,000, but Defendants argue

that, based on the oral modifications to the Sales Contract, Plaintiff still owes $26,558.82 for the

Boat. Def. Opp. at 7; Montgomery Decl. at ¶¶ 4, 10. Defendants' prices for the labor and parts

affected by the oral modifications, set forth in the Declaration of Harold Montgomery, are at odds

with the prices set forth by Plaintiff in the Declaration of Joseph Gonsalves. Montgomery Decl. at

¶¶ 5-10; Gonsalves Decl. at ¶¶ 3-5. The Court is unable to reconcile this conflict. Defendants have

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2

 The California Commercial Code uses the terminology "interest . . . can pass" instead of

"transfer." Cal. Com. Code § 2105. These two phrases are used interchangeably below.

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requested a jury trial in this matter. Notice of Removal at ¶ 5. As the Ninth Circuit has held,

"[w]here the facts are disputed, their resolution and determinations of credibility 'are manifestly the

province of a jury.'" Wall v. County of Orange, 364 F.3d 1107, 1110 (9th Cir. 2004). 

3. Defendants' Refusal to Release the Boat to Plaintiff

Plaintiff requests that the Court "confirm" that Defendants "refuse to release the Boat to

Plaintiff." Plaintiff's Mot. at 2. Defendants argue that they "have not failed to deliver the boat as

required by the contract—it is not finished." Def. Opp. at 7. Defendants explain that they "stopped

working on the incomplete boat after Plaintiff initiated the present litigation." Id. Defendants argue

that they should "be allowed the opportunity to complete the boat contracted for and tender it to the

Plaintiff." Def. Opp. at 7. Plaintiff's phrase that "[D]efendants refuse to release the Boat to

Plaintiff" is open to multiple constructions. This statement could be read to mean that Defendants

will not release the Boat to Plaintiff under any circumstances. Alternately, this statement could be

read to state simply that Defendants have thus far refused Plaintiff's requests for release of the Boat. 

As was the case with facts surrounding payment, to the extent that Defendants' representations are at

odds with "refus[ing] to release the Boat to Plaintiff," that conflict can only be resolved by the jury. 

Wall, 364 F.3d at 1110. 

4. The Boat is a "Good" in which Plaintiff has a Special Property Interest

Plaintiff requests that the Court "confirm" the following three arguments: a) the Boat is a

specially manufactured movable thing and, consequently, is a "good" that is subject to the California

Commercial Code, pursuant to section California Commercial Code § 2102; b) the Boat is existing

and identified and, therefore, is capable of being transferred,2 pursuant to California Commercial

Code § 2105; c) since the Boat is a good capable of being transferred, Plaintiff has a special property

interest in the Boat, pursuant to California Commercial Code § 2501. Plaintiff's Mot. at 2. Because

all three issues are closely related, this section will address these issues together.

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Both Plaintiff and Defendants agree that the California Commercial Code applies to the

Contract for Sale and governs whether the Boat is a good that is existing and identified and

transferable and in which Plaintiff has a special property interest. Plaintiff's Mot. at 5; Opp. at 4-6. 

The Court finds that the California Commercial Code does indeed apply to and govern these issues,

as explained below. Pursuant to California Commercial Code § 2102, the California Commercial

Code "applies to transactions in goods." Cal. Com. Code. § 2102. The California Commercial Code

defines goods, in pertinent part, as follows:

(1) "Goods" means all things (including specially manufactured goods) which are

movable at the time of identification to the contract for sale other than the money in

which the price is to be paid, investment securities (Division 8) and things in action.

(2) Goods must be both existing and identified before any interest in them can pass.

Goods which are not both existing and identified are "future" goods. A purported

present sale of future goods or of any interest therein operates as a contract to sell.

Cal. Com. Code § 2105. Pursuant to California Commercial Code § 2102 cmt. 5, "The question of

when an identification of goods takes place is determined by the provisions of Section [2501]." 

California Commercial Code § 2501 states, in pertinent part, 

(1) The buyer obtains a special property and an insurable interest in goods by

identification of existing goods as goods to which the contract refers even though the

goods so identified are nonconforming and he has an option to return or reject them.

Such identification can be made at any time and in any manner explicitly agreed to by

the parties. In the absence of explicit agreement identification occurs

 (a) When the contract is made if it is for the sale of goods already existing

and identified;

 (b) If the contract is for the sale of future goods . . . when goods are shipped,

marked or otherwise designated by the seller as goods to which the contract

refers;

Cal. Com. Code § 2501(1). 

Defendants argue that the Sales Contract was for the "sale of future goods" because the boat

did not "exist[]" at the time the parties signed the Sales Contract. Opp. at 4. Plaintiff does not

dispute this statement. 

Defendants state that the Boat is currently "unfinished" and "consists of a shell and large

number of parts." Opp. at 4; Montgomery Decl. at ¶ 5. Defendants thus argue that the Boat still

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3 In re CFLC, Inc., 166 F.3d 1012, 1015 n. 3 (9th Cir. 1999) ("California has adopted the

U.C.C."); U.C.C. 2-105; U.C.C. 2-501.

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"cannot be said to be [in] existence." Opp. at 4. "Goods which are not both existing and identified

are 'future' goods." Cal. Com. Code § 2105(2). Interest in such goods cannot be passed. Id.

Defendants cite only one case, North Pacific S.S. Company v. Hall Brothers Ry. & Shipbuilding Co.,

249 U.S. 119, 127 (1918), for the proposition that the Boat is not currently "a boat in the legal sense

because of its unfinished condition." As Plaintiff argues, North Pacific is irrelevant: it addresses

only when a ship becomes subject to admiralty jurisdiction and has no bearing on whether or when a

ship qualifies as a good, for the purposes of the California Commercial Code. Reply at 3; North

Pacific, 249 U.S. at 126-27.

Plaintiff argues that the Boat is properly characterized as a good in which interest might be

passed, rather than a future good, because the Boat exists and is identified. Plaintiff argues that

Defendants' acknowledgment that the Boat "consists of a shell and large number of parts" is a

concession that the Boat is transferrable because the Boat a) "clearly exists" and b) "is identified." 

Reply at 2. Plaintiff cites no cases in support of his argument.

There are no relevant cases interpreting California Commercial Code §§ 2105 and 2501. For

that matter, there are no relevant California or Ninth Circuit cases interpreting similar provisions of

other commercial codes. However, because the relevant sections of the California Commercial

Code are adopted word-for-word from the Uniform Commercial Code ("U.C.C."),3

 the Court

considers as persuasive authority other cases interpreting commercial statutes based on the same

U.C.C. provisions. 

In Jones, the Fifth Circuit interpreted Florida Statutes § 672.2-105, a statute adopted from the

U.C.C. and featuring the same language as California Commercial Code § 2105 (quoted above). 

Jones v. One Fifty Foot Gulfstar Motor Sailing Yacht, 625 F.2d 44 (5th Cir. 1980). The Fifth Circuit

held that a yacht—construction of which "was not totally complete"—is a "good," "within the

meaning of the Uniform Commercial Code," and that interest in that good could be passed. Id. at

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47, 49. 

In Holstein, the Rhode Island Supreme Court interpreted General Laws of Rhode Island §

6A-2-501, a statute adopted from the U.C.C. and featuring the same language as California

Commercial Code § 2501 (quoted above). Holstein v. Greenwich Yacht Sales, Inc., 122 R.I. 211

(R.I. 1979). Although the Rhode Island Supreme Court did not cite to it, General Laws of Rhode

Island § 6A-2-105 is also adopted from the UCC and contains the same language defining "goods"

and their transferability as California Commercial Code § 2105 (quoted above). In Holstein, the

Rhode Island Supreme Court held that an unfinished sailboat was an identified and existing good,

and that interest in the good could be passed. Id. at 214-16. The court held that the sailboat was

identified "as goods to which the contract refers" because the purchaser "viewed the [boat] at [the

shipbuilder's] yard, and the parties specifically referred to it as hull '#551' in the sales contract." Id.

at 216. The court explained "there is no necessity that goods, to be identifiable, have to be in a

deliverable state." Id. at 215.

In Kinetics, the Tenth Circuit interpreted Oklahoma Statutes title 12A, § 2-501, a statute

adopted from the U.C.C. and featuring the same language as California Commercial Code § 2501

(quoted above). Kinetics Technology International Corp v. Fourth National Bank of Tulsa, 705 F.2d

396 (10th Cir. 1983). Although the Tenth Circuit did not cite to it, Oklahoma Statutes title 12A, §

2-105 is also adopted from the UCC and contains the same language defining "goods" and their

transferability as California Commercial Code § 2105 (quoted above). Kinetics did not involve

boats, but speaks clearly to the status of unfinished products as “goods.” In Kinetics, the Tenth

Circuit held that partially-manufactured furnace economizers were existing, identified goods, and

that interest in the goods could be passed. Id. at 401-402. The Tenth Circuit explained, 

there is no requirement . . . that the goods be in a deliverable state or that all of the

seller's duties with respect to the processing of the goods be completed in order that

identification occur. . . . So long as the goods were designated as those to be

incorporated into [the buyer's] eight furnace economizers, it is irrelevant that the

fabrication was not complete.

Id.

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4

 Although neither California courts nor other courts interpreting similar language have

interpreted the term “movable,” as used in California Commercial Code § 2105(1), California courts

have referred to dictionaries in interpreting terms in the California Commercial Code. Oswald Machine

& Equipment, Inc. v. Yip, 10 Cal. App. 4th 1238, 1244 n. 7 (Cal. Ct. App. 1992). Dictionaries define

“movable” as “[p]roperty that can be moved or displaced, such as personal goods.” BLACK'S LAW

DICTIONARY 1035 (8th ed. 2004).

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In the instant case, the Court finds that a boat is a “movable” “thing[]” and thus qualifies as a

good within the plain meaning of the language of California Commercial Code § 2105(1).4

 This

comports with the holding of the Rhode Island Supreme Court in Holstein and the Fifth Circuit in

Jones; both courts held that boats are goods within the meaning of the language adopted in the

California Commercial Code. Defendants argue, and Plaintiff does not dispute, that the Boat did not

exist at the time the contract was signed. Opp. at 4. Thus, as Defendants argue, the Sales Contract

is a contract for the "sale of future goods." Opp. at 4; Cal. Com. Code. § 2105(2). 

The Sales Contract does not indicate when identification of the Boat “as [the] good[] to

which the contract refers” will occur. Cal. Com. Code § 2501(1); Plaintiff’s Mot., Ex. A (Sales

Contract). Therefore, pursuant to California Commercial Code § 2501(1), the Boat is considered

“identified” when the Boat is “shipped, marked, or otherwise designated by the seller as goods to

which the contract refers.” Cal. Com. Code. § 2501(1). As explained below, the Court finds that the

Boat has already been “identified” “as [the] good[] to which the contract refers.” Cal. Com. Code §

2501(1). As in Holstein, the Boat has been assigned a hull number, and the hull number was

included in the Sales Contract. Plaintiff’s Mot. at 1, Ex. A (Sales Contract). Defendant Harold

Montgomery refers to the Boat as “consist[ing] of a shell and large number of parts” and refers to

the shop “working on [Plaintiff’s] boat.” Montgomery Decl, at ¶¶ 7, 9. The commentary to

California Commercial Code § 2501 states, “there is no requirement in this section that the goods be

in deliverable state or that all of the seller's duties with respect to the processing of the goods be

completed in order that identification occur.” Cal. Com. Code § 2501 cmt. 4. Defendants do not

dispute that the Boat has been identified. The Court finds that, based on the hull number assignment

and Defendants’ references, the unfinished Boat has been clearly “designated by the seller as goods

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to which the contract refers” and hence identified. Cal. Com. Code § 2501(1). Because the “shell”

and “parts” comprising the Boat are movable things, see supra note 4, the Court also finds that the

Boat, in its present state, is an existing good, and hence one in which interest may be passed. Cal.

Com. Code § 2105(2). Indeed, the three appellate courts cited above all concur that a product need

not be in a finished state to qualify as a good, within the meaning of the language of the California

Commercial Code. Kinetics, 705 F.2d at 396; Jones, 625 F.2d at 44; Holstein, 122 R.I. at 211. 

Because the Boat is an existing good which has been identified, pursuant to California

Commercial Code §2501(1), the Court finds that Plaintiff has "obtain[ed] a special property" interest

in the Boat. 

5. Plaintiff Purchased the Boat for Personal, Family, or Household Purposes

Plaintiff requests that the Court “confirm” that Plaintiff “purchased the Boat for personal,

family, or household purposes.” Plaintiff’s Mot. at 2. The Declaration of Joseph Gonsalves states

that Plaintiff “bought the Boat for personal, family, and/or household purposes.” Gonsalves Decl. at

¶ 9. Defendants do not dispute—or, for that matter, address—this assertion. Therefore, the Court

finds that Plaintiff “purchased the Boat for personal, family, or household purposes.”

6. Plaintiff’s Right to Recovery the Boat

Plaintiff requests that the Court “confirm” that, pursuant to California Commercial Code §

2502, because Plaintiff has a special property interest in the Boat; purchased it for personal, family,

or household purposes; and fully paid Defendants for the Boat, Plaintiff is entitled to recover the

Boat from Defendants now. Plaintiff's Mot. at 2. The Court finds that Plaintiff’s argument is

unavailing. 

Pursuant to California Commercial Code § 2502 states, in pertinent part,

[A] buyer who has paid a part or all of the price of goods in which he or she has a

special property under the provisions of the immediately preceding section [Cal.

Com. Code. § 2501] may on making and keeping good a tender of any unpaid portion

of their price recover them from the seller if either:

(a) In the case of goods bought for personal, family, or household purposes,

the seller repudiates or fails to deliver as required by the contract.

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 (b) In all cases, the seller becomes insolvent within 10 days after receipt of

the first installment on their price.

Cal. Com. Code § 2502. As noted above, Plaintiff has a special property interest in the Boat, and

Plaintiff purchased the Boat for personal, family, or household purposes. While the parties dispute

whether Plaintiff has fully paid Defendants for the Boat, Plaintiff offers to place $26,558.82—the

amount that Defendants argue is still owed on the Boat—in escrow, and release those funds to

Defendants, “[i]f the result of this action is that [Defendants] [are] entitled to those funds.” Reply at

1. 

However, in spite of these facts, Plaintiff is still unable to recover the Boat. Pursuant to

California Commercial Code § 2502, Plaintiff may only recover the Boat if either

“the seller repudiates or fails to deliver as required by the contract” or “the seller becomes insolvent

within 10 days after receipt of the first installment on their price.” Cal. Com. Code § 2502. As

Defendants argue, neither of these events have occurred. Opp. at 6. First, Defendants argue that

they have not repudiated the Sales Contract: they simply “stopped working on the incomplete boat

after Plaintiff initiated the present litigation” and seek the “opportunity to complete the boat

contracted for and tender it to the Plaintiff.” Opp. at 7. According to the California Supreme Court,

"repudiation may be express or implied. An express repudiation is a clear, positive, unequivocal

refusal to perform; an implied repudiation results from conduct where the promisor puts it out of his

power to perform so as to make substantial performance of his promise impossible." Taylor, 15 Cal.

3d at 137. Defendants’ stated desire to continue work on and to complete the Boat, pursuant to the

terms of the Sales Contract, forecloses any argument that they have expressly repudiated the Sales

Contract. Moreover, Defendants argue, they have not “fail[ed] to deliver as required by the

contract.” Opp. at 7. As Defendants argue, the Boat is simply “not finished.” Id. Neither party

argues that the Boat was due to be completed by any particular date. The contract does not a contain

a deadline. Plaintiff’s Mot., Ex. A (Sales Contract). As noted above, both parties acknowledge that

various oral modifications were made to the original Sales Contract and the plans for the

construction of the Boat. Montgomery Decl. at ¶¶ 5-10; Gonsalves Decl. at ¶ 2. Defendant Harold

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 The Court need not address Defendants’ argument that allowing recovery of the Boat would

constitute unjust enrichment. Defendants argue, without citation to any authority, that "recovery of the

boat" when Plaintiff still owes Defendants $26,558.82 "would constitute unjust enrichment." Opp. at

7. This argument is MOOT, as the Court DENIES recovery of the Boat, for the reasons stated above.

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Montgomery declares that “[d]ue to the number of changes requested by [Plaintiff], the boat has had

a longer building schedule. . . . [U]p until [the start of the instant litigation], my shop did everything

that [Plaintiff] asked regarding the custom boat.” Montgomery Decl. at ¶¶ 9, 11. Plaintiff does not

dispute these statements. Plaintiff only disputes the outstanding amount owed for the Boat. Reply

at 1. As noted above, the final price of the Boat is a disputed matter that must be decided by to the

jury. Based on the known facts before the Court, the Court finds that Plaintiff has failed to show

that Defendants repudiated or failed to deliver as required by the Sales Contract. Additionally,

Plaintiff does not argue that Defendants are insolvent. Defendants specifically deny that they are

insolvent. Opp. at 6. Therefore, the Court finds that Plaintiff has failed to establish either of the two

possible triggers for recovery of the Boat, pursuant to California Commercial Code § 2502.5

CONCLUSION

IT IS HEREBY ORDERED THAT Plaintiff's Motion is DENIED, for the reasons stated

above.

Dated: 9/20/06 

SAUNDRA BROWN ARMSTRONG

United States District Judge

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