amount of $ 95,500.00. At the direction of Rich Savoie of PV, Easy Machinery issued a check for $ 15,000.00 as a deposit and sent it, on January 21, 1986, to the Bank of Nova Scotia. (See Keeling Affidavit, Exhibit "D" (Savoie letter of January 14, 1986, directing payment of $ 15,000 to Bank of Nova Scotia); Exhibit "C" (PV invoice to Easy of January 15, 1986, in amount of $ 95,500); Exhibits "E-1", "E-2", "E-3" (Easy Machinery letter and supporting documents confirming transmittal of check no. 7250)).
Sometime after January 15 and before February 3, 1986, Scalise was contacted by Rick Savoie, of PV, who told him that he had fired Mr. Ward and would deal directly with Scalise, offering to sell him the machinery for $ 100,000. (Brief of EFM, Exhibit "2" (Scalise deposition, 96)). Scalise, who stated that he regarded the difference between $ 100,000 and $ 123,000 as Ward's mark-up, agreed to buy directly from PV for $ 100,000. (Id., Scalise deposition 96-98).
Savoie had, on January 23, 1986, represented to Ward that the sale to Easy and thereafter to Scalise could not be consummated because the Bank of Nova Scotia would be retaining Easy's $ 15,000.00 deposit. (Ward Affidavit, paragraph 11; Exhibit "F"). On January 23, 1986, Hutchinson Lawson, a manager for the Bank of Nova Scotia, did inform Ward that the Bank held a second mortgage on the machinery. (Ward Affidavit, Exhibit "E-1".)
Having informed Ward that he could not go through with the sale and having represented to Scalise that Ward was out of the transaction, Savoie proceeded to sell directly to Scalise the same machinery that Scalise would have purchased from Easy. Scalise issued a second purchase order, on January 21, 1986, this time to PV, this time for $ 100,000. (Brief of EFM, Exhibit "3"). Scalise also on January 21, 1986, sent a letter to Ward which cancelled the Scalise-Ward agreement for the stated reason that the Scalise-Ward agreement had called for a one-third down payment. (Ward Affidavit Exhibit "G"). Scalise proceeded to negotiate the new finance lease with EFM for $ 100,000. Scalise deposited $ 15,000 with PV, an amount later reimbursed by EFM, and EFM paid the remaining $ 85,000 directly to PV. (Pretrial Stipulation VI, paragraphs 6, 7.)
Scalise did not know that the machinery as sold by PV was subject to the Bank of Nova Scotia's interest, and did not inquire. (Plaintiff's Motion for Summary Judgment As To Damages, Exhibit "B" (Scalise deposition, 52-58)). Scalise was made aware, prior to consummating the purchase of the machinery, of Ward's umbrage at being cornered out of the deal, by a telegram from Ward dated January 29, 1986. (Ward Affidavit, Exhibit "H").
Based on the evidence of record, Mark Scalise knew, or was under a duty to know, that the equipment he was negotiating the purchase of from PV may have been subject to a security interest of another. It is insupportable to imagine that a deal negotiated with a broker on January 10, 1986, for the purchase of machinery for $ 123,000.00 could be transformed no more than eleven days later into a direct sale for $ 100,000.00 without putting the prospective purchaser -- and despite EFM's acquisition of title, Mark Scalise uncontestedly negotiated the purchase himself -- on notice that something was amiss. The January 29, 1986, Ward telegram, as well as Scalise's own letter to Ward of January 21, 1986, gave Scalise notice and show that Scalise knew that Ward had not been simply "fired" by Savoie. Scalise was under a duty to proceed with caution, or not at all.
In summary, we hold that EFM does not have a duty, solely because of its role as a lender, to conduct a lien search for the benefit of a borrower. We further hold that a finance lease coupled with a purchase option for a nominal amount imposes the duty to warrant good title on the lender-lessor as stated in Section 2-312 of the Uniform Commercial Code. We find finally that the security interest that Nova Scotia had in PV's equipment was one that Scalise should have had knowledge of at the time it formed a contract in February 1986 with EFM, and therefore EFM breached no warranty of title to Scalise.
AND NOW, this 16th day of February, 1989, for the foregoing reasons, judgment is hereby entered on the crossclaim in favor of Equitable Financial Management, Inc. Judgment having previously been entered in favor of Bank of Nova Scotia against A.R. Scalise, Inc., only, it is further
ORDERED, that our Order of December 12, 1988, is vacated, and defendant Scalise is directed to surrender the machinery listed in our Order of November 15, 1988, within twenty (20) days.