Community Bank of Lafourche v. Mary Ann Vizier M/V et al

Filing 38

ORDER & REASONS granting 32 Motion for Summary Judgment Seeking Dismissal of Intervenors Maritime Lien Claims. Intervenor Kevin Gros Offshore, LLC does not hold a maritime lien against the vessel M/V MARY ANN VIZIER and its complaint in intervention is DISMISSED.. Signed by Judge Jay C. Zainey on 5/11/2012. (gbw, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
COMMUNITY BANK OF LAFOURCHE

CIVIL ACTION

VERSUS

NO: 11-630

THE M/V MARY ANN VIZIER, IN
REM, AND LORI ANN VIZIER,
INC., IN PERSONAM

SECTION: "A" (2)

ORDER AND REASONS
Before the Court is a Motion for Summary Judgment Seeking
Dismissal of Intervenor’s Maritime Lien Claims (Rec. Doc. 32)
filed by Plaintiff Community Bank of Lafourche.
Gros Offshore, LLC opposes the motion.

Intervenor Kevin

The motion, noticed for

submission on March 28, 2012, is before the Court on the briefs
without oral argument.
I.

BACKGROUND
The M/V MARY ANN VIZIER is owned by Lori Ann Vizier, Inc.

On May 8, 2008, Vizier and plaintiff Community Bank entered into
a preferred ship mortgage, which was properly recorded.

On April

4, 2010, Community Bank put Vizier into default for failing to
pay the promissory note secured by the mortgage.

On March 22,

2011, Community Bank filed the instant action against Lori Ann
Vizier, Inc. in personam and the M/V MARY ANN VIZIER in rem
seeking the balance due on the note of $469,170.73, plus accrued
interest and attorney’s fees.
arrested the vessel.

On July 29, 2011, the U.S. Marshal

Community Bank provided notice of the

arrest to all other lien holders of record, and on August 29,

2011, Kevin Gross Offshore, LLC intervened in the lawsuit.

(Rec.

Docs. 16 & 17).
Via its complaint in intervention, Kevin Gross Offshore, LLC
(“KGO”) asserts a maritime lien against the vessel arising out of
the alleged breach by Vizier of a Bareboat Charter and Vessel
Management Agreement (“the Agreement”) (Rec. Doc. 18-1), executed
on February 16, 2007, with the vessel being turned over to KGO on
that same date.

KGO is seeking the unpaid balance of $300,772.42

plus interest, that is allegedly due under the Agreement.

KGO

contends that under the law in this circuit it has a preferred
maritime lien that outranks Community Bank’s mortgage.

It is

unlikely that the proceeds from the sale of the MARY ANN VIZIER
will satisfy both Community Bank’s and KGO’s interests.
Community Bank now moves for summary judgment on the issue
of whether KGO has a valid maritime lien against the MARY ANN
VIZIER.

According to Plaintiff, KGO does not hold a maritime

lien against the vessel because the Agreement that Vizier
allegedly breached was not a charter party but rather a vessel
management agreement.

Alternatively, if the Agreement was a

charter party, then Plaintiff argues that the equitable “joint
venture” exception should apply to preclude lien status.
II.

DISCUSSION
Under the Ship Mortgage Act, a ship mortgage takes priority

over all other claims against a vessel except for preferred
maritime liens.

46 U.S.C.A. § 31326(b)(1) (West 2007); Bank One
2

v. MR. DEAN MV, 293 F.3d 830, 832 (5th Cir. 2002).

Breach of a

charter party gives rise to a maritime lien and that lien will be
a preferred maritime lien if it attaches before a ship mortgage
is filed.

Bank One, 293 F.3d at 832 (citing 46 U.S.C. §

31301(5)(A)).

A maritime lien for breach of a charter party

attaches when the vessel owner places the vessel at the
charterer’s disposal even though the breach might have occurred
much later in time.

Id. at 835.

Breach of a non-charter party,

maritime contract does not give rise to a maritime lien.

Comar

Marine Corp. v. Raider Marine Logistics, LLC, No. 09-1438, 2011
WL 2729071, at *3 (W.D. La. July 12, 2011) (Haik, J.).
The Agreement between Vizier and KGO was executed on
February 16, 2007, and according to KGO’s complaint the vessel
was delivered to its custody that very same date.
VI).

(Rec. Doc. ¶

Community Bank’s ship mortgage was recorded on May 9, 2008

(Rec. Doc.1-3, at 7).

Therefore, under the clear law of this

circuit, if the Agreement is in fact a charter party then its
breach will have created a maritime lien in favor of KGO as of
February 16, 2007–-the date of vessel delivery, not the date of
the breach--and KGO’s lien will outrank Community Bank’s
mortgage.

If on the other hand the Agreement is a vessel

management agreement, and therefore an ordinary maritime
contract, then KGO will not have a lien against the vessel based
on the breach.
Community Bank argues that when one moves past the
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Agreement’s labeling and invocation of traditional charter party
verbiage to delve into its substance, it becomes clear that the
Agreement is really a vessel management agreement as opposed to a
charter party.

Community Bank points out that under the

Agreement, Vizier is responsible for all crew and vessel expenses
and costs, as well as a monthly management fee, in addition to
the brokerage fee that KGO would earn on each charter that it
booked.

Community Bank contends that the jurisprudence regarding

bareboat charters is clear in that the vessel owner must
relinquish the vessel such that the charterer is responsible for
manning it, supplying it, insuring it, etc.

Community Bank

argues that the “owner-bears-all-costs” aspect of the Agreement
contradicts the assertion that it constitutes a bareboat charter
and reveals its true nature as a vessel management agreement.
KGO counters that control is the essential element that
courts look to when determining whether a demise or bareboat
charter exists and the fact that the contract called for the
owner to reimburse operational expenses does not affect the
analysis.

KGO points out that payment of expenses cannot be a

determining factor in the analysis because under time charters
the owner pays all expenses yet breach of a time charter can
support a maritime lien.

KGO contends that it is clear under the

terms of the Agreement that Vizier retained no control over the
vessel whatsoever.
A “charter” is an arrangement whereby one person, the
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“charterer,” becomes entitled to the use of the whole of a vessel
belonging to another, the “owner.”
80 (5th Cir. 1993).

Walker v. Braus, 995 F.2d 77,

There are essentially two types of charters:

the voyage or time charter and the bareboat or demise charter.
Id.
Under a time charter, the vessel owner retains possession
and control of the vessel, and mans, victuals, and supplies the
vessel, and is responsible for normal operating expenses.

Id.

The charterer’s use of the vessel is limited to a defined period
of time.

Id.

Under a voyage charter the charterer’s use of the

vessel is limited to a particular voyage between two defined
points.

Id.

The principal purpose of a time or voyage charter

is to move cargo owned by the charterer or to transport people
who are employed by or performing work for the charterer.

Id.

The charterer pays a stated fee for the transportation services
involved.

Id.

Under a bareboat or demise charter, the full possession and
control of the vessel is transferred to the charterer.

Id.

The

stated consideration for a demise charter is payable periodically
but without regard to whether the charterer uses the vessel
gainfully or not.

Id.

Under a bareboat or demise charter the

vessel is transferred without crew, provisions, fuel or supplies,
i.e., “bareboat.”

Id.

When and if the charterer operates the

vessel he must supply the essential operating expenses.

Id.

Because the charterer’s personnel operate and man the vessel
5

during a demise charter, the charterer has liability for any and
all casualties resulting from such operation and therefore
provides insurance for such liability.

Walker, 995 F.2d at 81.

A demise charter “requires complete transfer of possession,
command, and navigation of the vessel from the owner to the
charterer.”

Id. (quoting Agrico Chem. Co. v. M/V Ben Martin, 664

F.2d 85, 91 (5th Cir. 1981)).

“[A] demise is tantamount to,

though just short of, an outright transfer of ownership.”

Id.

The Agreement is by no means a voyage or time charter, and
it certainly is not a traditional bareboat charter party.

The

aspects of the Agreement that give rise to any colorable argument
of charter party status are that a vessel owned by one party was
delivered to a second party who then assumed complete operational
control of the vessel and who then became responsible to man,
victual, supply, repair, insure, and operate the vessel.

The

Court agrees with KGO’s contention that a contractual agreement
to shift expenses is not necessarily fatal to bareboat charter
status.

Although a traditional bareboat charter shifts

responsibility for any costs incurred from the owner to the
charterer, see Stolthaven Houston, Inc. v. RACHEL B, No. 08-4327,
2008 WL 2854278, at *4 (S.D.N.Y. July 18, 2008), some authorities
recognize that in certain “hybrid charters” some expenses might
very well be born by the owner, Charles M. Davis, Maritime Law
Deskbook § XII(H) (2010).

Further, the lack of contractual

provisions for vessel surveys and restrictions on liens,
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provisions which are customary aspects of bareboat charters, does
not necessarily deprive a charter party of bareboat status.

See

United States v. Banda Boats, Inc., 990 F.2d 626, 1993 WL 117821,
at *2 (5th Cir. 1993) (unpublished).
This Court is persuaded that the Agreement is exactly what
it purports to be–-a vessel management agreement and a bareboat
charter agreement.

In other words, the Agreement cannot be

categorized exclusively as either a bareboat charter agreement or
a vessel management agreement because it is both.

To be sure,

the Agreement is first and foremost a vessel management
agreement.

The clear purpose of the Agreement was for KGO to

broker charter hires for the vessel so that Vizier and KGO could
earn a profit on chartering the vessel to third parties.

The

parties apparently believed that the most efficacious way to
facilitate the brokering arrangement was to deliver the vessel to
KGO’s facility and give KGO unfettered operational control of the
vessel.

In admiralty, one places his vessel in the full custody

of another via a bareboat charter, and by doing so in this case
the parties evinced their intent that Vizier relinquish all
control over the vessel, including the ability to arrange hires
for the vessel on its own.1
1

Further, the fact that the Agreement contractually obligated
KGO to use the vessel for a specific purpose does not deprive the
charter of bareboat status. See Dow Chem. Co. v. Dixie Carrier,
Inc., 330 F. Supp. 1304 (5th Cir. 1971) (demonstrating that a valid
bareboat charter can exist even when the owner bareboat charters
the vessel to the charterer for the purpose of then time chartering
the vessel back to the owner).

7

But it does not follow that KGO is entitled to a maritime
lien for the damages flowing from the breached Agreement just
because a valid bareboat charter existed between these parties
via the Agreement.

Again, the Agreement is first and foremost a

vessel management agreement and it happens to include a bareboat
charter provision to facilitate the logistics of the service that
Vizier hired KGO to perform on Vizier’s behalf.

Thus, the Court

is persuaded that to the extent a maritime lien against the
vessel exists for breach of the charter party, that lien does not
include any amounts that relate solely to the vessel management
aspects of the Agreement, i.e., the $3800 monthly fee that Vizier
agreed to pay KGO for its services, the lost brokerage fees, or
contractual penalty interest.

None of these financial elements

of damage relate to the charter party.

After all, a vessel owner

does not pay a bareboat charterer to take a vessel off of his
hands.

The Court is certain that KGO cannot avail itself of a

maritime lien for the vessel management aspects of its damages
claim by piggy-backing those damages on a claim for breach of the
bareboat charter.2

2

The Court notes that the outcome in this case could be
different if Vizier’s breach of the bareboat charter provision
itself had caused KGO’s damages. For instance, if Vizier had
decided a month into the contract to reclaim custody of the vessel
so that KGO could not operate it and perform under the Agreement.
But that is not what occurred here. The Marshal did not arrest the
vessel until July 29, 2011, and by that point Vizier had already
been in default under the Agreement since February 16, 2007 (Comp.
Int. ¶ VII). Thus, by the time the vessel was arrested, the
original one year term of the Agreement and bareboat charter had
already lapsed.

8

KGO argues that at the very least it should be entitled to a
lien for the “necessaries” that it provided to the vessel
pursuant to the Agreement–-repairs, upkeep, maintenance,
insurance, crew wages, and crew supplies.

A person providing

necessaries3 to a vessel on the order of the owner or a person
authorized by the owner has a maritime lien on the vessel.

46

U.S.C.A. § 31342(a)(1) (West 2007); 46 U.S.C.A. § 31341(a) (West
2007).
The complaint alleges only that Vizier was contractually
obligated to reimburse KGO for certain expenses–-not that KGO
actually incurred any of those expenses and KGO has produced no
evidence of such expenditures thus far.4

Moreover, even if KGO,

while acting pursuant to its obligations under the vessel
management agreement, fronted the cost for certain expenditures
that might fall under the definition of “necessaries,” it does
not necessarily follow that KGO is a party entitled to a maritime
lien for those expenditures.
The purpose of providing a maritime lien for the provision
of necessaries is to encourage vendors to promptly furnish
vessels with supplies and repairs so as to facilitate the

3

“Necessaries” includes repairs, supplies, towage, and the
use of a dock or marine railway. 46 U.S.C.A. § 31301(4) (West
2007).
4

KGO alleges that Vizier breached the Agreement from its
inception on February 16, 2007, (Comp. Int. ¶ VII), so it is not
clear whether KGO actually performed any of its reciprocal duties
under the contract, or if so to what extent.

9

continued operation of vessels in commerce.

Racal Survey USA,

Inc. v. M/V MOUNT FLEET, 231 F.3d 183, 187 (5th Cir. 2000); Lake
Charles Stevedores, Inc. v. PROFESSOR VLADIMIR POPOV MV, 199 F.3d
220, 223-24 (5th Cir. 1999).

Reliance upon the credit of the

vessel itself, as opposed to the credit of the owner or some
other party, is a fundamental concept underlying the maritime
lien.

Lake Charles Stevedores, 199 F.3d at 224 n.3 (citing

Equilease Corp. v. M/V SAMPSON, 793 F.2d 598, 605 (5th Cir.
1986)).

Under current law the person providing necessaries to a

vessel is presumed to have relied on the credit of the vessel.
Racal Survey, 231 F.3d at 188-189; see 46 U.S.C. A. § 31342(a)(3)
(West 2007).

The presumption is rebuttable, however, and credit

to a vessel remains a prerequisite to a lien so credit to the
owner negates the possibility of a lien.

Racal Survey, 231 F.3d

at 189 (quoting Equilease, 793 F.2d at 605).
The Court is persuaded that under the particular
circumstances of this case, KGO is not entitled to a maritime
lien against the MARY ANN VIZIER for the provision of
necessaries.

Maritime liens are stricti juris, Racal Survey, 231

F.3d at 192 (citing Piedmont & George’s Creek Coal Co. v.
Seaboard Fisheries Co., 254 U.S. 1 (1920)), because they threaten
the bargained-for security that other creditors have relied upon.
The law recognizes that ease of obtaining necessaries is so
important to the vessel that vendors who supply and service the
vessel must be protected when the owner defaults on payment.
10

But

in keeping with the narrow nature of the maritime lien, a
supplier must deal with a person who has authority to bind the
vessel, see 46 U.S.C. § 31341, and he must act in good faith, see
Lake Charles Stevedores, 199 F.3d at 225 (noting that a supplier
who has actual knowledge of a no-lien clause will not be entitled
to a maritime lien), in order to obtain a lien.
In this case KGO was not acting as a supplier of necessaries
to this vessel because under the clear terms of the Agreement KGO
was acting as owner pro hac vice when it incurred the expenses at
issue, if any.

In other words, KGO was clearly the entity with

authority under 46 U.S.C. § 31341 to bind the vessel but KGO was
dealing with itself in the capacity as both owner and supplier of
the services.

This occurred because KGO was not acting as a

third-party supplier of services to the vessel but as a party who
had contracted with Vizier to manage and operate the vessel at a
profit to both parties under the terms of the Agreement.
Allowing KGO to claim a maritime lien on the vessel for its deal
gone bad with Vizier would be contrary to the purpose of allowing
bona fide suppliers the protection of a maritime lien.

This is

exactly what the Fifth Circuit demonstrated in Sasportes v. M/V
SOL DE COPACABANA, when it recognized that parties such as
owners, part owners, and joint venturers–-parties who are not
“strangers” to the vessel–-cannot hold a maritime lien against
the vessel for equitable reasons.
1978).
11

581 F.2d 1204, 1207 (5th Cir.

Moreover, a lien cannot exist where the supplier does not
rely on the credit of the vessel itself.

Although an ordinary

arms-length supplier would be entitled to the presumption that it
relied on the credit of the vessel, it is not so clear that such
a presumption applies under these facts.

Moreover, the express

terms of the Agreement itself belie any such presumption because
the Agreement leaves little doubt that KGO was relying on the
credit of the owner (Vizier) when it agreed to front the costs
for the vessel’s expenses.

And if KGO had been relying on the

vessel’s credit when incurring expenses then it would seem
logical that KGO would have taken steps to attempt to enforce its
purported maritime lien sooner given that Vizier had defaulted on
the Agreement almost immediately.

Instead, KGO made no attempt

to obtain payment from the vessel itself until over four years
after Vizier had first breached the Agreement, and after
Community Bank had foreclosed on its ship mortgage and incurred
the expense of having the vessel arrested.
In sum, KGO does not have a valid maritime lien against the
MARY ANN VIZIER and its intervention complaint is therefore
dismissed.
Accordingly, and for the foregoing reasons;
IT IS ORDERED that the Motion for Summary Judgment Seeking
Dismissal of Intervenor’s Maritime Lien Claims (Rec. Doc. 32)
filed by Plaintiff Community Bank of Lafourche is GRANTED.
Intervenor Kevin Gros Offshore, LLC does not hold a maritime lien
12

against the vessel M/V MARY ANN VIZIER and its complaint in
intervention is DISMISSED.
May 11, 2012

_______________________________
JAY C. ZAINEY
UNITED STATES DISTRICT JUDGE

13