Columbus Bank & Trust Co v. M/V Shooting Star et al

Filing 22

RULING granting 15 Motion for Interlocutory Sale of Vessel. Signed by Magistrate Judge C Michael Hill on 11/12/2009. (crt,Keifer, K)

U N IT E D STATES DISTRICT COURT W E S T E R N DISTRICT OF LOUISIANA L A F A Y E T T E -O P E L O U S A S DIVISION C O L U M B U S BANK & TRUST CO. d/b/a Synovus Capital Finance VS. M/V SHOOTING STAR (Official No. 591191), her engines, tackle, appurtenances, etc., in rem S O U T H E R N OFFSHORE TRANSPORTATION, LLC F R A N K ALLEN LEARY, in personam CIVIL ACTION NO. 09-CV-1569

J U D G E DOHERTY MAGISTRATE JUDGE METHVIN

R u l in g ( R e c . Doc. 15) Before the court is an unopposed motion for interlocutory sale of vessel filed by p la in tif f Columbus Bank and Trust Co., d/b/a/ Synovus Capital Finance. (Doc. 15).1 For the f o llo w in g reasons the motion is granted.
FINDINGS OF FACTS AND CONCLUSIONS OF LAW

The following facts are undisputed: B y a Promissory Note dated March 29, 2007, (the "Note") between plaintiff and d e f e n d a n t Southern Offshore Transportation, LLC ("Southern"), plaintiff agreed to make a d v a n ce s to Southern in an amount of $800,000.00.2 The Note was secured, inter alia, by

The deadline for defendant's opposition was November 3, 2009. (Doc. 18). No o p p o s itio n has been filed by either defendant or any other potential claimant. 2 Exh. 1.

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g u a ra n ty (the "Guaranty") in favor of plaintiff by Frank Allen Leary ("Leary"). Under the G u a ra n ty, Leary jointly and severally guaranteed Southern's obligations and liabilities to P lain tiff under the Loan Agreement.
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A s further security for the Note, Southern executed a preferred ship mortgage in favor o f Synovus dated March 29, 2007 (the "Preferred Ship Mortgage"), in the total amount of $ 8 0 0 ,0 0 0 .0 0 .
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T h e Preferred Ship Mortgage was filed for record at the National Vessel D o c u m e n ta tio n Center in Falling Waters, West Virginia on April 4, 2007 at 8:30 A.M., and re c o rd e d in Batch 582228, at Doc. ID 6930254.5 T h e Note requires that it be repaid by a series of payments. Southern failed to make certain payments when due on the Note. Further, by letter d a te d July 24, 2009, Southern advised Synovus that it was unable to operate the SHOOTING S T A R or the business associated with it.6 S o u th e rn 's actions triggered the obligations of Leary under the Guaranty. Plaintiff s ta te s that the unpaid Preferred Ship Mortgage balance is estimated at $626,493.85.7

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Exh. 2. Exh. 3. Exh. 4. Exh. 5.
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Rec. Doc. 15 at 2. -2-

O n September 8, 2009, plaintiff effected the arrest of the vessel pursuant to orders iss u e d by this Court. The vessel remains under arrest and neither her owners nor any party c la im in g an interest in her have taken any steps to obtain her release. N o tic e of the arrest of the vessel was published in the Daily Advertiser on September 1 3 , 20, and 27, 2009.
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A n a lys is P la in tif f seeks an order directing the Marshal to order the sale of the MV SHOOTING S T A R on grounds that defendants have not secured the release of the vessel and its expenses, a n d other potential claimants, continue to mount and erode the sale proceeds available to p la in tif f or any other claiming an interest in the vessel. Plaintiff argues that the vessel may b e damaged, deteriorate and/or decay while it sits in the shipyard. According to plaintiff, the

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Exh. 6.

R u l e C of the Supplemental Rules of Admiralty provides: (4 ) Notice. No notice other than execution of process is required when the property that is th e subject of the action has been released under Rule E(5). If the property is not released w ith in 10 days after execution, the plaintiff must promptly--or within the time that the c o u rt allows--give public notice of the action and arrest in a newspaper designated by c o u rt order and having general circulation in the district, but publication may be te r m in a t e d if the property is released before publication is completed. The notice must s p e c if y the time under Rule C(6) to file a statement of interest in or right against the s e iz e d property and to answer. This rule does not affect the notice requirements in an a c tio n to foreclose a preferred ship mortgage under 46 U.S.C. §§ 31301 et seq., as a m e n d e d . Supplemental Admiralty and Maritime Claims Rule C, 28 U.S.C.A. Plaintiff's notice advertized that any one claiming an interest in the property s h o u ld file its statement of interest within 15 days of the notice and file an answer to the c o m p la in t within 20. No such filing has been made. -3-

m a rk e t for the vessel is volatile and could result in a reduced sales price if delayed. Rule E(9)(a) of the Supplemental Rules for Admiralty and Maritime Claims & Asset F o r f e itu re Actions sets forth the criteria for the disposition of property and interlocutory sales a s follows: O n application of a party . . . the court may order all or part of th e property sold--with the sales proceeds, or as much of th e m as will satisfy the judgment, paid into court to await f u rth e r orders of the court--if: (A ) th e attached or arrested property is perishable, o r liable to deterioration, decay, or injury by being d e ta in e d in custody pending the action; (B ) th e expense of keeping the property is excessive o r disproportionate; or (C ) there is an unreasonable delay in securing re le a s e of the property.9 T h e Fifth Circuit has held that to obtain an order for an interlocutory sale, lien holders n ee d only show the existence of one of the three criteria set forth in Rule (E)(9)(a)(i). Merchants Nat'l Bank v. Dredge General G.L. Gillespie, 663 F.2d 1338, 1341 (5th Cir. 1 9 8 1 ). At the outset, defendants do not deny that Southern executed a promissory note, g u a ra n te e d by Leary, in favor of plaintiff in return for the advance of $800,000 and that S o u th e rn also executed a preferred ship mortgage in favor of plaintiff for $800,000 as further s e c u rity. Further, Southern has not disputed that its failure to pay past monies and its letter

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Fed. R. Civ. P., Supp Admiralty Rule E(9)(a)(i). -4-

in d ica tin g it is no longer operating the vessel or its business evidences its intent to default. (A ) Is the vessel liable to deterioration while being detained in custody pending the a c tio n ? T h e letter from Leary to Southern shows that the vessel is at Diamond B Shipyard in N e w Iberia, Louisiana on dry storage. Defendants have not disputed that maintenance s c h e d u le s have thus been disrupted and that the vessel is susceptible to decay and d e te rio ra tio n because it is sitting idle and blocks. Accordingly, the undersigned finds that p la in tif f has satisfied factor A. (B) Is the expense of keeping the property excessive or disproportionate? P lain tiff asserts that is has secured the services of a substitute custodian to maintain c u s to d y of the vessel for a monthly fee and been required to insure the Vessel and that these c o sts are mounting. It is clear that these costs will offset any amount the vessel can be sold f o r to satisfy any judgment in the case which has not been disputed by defendants. The u n d e rs ig n e d thus finds that criteria B has been satisfied. (C) H a s there been an unreasonable delay in securing release of the vessel? T h e vessel was arrested on September 9, 2009. (Rec. Doc. 7). Defendants have never m o v e d to vacate the arrest. Moreover, in Leary's July 24, 2009 letter, he states: [ d ]u e to the impact of the economy on the oilfield in the Gulf of Mexico and f in a n c ia l institution capital lending, I find that I cannot continue to operate the m /v Shooting Star O.N. 590629 or the business associated with it. . . . Sorry a b o u t the inconvenience.10

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Rec. Doc. 15-3, Exh. 5. -5-

T h is statement evidences that defendants are financially incapable of securing the r e le a s e of the vessel and does not intend to secure its release. Again, defendants have not d isp u ted this conclusion. Accordingly, the undersigned finds that criteria (C) has been met. Conclusion Based on the evidence submitted showing that Southern has no intention to seek a re le a s e of the vessel; mounting costs and the risk of deterioration to the vessel, the u n d e rs ig n e d concludes that plaintiff has shown good cause for the interlocutory sale of the v e s s e l. IT IS HEREBY ORDERED that the motion is GRANTED. The M/V SHOOTING S T A R , her engines, tackle, appurtenances, fuel, furniture, rigging, etc., shall be advertised a n d auctioned by the United States Marshal, pursuant to Rule E(9) of the Supplemental Rules f o r Admiralty or Maritime Claims & Asset Forfeiture Actions of the Federal Rules of Civil P r o c e d u re , plaintiff to arrange advertisement in the Lafayette Daily Advertiser newspaper leg a l notices section subject to U.S. Marshal supervision and approval, and for M/V S H O O T I N G STAR to be made available for inspection by prospective purchasers jointly w ith plaintiff's representatives at mutually-convenient dates and times before the sale, s u b je c t to U.S. Marshal rules and requirements for attending aboard the vessel, and then for M /V SHOOTING STAR to be sold as soon as possible that may be convenient for the U.S. M a rsh a l.

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I T IS FURTHER ORDERED that at the judicial auction, plaintiff is to be permitted b y the U.S. Marshal to bid on credit up to the sum of $626,493.85 or the amount of the u n p a id Preferred Ship Mortgage balance at the time of the judicial auction. Plaintiff is to p ro v id e the U.S. Marshal with a copy of the First Preferred Ship Mortgage and a printout or s ta te m e n t of the amount which will be outstanding as of the date of the judicial auction no late r than one week before the scheduled date of the judicial auction. If not, plaintiff's credit b id authority will be limited to $626,493.85. I T IS FURTHER ORDERED that the Court shall retain jurisdiction of the above s tyle d cause for such other and further proceedings as may be appropriate. Signed at Lafayette, Louisiana on November 12, 2009.

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