Opinion
Civ. No. 99-1261, SECTION "K" (4).
February 18, 2000.
Before the Court is Motion to Withdraw Funds filed by FMB Bank (successor in interest to the First National Bank of Maryland now renamed Allfirst Bank) ("FMB Bank") and Motion to Intervene filed by Nippon Kaiji Kyokia ("NKK"). The Court has reviewed the pleadings, memoranda and the relevant law, and finds that the motion to intervene must be granted and the Motion to Withdraw Funds denied.
The M/V NOR-ATLANTIC ("NOR-ATLANTIC"), a Panamanian flagged vessel, was owned by Nor-Atlantic Maritime, Ltd., a Panamanian corporation. The ship was was financed under the provisions of a Panamanian ship mortgage recorded in the Republic of Panama. The mortgagee, FMB Bank (successor in interest to the First National Bank of Maryland now renamed Allfirst Bank) ("FMB Bank") is a Maryland state-chartered commercial bank with its principal office in Baltimore, Maryland. FMB Bank is allegedly owed in excess of $546,611.83 with respect to this mortgage.
On April 21, 1999, a Verified Complaint for Unpaid Wages, Delay Wages, and Costs of litigation was filed by certain Philippine sailors who were seamen aboard the NOR-ATLANTIC. They moved at that time for the authorization of a Warrant of Arrest which was granted by the Court on that same day. A Substitute Custodian, the captain of the vessel, was also appointed by the Court.
On May 4, 1999, the seamen filed a Motion for Leave to Intervene which was granted and they filed a Verified Complaint by Intervention for Unpaid Wages, Delay Wages and Costs of Litigation. On May 12, 1999, noting that the owner made no appearance in this matter, the Court approved the appointment of an agent and deemed services, cost of food, and other expenses as custodia legis costs.
On May 21, 1999, the seamen filed a motion directing the manner of giving notice of the commencement of action to enforce maritime lien which was granted. The notice which was to be published according to LAR 64 and Supplemental Rule C(4) read as follows in relevant part:
All persons who claim an interest in the vessel are advised that they should file their claims with the Clerk of Court for United States District Court for the Eastern District of Louisiana, pursuant to Rule C(6) of the Federal Rules of Civil Procedure, and serve them upon the undersigned within 15 days after the first publication of this notice, or within such further time as may be allowed by the Court, and must serve their answers upon the undersigned within 20 days after the filing of their claims. All such persons claiming an interest in the vessel are further notified that if they do not file such claim or answer, default may be entered and condemnation ordered, and the application for intervention under Rule 24 of the Federal Rules of Civil Procedure, by persons claiming maritime liens, or other interest, may be barred if their claims are not filed within the time allowed for claims of possession.
(Doc. 10 Exh. A). FMB filed its intervention based on its ship mortgage on May 25, 1999 (Doc. 13).
On May 25, 1999, a Consent Motion for interlocutory Sale of the NOR-ATLANTIC pursuant to Rule E(9)(b) was granted. However, because the vessel was subject to deterioration and decay, and the custodial expenses would have outstripped the value of the vessel, the Court approved the sale. A major concern to the Court was that the crew that had filed suit was basically stranded in New Orleans and had not been paid their wages. These circumstances required the prompt resolution of this matter.
There was a problem, however, with the first Notice of Sale. That notice provided that the sale would be "subject to confirmation or rejection by the Court on the 26th day of July, 1999." As the sale of the vessel was set for June 17, 1999, this delay for confirmation was longer than that required under LAR 64.6 which provides for a three day delay for the confirmation of the sale. The seamen sought to correct the notice of sale on June 15, 1999, immediately before the sale and making meaningful publication impossible.
The NOR-ATLANTIC was judicially sold on June 17, 1999 for $300,000. (Doc. 18). On June 18, 1999 Motion for Leave to Intervene by Steamship Mutual Underwriting Association Limited was filed. The basis for this intervention was for unpaid premiums for the ship's insurance. On June 23, 1999, a Motion and Order to Confirm the United States Marshal's Sale and to Cancel all Mortgages, Liens, Encumbrances, and Pre-Existing Claims Against the M/V NOR ATLANTIC was filed. The Court granted the motion because of the extreme difficulties and expenses facing the seamen; however, because of the irregularities with the notice of sale and the confirmation date, the Court extended the time by which a claimant could file a statement of claim or intervention up to and including July 12, 1999. The Court did so in an attempt to rectify' any possible prejudice caused by virtue of the irregularities with the Notice of Sale. This amendment was required to be published.
On July 8, 1999, a Motion for Summary Judgment was filed by the Underwriters seeking a finding that its lien outranked that of the preferred ship mortgage holder.
On July 12, 1999, a Notice of Lien and Claim for $15,361.30 was filed by NKK. (Doc. 27). No motion to intervene was filed. The claim is for unpaid survey fees for classification surreys that were apparently conducted between December 3, 1998 and May 31, 1999. Counsel did not send this notice to any party to the suit. Indeed, the document does not contain a Certificate of Service as required under LR5.3 which provides:
Every pleading and every brief or memorandum filed in any proceeding in this court shall bear a certificate by the attorney or party who files it that, prior to filing, copies have been served on all parties or their attorneys, either in person or by mailing it postage prepaid, properly addressed. This certificate may be by rubber stamp or typing, or it may be contained in the text of the pleading.
A Statement of Claim of Bloom Shipping, Ltd. was filed on July 12, 1999 for the publication costs. On July 19, 1999, a Consent Judgment was signed, and by consent of the parties appearing at that time, $230,000 was withdrawn from the registry of the Court to pay the crew on July 19, 1999, at 1:25 p.m.
An opposition to the Underwriter's motion was eventually filed and the motion was denied by the Court on October 5, 1999. The subject Motion to Withdraw Funds was filed on October 12, 1999. The Court reviewed the record at that time and discovered the above-referenced notice of lien filed by NKK. It informed counsel for FMB Bank of the lien and contacted counsel for NKK to ascertain his position vis-a-vis the motion to withdraw funds. On November 10, 1999, the subject Motion for Leave to Intervene was filed and on November 12, 1999, the Court received an opposition from NKK to the motion to withdraw funds. With that as background, the Court will now address the legal issues before it.
In essence, FMB Bank contends that the Court should not allow NKK's intervention based on the failures outlined above by NKK to properly pursue its lien in a timely fashion. Counsel relies primarily on cases dealing with untimely interventions in circumstances other than that of maritime liens.
An intervention based on a maritime lien against the res is an intervention of right governed by Fed.R.Civ.P. 24(a). DnB Holdings, Ltd. v. M/V HERMITAGE, 1995 WL 529853 (E.D.La. Sept. 7, 1995). Rule 24(a) requires however "timely" application to intervene. To determine whether this intervention is timely, which is within the discretion of the Court, it must consider:
(1) the length of time during which the would-be intervenor knew or should have known of his interest in the case before he petitioned to intervene; (2) prejudice to the existing parties as a result of the intervenor's failure to apply as soon as he knew or should have known of his interest; (3) prejudice to the intervenor if his application is denied; and (4) the existence of unusual circumstances militating for or against a determination that the application was timely.Id. citing Stallworth v. Monsanto Co., 558 F.2d 257, 263 (5th Cir. 1977). The inquiry is a flexible one which focuses on the particular facts and circumstances surrounding each application and must be measured by a practical rather than technical yardstick. Ceres Gulf v. Cooper, 957 F.2d 1199, 1202 (5th Cir. 1992).
As stated in Point Landing, Inc. v. Alabama Dry Dock Shipbuilding Co., 261 F.2d 861 (5th Cir. 1958):
Liberality in allowing interventions mirrors not alone admiralty's approach to do justice with slight regard to formal matters. It is a recognition of the unavoidable consequence of a sale of a vessel in an in rem proceeding. The sale cuts off the rights of all non-parties. The title from the marshal is good against the worlds. Unless one claiming a lien is given the opportunity of asserting his right as against the proceeds resulting from the sale which has been made or is in the course of being carried out, the rights are forever and irretrievably lost.Id. at 866.
Addressing the four considerations set forth in Stallworth, as to the length of time, the Court has not been apprised of the precise time at which NKK became aware of the suit. At a minimum, it is clear that it filed a claim in this suit within the time allotted by the Court to do so. However, it did not follow through and file an intervention immediately, and furthermore, counsel failed to serve the other claimants in this matter with its notice. As a result of this defalcation, the Court was denied the opportunity to deal with all of the ranking issues at one time; instead, if it allows the intervention, another round of motions concerning ranking will have to be addressed. Nonetheless, NKK did comply with the letter of the Court's order; it simply ignored the local rules.
As to the prejudice to the existing parties, "the prejudice to be considered is that prejudice created by the intervenor's delay in seeking to intervene after it has learned of its interest in the action, not prejudice to existing parties if intervention is allowed." Ceres, 957 F.2d at 1203. Here, the Court sees no prejudice to the parties created by the delay other than the fact that FNB Bank will be faced with another ranking issue. The delay has caused no real prejudice to FNB Bank.
As to the prejudice to NKK should the Court not allow the intervention, NKK would lose its in rem claim, albeit its in personam claim would remain. However, as stated in Sunrise Shipping, Ltd. v. M/V AMERICAN CHEMIST, 1997 WL 62559:
There is a strong presumption against the waiver of a maritime lien. Gulf Oil Trading v. M/V Caribe Mar, 757 F.2d 743, 750 (5th Cir. 1985). Any opponents of a lien must prove that the creditor purposefully intended to forego both the lien and the valuable privilege that it affords and look solely to the owner's personal credit. Id. at 750 Point Landing v. Alabama Dry Dock Shipbuilding Co., 261 F.2d 861, 867 (5th Cir. 1958).Id at *2.
Finally, because of the Court's order which arguably intimated that the filing of the claim would suffice, such a circumstance likewise militates that the Court find that the intervention was timely. Accordingly,
IT IS ORDERED that the Motion to Withdraw Funds is DENIED and the Motion for Leave to File Intervention is GRANTED.
IT IS FURTHER ORDERED that the issue of ranking these two claims be presented by cross-motions no later than March 13, 1999, unless counsel can resolve this issue without the Court's intervention.
MINUTE ENTRY DUVAL, J. FEBRUARY 17, 2000