Salazar v. Atlantic Sun

• Decision Date: 29 August 1989
• Docket Number: No. 88-5979,88-5979
• Citation: 881 F.2d 73
• Parties: Captain Manuel SALAZAR and the Crew of the Vessel "ATLANTIC SUN" and Salem Port Authority, Intervenor, and Coast to Coast Trucking, Inc., Intervenor, and Harbor Petroleum, Inc., Intervenor, and The Pilots Association for the Bay and River Delaware, Intervenor, v. The "ATLANTIC SUN," Her Engines, Boilers, Tackle, Appurtenances, etc., in Rem, and Atlantic Sun Ltd., and Resolve Maritime Corp., in Personam. Appeal of ATLANTIC SUN, LTD.
• Court: U.S. Court of Appeals — Third Circuit

Page 73

881 F.2d 73

1989 A.M.C. 2594

Captain Manuel SALAZAR and the Crew of the Vessel "ATLANTIC

SUN" and Salem Port Authority, Intervenor,

and

Coast to Coast Trucking, Inc., Intervenor,

and

Harbor Petroleum, Inc., Intervenor, and The Pilots Association for the Bay and River Delaware, Intervenor, v. The "ATLANTIC SUN," Her Engines, Boilers, Tackle,

Appurtenances, etc., in Rem, and Atlantic Sun

Ltd., and Resolve Maritime Corp., in Personam.

Appeal of ATLANTIC SUN, LTD.

No. 88-5979.

United States Court of Appeals, Third Circuit.

Argued June 13, 1989.

Decided Aug. 3, 1989.

Rehearing Denied Aug. 29, 1989.

Fredric J. Gross (argued), Fredric J. Gross Law Firm, Mount Ephraim, N.J., for appellant.

R. Timothy Swiecicki (argued), Cichanowicz, Callan & Keane, New Providence, N.J., for appellees Captain Manuel Salazar and the Crew of the Vessel "Atlantic Sun".

Francis X. Kelly (argued), Mattioni, Mattioni & Mattioni, Philadelphia, Pa., Stephen J. Galati, Mattioni, Mattioni & Mattioni, Westmont, N.J., for intervenor-appellee Marshall Enterprises, Ltd. and Salem Port Authority.

Before SLOVITER, COWEN, and WEIS, Circuit Judges.

OPINION OF THE COURT

WEIS, Circuit Judge.

In this admiralty case, we conclude that the shipowner has failed to substantiate its contention that the district court denied due process by failing to conduct a hearing following the arrest of a vessel. We are also persuaded that the owner waived any right it might have had to release the vessel on bond by not taking action until the day of the hearing to confirm the marshal's sale of the vessel. Accordingly, we will affirm the order of the district court confirming the sale.

Before docking at the port of Salem, New Jersey, a dispute had arisen between the captain and seamen aboard The Atlantic Sun and the ship's owner over alleged unpaid wages and the crew's failure to pick up cargo at a Brazilian port. After the vessel arrived at Salem, negotiations took place, but were unsuccessful.

At the instance of the captain, the district court ordered the ship arrested and ultimately set bond at $75,000. Apparently unable to secure a bond, the owner filed a petition in bankruptcy under Chapter 11. After a hearing, the bankruptcy judge lifted the automatic stay, and the district court scheduled a marshal's sale.

On the day set for sale, the owner presented a bond for $75,000, which the district court found defective in form and inadequate in amount because of increased charges resulting from the lapse of time. After the marshal's auction, the court set the time for a confirmation hearing. Near the conclusion of that hearing, the owner asked for a delay of two weeks to post a bond in the amount of $140,000, the high bid at the auction. The court denied the request, and instead confirmed the sale. When the owner did not present a supersedeas bond on the morning of the following day, the court refused a stay of confirmation. A panel of this Court denied a twenty-four hour stay.

On appeal, the owner argues that the sale should be set aside and the vessel returned. The owner asserts that the district court's failure to conduct an adversarial post-arrest hearing resolving challenges to the plaintiffs' claims amounts to a denial of due process and a violation of the Federal Rules of Civil Procedure. The owner also argues that the district judge denied it a reasonable opportunity to post a bond at the conclusion of the confirmation hearing.

I. JURISDICTION

Preliminarily, we address the question of our jurisdiction. Because the district court did not adjudicate all issues involved in the parties' claims and counterclaims, the order appealed from is not final under 28 U.S.C. Sec. 1291. Although that might be fatal to appellate jurisdiction in most civil cases, special provisions apply in admiralty matters.

The Courts of Appeals have jurisdiction to review "[i]nterlocutory decrees of ... district courts ... determining the rights and liabilities of the parties to admiralty cases." 28 U.S.C. Sec. 1292(a)(3). For a district court order in admiralty to be appealable, it "need not determine all rights and liabilities of all parties." Kingstate Oil v. M/V Green Star, 815 F.2d 918, 921 (3d Cir.1987). Section 1292(a)(3), however, is not completely open-ended--the order appealed from "must conclusively determine the merits of a claim or defense." Kingstate Oil, 815 F.2d at 921. See Todd Shipyards Corp. v. Auto Transp., S.A., 763 F.2d 745, 751 (5th Cir.1985); Bankers Trust Co. v. Bethlehem Steel Corp., 761 F.2d 943, 945 n. 1 (3d Cir.1985); Gulf Towing Co. v. The Steam Tanker, Amoco New York, 648 F.2d 242, 244 (5th Cir. Unit B June 1981) (per curiam).

In the matter at hand, the order of confirmation ffectively terminated the owner's rights to title and possession of The Atlantic Sun. The order, therefore, comes within the ambit of 28 U.S.C. Sec. 1292(a)(3), and is properly before this Court.

Plaintiffs concede our jurisdiction over the confirmation order, but would limit our review to the circumstances of the sale itself, leaving to another day the owner's due process and other challenges. We think that approach impracticably narrow.

If the owner successfully establishes a due process violation in the district court's alleged failure to provide a post-arrest hearing, reversible error may have occurred, undermining the legitimacy of the sale. See Neapolitan Navigation, Ltd. v. Tracor Marine, Inc., 777 F.2d 1427 (11th Cir.1985). Consequently, the issues raised by defendant are inextricably intertwined with the validity of the sale, and are properly subject to review at this time. See Kershner v. Mazurkiewicz, 670 F.2d 440, 449 (3d Cir.1982) (in banc). We therefore

exercise jurisdiction over all of the points raised in this appeal.

II. DUE PROCESS

Arrest of a vessel is an in rem procedure in admiralty law having an ancient lineage. Utilized even before the Elizabethan era, it had become a dominating feature of admiralty practice by the nineteenth century. See generally F. Wiswall, The Development of Admiralty Jurisdiction and Practice Since 1800 155-208 (1970), noted in Merchants Nat'l Bank v. The Dredge Gen. G.L. Gillespie, 663 F.2d 1338, 1342 n. 8 (5th Cir. Unit A Dec.1981), cert. dismissed, 456 U.S. 966, 102 S.Ct. 2263, 72 L.Ed.2d 865 (1982).

Seizure of a vessel by court officials at the instance of a complainant serves the dual purpose of securing jurisdiction and providing a source for the satisfaction of a maritime lien. In the English view--the so-called "procedural" theory--the arrest of a vessel is intended to force the owner to appear so as to give the court in personam jurisdiction. ¹ American courts, by and large, adopted a "personification" theory in which the vessel itself is a party and judgments are entered against her without the necessity of securing jurisdiction over the owner.

The Supreme Court in Tucker v. Alexandroff, 183 U.S. 424, 438, 22 S.Ct. 195, 201, 46 L.Ed. 264 (1902), described the personification theory in modern admiralty practice. See also United States v. The Little Charles, 26 F.Cas. 979, 981-82 (C.C.D.Va.1818) (No. 15,612) (Marshall, C.J., sitting as Circuit Justice). Although subjected to academic criticism, e.g., G. Gilmore & C. Black, The Law of Admiralty Sec. 9-3 (2d ed. 1975), the personification theory has provided a useful jurisprudential concept in formulating procedures for the arrest process where maritime liens are in existence. ²

In 1844, the Supreme Court adopted the Rules of Practice in Causes of Admiralty and Maritime Jurisdiction, codifying in rem procedures then in practice. 44 U.S. (3 How.) iii-xiv (1844). The Court revised the rules in later years, and in 1966 admiralty practice was unified through amendments to the Federal Rules of Civil Procedure. Rules A-F of the Supplemental Rules for Certain Admiralty and Maritime Claims ("Supplemental Admiralty Rules") addressed the unique admiralty in rem action.

A few years later, common law in rem proceedings attracted the concern of the Supreme Court. In a series of decisions beginning with Sniadach v. Family Fin. Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969), the Court outlined procedural due process requirements in attachment and garnishment, emphasizing particularly the need for a pre- or post-seizure hearing. See Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972); Mitchell v. W.T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974); North Georgia Finishing, Inc. v. DiChem, Inc., 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751 (1975). In another opinion affecting traditional in rem procedures, the Court insisted on the presence of a defendant's minimum contacts with the forum, Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977), a matter not at issue here.

None of these decisions by the Supreme Court arose in the admiralty context, and some federal courts reasoned that the unique historical and constitutional foundations of admiralty law may place maritime claims beyond the sweep of common law in rem cases. See, e.g., Merchants Nat'l Bank, 663 F.2d at 1345-46; Amstar Corp. v. S/S Alexandros T., 664 F.2d 904, 911-12 (4th Cir.1981). At least two district courts, however, considered procedures under the Supplemental Admiralty Rules to be suspect. Alyeska Pipeline Serv. Co. v. The Vessel Bay Ridge, 509 F.Supp. 1115, 1120 (D.Alaska 1981), appeal dismissed, 703 F.2d 381 (9th Cir.1983), cert. dismissed, 467 U.S. 1247, 104 S.Ct. 3526, 82 L.Ed.2d 852 (1984); Karl Senner, Inc. v. M/V Acadian Valor, 485 F.Supp. 287, 295 (E.D.La.1980).

In Merchants National Bank, the Court of Appeals commented that local rules making a prompt post-seizure hearing available on request would cure any alleged constitutional defects in the arrest procedure. Where no such local rules exist, the Court declared that "every Admiralty Court has the inherent power to assure the protections contemplated." Merchants Nat'l Bank, 663 F.2d at 1344...