All Alaskan Seafoods, Inc. v. M/V Sea Producer

• Decision Date: 14 August 1989
• Docket Number: No. 88-3585,88-3585
• Citation: 882 F.2d 425
• Parties: ALL ALASKAN SEAFOODS, INC., Plaintiff-Appellant, v. M/V SEA PRODUCER, her engines, tackle, apparel, furniture, and equipment, In Rem; and Express Marine Transportation Company, In Personam; Defendants. M/V SEA PRODUCER, O.N. 284437, her engines, tackle, apparel, furniture and equipment, In Rem, Defendant-Intervenor, v. PEOPLES NATIONAL BANK OF WASHINGTON, Plaintiff-Intervenor-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 425

882 F.2d 425

1989 A.M.C. 2935

ALL ALASKAN SEAFOODS, INC., Plaintiff-Appellant, v. M/V SEA PRODUCER, her engines, tackle, apparel, furniture, and equipment, In Rem; and Express Marine

Transportation Company, In Personam;

Defendants.

M/V SEA PRODUCER, O.N. 284437, her engines, tackle, apparel, furniture and equipment, In Rem, Defendant-Intervenor, v. PEOPLES NATIONAL BANK OF WASHINGTON, Plaintiff-Intervenor-Appellee.

No. 88-3585.

United States Court of Appeals Ninth Circuit.

Argued and Submitted May 2, 1989.

Decided Aug. 14, 1989.

Steven V. Gibbons, Lane, Powell, Moss & Miller, Seattle, Wash., for plaintiff-appellant.

Dwight L. Guy, Seattle, Wash., for plaintiff-intervenor-appellee.

Appeal from the United States District Court for the Western District of Washington.

Before ALARCON, FERGUSON and THOMPSON, Circuit Judges.

DAVID R. THOMPSON, Circuit Judge:

All Alaskan Seafoods Inc. ("All Alaskan"), a shipper and the plaintiff in this admiralty case, appeals the district court's partial summary judgment. The district court held that All Alaskan's maritime lien on a vessel was subordinate to a mortgagee's ship's mortgage. The district court determined that under the Ship Mortgage Act, All Alaskan's claim for cargo damage could only arise under contract law, not under tort law; therefore the claim was not entitled to priority as a maritime lien under 46 U.S.C. Sec. 953(a)(2). We reverse and remand.

FACTS

In October 1986, All Alaskan commenced an action for cargo damage against the vessel M/V Sea Producer and against Express Marine Transportation Co. ("Express Marine"), the vessel's operator. In its complaint, All Alaskan alleged that it suffered losses of approximately $1.5 million when its shipment of frozen king crab thawed while in transit from Molar, Alaska to Seattle, Washington, and was contaminated by a refrigerant leakage in the hold of the Sea Producer. All Alaskan further alleged that the losses it suffered were caused by the negligence of Express Marine.

In April 1987, People's National Bank of Washington ("People's") intervened in the Before discovery commenced, All Alaskan and People's filed cross-motions for partial summary judgment on the issue of the priority of their respective liens against the Sea Producer. The district court denied All Alaskan's motion and granted partial summary judgment for People's Bank, holding that All Alaskan's claim sounded only in contract, not in tort, and thus was inferior to the lien created by People's preferred mortgage. ¹ All Alaskan appeals that judgment.

action to foreclose a preferred maritime mortgage on the Sea Producer.

ANALYSIS

A. Jurisdiction

We must first determine whether we have jurisdiction over this appeal. All Alaskan concedes that the order at issue is interlocutory in that the merits of its claims and People's mortgage remain unadjudicated. All Alaskan contends, however, that appellate jurisdiction exists pursuant to 28 U.S.C. Sec. 1292(a)(3) which provides in relevant part that courts of appeals shall have jurisdiction of appeals from:

(3) Interlocutory decrees of such district courts or the judges thereof determining the rights and liabilities of the parties to admiralty cases in which appeals from final decrees are allowed.

To fall within the ambit of section 1292(a)(3), it is sufficient if an order conclusively determines the merits of a particular claim as between the parties. Martha's Vineyard Scuba Headquarters v. Unidentified Vessel, 833 F.2d 1059, 1064 (1st Cir.1987) (jurisdiction under section 1292(a)(3) where district court order granting salvor title to property already recovered from shipwreck determined rights of two claimants to that property, but left undecided claims of same parties to future exploration rights). A partial summary judgment order which finally determines one party's claims as to another party is appealable under section 1292(a)(3). See Kingsgate Oil v. M/V Green Star, 815 F.2d 918, 921 (3d Cir.1987) (jurisdiction under section 1292(a)(3) where order denying application to categorize cargo unloading expenses as administrative costs finally determined appellant's right to recover share of the proceeds from sale of vessel); cf. Seattle-First National Bank v. Bluewater Partnership, 772 F.2d 565, 569 (9th Cir.1985) (no jurisdiction under section 1292(a)(3) because challenged order did not finally determine all claims of party asserting maritime lien on vessel as to mortgagee of vessel).

In urging us to reject jurisdiction over this appeal, appellees rely on our decision in Bluewater Partnership, 772 F.2d 565. In that case, a maritime lien claimant, Pacific Fisherman Inc., ("Pacific") attempted to appeal from a district court's interlocutory order determining that a number of maritime lien claims on a vessel, including Pacific's claim, were subordinate to a preferred maritime mortgage held by Seattle-First National Bank. In addition to the question of lien priorities, the case involved a challenge by lien claimants to the validity of Seattle-First's mortgage; they contended that Seattle-First's trustee status did not meet the requirements of the Ship Mortgage Act. We held that we did not have appellate jurisdiction over Pacific's appeal under section 1292(a)(3) because the disputed order from which the appeal was taken had not finally determined Pacific's claims as to Seatle-First National Bank. Id. at 569. We pointed out that the challenge to Seattle-First's trustee status was still pending following the interlocutory order from which Pacific eventually appealed, and as a result the district court's lien priority determination could not have been final as to any of the lien claimants, including Pacific. Pacific, in fact, continued to participate in the district court proceedings notwithstanding the entry of the district court's interlocutory order from which it appealed. Id. at 568-69.

Here, in contrast, the validity of People's maritime mortgage is unchallenged and there are no claims between All Alaskan and People's against one another. As between the two of them, they seek only a determination of their relative priorities as lien claimants. The district court's partial summary judgment conclusively determined the priority of All Alaskan's lien by classifying it as a contractual lien, and thus denying it priority under 46 U.S.C. 953(a)(2). Further, under the circumstances of this case, as a practical matter, the district court's decision giving People's mortgage priority over All Alaskan's lien claim constitutes a final determination of All Alaskan's right to recover anything for its cargo loss under any theory. This is so because it is undisputed that Express Marine is judgment proof and the unpaid balance of People's preferred ship mortgage far exceeds the proceeds from the sale of the vessel. Given these financial realities, "although in the abstract, [All Alaskan] may still assert [its] claim[ ], its nether position on the creditors' totem pole [which position the court determined by its partial summary judgment] converts this assertion into a fruitless gesture." Kingsgate Oil, 815 F.2d at 922. Accordingly, we conclude that the district court's partial summary judgment is appealable under section 1292(a)(3). ²

B. Merits

All Alaskan contends that the district court erred in ruling that, under the Ship Mortgage Act, a claim for cargo damage could sound only in contract, not in tort, and thus that All Alaskan's lien was subordinate to People's mortgage. We review de novo the district court's grant of partial summary judgment. See Ashton v. Cory, 780 F.2d 816, 818 (9th Cir.1986).

The Ship Mortgage Act (the "Act"), gives lien status and relatively high priority to a mortgage which complies with the Act. 46 U.S.C. Sec. 953. The statutory mortgage, sometimes referred to as a preferred ship mortgage, was created to encourage investment in the shipping industry. See Seattle First Nat'l Bank v. Bluewater Partnership, 772 F.2d 565, 569 (9th Cir.1985). Under the Act, a preferred ship mortgage lien has priority over most claims against a vessel, including contract claims, but is subordinate to preferred maritime liens. Subsection 953(a)(2) defines "preferred maritime liens" to include "a lien for damages arising out of tort...."

In its motion for summary judgment on the issue of lien priority, All Alaskan alleged that damage to its shipment of king crab resulted from the negligent operation of the vessel Sea Producer as a common carrier. Thus, All Alaskan argued, its cargo damage claim gave rise to a tort lien which was superior, under the Ship Mortgage Act, to People's mortgage. The district court acknowledged that liens against a ship for cargo damage are "hard to rank with precision," and have been viewed by courts as both "breaches of the contract of affreightment or as breaches of a duty imposed by law and, therefore tort." The district court was concerned however, that allowing All Alaskan to plead its cargo damage claim in tort, and thus secure priority over the bank's preferred ship mortgage, would undercut the purpose of the Ship Mortgage Act, that of encouraging investment in shipping. Thus, without determining what duty of care Express Marine owed to All Alaskan under common law or maritime statutory law, the district court ruled that All Alaskan's claim for cargo damage could sound only in contract. As a result, it was not entitled to priority under 46 U.S.C. Sec. 953(a)(2).

In ruling as it did, the district court considered the contractual relationship between All Alaskan and Express Marine to preclude a maritime lien for damages premised on tort liability. We disagree with this premise. In The John G. Stevens, 170 U.S. 113, 18 S.Ct. 544, 42 L.Ed. 969 (1898), the Supreme Court held that a claim for damage to a tow sounded in tort independent of any contract made, and was thus superior as a maritime lien to other purely contractual liens. In the course of its opinion, the Court...