Associated Metals and Minerals Corp. v. Alexander's Unity MV

• Decision Date: 09 January 1995
• Docket Number: No. 93-3524,93-3524
• Citation: 41 F.3d 1007
• Parties: ASSOCIATED METALS AND MINERALS CORPORATION, Plaintiff-Appellee, v. ALEXANDER'S UNITY MV, her engines, boilers, etc., et al. Defendants, Banque Internationale A Luxembourg S.A., Claimant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1007

41 F.3d 1007

1995 A.M.C. 1006

ASSOCIATED METALS AND MINERALS CORPORATION, Plaintiff-Appellee, v. ALEXANDER'S UNITY MV, her engines, boilers, etc., et al. Defendants Banque Internationale A Luxembourg S.A., Claimant-Appellant.

No. 93-3524.

United States Court of Appeals Fifth Circuit.

Jan. 9, 1995.

C. Gordon Starling, Jr., William B. Gibbens, III, and John C. Duplantier, Gelpi, Sullivan, Carroll & Gibbens, New Orleans, LA, for appellant.

John Barr Gooch, Jr. and A. Carter Mills, IV, Montgomery, Barnett, Brown, Read, Hammond & Mintz, New Orleans, LA, for appellees.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before KING, JOLLY and STEWART, Circuit Judges.

KING, Circuit Judge:

This case concerns damage to maritime cargo. In the lower court, Associated Metals and Minerals Corporation argued, and the district court agreed, that damage to its cargo transported by the M/V Alexander's Unity resulted not only from the breach of the contract of carriage by the vessel but also from the physical and financial unseaworthiness of the vessel and the negligence of her owners and/or operators. The district court's judgment recognized that Associated Metals and Minerals had a preferred maritime tort lien for the full amount of its claim, priming the liens of the preferred ship mortgages held by Banque Internationale A Luxembourg S.A. The district court also determined that the expenses incurred by Associated Metals and Minerals in discharging its cargo were custodia legis. Banque Internationale A Luxembourg S.A., which was also awarded a default judgment and custodia legis expenses in a separate proceeding, appeals the district court's findings that: (1) Associated Metals' claims are tort claims and therefore entitled to preferred maritime lien status and (2) Associated Metals' expenditures surrounding the removal of the cargo were custodia legis expenses. We find that we have jurisdiction over this matter and affirm the rulings of the district court.

I. BACKGROUND

In early May of 1992, the M/V Alexander's Unity, a bulk carrier travelling under the Maltese flag, arrived in India at the port of Visakhapatnam. After discharging its cargo, the ship was moved to another berth for the loading of steel plates for transport to the ports of Houston and Mobile pursuant to a May 15, 1992 charter agreement between Alexander's Unity Shipping Company, Ltd. Valletta ("Alexander's Unity Shipping") and Associated Metals and Minerals Corporation ("Associated Metals"). Over seven thousand pieces of steel were loaded into three of the Alexander's Unity's hatches. While in Visakhapatnam, the ship also picked up a cargo of high carbon ferro chrome for transport to New Orleans; later, after sailing to the port of Paradip, the Alexander's Unity received a cargo of chrome also bound for delivery in New Orleans.

While the ship was discharging and loading its various cargos in India, the ship's master and the port engineer, a representative of Alexander's Shipping, discussed the upcoming voyage. The Master, aware that the cargo of steel was "sensitive to sea water," expressed concern that the ship would encounter high winds and rough seas traveling around the Cape of Good Hope during winter. His apprehension was magnified by the condition of the hatch covers, which had been in disrepair for some time and which the Master believed likely would allow water to seep through them. The Master pointed out his concerns and requested permission to travel through the more tranquil Suez canal. Unwilling to pay the fees associated with traveling through the Suez canal, Alexander's Shipping's representative ordered the ship to proceed around Africa. Additionally, instead of removing the hatch covers or placing the ship in dry dock for repair, the hatch covers were patched with "asphalt tape." Thus loaded, the Alexander's Unity set sail for the United States in June of 1992.

In late June, during the journey to the United States, the Master's concerns came to fruition, and the ship encountered weather and seas so rough that the ship's log reflects that "waves cover[ed] the deck" for several days. During the inclement conditions, seawater evidently penetrated the hatch covers and cargo holds, necessitating the operation of the bilge pumps for several days in late June and early July. Except for some engine repairs at the end of July, the rest of the voyage was relatively uneventful, and the Alexander's Unity arrived in New Orleans on July 30, 1992.

Upon its arrival in New Orleans, the Alexander's Unity suffered the first of several arrests. The ship had outstanding debts to numerous groups including the appellant in this matter, Banque Internationale A Luxembourg S.A. ("BIL"). Specifically, BIL held two mortgages on the Alexander's Unity, and on the basis of these debts, BIL initiated an in rem action against the ship. Associated Metals also initiated an in rem action against the Alexander's Unity as well as in personam actions against Alexander's Unity Shipping and Alexco Shipmanagement (Hellas) Ltd., the vessel's operator.

On October 29, 1992, the United States Marshal sold the Alexander's Unity and the proceeds of $4,615,000 (less the Marshal's commission and certain custodia legis expenses) were placed in the court's registry. From these funds, outstanding debts owed to the Master and crew of the ship and to domestically based suppliers were paid; nevertheless, more than four million dollars still remains in the registry of the court.

In April of 1993, Associated Metals sought a default judgment against the Alexander's Unity, Alexander's Unity Shipping, and Alexco Shipmanagement (Hellas) Ltd. Specifically, Associated Metals sought $736,873 for seawater rust damage to the steel plates. Associated Metals also requested $181,340.97 for expenses resulting from the forced discharge of the steel in New Orleans instead of in Houston and in Mobile, the original destinations of the cargo. Additionally, Associated Metals argued that it was entitled to interest and that the full amount of its claim constituted a preferred maritime tort lien. Finally, Associated Metals asserted that its costs from the forced discharge were custodia legis expenses.

In late May, the district court granted a default judgment in favor of Associated Metals in the amounts requested. Specifically, in a minute entry, the district court found that Alexander's Unity was engaged in the common carriage of cargo, and that Associated Metals' cargo aboard the ship was "damaged not only from the breach of contract of carriage by the vessel but also from the physical and financial unseaworthiness of the vessel and the negligence of her owners and/or operators." The district court also determined that "under admiralty law, Associated rightfully has a claim in tort for negligence and such a claim is a preferred maritime tort lien against the vessel, ... [and] Associated's preferred maritime tort lien against the vessel encompasses both the seawater rust damage to the cargo and the forced discharge expenses." The district court later modified the judgment to include an additional $70,889.95 in forwarding expenses. This sum was not added to the custodia legis expenses, but was added to the preferred maritime tort lien because the district court concluded that "the financial unseaworthiness of the M/V Alexander's Unity was the proximate cause of these unanticipated forwarding expenses." Thus, on June 23, 1993, the district court entered its minute entry and modified default judgment consisting of a preferred maritime tort lien in the amount of $918,213.97 plus five percent interest from the date of discharge; $110,451.02 of that sum was recognized as custodia legis expenses. BIL appeals from this order.

II. STANDARD OF REVIEW

BIL does not challenge the grant of the default judgment, the district court's findings of unseaworthiness and negligence, or the determination that the Alexander's Unity was a common carrier. Instead, BIL contests the application of the law to the findings contained within the judgment and the determination that the discharge expenses were custodia legis. It is well settled that a district court's findings of fact must be accepted unless clearly erroneous. Prudhomme v. Tenneco Oil Co., 955 F.2d 390, 392 (5th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 84, 121 L.Ed.2d 48 (1992). On the other hand, "we review de novo the legal questions decided by the district court." Landmark Land Co. v. Office of Thrift Supervision, 990 F.2d 807, 809 (5th Cir.1993); accord Prudhomme, 955 F.2d at 392. Finally, we examine determinations of custodia legis expenses for abuse of discretion. Oil Shipping (Bunkering) B.V. v. Sonmez Denizcilik Ve Ticaret A.S., 10 F.3d 176, 181 n. 3 (3d Cir.1993); Taino Lines, Inc. v. M/V Constance Pan Atlantic, 982 F.2d 20, 24 (1st Cir.1992); Kingstate Oil v. M/V Green Star, 815 F.2d 918, 922-23 (3d Cir.1987).

III. ANALYSIS

A. Jurisdiction

Because there are still aspects of this case pending in the district court, our jurisdiction to decide the issues presented in this case must be addressed. Generally, appellate courts only have jurisdiction over final decisions of district courts. See 28 U.S.C. Sec. 1291. There is, however, an exception allowing review of certain interlocutory decisions. Section 1292(a)(3) of 28 U.S.C. provides that "the courts of appeals shall have jurisdiction of appeals from ... [i]nterlocutory 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." See Todd Shipyards Corp. v. Auto Transp., S.A., 763 F.2d 745, 751 (5th Cir.1985); Gulf Towing Co. v. Steam Tanker, Amoco New York, 648 F.2d 242, 244 (5th Cir.1981) (per curiam). Although in order for this exception to apply, it is not necessary for "all of the rights and liabilities of all of the parties [to] be...