Bank One, Louisiana N.A. v. Mr. Dean Mv

• Decision Date: 10 June 2002
• Docket Number: No. 00-31288.,00-31288.
• Citation: 293 F.3d 830
• Parties: BANK ONE, LOUISIANA N.A., Plaintiff-Appellee, v. MR. DEAN MV, Etc.; et al, Defendants, BargeCarib Incorporated, Intervenor-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

293 F.3d 830

BANK ONE, LOUISIANA N.A., Plaintiff-Appellee, v. MR. DEAN MV, Etc.; et al, Defendants, BargeCarib Incorporated, Intervenor-Appellant.

No. 00-31288.

United States Court of Appeals, Fifth Circuit.

June 10, 2002.

John J. Broders (argued), Richard Scott Jenkins, Sr., Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, LA, for Plaintiff-Appellee.

Ford C. Thanheiser (argued), Billings & Solomon, Houston, TX, Nicole S. Tygier, Chopin, Wagar, Cole, Richard, Reboul &amp Kutcher, Metairie, LA, for Intervenor-Appellant.

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

Before GARWOOD and WIENER, Circuit Judges and FALLON, District Judge.¹

GARWOOD, Circuit Judge:

BargeCarib, Inc. (BargeCarib) appeals the district court's grant of summary judgment in favor of Bank One, Louisiana N.A. (Bank One) establishing that Bank One's preferred ship mortgage had priority over BargeCarib's maritime lien for breach of charter. Because maritime liens for breach of charter attach at the moment the owner places the vessel at the charterer's disposal, we vacate and remand.

Background

BargeCarib, Inc. (a subsidiary of American Rice, Inc.) sells rice to Haiti and transports it there by an ocean-going barge called the LAURIKRISTI. To provide propulsion for the LAURIKRISTI, BargeCarib executed a time charter agreement with Offshore Supply Ships, Inc. (Offshore), owner of the towboat M/V SOVEREIGN, to hire the SOVEREIGN for a period of one year, beginning August 15, 1996. BargeCarib began using the SOVEREIGN under this charter and later, in July 1997, timely exercised its contractual right, provided for in the charter, to extend the charter for another year.

On May 20, 1997, Offshore sold the SOVEREIGN to Global Towing, LLC (Global). To finance this purchase, Global received a line of credit from First National Bank of Commerce (FNBC) and in return gave FNBC a $2,000,000 preferred ship mortgage as security. Global completely satisfied the SOVEREIGN's existing mortgage of record and FNBC duly recorded its preferred mortgage on May 21, 1997. On October 2, 1998, Global's owner Michael Blake executed an $800,000 guarantee of the Global indebtedness.

After the sale of the vessel and recording of the mortgage, Offshore and Global reassured BargeCarib that the SOVEREIGN, now renamed the M/V MR. DEAN, would sail on time for a scheduled trip to Haiti. Nevertheless, Global delivered neither the MR. DEAN nor a substitute suitable under the charter. BargeCarib immediately filed suit in the United States District Court for the Southern District of Texas against the MR. DEAN in rem and Global in personam for breach of the charter. This court held that the charter had indeed been breached. BargeCarib Inc. v. Offshore Supply Ships, Inc., 168 F.3d 227 (5th Cir.1999). On remand, the district court held that the date of breach was July 10, 1997.

Global defaulted on the loan and Blake refused to pay under the terms of his guarantee. On March 24, 2000, Bank One (successor by merger to FNBC) responded by filing the present lawsuit in the United States District Court for the Eastern District of Louisiana against the MR. DEAN in rem and against Global and Blake in personam. On June 2, 2000, BargeCarib intervened in the lawsuit and asserted a maritime lien based on the breach of charter. BargeCarib and Bank One disputed the priorities of their claims to the MR. DEAN, a critical issue because the proceeds of sale of the MR. DEAN would be unlikely to satisfy both interests. They filed cross motions for summary judgment, and by order dated September 29, 2000 and entered October 2, 2000, the district court denied BargeCarib's motion and granted summary judgment to Bank One, determining that Bank One's mortgage had priority over BargeCarib's maritime lien. BargeCarib has timely appealed the September 29 order.

Discussion

I. Threshold Issues

This court takes jurisdiction of this appeal pursuant to 28 U.S.C. § 1292(a)(3), allowing for review of interlocutory decrees of district courts determining the rights and liabilities of the parties to admiralty cases. Because the grant of summary judgment disposed of BargeCarib's case on the merits, we have jurisdiction even without Rule 54(b) certification. See Walter E. Heller and Co. v. O/S Sonny V., 595 F.2d 968, 971-72 (5th Cir.1979). We review a grant of summary judgment "de novo, applying the same standards as the district court, while viewing all disputed facts and reasonable inferences in the light most favorable to the nonmoving party." McClendon v. City of Columbia, 258 F.3d 432, 435 (5th Cir.2001) (quotation omitted).

II. Attachment of a Maritime Lien

Under the Ship Mortgage Act, Bank One's mortgage takes priority over all other claims against the vessel except for "preferred maritime liens." 46 U.S.C. § 31326(b)(1). Under the facts of this case, BargeCarib's lien could only be preferred if it "arose" before the mortgage was filed. 46 U.S.C. § 31301(5)(A). The time charter commenced before the mortgage was filed, but Offshore and Global breached the charter twenty days after that date. Thus, this case presents the purely legal question of when a maritime lien for breach of charter "arises." Bank One prevails if maritime liens arise at the time of breach, while BargeCarib prevails if they arise at the inception of the charter.

We begin our analysis, as we must, with a recognition of the unique qualities of the maritime lien. Rather than arising from the English common law, maritime liens are based on principles of civil law. The Young Mechanic, 30 F. Cas. 873, 874 (Curtis, Circuit Justice 1855). As a result, a "maritime lien, so-called, is not a lien at all in the common-law sense of the term." GRANT GILMORE & CHARLES L. BLACK, JR., THE LAW OF ADMIRALTY 586 (2nd ed.1975) (hereinafter GILMORE & BLACK). "A lien is a lien is a lien, but a maritime lien is not." Id. at 589. This case concerns the maritime lien's unique power to confer the right to sue the vessel itself in rem, almost as if it were a person. See id. at 589.² When the vessel is sold under an in rem proceeding to satisfy a maritime lien, the owner takes the vessel free of all liens imposed anywhere in the world. Id. at 622. Accordingly, we take note that our analysis should not be primarily guided by reference to the commercial law of secured credit or the land-based common law of liens. Instead, we find our guidance in the ancient and peculiar case law of admiralty. While recent cases cast only a dim glow, we find our lighthouse in the Supreme Court of the 1860s.

A. Older Case Law

A wealth of authority from the nineteenth century exists to guide us in our resolution of this case. We discover that courts have long understood that maritime liens for charters and shipping contracts attach at the beginning of the contract and remain inchoate until breached.

The Supreme Court first examined the timing of charter liens in The Freeman, 59 U.S. (18 How.) 182, 15 L.Ed. 341 (1855), observing in dictum that "charterparties, must, in the invariable regular course of that business, be made, for the performance of which the law confers a lien on the vessel." Id. at 190. The Court added that "third persons, who have shipped merchandise and taken bills of lading therefor, would thereby acquire a lien on the vessel." Id. This use of "thereby" implies that the lien attaches at the delivery of the merchandise, a point made explicit in 1860 when Mr. Justice Nelson held that:

"The goods were put on board of the vessel, and, if the lien attached at all, it attached as soon as they were laden on board. So far as the form of the remedy is concerned, it is the same as if the voyage had been broken up by the charterers at any other point in the course of the voyage, after the vessel had been out a week, a month, or longer." The Hermitage, 12 F. Cas. 27, 28 (Nelson, Circuit Justice 1860).

The entire Court agreed that same term, holding that "we do not see why the lien may not attach, when the cargo is delivered to the master for shipment." The Edwin, 65 U.S. (24 How.) 386, 394, 15 L.Ed. 599 (1860). The Court reaffirmed the principle six years later. "[T]he better opinion is, that the lien for freight commences as soon as the goods are delivered into the control of the master, or certainly as soon as they are put on board." The Bird of Paradise, 72 U.S. (5 Wall.) 545, 563, 18 L.Ed. 662 (1866).³ These holdings were reiterated by district and circuit courts. "[A]s soon as the performance of the contract is commenced a lien exists on the vessel in favor of the shipper or charterer, and a suit in rem may be maintained against the same for any liability of the master or owner arising on or growing out of such contract." The Director, 26 F. 708, 710 (D.Or.1886). See also The Oceano, 148 F. 131, 133 (S.D.N.Y.1906) (quoting same); The Esrom, 272 F. 266, 270-71 (2nd Cir.1921) ("[T]he lien of the vessel upon the goods and of the goods upon the vessel attaches from the moment the goods are laden on board").

Soon after The Bird of Paradise, the Supreme Court elaborated further by adopting the Privy Council's classic exposition of the maritime lien:

"A maritime lien is the foundation of the proceeding in rem, a process to make perfect a right inchoate from the moment the lien attaches; and whilst it must be admitted that where such lien exists, a proceeding in rem may be had, it will be found to be equally true, that in all cases where a proceeding in rem is the proper course, there a maritime lien exists, which gives a privilege or claim upon the thing, to be carried into effect by legal process." The Bold Buccleugh, 7 Eng. Rep. 267, 284 (1851), quoted in The Rock Island Bridge, 73 U.S. (6 Wall.) 213, 215, 18 L.Ed. 753 (1867) (emphasis added).

This statement explains how a maritime lien can attach at the beginning of the charter, yet only be enforceable at the time of breach: the lien remains "inchoate" until "perf...