Crimson Yachts v. Betty Lyn II Motor Yacht

• Citation: 603 F.3d 864
• Decision Date: 12 April 2010
• Docket Number: No. 09-11288.,09-11288.
• Parties: CRIMSON YACHTS, an unincorporated division of Horizon Shipbuilding, Inc., an Alabama corporation, Plaintiff-Appellant, v. BETTY LYN II MOTOR YACHT, Official No. 55036, in rem, Blyn II Holding, LLC, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

603 F.3d 864

CRIMSON YACHTS, an unincorporated division of Horizon Shipbuilding, Inc., an Alabama corporation, Plaintiff-Appellant, v. BETTY LYN II MOTOR YACHT, Official No. 55036, in rem, Blyn II Holding, LLC, Defendants-Appellees.

No. 09-11288.

United States Court of Appeals, Eleventh Circuit.

April 12, 2010.

COPYRIGHT MATERIAL OMITTED

J.W. Goodloe, Jr., Vickers, Rils, Murray & Curran, L.L.C., Mobile, AL, for Crimson Yachts.

Francis I. Spagnoletti, David S. Toy, James Thomas Liston, Spagnoletti & Co., Houston, TX, John Patrick Kavanagh, Jr., Burr & Forman, LLP, Mobile, AL, for Defendants-Appellees.

Before BLACK, MARCUS and

HIGGINBOTHAM,^* Circuit Judges.

BLACK, Circuit Judge:

Appellant, shipyard Crimson Yachts, seeks to enforce a maritime lien for major repairs it performed on a motor yacht, Appellee the BETTY LYN II. Crimson Yachts claims the yacht's owner, Appellee BLyn II Holding, LLC (Blyn), failed to make full payment for the repairs. Crimson Yachts sued the BETTY LYN II in rem, and sued BLyn in personam, to recover the remainder of the debt. Pursuant to Appellees' joint motion, the district court dismissed the in rem claims against the BETTY LYN II and vacated its arrest. The district court found the BETTY LYN II was not a "vessel" subject to maritime liens. Because the maritime lien was a prerequisite to the court's admiralty jurisdiction, the court concluded it lacked jurisdiction over the in rem proceeding against the BETTY LYN II. The issue we resolve on appeal is whether the BETTY LYN II is a vessel and, therefore, subject to maritime liens and the court's admiralty jurisdiction. We conclude that she is and reverse and remand for further proceedings.

I. BACKGROUND

The BETTY LYN II is a 132-foot yacht built in 1974. In 2006, the parties agreed to have Crimson Yachts perform a major overhaul on the BETTY LYN II to include, inter alia, extension of its decks and replacement of its engines, generators, electronics, navigation equipment, plumbing, and wiring. The original estimated duration of the repair was 15 months. After the parties agreed to the repairs, the BETTY LYN II's engines, propellers, propeller shafts, generators, and most of its furniture and equipment were removed, and it was towed to Crimson Yachts's shipyard in Alabama. Crimson Yachts began work on the BETTY LYN II around October 1, 2006. The repairs required Crimson Yachts to remove the BETTY LYN II from the water with cranes and place her on a cradle in a covered shed. The work and the corresponding payments continued for a year and a half. Then, in March 2008, BLyn allegedly ceased payment for the repairs. Crimson Yachts claims the amount in unpaid invoices currently exceeds $1,200,000.

Crimson Yachts filed suit on June 11, 2008. The Appellees jointly filed a motion to vacate the arrest of, and to dismiss the in rem claims against, the BETTY LYN II for lack of admiralty jurisdiction. The district court held a motion hearing on October 29, 2008 at which the court heard testimony about the overhaul and condition of the BETTY LYN II.¹ On February 26, 2009, the district court issued an order concluding that a ship must be "in navigation" to be a "vessel," and finding the major overhaul of the BETTY LYN II had taken the yacht out of navigation, thereby divesting her of her status as a vessel. The district court dismissed the in rem claims against the BETTY LYN II and vacated her arrest. This timely interlocutory appeal followed.

II. STANDARD OF REVIEW

The Constitution empowers the federal judiciary to hear "all Cases of admiralty and maritime Jurisdiction." U.S. Const. art. III § 2, cl. 2. Congress, in accordance with Article III, vested in federal district courts "original and exclusive jurisdiction over `any case of admiralty or maritime jurisdiction.'" Sea Vessel, Inc. v. Reyes, 23 F.3d 345, 348 (11th Cir.1994) (quoting 28 U.S.C. § 1333(1)). This Court reviews de novo the district court's dismissal for lack of admiralty jurisdiction. Bd. Of Comm'rs of the Orleans Levee Dist. v. M/V Belle of Orleans, 535 F.3d 1299, 1305 (11th Cir.2008).

III. DISCUSSION

An in rem admiralty proceeding requires as its basis a maritime lien. The Rock Island Bridge, 73 U.S. (6 Wall.) 213, 215, 18 L.Ed. 753 (1867). "A maritime lien is a special property right in a ship given to a creditor by law as security for a debt or claim," and it attaches "the moment the debt arises." Dresdner Bank AG v. M/V Olympia Voyager, 465 F.3d 1267, 1272 (11th Cir.2006) (citing Galehead, Inc. v. M/V Anglia, 183 F.3d 1242, 1247 (11th Cir.1999) (quotations omitted)). Maritime liens differ from other common law liens in that a maritime lien is "not simply a security device to be foreclosed if the owner defaults"; rather, a maritime lien converts the vessel itself into the obligor and allows injured parties to proceed against it directly. Amstar Corp. v. S/S ALEXANDROS T., 664 F.2d 904, 908-09 (4th Cir.1981). This is called an in rem proceeding. "An in rem suit against a vessel is . . . distinctively an admiralty proceeding, and is hence within the exclusive province of the federal courts." Belle of Orleans, 535 F.3d at 1314 (quoting Am. Dredging Co. v. Miller, 510 U.S. 443, 446-47, 114 S.Ct. 981, 985, 127 L.Ed.2d 285 (1994)).

Federal district courts obtain in rem jurisdiction over a vessel when a maritime lien attaches to it. Industria Nacional Del Papel, CA. v. M/V Albert F, 730 F.2d 622, 625 (11th Cir.1984). Upon filing an in rem complaint, the clerk of court issues a warrant for the arrest of the res. See Merchs. Nat'l Bank v. Dredge Gen. G.L. Gillespie, 663 F.2d 1338, 1340 n. 1 (5th Cir.1981) (quoting Fed.R.Civ.P., Supplemental Rules for Certain Admiralty and Maritime Claims (Rule C)). The res remains in the court's custody during the proceeding as serves as both the respondent and the subject matter. See 2 Benedict on Admiralty § 21 at 2-6 to 2-8 (7th ed. rev.1998).

The Federal Maritime Lien Act, 46 U.S.C. §§ 31341-31343, grants maritime liens to particular persons based on their relationship to, or service of, a vessel. For example, the Act grants a maritime lien to "a person providing necessaries to a vessel." See id. § 31342(a). The Act then grants maritime lienholders the right to "bring a civil action in rem to enforce the lien." Id. In other words, "a maritime lien gives to its holder a property right in a vessel, and the proceeding in rem is . . . a means of enforcing the property right." See Merchs. Nat'l Bank, 663 F.2d at 1346. A maritime lien cannot be executed or divested outside of an in rem proceeding. Vandewater v. Mills, 60 U.S. 82, 89, 19 How. 82, 15 L.Ed. 554 (1856).

Crimson Yachts claims that its repair work on the BETTY LYN II entitles it to a maritime lien. Crimson Yachts sought to enforce this lien by filing in rem claims against the BETTY LYN II and causing the court to effect her arrest. Appellees claim Crimson Yachts's work on the BETTY LYN II did not result in a maritime lien, because the yacht is not a "vessel" according to maritime law, and thus is not subject to maritime liens. The issue, then, is whether the BETTY LYN II is a "vessel" subject to maritime liens and the court's jurisdiction, or whether the extensive and time-consuming nature of the repairs divested the BETTY LYN II of her vessel status, thereby making her ineligible for a maritime lien and depriving the district court of admiralty jurisdiction over the in rem claims in this case.

A. The Purpose of Maritime Liens

In resolving whether the district court's admiralty jurisdiction encompasses the claims against the BETTY LYN II, we review the purpose, origin, and development of maritime liens. "The maritime lien developed as a necessary incident of the operation of vessels." Piedmont & George's Creek Coal Co. v. Seaboard Fisheries Co., 254 U.S. 1, 8, 41 S.Ct. 1, 3, 65 L.Ed. 97 (1920) (elaborating on the intent behind § 31342(a)'s predecessor statute, the Act of June 23). Maritime liens have special features designed to protect persons who own, sail, and service ships from the unique risks associated with the shipping industry.

Maritime liens originated, in part, "in a desire to protect the ship," which is "peculiarly subject to vicissitudes which would compel abandonment . . . unless repairs and supplies were promptly furnished." Id. at 9, 41 S.Ct. at 3. Ships braved the danger of the seas dependent on a solid construction and a skillful crew. Should structure or seaman fail, ships had little to compensate for the loss and, at times, had to seek the help of strangers. Ships, however, often lacked items of sufficient value to offer in exchange for the help they needed.

Because a ship was often in need of repairs and necessaries while it was away from its home port and without large sums of money on board, maritime liens enabled persons in charge of the ship to use the value of the vessel itself as a pledge of credit in order to secure the work and parts it needed during the voyage. Id.; see also Veverica v. Drill Barge Buccaneer No. 7, 488 F.2d 880, 883 (5th Cir.1974) ("The very purpose of maritime liens is to encourage necessary services to ships whose owners are unable to make contemporaneous payment.");² The Alligator, 161 F. 37, 40 (3d Cir.1908) (explaining maritime liens facilitate commerce by encouraging merchants to furnish ships with supplies and repairs); 2 Benedict on Admiralty § 21 at 2-1 (7th ed. rev.1998). "Moneys are not usually loaned to strangers, residents of distant and foreign countries, without security, and it would be a violent presumption to suppose that any such course was adopted when ample security in the vessel was lying before the parties." Wilkins v. Commercial Inv. Trust Corp., 153 F.3d 1273, 1276 (11th Cir.1998) (citing The Emily Souder, 84 U.S. (17 Wall.) 666, 671, 21 L.Ed. 683 (1873)).

Maritime liens could attach "even if the vessel owner had not personally contracted" for the services performed. S.E.L. Maduro (Fla.), Inc. v....