HSH Nordbank v. M/V Ahmetbey, Civil Action No. 03-3520 (E.D. Pa. 11/18/2003)

• Decision Date: 18 November 2003
• Docket Number: Civil Action No. 03-3520.
• Parties: HSH NORDBANK, v. M/V AHMETBEY, ODIN DENIZCILIK.
• Court: U.S. District Court — Eastern District of Pennsylvania

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HSH NORDBANK, v. M/V AHMETBEY, ODIN DENIZCILIK.

Civil Action No. 03-3520.

United States District Court, E.D. Pennsylvania.

November 18, 2003.

MEMORANDUM

JOHN PADOVA, District Judge.

Following an auction for the sale of the motor vessel Ahmetbey, both Defendants and disappointed bidders filed motions opposing the confirmation of the sale and requesting that the Court order a new sale. On November 14, 2003, the Court entered an order denying these motions in their entirety and confirming the sale of the Ahmetbey. This memorandum sets out the Court's reasoning.

I. RELEVANT BACKGROUND

Plaintiff HSH Nordbank ("Plaintiff", or "Bank") filed an action against the vessel M/V Ahmetbey, in rem, and Odin Denizcilik, in personam, seeking judgment against Defendants for money due and unpaid under a loan agreement and enforcement of a mortgage on the M/V Ahmetbey by the sale of the vessel. A bench trial was held on this matter on September 23 through September 25, 2003. The Court subsequently ruled in favor of Plaintiff and against Defendants in the preliminary amount of $805,591.73, to be amended by motion to include additional per diem interest subsequently accrued. The Court further ordered that the M/V Ahmetbey be sold by the United States Marshal in accordance with the Supplemental Rules for Certain Admiralty and Maritime Claims of the Federal Rules of Civil Procedure, and that Plaintiff should recover its judgment from the proceeds of such sale. On November 5, 2003, an auction of the M/V Ahmetbey was conducted. Orient Shipping of Rotterdam, bidding on behalf of Goldfish Shipping, submitted the winning bid of $2,350,000.00. In accordance with the notice of sale ordered by the Court, Goldfish Shipping provided certified funds in the amount of $235,000.00 to the United States Marshal at the time of sale. Plaintiff filed a motion for confirmation of the sale of M/V Ahmetbey, and Goldfish Shipping joined in that motion. On November 13, 2003, Defendants and Azure Maritime (hereinafter, "Objectors"), a disappointed bidder, collectively filed a motion in opposition to the confirmation of sale. Both Defendants and Azure Maritime are represented by Ms. Ann-Michele Higgins, of Rawle and Henderson. Ms. Higgins was present at the November 5th auction and bid on behalf of Azure Maritime. Pyramid Shipping, another disappointed bidder, filed a separate motion in opposition to confirmation of the sale. The Court held a hearing regarding the confirmation of sale on November 13, 2003. On November 14, 2003, the Court entered an order confirming the sale of the Ahmetbey and overruling all of the objections to the sale lodged by the parties.

II. OBJECTIONS OF DEFENDANTS AND AZURE MARITIME TO CONFIRMATION

"Whether a marshal's sale shall be confirmed is largely a matter of sound judicial discretion." Christian v. Sewer, 962 F. Supp. 673, 675 (D. V.I. 1997). "The bid at the marshal's auction does not consummate a sale. It is the equivalent of an offer to the court, not accepted until judicially confirmed. Until confirmation, the auction bid may be rejected." First Nat. Bank of Jefferson v. M/V Lightning Power. 776 F.2d 1256, 1261 (5th Cir. 1985). However, the "policy of inspiring confidence in sales under the supervision of the court favors confirmation of a sale made to the highest bidder at a fairly conducted public auction." Salazar v. Atlantic Sun. 881 F.2d 73, 81 (3d Cir. 1989) (citations omitted). Thus, "[a]bsent fraud or collusion, a bid at a judicial sale should not ordinarily be rejected . . . but `the court has power to do so if the price is so grossly inadequate as to shock the conscience.'" M/V Lightning Power, 776 F.2d at 1261 (citations omitted). Thus, absent fraud or collusion, there generally must be at least some evidence of prejudice to the parties resulting from alleged improprieties at the auction for a Court to rescind a sale. Christian, 962 F. Supp. at 675 (citing Wong Shing v. M/V Mardina Trader. 564 F.2d 1183, 1189 (5th Cir. 1977)).

A. Inadequacy of Notice of Sale

Objectors argue that the notice of sale provided by the Court (and drafted by the Bank) was defective on its face, and further that the law firm representing the Bank, Hollstein, Keating, Cattell, Johnson and Goldstein ("Hollstein Keating"), did not take adequate steps to respond to queries of potential bidders concerning the logistics of the auction. Objectors argue that the resulting confusion among potential bidders may have prevented them from bidding on the vessel. Specifically, Azure Maritime objects to the language in the notice stating that "a cash deposit of ten percent (10%) of the bid shall be paid at the time of sale, and, if the sale is confirmed by the Court, the remaining ninety percent (90%) shall be paid within three (3) days after the date of confirmation." (See 10/9/03 Order, Docket # 65) (emphasis added). Azure Maritime argues that a potential bidder by the name of Demetrious Kalogerakis, who was retained by two separate parties to bid on the vessel, interpreted this provision to require that the down-payment be made in actual cash, as opposed to a certified or cashier's check. Objectors further argue that Mr. Kalogerakis attempted to contact Mr. Edward Cattell, of Hollstein Keating, by email to clarify this issue and receive additional information before the date of the sale, and received no response. According to Objectors, without the additional information Mr. Kalogerakis' principals were unable to make an informed decision regarding their purchase.

There is no merit to Azure Maritime's argument that the notice was defective on its face. It is generally understood that, in business affairs, certified funds are recognized as legally equivalent to cash. See City Check Cashing v. Jul-Ame Constr. Co., 742 A.2d 141, 151 (N.J. Super. 1999) (overruled on other grounds by City Check Cashing, Inc. v. Maunfac. Hanover Trust, 764 A.2d 411 (N.J. 2001)) ("Certified checks are commonly used in the business and commerce of this county. Most persons consider a certified check to be virtually equivalent to cash. Certifying a check signifies to the world that a certifying bank has cash on hand to cover the check.") (citing Edwards v. Nat. City Bank of New York, 269 N.Y.S. 637, 639 (N.Y. Mun. Ct. 1934)). Numerous loan agreements are written with the implicit assumption that payment in "cash" can be made by certified check. In In Re. Wagner, 174 B.R. 189 (W.D. Pa.), the contract between the debtor and creditor stated, in relevant part, that:

If you wish to purchase the property, the terms are "cash" . . . In other words you must have your financing arranged with another lender and have the full payment price set out above in the form of a cashier's or certified check at the closing.

Id. at 193-94. The brief submitted on behalf of Pyramid Shipping recognizes this fact when it states that "Certified funds are recognized as the legal equivalent of cash." (Pyramid Shipping Opp. Sale, Mem. at 3.)

Indeed, as Azure Maritime points out, the concept of providing hundreds of thousands of dollars in cash as a down payment would have been logistically untenable. This fact alone should have put all of the potential bidders on notice of at least the likelihood that a certified check would have been accepted for the down payment.¹ Thus, the Court rejects Azure Maritime's argument that the notice was defective on its face.

Objectors also argue that Mr. Cattell's failure to respond to Mr. Kalogerakis' queries in a timely manner prevented Mr. Kalogerakis' clients from procuring the funds necessary to bid on the ship. Mr. Kalogerakis testified that, after obtaining Mr. Cattell's email address from a website listing auctions of maritime vessels, he attempted to contact Mr. Cattell on Friday, October 31, 2003, by email to obtain more information about the details of the auction, but received no response.² (11/13/03 N.T. at 38.) According to Mr. Kalogerakis, he was able to contact Hollstein Keating by telephone on Monday, November 3, 2003 (two days before the auction), and learn the details of the auction, including where the ship was and when he could inspect it. Mr. Kalogerakis testified that, after he inspected the vessel and reported the details back to his clients, one of his clients, Tiga, was interested in bidding on the ship up to the amount of $2,527,000.00 but was unable to procure the ten percent deposit in certified funds by the day of the auction. (11/13/03 N.T. at 23.) According to Mr. Kalogerakis, had he been given his requested information in a more timely manner, it is likely that Tiga would have been able to procure the certified funds and bid on the ship. (Id.) Objectors therefore contend that Mr. Cattell's failure to reply to Mr. Kalogerakis' email in a timely manner improperly prevented a potential buyer from bidding on the Ahmetbey.

This argument is without merit. The notice of sale approved by the parties and the Court contains the telephone number of Mr. Cattell, and directs interested parties to contact this number for more information. There is no email address listed on the notice of sale. (See 10/9/03 Order, Docket #65.) According to Mr. Kalogerakis, he never saw this notice of sale, because he does not read the newspapers where the notice of sale was published. (11/13/03 N.T. at 40.) Mr. Kalogerakis apparently obtained Mr. Cattell's email address from a website maintained by a third party, which did not contain Mr. Cattell's phone number. However, there is no evidence that this website was in any way maintained or controlled by the Bank or any other party to this action. Because there is no evidence the Bank did not comply with the publication requirements ordered by the Court and dictated by the Rules of Admiralty, the Bank cannot be held responsible for the fact that Mr. Kalogerakis never saw the Notice of Sale. Furthermore, because the notice of sale did not provide for contact by email, Mr. Cattell's failure to...