International Marine Towing, Inc. v. Southern Leasing Partners, Ltd.

• Decision Date: 22 December 1983
• Docket Number: No. 82-3348,82-3348
• Citation: 722 F.2d 126
• Parties: INTERNATIONAL MARINE TOWING, INC., Plaintiff-Appellant, v. SOUTHERN LEASING PARTNERS, LTD., etc., et al., Defendants-Appellees. FIRST MISSISSIPPI NATIONAL BANK, Plaintiff-Appellee, v. INTERNATIONAL MARINE TOWING, INC., Intervenor-Plaintiff-Appellant, v. M/V KING'S CHALLENGER, her engines, tackle, apparel, etc., in rem, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 126

722 F.2d 126

1985 A.M.C. 1908

INTERNATIONAL MARINE TOWING, INC., Plaintiff-Appellant, v. SOUTHERN LEASING PARTNERS, LTD., etc., et al., Defendants-Appellees.

FIRST MISSISSIPPI NATIONAL BANK, Plaintiff-Appellee, v. INTERNATIONAL MARINE TOWING, INC., Intervenor-Plaintiff-Appellant, v. M/V KING'S CHALLENGER, her engines, tackle, apparel, etc., in rem, Defendant-Appellee.

No. 82-3348.

United States Court of Appeals Fifth Circuit.

Dec. 22, 1983.

Phelps, Dunbar, Marks, Claverie & Sims, James H. Roussel, New Orleans, La., for plaintiff-appellant.

Lemle, Kelleher, Kohlmeyer & Matthews, W.E. Noel, New Orleans, La., for First Miss. Nat. Bank.

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

Before GARZA, RANDALL and GARWOOD, Circuit Judges.

RANDALL, Circuit Judge:

This appeal involves the breach of a bareboat charter party. The issue presented for our determination is whether a maritime lien arises in favor of the charterer for the owner's breach of the charter party. Appellant International Marine Towing, Inc. ("IMT") contends that the district court erred in holding that IMT could not acquire a lien on the M/V KING'S CHALLENGER for breach of a charter party as a matter of law and as a result of a "prohibition of liens" clause in the charter party. IMT also alleges that the district court erroneously allowed appellee First Mississippi National Bank ("FMNB") to interpose an objection to a settlement entered into between IMT and Southern Leasing Partners, Ltd. ("Southern Leasing").

For the reasons stated below, we find that the district court properly allowed FMNB to object to the settlement between IMT and Southern Leasing. The district court erred, however, in holding that IMT was not entitled to a lien for damages suffered as a result of Southern Leasing's breach of the charter party. Thus, we reverse and remand.

I. FACTUAL AND PROCEDURAL BACKGROUND.

This action originated in Jacksonville, Florida, where the tug M/V KING'S CHALLENGER was arrested in connection with the foreclosure of a preferred ship's mortgage by FMNB. The M/V KING'S CHALLENGER was owned by Southern Leasing, but, at the time of the arrest, the vessel was under a bareboat charter to IMT. Prior to the arrest, IMT had made substantial expenditures in outfitting and repairing the tug so as to make the vessel seaworthy and fit for its intended use. IMT had also engaged the M/V KING'S CHALLENGER in a number of profitable towing operations. Once the tug was seized, IMT intervened, by way of an in rem proceeding against the vessel, to assert a claim for damages caused by the breach of the bareboat charter party. Several other parties also intervened, and eventually all parties to the action except IMT agreed to settle the litigation. It was decided that the vessel would not be sold but would be released for operation in order to obtain funds to pay various claims. A cash bond was posted by FMNB to secure IMT's claim, and the vessel was released. Thereafter, a corporate surety bond was substituted for the cash bond with FMNB as principal and the Federal Insurance Company as surety.

In addition to its in rem action filed in Florida, IMT filed an in personam action IMT's consolidated action was scheduled for trial, but IMT and Southern Leasing reached a settlement agreement as to IMT's suit for breach of the bareboat charter by Southern Leasing. An order of dismissal was entered and a stipulation of fact and law ¹ was filed by the two parties and approved by the district court. FMNB made a motion to recall approval of the stipulation of fact and law, and to cancel the $50,000 release bond it had posted before IMT's actions were consolidated. FMNB asserted that the stipulation was erroneous as a matter of law in that it gave IMT a lien on the vessel and therefore the bond as a bareboat charterer. FMNB also maintained that such a lien was contrary to the "prohibition of liens" clause in the charter party. The district court set aside the stipulation insofar as it recognized a lien on the M/V KING'S CHALLENGER in favor of IMT. IMT appeals, contending that FMNB had no standing to intervene in the suit, and that the district court erred in holding IMT could not acquire a lien for breach of the charter party.

against Southern Leasing in New Orleans, Louisiana. The in rem action was then transferred to New Orleans and consolidated with the in personam proceeding. Meanwhile, in Jacksonville, FMNB foreclosed on its preferred ship's mortgage, alleging that Southern Leasing had breached the settlement agreement. The vessel was seized a second time and was sold to satisfy FMNB's judgment against Southern Leasing.

II. INTERVENTION OF FMNB.

The threshold question presented by this appeal is whether FMNB had standing to challenge the settlement entered into by Southern Leasing and IMT. ² Before addressing this issue, however, it is necessary for us to consider the effect of FMNB's failure to comply with the procedure for intervention established by Federal Rule of Civil Procedure 24(c). ³ Although some courts have held that it is reversible error to conduct any proceedings at the behest of parties who have failed to intervene formally pursuant to rule 24(c), see, e.g., Spangler v. Pasadena City Board of Education, 552 We have been lenient in hearing the appeals of parties who have failed to fulfill the provisions of Rule 24(c). See In re Beef Industry Antitrust Litigation, 589 F.2d 786, 789 (5th Cir.1979) (trial court implicitly authorized intervention of nonparties when it denied nonparties' motion to modify protective order so that party could comply with House of Representatives subpoena for documents); United States v. United Fruit Co., 410 F.2d 553 (5th Cir.), cert. denied, 396 U.S. 820, 90 S.Ct. 59, 24 L.Ed.2d 71 (1969) (nonparty allowed to appeal denial of motion for permission to inspect and copy reports sealed under protective order); Caswell v. Manhattan Fire & Marine Insurance Co., 399 F.2d 417 (5th Cir.1968) (nonparty allowed to appeal denial of motion to quash subpoena).

                F.2d 1326 (9th Cir.1977), other courts have been willing to ignore technical flaws in the intervention process, see, e.g., Smartt v. Coca-Cola Bottling Corp., 337 F.2d 950 (6th Cir.1964), cert. denied, 380 U.S. 934, 85 S.Ct. 941, 13 L.Ed.2d 822 (1965), or have been willing to overlook a total failure to comply with Rule 24(c).   See, e.g., SEC v. Lincoln Thrift Association, 577 F.2d 600 (9th Cir.1978);  Roach v. Churchman, 457 F.2d 1101 (8th Cir.1972)
                

When FMNB first learned that IMT and Southern Leasing had settled their dispute, it asked that a conference be held in chambers. During this conference, the district court concluded that the case should be reopened for consideration of the bond. The court then directed FMNB to submit a brief on this issue, giving IMT ten days to respond. Record Vol. V at 1143. This could be construed as an invitation to FMNB to file its motion without first seeking formal intervention. See In re Beef Industry Antitrust Litigation, supra, at 789. Compare Roach v. Churchman, supra, at 1104 (affording relief to a participant without formally naming it as a party deemed "equivalent to authorizing" intervention). In view of our lenience in the past and the fact that the district court's act might be considered equivalent to authorizing intervention, we will not dismiss for failure to comply with Rule 24(c). Instead, we will assume that the district court implicitly allowed FMNB to intervene. ⁴ We stress, however, that FMNB should have filed a formal motion for intervention pursuant to Rule 24(c), and that future litigants should not rely upon this decision as a means to circumvent the clear requirements of the rule.

We now turn to IMT's assertion that FMNB lacked standing to interpose an objection to the stipulation filed with the district court. IMT contends that FMNB is a mere surety for any in rem judgment rendered against Southern Leasing for IMT and, as such, had no right to intervene. In support of its position, IMT cites several cases purportedly standing for the proposition that sureties on a stipulation for the release of a vessel have no right to defend the bond and thus may not intervene. The L.I.R.R. No. 18, 67 F.2d 290 (2d Cir.1933); The Cartona, 297 F. 827 (2d Cir.1924); The Lydia, 1 F.2d 18 (2d Cir.), cert. denied, 266 U.S. 616, 45 S.Ct. 97, 69 L.Ed. 470 (1924); Perriam v. Pacific Coast Co., 133 F. 140 (9th Cir.1904); The New York, 104 F. 561 (6th Cir.1900); The Glide, 72 F. 200 (4th Cir.1896). Most of these cases, however, do not support the position that a surety cannot appear; the cases instead stand for the proposition that the claimant of a vessel may appeal alone, without the participation of its surety. See, e.g., The L.I.R.R. No. 18, supra; The Lydia, supra; Perriam v. Pacific Coast Co., supra; The New York, supra; The Glide, supra. Moreover, these cases would be more apposite if the Federal Insurance Company, surety of the release bond posted by FMNB, had sought to intervene. Here, FMNB has a direct interest in the outcome of IMT's suit, as it posted the bond as principal and will bear the cost of Therefore, we hold that FMNB had sufficient standing to intervene in the action between IMT and Southern Leasing, and that FMNB is a party to the case.

an in rem judgment against Southern Leasing. ⁵

III. MARITIME LIENS ARISING FROM BREACH OF THE CHARTER PARTY.

The term "charter party," often shortened to "charter," refers to the document setting forth the terms of a contract when one person (the "charterer") takes over the use of the whole ship belonging to another (the "owner"). G. Gilmore & C. Black, The Law of Admiralty Sec. 4-1, at 193 (2d ed. 1975). There are three generally recognized types of charter parties: the first two, the "voyage charter" and the "time charter," occur when the vessel is manned and navigated by the owner. In the voyage charter the ship is engaged to...