Western Bulk Carriers v. PS INTERN.
| Decision Date | 14 February 1994 |
| Docket Number | No. IP 93-775 C.,IP 93-775 C. |
| Citation | 164 BR 616,1994 AMC 1981 |
| Parties | WESTERN BULK CARRIERS (AUSTRALIA) PTY., LTD., Appellant, v. P.S. INTERNATIONAL, INC., Appellee. |
| Court | U.S. District Court — Southern District of Indiana |
Judy L. Woods, McTurnan & Turner, Indianapolis, IN, Charles L. Trowbridge, Treanor Harvey Sullivan Trowbridge & Mullen, New York City, for appellant.
Leonard Opperman, Thomas G. Burroughs, Bose McKinney & Evans, Indianapolis, IN, John P. Love, Proctor in Admiralty, New Canaan, CT, David Powlen, Diane Cruz-Burke, Barnes & Thornburg, Indianapolis, IN, for appellee.
In accord with the entry of this date, the court reverses the bankruptcy court's granting of BancOhio National Bank's summary judgment motion and denial of Western Bulk Carriers' cross-motion for the issuance of ancillary in rem process and remands the action for determination of whether demurrage is owed by PSI International, Inc. to Meridian Ship, Inc. Each side is to bear its respective costs.
Western Bulk Carriers (Australia) Pty. Ltd. ("Western Bulk") appeals the bankruptcy court's granting of BancOhio National Bank's ("BancOhio") motion for summary judgment and the denial of Western Bulk's cross-motion for the issuance of ancillary in rem process. For the reasons stated below, we reverse the bankruptcy court's decision and find that material facts in controversy precluded its granting of summary judgment and denial of the cross-motion.
Western Bulk, an Australian corporation, is engaged in the business of operating, chartering, subchartering, and trading with ocean going cargo vessels in international commerce. Western Bulk owns the ocean cargo vessel M/V Morland ("Morland"). P.S. International Limited, a/k/a P.S. International, Inc. ("PSI"), an Indiana corporation, buys, sells, trades, and exports agricultural products, including food grains. On January 22, 1990, PSI entered into a fully secured line of credit with BancOhio under which PSI's indebtedness was secured by an Agribusiness Security Agreement (the "Agreement"). Under the Agreement, BancOhio took a security interest1 in virtually all of PSI's assets and was given the right to set off funds in PSI's deposit account ("Account") with BancOhio. See Bankruptcy Court's Findings of Fact ("Findings"), at ¶ 5. BancOhio perfected its security interest on January 29, 1990. Findings, at ¶ 7. PSI regularly deposits into the Account all collections of accounts receivable and any sums generated by the sale of inventory. One of these deposits was a wire transfer in the amount of $209,459.00 from Dominica Export and Import Agency ("Dominica") on which BancOhio held a security interest. Findings, at ¶ 10.
Around May, 1990, Western Bulk time chartered2 the Morland to Meridian Ship, Inc. ("Meridian") at a rate of $10,650.00 per day. The time charter gave Western Bulk a "lien upon all cargoes, and all sub-freights for any amounts due under this Charter." See Time Charter, ¶ 18. Around May 10, 1990, Meridian subchartered space to PSI for a fixed rate of $43.00 per metric ton. Under the terms of the subcharter, Meridian agreed to transport for PSI 15,000 metric tons of soybean meal from a port in Louisiana to a port in Manila, Philippines and PSI paid "freight"3 to Meridian.
In August, 1990, Meridian filed for bankruptcy and failed to pay $1,304,029.21, the amount Western Bulk claims Meridian owed for unpaid time charter hire, fuel, and other charges. On July 20, 1990, Western Bulk gave formal notice to PSI that it intended to exercise its maritime lien on the subfreights due from PSI to Meridian, including demurrage4 in the amount of $610,672.57 earned in the course of discharging the cargo of soybean meal at Manila. PSI denied that it owed any demurrage to Meridian.
On April 2, 1991, Western Bulk activated its lien by requesting a writ of attachment pursuant to Rule B of the Supplemental Rules of Certain Admiralty and Maritime Claims ("Supplemental Rules") of the Federal Rules of Civil Procedure.5 The U.S. District Court for the Southern District of Ohio issued the attachment order, permitting Western Bulk to attach PSI's Account with BancOhio. The order served on BancOhio on April 3, 1991, froze $210,509.49 in the Account of which $209,459.00 constituted the wire transfer from Dominica.
On April 3, 1991, Western Bulk filed a verified in rem6 complaint in admiralty against the freights, including demurrage, of the Morland in the U.S. District Court for the Southern District of Indiana. Findings, at ¶ 16. Western Bulk instituted other attachment and quasi in rem suits in Ohio and Illinois, all of which were subsequently transferred to the Southern District of Indiana. After bankruptcy proceedings commenced on October 2, 1991, all suits were automatically stayed. By consent of the parties, all three admiralty suits, the in rem suit, and the Ohio and Illinois attachment suits were consolidated in the bankruptcy proceeding.
BancOhio moved for summary judgment on October 29, 1992, claiming that its security interest in the PSI funds in the Account was superior to any interest Western Bulk possessed. Western Bulk brought a cross-motion for the issuance of ancillary in rem process against the funds. On May 19, 1993, the bankruptcy court granted BancOhio's motion for summary judgment and denied Western Bulk's cross-motion for the issuance of ancillary in rem process against the funds. The bankruptcy court found that because none of the funds attached by Western Bulk were freights, subfreights or in any manner related to the Morland, Western Bulk did not possess a maritime lien superior to BancOhio's perfected security interest. Western Bulk now appeals the bankruptcy court's decision to this court.
The district judge is required to accept the bankruptcy judge's findings on questions of fact as long as they are not clearly erroneous. Matter of Tolona Pizza Products Corp., 3 F.3d 1029 (7th Cir.1993). Matter of Love, 957 F.2d 1350, 1354 (7th Cir.1992). Indeed, the reversal under the clearly erroneous standard is only warranted if "the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Id. (citing EEOC v. Sears, Roebuck & Co., 839 F.2d 302, 309 (7th Cir.1988)). We note, however, that the bankruptcy court's conclusions of law are subject to de novo review on appeal. Matter of Wiredyne, Inc., 3 F.3d 1125, 1126 (7th Cir.1993); Matter of Newman, 903 F.2d 1150, 1152 (7th Cir.1990).
The core question on appeal is whether Western Bulk has a maritime lien in PSI's funds on deposit in its Account with BancOhio or only an attachment interest as a lien creditor under Ohio Revised Statutes § 1309.20(C). If Western Bulk possesses a maritime lien on the deposited funds, its lien would have priority over all non-maritime claims, including BancOhio's perfected Uniform Commercial Code (UCC) security interest. See Matter of Topgallant Lines, Inc., 154 B.R. 368, 376, 1993 A.M.C. 2775 (S.D.Ga. 1993). If, however, Western Bulk does not have a maritime lien but only holds an attachment interest, BancOhio's perfected security interest would have priority.
The bankruptcy court held that Western Bulk's "claim is not a maritime lien because the property attached is not the freights or subfreights or in any way connected with the M/V Morland." Conclusions of Law ("Conclusions"), at ¶ 15. The court reasoned that because the Account consisted of funds almost exclusively derived from the wire transfer from Dominica Export and Import Agency, they were not freights or subfreights of the Morland and were not related to any subfreights. Conclusions, at ¶ 16. Moreover, the court noted that because only a U.S. District Court "setting (sic) in Admiralty with the custody of the res can execute a maritime lien, the attachment in Ohio is not an action to execute a maritime lien." Conclusions, at ¶ 18.
The leading treatise on admiralty law — Gilmore & Black, The Law of Admiralty (2d Ed.1975) ("Gilmore & Black") — has noted that a "maritime lien" has few, if any similarities to land liens in the common-law sense of the term. See Gilmore & Black, § 9-1, at 586. The authors give the following guidance regarding the scope of maritime liens:
Cases commenting on the nature of maritime liens give similar descriptions. For example, in Cardinal Shipping Corp. v. M/S Seisho Maru, 744 F.2d 461, 466 (5th Cir. 1984), the court found that a maritime lien
Similarly, in Itel Containers Intern. Corp. v. Atlanttrafik Exp. Service Ltd., 982 F.2d 765, 766, 1993 A.M.C. 609 (2d Cir.1992), the court stated that a maritime lien is:
a special...
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