Wong Shing v. M/V Mardina Trader, 74-3441

• Decision Date: 22 December 1977
• Docket Number: No. 74-3441,74-3441
• Citation: 564 F.2d 1183
• Parties: WONG SHING et al., Plaintiffs-Appellees, v. M/V MARDINA TRADER, her engines, etc., et al. Glenn R. HEYMAN, Receiver for the Estate of Mardina Lines, S.A., a Bankrupt, Plaintiff-Appellant, v. Clayburne A. McLELLAND, U. S. Marshal for the Canal Zone, et al., Defendants-Appellees. Astilleros ESPANOLES, Plaintiff-Appellant, v. The Monetary Proceeds from the Sales of the vessel M/V MARDINA TRADER, etc., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1183

564 F.2d 1183

WONG SHING et al., Plaintiffs-Appellees, v. M/V MARDINA TRADER, her engines, etc., et al.

Glenn R. HEYMAN, Receiver for the Estate of Mardina Lines, S.A., a Bankrupt, Plaintiff-Appellant, v. Clayburne A. McLELLAND, U. S. Marshal for the Canal Zone, et

al., Defendants-Appellees.

Astilleros ESPANOLES, Plaintiff-Appellant, v. The Monetary Proceeds from the Sales of the vessel M/V

MARDINA TRADER, etc., Defendant-Appellee.

No. 74-3441.

United States Court of Appeals, Fifth Circuit.

Dec. 22, 1977.

Rehearing Denied Jan. 18, 1978.

Bernard Wiczer, Chicago, Ill., for Spira S. Mardina.

Daniel D. Douglass, Balboa, Canal Zone, for Spira & Mardina Lines.

Jacob Rassner, Alan C. Rassner, New York City, for Astilleros Espanoles.

Engelbert J. Berger, Cristobal, Canal Zone, Walter Carroll, Jr., New Orleans, La., Glenn R. Heyman, Chicago, Ill., for Receiver of Mardina Lines.

Lester Engler, U. S. Atty., John B. McCormick, Asst. U. S. Atty., Balboa, Canal Zone, Carlos A. Arosemena, Panama 5 R.P. Panama, for Ship Management.

Roy P. Phillipps, Balboa, Canal Zone, for Shell Oil Co.

Henry L. Newell, Albert J. Joyce, Jr., Balboa, Canal Zone, for Dixie Machine, etc.

DeCastro & Robles, Balboa, Canal Zone, for C. B. Fenton.

Gerard T. Gelpi, Whitfield W. Fitzpatrick, New Orleans, La., for N. O. Cold Storage, et al.

Edward J. DeMartini, Kenner, La., for Dixie Machine.

Harry H. Allen, Jr., Michael C. Pierce, Balboa, Canal Zone, for J. Young & Co.

Appeals from the United States District Court for the District of the Canal Zone.

Before GOLDBERG and HILL, Circuit Judges, and KERR, District Judge. ^*

KERR, District Judge.

This is an appeal from an admiralty action resulting in the arrest and sale of a motor vessel, "Mardina Trader." The action was commenced in the United States District Court in the Canal Zone.

A chronological history is necessary to a clear understanding of the facts and law involved and are reviewed as follows:

On June 6, 1974, the Mardina Trader, registered in Hong Kong, was arrested and seized in the Canal Zone pursuant to an action in rem filed by various crew members for wages.

On the same date, Wong Shing and other seamen filed a complaint in rem in United States District Court, Balboa Division, against M/V Mardina Trader and Mardina Trader, Ltd., for seamen's wages due and owing them. Thereafter, a judgment was obtained under a writ of venditioni exponas, dated July 15, 1974 and the vessel was ordered to be sold July 30, 1974.

The Mardina Trader was owned by the Mardina Trader, Ltd., a Hong Kong corporation. The Mardina Trader, Ltd., is a wholly owned subsidiary of Mardina Lines, S. A., a Panama corporation, with its principle place of business in Chicago.

On July 13, 1974, Leonard M. Spira was appointed trustee and assignee for the benefit of creditors of Mardina Lines, S. A. On July 29, 1974, Spira alleges to have been first notified of the arrest and potential sale of the vessel. On the same date, Spira appeared before a United States District Judge for the Northern District of Illinois and requested that he be appointed as receiver in the action. On this same day, Spira obtained a temporary restraining order against the United States Marshal of the Canal Zone for the purpose of postponing the sale of the vessel.

On July 30, the Mardina Trader was ordered sold by the United States District Court for the Canal Zone in execution of the judgment previously obtained. Prior to the sale of the vessel, a motion to enforce the temporary restraining order previously obtained was presented to the District Court for the Canal Zone.

On the same date, the District Judge of the Canal Zone ordered the judicial sale to proceed and directed the United States Marshal to disregard the temporary restraining order. The vessel was sold on this date for the sum of $610,000.00 to one Robert Motto, a resident of the Republic of Panama.

On August 5, Spira drafted a petition and objection to the confirmation of the sale which was filed in the District Court for the Canal Zone on the same date.

On appeal, appellants urge:

(1) the entry of Default Judgment was without notice and violated the provisions of Federal Rule 5(b) and Rule 55(b)(2) of the Federal Rules of Civil Procedure;

(2) the Court improperly confirmed the sale of the vessel since the interested parties were not given an opportunity to cross-examine the United States Marshal who seized the vessel and conducted the sale;

(3) the Court erroneously denied the priority of a first ship's mortgage over that of other creditors and erroneously requested the first ship's mortgagee to guarantee the claims of lien holders who were junior to the mortgagee;

(4) the Court improperly disregarded the temporary restraining order issued by the District Court in Illinois;

(5) the District Court erroneously confirmed the sale of the vessel; and

(6) the proceedings at the District Court for the Canal Zone constituted an abuse of judicial discretion.

Each of these assignments of error will be discussed in the course of this opinion.

The appellants maintain that the M/V Mardina Trader was improperly arrested and sold without first attempting to make personal service upon or give notice to the owner or to the mortgagees, in violation of the Admiralty Rules of the Supreme Court of the United States, the provisions of 46 U.S.C. 951, and the Fifth Amendment of the Constitution.

This claim is not substantiated by the record. The arrest and sale of the Mardina Trader were proceedings in rem rather than in personam. In rem process is a peculiar feature of admiralty jurisdiction. It is begun by arresting the property which is the subject of the litigation, here the ship Mardina Trader. This arrest or seizure of the property gives the court jurisdiction. Rule C(4) Supplemental Rules, Federal Rules of Civil Procedure, provides for notice as follows:

No notice other than the execution of the process is required when the property that is the subject of the action has been released in accordance with Rule E(5). If the property is not released within 10 days after execution of process, the plaintiff shall promptly or within such time as may be allowed by the court cause public notice of the action and arrest to be given in a newspaper of general circulation in the district, designated by order of the court. Such notice shall specify the time within which the answer is required to be filed as provided by subdivision (6) of this rule. This rule does not affect the requirements of notice in actions to foreclose a preferred ship mortgage pursuant to the Act of June 5, 1920, ch. 250, § 30, as amended.

The record shows that, after arrest of the ship, notice of the action was published in two newspapers of general circulation in the district. In addition, it is shown that Mardina Lines, S. A., had actual knowledge that the vessel was under attachment on the 10th or 12th of June through Mr. Boas, Vice President and Secretary of the corporation. As to notice to the mortgagee, it has been held that every person claiming any right or title in a vessel is charged with constructive notice of its seizure when notice is properly served upon the vessel itself. Loud v. United States, 286 F. 56, 60 (6 Cir. 1923).

"The in rem process of the Admiralty Court is based upon the presumption that the fact of seizure of a vessel alone will result in prompt, actual notice to all interested parties, without the necessity of formal personal notice." The Mary, 9 Cranch (13 U.S.) 126, 3 L.Ed. 678 (1815); United States v. Steel Tank Barge H 1651, 272 F.Supp. 658 (D.C.1967).

The arguments of the appellants based upon 46 U.S.C. 951 are inapplicable. That section provides for notice in actions to foreclose a ship's mortgage. That is not the case here. The libel filed against the Mardina Trader was for unpaid wages.

Since the notice was sufficient and given in the manner required by law, the appellants' Fifth Amendment due process argument is also without merit.

The appellants also assert error in the entry of default and judgment without notice as required by Rule 5(b) and 55(b)(2) of the Federal Rules of Civil Procedure. They maintain that counsel appeared on August 5, 1974 and filed an objection to the confirmation of sale and a motion to set aside the sale of the Mardina Trader. In open Court, counsel for the owners requested leave of Court to vacate all default judgments and permit the filing of answers and schedule a hearing on the merits. This request was refused.

The record shows that judgment was obtained in this matter under a writ of venditioni exponas dated July 15, 1974. Counsel did not enter its appearance until August 5, 1974. Alleged violation of 5(b) and 55(b)(2) are obviously without merit. Under the provisions of Rule 5 in an action begun by seizure of property, in which no person need be or is named as defendant, any service made prior to appearance shall be made upon the person having custody of the property at the time of seizure. Since the default judgments were entered prior to any appearance by the appellants, no notice to appellants' counsel was required.

The appellants' next contention is that they were not given an opportunity to cross-examine the U. S. Marshal who seized the vessel and conducted the sale. At the confirmation hearing, a deputy Marshal did testify and was cross-examined by the appellants. His testimony, plus that of several other witnesses, was adequate to support the Judge's decision to confirm the sale. If the appellants desire to conduct a fishing expedition in search of possible evidence of possible fraud, collusion or misconduct, they should not look to the Court for assistance. Where no iota of evidence exists to suggest such improprieties may have occurred, the Court is under no duty to affirmatively show that such was in fact the case. There was no error in the Court's refusal to call the U. S. Marshal to the witness stand.

During the...