92-1530, 92-2133 | 1st Cir. | Dec 23, 1992
USCA1 Opinion
December 23, 1992
United States Court of Appeals
United States Court of Appeals
For the First Circuit
For the First Circuit
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No. 92-1530
TAINO LINES, INC.,
Plaintiffs, Appellees,
v.
M/V CONSTANCE PAN ATLANTIC,
ITS ENGINES, TACKLE, EQUIPMENT, ETC. ET. AL.,
Defendants, Appellees.
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CURTIS SHIPPING, INC.,
Defendant, Appellant.
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No. 92-2133
TAINO LINES, INC.,
Plaintiffs, Appellees,
v.
M/V CONSTANCE PAN ATLANTIC,
ITS ENGINES, TACKLE, EQUIPMENT, ETC. ET. AL.,
Defendants, Appellees.
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CURTIS SHIPPING, INC., ET. AL.,
Defendant, Appellant.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Carmen C. Cerezo, U.S. District Judge]
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Before
Torruella and Stahl, Circuit Judges,
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and Skinner,* Senior District Judge.
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Harry A. Ezratty for appellant.
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Juan A. Lopez-Conway, with whom Herbert W. Brown, III and
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Calvesbert & Brown, were on brief for appellees.
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*Of the District of Massachusetts, sitting by designation.
STAHL, Circuit Judge. In this appeal, defendant-
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appellant Curtis Shipping, Inc. ("Curtis") challenges the
district court's award, without a hearing, of full custodia
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legis expenses to plaintiff-appellee Taino Lines, Inc.
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("Taino") for certain expenditures made by Taino as
substitute custodian of defendant in rem the M/V Constance
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Pan Atlantic ("the vessel"). Finding no error in the
district court's ruling, we affirm.
I.
I.
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BACKGROUND
BACKGROUND
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Because the weakness of Curtis's arguments becomes
more apparent with a fuller understanding of the convoluted
history of this litigation, we set forth the relevant
background in some detail. This action began August 15,
1990, when Taino filed a verified complaint in admiralty
against the vessel in rem and against Curtis, Robert Brewis,
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and Connie Frazier in personas.1 The complaint alleged that
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Curtis, the owner of the vessel, breached a 1989 Bareboat
Charterparty Agreement ("the Agreement") under which Taino
had chartered the vessel to carry cargo between the Port of
Mayaguez, Puerto Rico, and certain ports in the Dominican
Republic. The complaint further requested the entry of
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1. According to the complaint, Curtis is an alter ego of
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Robert Brewis and Connie Frazier. Neither Brewis nor Frazier
is a party to this appeal.
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judgment and/or the confirmation of an arbitration award2 in
an amount exceeding $269,000 to cover Taino's damages.3
Finally, the complaint prayed that the vessel, as defendant
in rem, "be compelled to act as security to the arbitration
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in Miami." To that end, the complaint asked the court to
issue a warrant for the vessel's arrest. See 9 U.S.C. 8
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(1970).4
After reviewing Taino's verified complaint,
Magistrate Judge Castellanos issued an order directing that
the vessel be arrested. See Rule C(3) of the Supplemental
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Rules for Certain Admiralty and Maritime Claims
("Supplemental Rules").5 He also appointed Taino substitute
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2. The Agreement provided that any dispute between Curtis
and Taino would be settled by arbitration in Miami, Florida.
3. The complaint subsequently was amended to request damages
in excess of $910,000.
4. 9 U.S.C. 8 governs proceedings begun by libel in
admiralty and seizure of a vessel or property. It provides:
If the basis of jurisdiction be a cause of action
otherwise justiciable in admiralty, then,
notwithstanding anything herein to the contrary,
the party claiming to be aggrieved may begin his
proceeding hereunder by libel and seizure of the
vessel or other property of the other party
according to the usual course of admiralty
proceedings, and the court shall then have
jurisdiction to direct the parties to proceed with
the arbitration and shall retain jurisdiction to
enter its decree upon the award.
5. Rule C of the Supplemental Rules governs actions in rem.
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In relevant part, the version of Rule C(3) in effect at the
time Taino filed its complaint provided:
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custodian of the vessel. On August 27, 1990, after
conducting a post-arrest hearing, Magistrate Judge
Castellanos ordered defendants to post security in the amount
of $350,000 in order to obtain the release of the vessel.
See generally Supplemental Rule E(5) (governing the posting
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of bonds to release property that has been arrested in rem).
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The order specifically stated: "The release of the vessel
should be undertaken upon posting of [$350,000] within the
next ten (10) days or[,] upon request of [the] aggrieved
party[,] the sale of the arrested vessel shall be ordered."
Defendants never posted the security.
On September 5, 1990, both the in rem defendant
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vessel and defendants Brewis and Frazier requested a stay of
the proceedings until the parties' dispute had proceeded to
arbitration. On September 10, 1990, Taino objected to the
request for a stay on the grounds that no security had been
posted, and moved for the interlocutory sale of the vessel.
On September 24, 1990, the district court issued an order
notifying defendants that Taino's motion for an interlocutory
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[T]he verified complaint and any supporting papers
shall be reviewed by the court and, if the
conditions for an action in rem appear to exist, an
order so stating and authorizing a warrant for the
arrest of the vessel or other property that is the
subject of the action shall issue and be delivered
to the clerk who shall prepare the warrant and
deliver it to the marshal for service. . . .
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sale of the vessel would be granted unless security were
posted within three days. On September 25, 1990, Curtis
filed a notice of stay advising the court that it had filed a
Chapter 11 petition for bankruptcy in the United States
Bankruptcy Court for the District of Maryland and invoking
the automatic stay of 11 U.S.C. 362 (1979 & Supp. 1992).
Attached to the notice of stay was a proposed order which
apparently contained language directing that the arrest of
the vessel be dissolved.6 Evidently, the proposed order
never was noticed to or served upon Taino.7
For several months, the parties skirmished in both
the district court and in bankruptcy court over numerous
issues, i.e., whether the interlocutory sale should proceed
despite the automatic stay of 11 U.S.C. 362, whether the in
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rem action should be stayed, and whether Curtis's filing of
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the Chapter 11 petition was sufficient for Curtis to obtain
the release of the vessel even where it had not posted
security. Finally, on February 5, 1991, the bankruptcy court
issued an order which (1) enjoined Taino from selling the
vessel; (2) directed Taino to turn the vessel over to Curtis
"upon the posting by [Curtis] of a bond in favor of Taino . .
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6. The notice of stay contained no such language.
7. Indeed, it appears that Taino only became aware that
Curtis was seeking dissolution of the vessel's arrest when
the court so notified it in a margin order entered on
Curtis's notice of stay.
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. in the amount of $350,000.00, or such lower amount or none
as may be established in equity by the United States District
Court for the District of Puerto Rico . . ."; (3) enjoined
Taino "from continuing the civil action pending in the United
States District Court for the District of Puerto Rico"; and
(4) modified the automatic stay so that Curtis could both
petition the district court to have its bond lowered and/or
changed in nature and request that Taino "post a bond for
damages which [Curtis] alleges it has suffered[.]"8
Although the record is not clear on exactly when,
sometime in February 1991, Curtis filed with the district
court a motion to compel Taino to arbitrate.9 Taino opposed
the motion, arguing (1) that it should not be forced to
arbitration without obtaining security from Curtis, and (2)
that, in light of the bankruptcy court's February 5, 1991,
order, Curtis should be directed to seek relief before the
bankruptcy court and not the district court. The district
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8. Although not a part of the district court record, we take
judicial notice of the proceedings before the bankruptcy
court per the request of Curtis. See Fed. R. Evid. 201(d).
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9. The copy of the motion in Curtis's appendix is dated
February 13, 1991. The motion itself is not, however, date-
stamped. Nor does the district court docket sheet indicate
that any such motion was filed on February 13, 1991. Rather,
the docket sheet reflects that the motion was filed on
February 25, 1991.
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court did not respond specifically to Curtis's motion,10
and on March 15, 1991, Curtis filed a second motion seeking
to compel Taino to proceed to arbitration. Again Taino
opposed, arguing that the bankruptcy court was the forum in
which Curtis should be pressing its argument. On April 16,
1991, the district court denied Curtis's motion.
Meanwhile, on April 11, 1991, Taino had moved
before the district court for the interim approval of the
fees and expenses it had thus far incurred in its role as
custodia legis of the vessel. Curtis opposed the motion,
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arguing that the automatic stay of 11 U.S.C. 362 prohibited
such approval. On May 10, 1991, the court denied Taino's
motion.11
On May 7, 1991, after considering the parties'
arguments on the question of whether Taino could be compelled
to arbitration where Curtis had not yet posted security, the
bankruptcy court ordered the parties to proceed to
arbitration. Arbitration commenced on May 30, 1991. On June
19, 1991, the arbitrators found for Taino in the amount of
$144,206 plus prejudgment interest, taxable costs, and the
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10. On February 27, 1991, the district court did, however,
issue an order staying the action before it, stating that the
arrest of the vessel would remain in effect until either
Curtis posted security or the bankruptcy court "vacates the
automatic stay of this action, avoid[s] the liens, or
otherwise act[s] according to its jurisdiction."
11. The basis of the district court's denial is not made
clear by the record.
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arbitrators' fees. On July 5, 1991, Taino requested that the
district court confirm the arbitration award. The court
confirmed the arbitrator's award on July 29, 1992.
Though nothing in the record documents such fact,
Taino represents that, on August 31, 1991, the bankruptcy
court lifted the automatic stay and permitted Taino to move
for the interlocutory sale of the vessel. On September 3,
1991, Taino so moved before the district court, and
simultaneously moved for taxation of its custodia legis
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expenses. On September 19, 1991, the district court ordered
the interlocutory sale of the vessel. The district court
confirmed the sale of the vessel on November 15, 1991.
Pursuant to court order, proceeds from the sale, in the
amount of $331,887, were subsequently placed in an interest
bearing savings account.
Needless to say, the parties were unable to
successfully determine the amount to which Taino was entitled
as custodia legis. Thus, the district court directed that
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the parties file legal memoranda on the issue. The parties
complied with the district court's request, and presented the
court with yet another volley of motions and replies. On
March 30, 1992, after considering the documentation before
it, the court, without a hearing, granted Taino's motion for
taxation of costs in the amount of $220,438.52, the full
amount requested. This appeal followed.
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II.
II.
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DISCUSSION
DISCUSSION
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On appeal, Curtis does not dispute either the
confirmation of the arbitrators' award or that Taino is
entitled to some custodia legis expenses. Rather, Curtis
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argues: (1) that the district court erred in refusing to
exercise its equitable powers to deny Taino those custodia
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legis expenses which accrued during that period when it
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unreasonably and unjustly refused to submit to arbitration,
and (2) that the district court erred in foregoing a hearing
on Curtis's challenge to certain of the custodia legis costs.
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Both of Curtis's arguments are singularly without merit.
A. The Court's Refusal To Award Equitable Relief
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As noted above, Curtis argues that the district
court erred in declining to award Taino less than its full
custodia legis expenses. More specifically, Curtis asserts
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that the district court was obliged to exercise its equitable
powers and to reduce its custodia legis award to Taino by
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some unspecified sum in order to prevent Taino from being
unjustly enriched by its obstructionist behavior in refusing
to proceed to arbitration until May 1991. We disagree.
It has long been settled that "[e]quity is no
stranger in admiralty; admiralty courts are, indeed,
authorized to grant equitable relief." Vaughan v. Atkinson,
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369 U.S. 527, 530 (1962); see also Pino v. Protection
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Maritime Ins. Co., Ltd., 599 F.2d 10, 15 (1st Cir.), cert.
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denied, 444 U.S. 900" date_filed="1979-10-09" court="SCOTUS" case_name="Lamb v. Brown">444 U.S. 900 (1979). Of course, a court's decision
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on whether or not to exercise its equitable powers is
committed to its sound discretion. See Roland M. v. Concord
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Sch. Comm., 910 F.2d 983" date_filed="1990-09-14" court="1st Cir." case_name="Roland M. And Miriam M. v. The Concord School Committee">910 F.2d 983, 999 (1st Cir. 1990), cert. denied,
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111 S. Ct. 1122 (1991); see also Reyes v. Supervisor of Drug
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Enforcement Admin., 834 F.2d 1093" date_filed="1987-12-08" court="1st Cir." case_name="Tomas Reyes v. The Supervisor of the Drug Enforcement Administration">834 F.2d 1093, 1098-99 (1st Cir. 1987).
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Therefore, we review such a decision only for abuse of
discretion. See, e.g., Ferrofluidics v. Advanced Vacuum
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Components, Inc., 968 F.2d 1463, 1471 (1st Cir. 1992);
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Hiraldo-Cancel v. Aponte, 925 F.2d 10" date_filed="1991-02-04" court="1st Cir." case_name="Norma Iris Hiraldo-Cancel v. Jose E. Aponte, Etc.">925 F.2d 10, 13 (1st Cir.), cert.
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denied, 112 S. Ct. 637 (1991); see also Kingstate Oil v. M/V
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Green Star, 815 F.2d 918" date_filed="1987-05-06" court="3rd Cir." case_name="In The Matter of Kingstate Oil v. M/V Green Star. (Two Cases) Drew Ameroid International Corp.">815 F.2d 918, 922 (3rd Cir. 1987) (decision on
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whether to allow application for custodia legis expenses
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reviewed for abuse of discretion).
Here, Curtis's argument that the district court
abused its discretion in refusing to reduce Taino's custodia
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legis award strains credulity. The record amply reflects
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that Taino was prepared to proceed to arbitration as soon as
Curtis posted security. Despite the bankruptcy court's
eventual ruling to the contrary,12 it appears to us that
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12. We do not, of course, express an opinion on whether the
bankruptcy court was correct in compelling Taino to proceed
to arbitration despite the fact that Curtis had not yet
posted security.
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Taino's position was neither frivolous nor taken in bad
faith.13 Furthermore, when the bankruptcy court seemingly
rejected Taino's argument by ordering it to proceed to
arbitration in May 1991, Taino promptly complied with the
bankruptcy court's order.
More importantly, however, the record
overwhelmingly indicates that Curtis is at least as
responsible as Taino for the length of time that the vessel
was under arrest. It was Curtis who never posted security to
release the vessel in the manner provided for in the
Supplemental Rules. Moreover, it was Curtis who filed a
Chapter 11 petition in order to prevent the vessel from being
sold in September 1990, and then alternated between defensive
invocations of the automatic stay of 11 U.S.C. 362 and
affirmative attempts both to release the vessel from arrest
and to compel Taino to proceed to arbitration. In light of
these facts, Curtis's lamentations about the length of time
between the seizure of the vessel and its eventual sale can
most charitably be described as unpersuasive.
In sum, we find that the district court acted well
within its discretion in refusing to exercise its equitable
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13. Taino argues that Congress's use of the word "then" in 9
U.S.C. 8, see supra note 4, evinces an intent that courts
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should not direct parties to proceed with arbitration until
such time as bond is posted since the posting of bond occurs
during "the usual course" of an admiralty arrest. Regardless
of whether Taino's position is correct, it strikes us that it
is based upon at least a plausible reading of the statute.
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powers to reduce Taino's custodia legis award. Accordingly,
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we affirm the district court's ruling awarding Taino its full
custodia legis expenses.
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B. The Court's Refusal To Hold A Hearing
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Curtis also contends that the district court erred
in failing to hold a hearing on its challenges to certain
custodia legis costs.14 This contention does not warrant
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extended discussion.
In support of its position, Curtis advances one
general argument and one piece of evidence. Curtis asserts
that Alejandro Ortiz Cardona, who acted as custodian of the
vessel on behalf of Taino, could not have made cash outlays
of $172,610.97 over fifteen months since he, as owner of an
auto repair shop, could not have access to that much
cash.15 Curtis also submits the affidavit of Benjamin B.
Gifter as evidence that the custodial care delineated by
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14. Curtis neither argues nor points us to any authority
suggesting that a hearing is always necessary before a court
can award custodia legis expenses. Accordingly, we construe
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Curtis's argument as being that the court's failure to hold a
hearing in this instance was an abuse of its discretion.
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15. We note that in support of his claimed custodial
expenses, Ortiz Cardona submitted to the court both copies of
cash receipts and a sworn statement that the expenses at
issue were "necessarily incurred in the custody of the vessel
and the services for which the fees have been charged were
actually and necessarily performed."
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Taino in its expense submissions to the district court was
not really provided.16
Simply put, Curtis's argument and evidence are far
from sufficient for us to find that the district court abused
its discretion in failing to hold the requested hearing.
Curtis has submitted no evidence supporting its blanket
assertion about Ortiz Cardona's alleged lack of access to
cash. Nor has it specifically called into question the
veracity of any of Ortiz Cardona's supporting
documentation.17 The Gifter affidavit tends to establish
nothing other than the fact that on three occasions during a
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16. Gifter is a rabbi who, while in Mayaguez "supervising
special Kosher productions at the Star Kist Tuna plant," had
occasion to visit the area where the vessel was docked during
the period of its arrest. Gifter asserts that during three
visits to the dock area, he did not observe any guards on
board the vessel. Gifter further states that on two
subsequent visits, he observed a male person sleeping on a
hammock on board the vessel.
17. In fact, the only specific item challenged by Curtis is
a claim for 12% interest on cash outlays made by Ortiz
Cardona in his sworn statement. Curtis argues that the 12%
interest figure is outrageously high.
Curtis's challenge to the interest claimed by Ortiz
Cardona does not alter our conclusion that the district court
was not required to hold a hearing. First of all, this
argument was not made before the district court. Therefore,
Curtis is precluded from making it here. See, e.g., Federal
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Deposit Ins. Corp. v. World Univ., No. 92-1389, slip op. at 5
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(1st Cir. Oct. 22, 1992) (arguments ordinarily cannot be made
for the first time on appeal) (citations omitted). Moreover,
even if the argument were not procedurally defaulted, it is
apparent that it lacks substantive merit. The record
reflects that, in the end, Taino never submitted to the
district court Ortiz Cardona's request for 12% interest in
its final claim for custodia legis expenses.
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fifteen month period, no person was on the vessel's deck and
thus visible from the dock area. Obviously, the district
court acted well within its discretion in viewing such fact,
even if accepted, as insufficient to call into question
whether Taino actually provided the custodial care claimed in
its expense submissions.
In light of the foregoing, we conclude that the
district court did not abuse its discretion in failing to
hold a hearing on Curtis's challenge to certain custodia
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legis expenses claimed by Taino.
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III.
III.
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CONCLUSION
CONCLUSION
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Because we find that Curtis's arguments are without
merit, we affirm the judgment of the district court.
Affirmed. Costs to appellee.
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