Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-02952/USCOURTS-cand-3_07-cv-02952-2/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1345 Foreclosure

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United States District Court

For the Northern District of California

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`

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

DEL MAR SEAFOODS INC.,

Plaintiff,

 v.

BARRY COHEN, CHRIS COHEN (aka

CHRISTINE COHEN), in personam and, F/V

POINT LOMA, Official Number 515298, a

1968 steel-hulled, 126-gross ton, 70.8 foot long

fishing vessel, her engines, tackle, furniture

apparel, etc., in rem, and Does 1-10,

Defendants. /

No. C 07-02952 WHA

ORDER GRANTING MOTION TO

VACATE ORDER OF ARREST

INTRODUCTION

In this maritime action for breach of a promissory note, defendants move to vacate an

order of arrest pursuant to Rule E(4)(f) of the Supplementary Admiralty Rules. Plaintiff has

failed to establish probable cause for the order of arrest. Accordingly, defendants’ motion to

vacate the order of arrest is GRANTED. 

STATEMENT

Plaintiff Del Mar Seafoods is a California corporation that owns fishing vessels and runs

fish processing plants. Defendants Barry Cohen and Chris Cohen are individuals, married to

one another, who reside in this district. At all relevant times, the Cohens represented that they

Case 3:07-cv-02952-WHA Document 57 Filed 08/17/07 Page 1 of 7
United States District Court

For the Northern District of California

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were the owners of defendant Vessel, the F/V POINT LOMA (Compl. ¶¶ 4–7; Cappuccio Decl.

¶ 4). 

In 1999, plaintiff and defendant Barry Cohen formed a joint venture for the purpose of

buying, processing, and selling fish from a site that Barry Cohen leased in Avila Beach,

California. Plaintiff advanced funds to Cohen as part of this venture. In 2003, following

plaintiff’s decision not to continue with the partnership, plaintiff and defendants entered into a

promissory note secured by a ship mortgage. In the note, the parties agreed on a schedule for

defendants’ repayment of the amount that had been advanced by plaintiff. Specifically,

defendants agreed to pay the following:

[T]he sum of two hundred fifteen thousand ($215,000) dollars at

the rate of seven (7) percent per annum as follows:

Monthly payments of $3,000.00 or fifteen (15) percent of the

gross landing receipts of each and every landing of seafood

product made by the fishing vessel POINT LOMA, whichever is

greater, commencing on January ’04 and on the 15th day of each

succeeding month until principal and interest are fully paid. 

Payments are to be applied to interest first.

(Cappuccio Decl. ¶¶ 8–11, Exh. A at 1; Cohen Decl. ¶¶ 4–5).

Plaintiff maintains that the total principal amount owed under the note increased to

$295,429.53 by November 2004. The principal amount allegedly increased from $215,000 due

to additional amounts owed by Cohen’s sons, fuel advances, and additional information on the

original amount owed pursuant to an audit. Plaintiff contends that Barry Cohen agreed to

include these additional amounts with the amount owed under the note and mortgage. 

Defendants deny such an agreement (Cappuccio Decl. ¶¶ 18–22; Cohen Decl. ¶ 12). 

Between November 2004 and November 2005, plaintiff alleges that defendants paid a

total of $7,474.75 on the note, all of which was applied to the accrued interest rather than to the

principal. During this period, defendants point to only one payment of $5000, paid in

December 2004 (Cappuccio Decl. ¶¶ 22–23; Cohen Decl. ¶ 11). Defendants then paid $175,000

in November 2005. Defendants made additional payments in January, February, and March of

2007 for a total of $8000. 

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United States District Court

For the Northern District of California

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There is significant dispute between the parties as to the effect of the $175,000 payment

in November 2005. Plaintiff maintains that this amount was credited first against the accrued

interest of $30,359.83 and then $145,940.17 was applied against the principal amount following

an inventory credit of $1300. Plaintiff alleges that the principal balance was then $149,489.36. 

Defendants allege that the $175,000 settled payments that were overdue at that point and

constituted a prepayment of monthly payments due under the note. In exchange for the advance

payment, defendants contend that plaintiff agreed to make the loan interest-free. Plaintiff

disputes agreeing to an interest-free loan (Cappuccio Decl. ¶¶ 26– 28; Cohen Decl. ¶¶ 11–13). 

The parties also disagree whether the value of the principal ever changed. Following the

$175,000 payment, plaintiff maintains that $30,095.01 was added to the principal on the note

due to advances to defendants as well as to cover attorney’s fees in separate litigation. 

Defendants maintain that the principal owed under the loan did not increase above the original

$215,000. 

The parties also dispute the effect of the $8000 paid during January, February, and

March of 2007. Plaintiff maintains that these payments were applied to interest only. After

these payments, plaintiff contends that the total amount owed on the note as of June 14, 2007,

was $189,374.54, including $9,790.17 in accrued interest. Plaintiff thus alleges that defendants

continued to owe monthly payments and were in default for failure to make those payments. 

Defendants maintain that because there was no interest on the loan, and the principal amount

never increased above $215,000, the amount owed as of June 14 was $27,000, which meant

they were current on the note through February 2009 (Cappuccio Decl. ¶¶ 36–38; Cohen Decl.

¶¶ 14–15).

Plaintiff believes that defendants are in default. As a result of the alleged default,

plaintiff filed an ex parte application for arrest of the vessel on June 6, 2007. A warrant of

arrest was issued for the vessel on June 7, 2007, and the vessel was arrested by a United States

Marshal. This motion to vacate the order of arrest due to lack of subject-matter jurisdiction and

lack of probable cause for the order of arrest was filed on July 9, 2007. 

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United States District Court

For the Northern District of California

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ANALYSIS

1. LACK OF SUBJECT-MATTER JURISDICTION.

Defendants allege that this Court does not have subject-matter jurisdiction over the case

under maritime law. Defendants maintain that because, in their view, there was no breach of

the promissory note, plaintiff has no maritime cause of action and thus no basis for the order of

arrest. Defendants’ contention is without merit. “Article III, § 2, cl.3 of the United States

Constitution extends the judicial power of the federal sovereign to ‘all cases of admiralty and

maritime jurisdiction.’” World Tanker Carriers Corp. v. M/V Ya Mawlayav, 99 F.3d 717, 722

(5th Cir. 1997). Under 28 U.S.C. 1333, federal courts have authority over civil admiralty

disputes, “regardless of the existence of a federal statute creating the maritime right, diversity of

citizenship, or the minimum amount in controversy.” Id. at 723. At issue here is the ship’s

mortgage, which is a maritime contract over which the district courts of the United States have

original jurisdiction. Accordingly, this Court does have subject-matter jurisdiction.

2. PROBABLE CAUSE FOR ARREST.

Defendants contend that the order of arrest was improperly issued pursuant to Rule

E(4)(f), which states as follows:

Whenever property is arrested or attached, any person claiming an

interest in it shall be entitled to a prompt hearing at which the

plaintiff shall be required to show why the arrest or attachment

should not be vacated or other relief granted consistent with these

rules.

The purpose of this hearing is not “to resolve definitively the dispute between the parties, but

only to make a preliminary determination whether there were reasonable grounds for issuing the

arrest warrant.” Lion de Mer v. M/V Loretta V, 1998 WL 307077 at *2 (D. Md. Apr. 3, 1998)

(Legg, J.). “At this stage in the proceedings, plaintiff merely needs to show ‘probable cause’

for the issuance of the warrant and writ.” Continental v. Adriatic Tankers Shipping Co., 1995

WL 649942 (E.D. La. 1995) (McNamara, J.); see also Greger Leasing Corp. v. Barge PT.

Potrero, 2006 WL 889537, at *1 (N.D. Cal. Apr. 5, 2006) (Conti, J.). This “probable cause”

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requirement “translates roughly to requiring that plaintiff show entitlement to a maritime lien.”

Newport News Shipbuilding and Dry Dock Co. v. S.S. Independence, 872 F. Supp. 262, 265

(E.D.Va.1994) (Doumar, J.). 

A number of factual disputes exist, such as whether the principal amount owed pursuant

to the note increased above the original $215,000 and whether plaintiff agreed to an interestfree loan as a result of the $175,000 payment in November 2005. The purpose of a Rule E(4)(f)

hearing, however, is not to resolve these factual disputes, but rather to assess whether plaintiff’s

showing rises to the level of probable cause.

Plaintiff has failed to meet its burden of establishing probable cause because there is not

sufficient evidence that defendants were in default at the time the order of arrest was issued. 

Under the note, defendants were to make monthly payments of the greater of “$3,000.00 or

fifteen (15) percent of the gross landing receipts” (Cappuccio Decl. Exh. A). From January

2004 through May 15, 2007, the last payment date prior to the order of arrest, 41 monthly

payments should have been made on the note. At a rate of $3000 per month, defendants should

have paid a total of $123,000. From the time the promissory note went into effect in January

2004 until the time the boat was seized in June 2007, it is undisputed that defendants paid at

least $188,000 to plaintiff. It is true that most of this amount — $175,000 — was paid in a

lump sum in November 2005. But paying via lump sum prepayment rather than by monthly

payments does not mean defendants are in default.

Plaintiff fails to demonstrate that defendant at any point owed more than $3000 per

month. Plaintiff makes no assertion that more is owed, for example, due to fifteen percent of

gross landing receipts being greater than the $3000 for any month. Even if additional amounts

were due because of other advances or interest, the promissory note has no provision indicating

that payments would ever exceed the $3000 or fifteen percent. Rather, the note indicates that

the payments are to continue according to the payment schedule “until principal and interest are

fully paid” (ibid.). 

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Plaintiff also fails to show that defendants were behind on the payment schedule at the

time of the arrest or that they were obligated to make monthly payments when defendants’

payments were actually ahead of schedule. Plaintiff asserts that the $175,000 payment was

applied first to interest and then $145,940.17 of it was applied to reduce the principal balance

on the note (Cappuccio Decl. ¶ 28). Even if only this $145,940.17 had been paid toward the

note at the time of the order of arrest, this is more than would have been due at that time under a

$3000 per month payment schedule. Plaintiff’s mere assertion that monthly payments were still

owed at that point is not sufficient to establish probable cause. Defendants allege that they

understood the payment to be an advance on future payments. Common sense also suggests

that if a debtor pays more than is owed on a payment schedule, monthly payments should not be

required until there is no longer an excess.

Plaintiff has not presented any evidence that defendants owed more than $3000 per

month pursuant to the note. They have also failed to establish that defendants were behind on

that $3000 per month schedule or that they were obligated to make payments ahead of schedule. 

Accordingly, while factual disputes remain, this order finds that plaintiff has not met its burden

of showing probable cause for the order of arrest. This order is without prejudice to plaintiff

proving its case at trial or on summary judgment.

CONCLUSION

For all of the above-stated reasons, defendants’ motion to vacate the order of arrest is

GRANTED. Defendants are ORDERED not to sell, pledge, hypothecate, diminish the value of, or

take the vessel outside the jurisdiction. Defendants must also keep the vessel fully insured. 

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United States District Court

For the Northern District of California

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Defendants’ counsel agreed to these conditions at the hearing. Mr. Cohen was also present at

the hearing and agreed to these conditions.

IT IS SO ORDERED.

Dated: August 16, 2007. 

WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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