Court Opinion

ID: 2162
Source: CourtListenerOpinion
Date Created: 2010-04-22 00:00:20+00
Date Added: 2024-06-11T16:42:10.715156
License: Public Domain

NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                                ____________

                              Nos. 09-2314 and 09-2399
                                   ____________

                            GOLDFISH SHIPPING, S.A.,

                                          Appellant No. 09-2314
                                           v.

                               HSH NORDBANK AG

                                         Appellant No. 09-2399
                                    ____________

                    On Appeal from the United States District Court
                       for the Eastern District of Pennsylvania
                               (D.C. No. 2-07-cv-03518)
                      District Judge: Honorable John R. Padova
                                    ____________

                   Submitted Pursuant to Third Circuit LAR 34.1(a)
                                   April 12, 2010

             Before: FISHER, HARDIMAN and COWEN, Circuit Judges.

                                (Filed: April 21, 2010)
                                    ____________

                             OPINION OF THE COURT
                                  ____________

FISHER, Circuit Judge.

      Goldfish Shipping, S.A. (“Goldfish”) appeals from an order of the District Court

granting HSH Nordbank AG’s (“Nordbank”) motion to dismiss for failure to state a claim
upon which relief may be granted under Federal Rule of Civil Procedure 12(b)(6) and an

order rejecting Goldfish’s Motion to file a Second Amended Complaint. Nordbank cross-

appeals the District Court’s order denying attorney’s fees to Nordbank. For the reasons

stated herein, we will affirm the District Court in full.

                                               I.

       We write exclusively for the parties, who are familiar with the factual context and

legal history of the case. Therefore, we will set forth only those facts necessary to our

analysis.

       Nordbank held a first mortgage on the M/V AHMETBEY (“the vessel”) at the

time it arrived in the Port of Philadelphia. The mortgagor was Odin Denizcilik, A.S.

(“Odin”), a Turkish corporation. The vessel flew the Turkish flag and appeared on the

Turkish Registry of Shipping (“Turkish Registry”), with Odin listed as the owner.

       On June 6, 2003, Nordbank initiated foreclosure proceedings on the vessel in the

United States District Court for the Eastern District of Pennsylvania alleging default on

the part of Odin. Nordbank had the United States Marshal arrest the vessel in the Port of

Philadelphia pursuant to the Commercial Instruments and Maritime Lien Act, 46 U.S.C.

§ 31325 (“Ship Mortgage Act”). Odin entered a restricted appearance with the District

Court to defend its interest. The Court ultimately found in favor of Nordbank and ordered

that the vessel be sold to satisfy the mortgage. A judicial sale was held with Goldfish

emerging as the winning bidder. On November 14, 2003, the District Court confirmed

                                               2
the sale of the vessel in accordance with the Ship Mortgage Act and ordered that the

United States Marshal transfer title to the vessel to Goldfish free and clear of all claims,

liens, or encumbrances.

       After the District Court’s disposition in the foreclosure proceeding, the vessel

remained on the Turkish Registry, with Odin listed as its owner. Odin contacted both

Nordbank and Goldfish to inform them that it would continue to fight for ownership of

the vessel. Odin had the vessel arrested in Barcelona, Spain, alleging that the sale in

Philadelphia was illegal under Turkish law. Goldfish alleges a loss of $581,048.34 as a

result of this incident. Goldfish subsequently began an action against Odin for wrongful

arrest by attaching the prior sale proceeds, which were being held by the United States

Marshal. Pursuant to a consent order between Nordbank and Goldfish, Goldfish

recovered $327,546.82 from the sale proceeds. Odin again caused the vessel to be

arrested on June 4, 2004, in Ravenna, Italy. Goldfish alleges that it incurred losses of

$507,369.00 due to this arrest.

       Goldfish argues that the arrests were the direct result of the fact that Nordbank did

not effect the deletion of the vessel from the Turkish Registry under Article 851 of the

Turkish Commercial Code. Goldfish requested that Nordbank provide consent to the

deletion, and Nordbank sent an April 30, 2004 letter to the Turkish Registry consenting to

the deletion from the Turkish Registry, but asserting the continued existence of its

mortgage.

                                              3
       Goldfish subsequently filed suit against Nordbank in the District Court for Eastern

District of Pennsylvania. Goldfish’s First Amended Complaint asserted nine claims and

reflected Goldfish’s argument that Nordbank should be held liable for failing to deliver

the vessel “free and clear of all liens and encumbrances” because it did not successfully

delete the vessel from the Turkish Registry.

       The District Court granted Nordbank’s Motion to Dismiss, but denied its request

for attorney’s fees from Goldfish. Goldfish then filed a Motion to Amend the Judgment

and sought leave to file a Second Amended Complaint. The District Court denied

Goldfish’s Motion to Amend the Judgment and its accompanying request for leave to file

a Second Amended Complaint because of Goldfish’s undue delay and the futility of the

Second Amended Complaint. Goldfish filed a timely notice of appeal.

                                               II.

       The District Court had jurisdiction under 28 U.S.C. § 1331, and we have

jurisdiction pursuant to 28 U.S.C. § 1291. Our standard of review of the District Court’s

order granting Nordbank’s Motion to Dismiss the First Amended Complaint is plenary.

AT&T v. JMC Telecom, LLC, 470 F.3d 525, 530 (3d Cir. 2006). We must accept as true

all of the allegations contained in the complaint and draw all inferences from the facts

alleged in the light most favorable to the plaintiff. Upon review of the District Court’s

decision of the denial of Goldfish’s Motion to Amend, we will only reverse if the District

Court abused its discretion. Ramsgate Court Townhome Ass’n v. West Chester Borough,

                                               4
313 F.3d 157, 161 (3d Cir. 2002). Our standard of review of the District Court’s decision

not to award attorney’s fees to Nordbank is also for an abuse of discretion. Doering v.

Union County Bd. Of Chosen Freeholders, 857 F.2d 191, 195 (3d Cir. 1988). “An abuse

of discretion exists where the district court’s decision rests upon a clearly erroneous

finding of fact, an errant conclusion of law or an improper application of law to fact.”

UAW v. Mack Trucks, Inc., 820 F.2d 91, 95 (3d Cir. 1987).

                                              III.

       A.     Nordbank’s Motion to Dismiss Goldfish’s First Amended Complaint

       Goldfish does not allege any defect in the sale of the vessel itself but instead

claims that Nordbank was required to take action beyond the sale in order to ensure title

free and clear of all encumbrances would be presented to the buyer. The Supreme Court

has noted that the “dominion of the suit in admiralty over the vessel or thing itself . . .

gives to the title made under its decrees validity against all the world.” The Moses

Taylor, 71 U.S. 411, 427 (1866). In Oil Shipping (Bunkering) B.V. v. Sonmez Denizcilik

Ve Ticaret A.S., 10 F.3d 1015, 1022 (3d Cir. 1993), this Court examined the

consequences of a judicial sale under the Ship Mortgage Act. Particularly, we noted that

Congress intended for sales under the Act to provide for “an expeditious procedure by

which a United States court sitting in admiralty may foreclose a ship mortgage on a

foreign-flag vessel and give title good against the world to the new purchaser.” Id.

(quoting H.R. Rep. No. 1662, 83d Cong., 2d Sess. reprinted in 1954 U.S.C.C.A.N. at

                                               5
2452). The consequences of the judicial sale itself are to extinguish any previous rights in

the vessel and to deliver title to the purchaser free and clear of any encumbrances as a

matter of law. All rights Nordbank and Odin had in the vessel before the sale were

extinguished, and Goldfish’s claim to ownership was free and clear of any encumbrances

anywhere in the world. The fact that the vessel had not been deleted from the Turkish

Registry has no bearing on the legal status of Goldfish’s claim. Odin’s illegal actions in

arresting the vessel on multiple occasions do not alter the fact that the legal and rightful

owner of the vessel was Goldfish. The party at fault in the interference of Goldfish’s

ownership of the vessel was Odin, not Nordbank.

       Goldfish argues that the sale of the vessel created a duty for Nordbank to take

affirmative steps to effect the vessel’s deletion from the Turkish Registry. Goldfish cites

no cases in admiralty evidencing such a duty but instead turns to analogous state law.

While federal courts sitting in admiralty will sometimes borrow law from the states and

incorporate it into general maritime law, Goldfish has not presented analogous law which

imposes any duty to take further action to clear title after a judicial sale has taken place.

See East River S.S. Corp. v. Transamerica Delaval Inc., 476 U.S. 858, 864 (1986).

       To support the conclusion that transfers of title in court can give rise to continuing

duties on the transferor of the property, Goldfish relies solely on Sterling v. Blackwelder,

302 F. Supp. 1125 (E.D.Va. 1968). In Sterling, the transfer was effected by a contract,

and the court relied upon the language of the contract that purported to convey property

                                               6
“free from all encumbrances.” Id. at 1128-29. Contracting parties in a real estate

transaction do not have the power to extinguish all other impairments of title the way that

the federal courts do under the Ship Mortgage Act, and thus Sterling cannot be read to

impose the same duties on foreclosing creditors in an admiralty case that it would on

parties to a real estate transaction, even if under the supervision of a state court. Unlike

Sterling, when the District Court in this case transferred title to Goldfish under the Ship

Mortgage Act, it also extinguished all encumbrances as a matter of law and delivered

clear title. Any attempt by Odin to enforce rights in the vessel after the District Court’s

decree was without legal merit.

       Because it is clear that, upon the decree of the District Court, Goldfish held free

and clear title and that Nordbank had no duty to do take additional steps to clear title, all

of Goldfish’s claims fail. Goldfish’s asserted causes of action against Nordbank rely on

the assumption that Goldfish did not receive clear title and that Nordbank in some way

prevented Goldfish from receiving that to which it was entitled. While it is quite

unfortunate that Goldfish’s enjoyment of the vessel has indeed been interfered with, this

interference has nothing to do with any defect in title as a matter of law, but is instead due

to the illegal actions of Odin.

       B.     Goldfish’s Motion for Leave to Amend the Complaint

       The District Court refused to grant leave to amend based on both futility and

inequity. In Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002), we held

                                              7
that an amendment must be permitted unless inequitable or futile. We find that it was not

an abuse of discretion for the District Court to find that Goldfish’s Second Amended

Complaint was futile.

       Futility means that the complaint, “as amended, would fail to state a claim upon

which relief could be granted.” In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410,

1434 (3d Cir. 1997). The District Court below opined that the Second Amended

Complaint is essentially the same as the First Amended Complaint except that it placed

more emphasis on the belief that Nordbank had a duty to take further action after the sale.

Since the Court had held in its previous opinion that, as a matter of law, a foreclosing

creditor at a sale under the Ship Mortgage Act had no further duty to clear title, the Court

determined that Goldfish’s Second Amended Complaint would still fail to state a claim

upon which relief could be granted. In the light of our holding that Nordbank had no

further duties, it is clear that the District Court did not abuse its discretion in denying

Goldfish’s Motion to Amend.

       C.     Nordbank’s Motion for Award of Attorney’s Fees

       In its Motion to Dismiss, Nordbank asked the District Court to uses its inherent

powers in admiralty to order Goldfish to pay Nordbank’s attorney’s fees. The District

Court was not convinced that Goldfish initiated this action for an improper purpose and

denied Nordbank’s motion. The Second Circuit in Ingersoll Milling Mach. Co. v. M/V

Bodena, 829 F.2d 293, 309 (2d Cir. 1987), stated that “the general rule is that the award

                                               8
of fees and expenses in admiralty actions is discretionary with the district judge upon a

finding of bad faith.” There is nothing in the record to indicate that the District Court

abused its discretion in concluding that Goldfish did not bring suit in bad faith, and thus

its decision should stand.

                                             IV.

        For all the foregoing reasons, we will affirm the District Court’s order dismissing

for failure to state a claim, denying leave to amend the complaint, and denying attorney’s

fees.

                                              9