Court Opinion

ID: 202076
Source: CourtListenerOpinion
Date Created: 2011-02-07 05:44:06+00
Date Added: 2024-06-11T09:43:06.467599
License: Public Domain

United States Court of Appeals
                        For the First Circuit

Nos. 05-1173, 05-1174

             DAVID E. MULLANE; JOAN-LESLIE MULLANE,

            Plaintiffs, Appellants, Cross-Appellees,

                                 v.

                  ADELE CHAMBERS; JEAN FARESE,

            Defendants, Appellees, Cross-Appellants.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

          [Hon. William G. Young, U.S. District Judge]

                               Before

                       Lynch, Circuit Judge,
                  Stahl, Senior Circuit Judge,
                    and Lipez, Circuit Judge.

     Thomas E. Clinton, with whom Robert E. Collins and Clinton &
Muzyka, P.C. were on brief, for the appellants.
     Paul L. Kenny, with whom Salim Rodriguez Tabit was on brief,
for the appellees.

                          February 24, 2006
           LIPEZ, Circuit Judge. This is an appeal and cross appeal

of the district court's resolution, on remand from this court, of

competing claims to a 42-foot motorized yacht, known variously as

the Lady B, the Lady B Gone, and the Cent'Anni (the vessel).              The

vessel's owners, David and Joan Mullane, appeal the district

court's rejection of their claim to a lien on the vessel.             Adele

Chambers and Jean Farese, who seized the vessel to satisfy debts of

the vessel's previous owner, appeal the district court's order that

they reimburse the Mullanes for storing the vessel during the

course of the litigation.     We affirm.

                                       I.

           The facts have been recounted elsewhere.           This case has

been tried twice, by two different district court judges, each of

whom published an opinion.        Mullane v. Chambers, 349 F. Supp. 2d

190 (D. Mass. 2004); Mullane v. Chambers, 206 F. Supp. 2d 105 (D.

Mass. 2002).     It has been the subject of a published opinion by

this court.    Mullane v. Chambers, 333 F.3d 322 (1st Cir. 2003).          We

review only the details relevant to the issues before us.           Because

this case comes to us after a trial, we present the facts in the

light most favorable to the district court's judgment.           See Wilson

v. Mar. Overseas Corp., 150 F.3d 1, 3 (1st Cir. 1998).

           In July 1998, the Mullanes bought the vessel from a trust

established by Dr. David Murphy and his wife.            As consideration,

the   Mullanes   paid   $98,117   to    Eastern   Bank   to   discharge   the

                                    -2-
preferred ship's mortgage on the vessel in favor of the bank,1 paid

$2,000 cash to Murphy and assumed a $40,000 lien Murphy owed to his

own company.

           The vessel was federally documented and listed on the

registry maintained by the United States Coast Guard.2                     In the

normal course of maritime affairs, transfer of the vessel and

discharge of the mortgage should have been recorded immediately

with the Coast Guard, in which case the public record would have

shown that the Mullanes, not the Murphys, owned the vessel.                      46

U.S.C. §§ 12101-12124, 31321.         For whatever reason, however, the

sale and discharge were not recorded until September.                     In the

interim   --   for    all   of   August     --   the   public    record    showed

erroneously    that   the   Murphys   owned      the   vessel,   subject    to   a

mortgage in favor of Eastern Bank.

           At the time he sold the vessel to the Mullanes, David

Murphy was indebted to Chambers and Farese, both of whom had loaned

him money.     Chambers had obtained a $70,132 writ of execution

1
  A preferred ship's mortgage is a statutorily-created lien that
can be publicly registered, see infra note 2, and can be enforced
in an admiralty court. See 46 U.S.C. § 31322 et seq.
2
  The Coast Guard maintains a "national form of registration" for
vessels larger than five net tons. Vessels like the one involved
in this case, larger than five net tons but not involved in any
commercial enterprise, may be registered at the option of the
owner. See 46 U.S.C. § 12101 et seq. See also National Vessel
Documentation    Center:   Frequently    Asked   Questions,    at
http://www.uscg.mil/hq/g-m/vdoc/faq.htm (last visited Jan. 24,
2006).

                                      -3-
against Murphy, and Farese a writ for $27,612.                  But neither

Chambers nor Farese had attached any claim to the vessel until late

August, when, acting on the information in the public record, they

arranged for sheriff's deputies to seize the vessel.

             Chambers and Farese learned about the transfer from the

Murphys to the Mullanes and the mortgage discharge hours after the

seizure.     Nonetheless, they elected to press their claim to the

vessel rather than attempt to satisfy Murphy's debt with property

that actually belonged to him.          Indeed -- according to their own

statements -- upon learning that the Eastern Bank mortgage on the

vessel had been discharged, Chambers and Farese abandoned their

plans to seize Murphy's condominium, which they also had arranged

for the sheriff's deputies to levy.                 They believed that the

additional equity in the vessel available after the mortgage

discharge     would     make   any   seizure   of   Murphy's   own    property

unnecessary.

             The Mullanes sued Farese, Chambers, and the Sheriff's

Department that had seized the vessel.               They claimed that the

seizure had been illegal, that they were entitled to unencumbered

ownership of the vessel, and that they were owed compensation for

damage to the vessel that occurred during the seizure.               The case

landed on the admiralty docket of the district court. See Mullane,

333   F.3d   at   328   (concluding    admiralty    jurisdiction     correctly

invoked). The Mullanes arranged for the vessel to be arrested, see

                                       -4-
Fed. R. Civ. P. D, an action that prevented anyone from selling the

vessel before litigation concluded. Initially, the vessel was held

by the court.       At some relatively early point, however, the

Mullanes posted a $125,000 passbook savings account as security for

the vessel, and it was released to their custody.            See Fed. R. Civ.

P. E(5)(d).

            After the first trial in this case, the district court

found that the Mullanes were bona-fide purchasers of the vessel who

had no notice of Chambers and Farese's claims.                The court also

concluded   that   the   seizure   of   the   vessel   was    improper   under

Massachusetts law.       The district court restored the Mullanes'

ownership rights and ordered Chambers and Farese to pay $100,000 in

punitive damages to the Mullanes, for what the district court

termed their "wanton and reckless" disregard of the Mullanes'

rights.3

            We vacated and remanded, concluding that Chambers and

Farese were entitled to rely on the public record unless they had

actual notice of the transfer to the Mullanes, and that they had

adhered to Massachusetts law in seizing the vessel.             See Mullane,

333 F.3d at 329-33.       We asked the district court to determine

whether Chambers and Farese had knowledge of the Mullanes' claim to

the vessel before they completed their seizure.              We noted that if

3
  The district court found that no relief was warranted on the
Mullanes' claims against the sheriff's department.

                                    -5-
the district court found that Chambers and Farese had knowledge of

the Mullanes' purchase, the court would need to determine whether

there was any merit in Chambers and Farese's claim that the

Murphys'   sale   of     the   vessel    to    the    Mullanes   constituted   a

fraudulent transfer under Massachusetts law.              (The district court

had   resolved    that    question      in    the    Mullanes'   favor   through

application of federal law, which we concluded did not govern the

transaction.)

           On remand, the district court found that Chambers and

Farese had no actual or constructive notice of the Mullanes'

purchase at the time of the seizure (though they did within hours

thereafter).4     Consequently, the district court determined that

Chambers and Farese had a valid claim on the vessel.               The parties

do not contest this determination on appeal.              Because the district

court found that Chambers and Farese had valid liens on the vessel,

it did not need to reexamine the fraudulent transfer issue.

           Recognizing that application of 46 U.S.C. § 31321, the

vessel documentation statute, would yield a "harsh" penalty on the

"innocent" Mullanes, the district court invited briefing on whether

the Mullanes might be entitled to relief from that application, on

admiralty or analogous state law grounds.              The Mullanes suggested

4
  After our remand, the case was assigned to a different district
court judge than the one who presided at the first trial. Due to
that judge's busy schedule, the case was reassigned to the Chief
Judge, who presided at the second trial and entered the judgment
that we now review.

                                        -6-
only that they were entitled to a maritime lien on the vessel,

equal   in   value   to   the   Eastern     Bank   mortgage   that   they   had

discharged.     The district court determined that no such maritime

lien existed.

             Finally, the court ordered, "in the interest of equity,"

that Chambers and Farese "reimburse the Mullanes for all reasonable

storage and insurance costs of the vessel incurred since the levy."

The Mullanes had incurred such charges by storing the vessel at

various marinas during the course of the litigation as they tried

to clear title to the vessel.

                                      II.

A.   The Mullanes' Appeal

             At the conclusion of the second trial in this case, the

district court opined that relief might be possible on grounds

that, in light of Chambers and Farese's seizure, the Mullanes'

discharge of the Eastern Bank mortgage had unjustly enriched

Murphy. Seeking to resolve the issue, the district court gave very

specific instructions:

             I . . . need to have briefed the issue of . .
             . the role that Dr. Mullane's discharge of the
             preferred ships mortgage plays here. I'm not
             here talking about simple appeals to equity. .
             . .   I want to know everything there is to
             know about this type of circumstance either
             under the federal recording statute, and if we
             can't find that let's go to the common law of
             the several states which have recording
             statutes.   When a creditor seeks to levy on
             encumbered assets of the debtor, the creditor
             takes those assets encumbered.     Here there

                                -7-
          appears no evidence but that Dr. Mullane was
          innocent . . .. Dr. Mullane may be entitled
          to . . . the equivalent of a preferred ship's
          mortgage . . ..

Tr. Day 2, pp. 33-34 (emphasis added).

          Whether or not an equitable subordination argument could

have been made on these facts, it was not made before the district

court or before us, and so is waived.    Cf. Maryland National Bank

v. The Vessel Madam Chapel, 46 F.3d 895, 901 (9th Cir. 1995)

(recognizing   that   equitable   subordination   is   "available    in

admiralty to resolve priority disputes").     Instead, the Mullanes

argued that they were entitled to a maritime lien on the vessel,

which they argued had been created by their discharge of the

Eastern Bank mortgage.5   The holder of a maritime lien can look to

a vessel itself, in rem, to satisfy any resultant debt.             See

generally 46 U.S.C. § 31301 et seq.; Fed. R. Civ. P. C(1)(a); 2-II

Benedict on Admiralty (2004).     The Mullanes relied on 46 U.S.C.

5
  The Mullanes argue here, as they did in their motion for
reconsideration before the district court, that they had asked not
for a maritime lien but for an equitable lien. But the Mullanes
did not forward any theory of law pursuant to which an equitable
lien could be granted. While they included the term "equitable
lien" in their post-trial motion, the Mullanes relied entirely on
two maritime lien theories and asserted that Dr. Mullane was "the
holder of a maritime lien."      Pltfs. Post Trial Brief at 11.
Perhaps the Mullanes mistakenly thought that their maritime lien
theories could create equitable liens. But see 2-III Benedict on
Admiralty § 24 (2005) (suggesting consensus that maritime liens
are "stricti jurris; they cannot be conferred on the theory of
unjust enrichment or subrogation"). At most, however, the Mullanes
made legal arguments spiked with exactly the kind of "simple
appeals to equity" that the district court had asked them to avoid.

                                  -8-
§ 31342(a), the statute that creates a lien in favor of "a person

providing necessaries to a vessel on the order of the owner."          See

Lake Charles Stevedores, Inc. v. Professor Vladimir Popov, MV, 199

F.3d 220, 223-25 (5th Cir. 1999) (discussing generally maritime

liens for necessaries).      The Mullanes also argued that they were

entitled to a lien under the "rule of advances," a common-law

principle that awards liens to certain persons who do not provide

necessaries but do "satisfy an outstanding or future lien" on a

vessel, typically by paying for necessaries that are provided by

another party.    2-III Benedict on Admiralty § 34 (2004).        See also

Wilkins v. Commercial Inv. Trust Corp., 153 F.3d 1273, 1276-78

(11th Cir. 1998) (discussing rule of advances).

           Under § 31342(a), a person provides a "necessary" by

furnishing "goods or services . . . necessary to the continued

operation of the vessel," in a manner that "facilitates the flow of

commerce."     Payne v. S.S. Tropic Breeze, 423 F.2d 236, 241 (1st

Cir.   1970)   (discussing    predecessor    statute   to   §   31342(a)).

Classically, "necessaries" are those things that allow a vessel to

perform its ordinary functions, such as needed repairs to an engine

or   foodstuffs   for   a   long   voyage.    See   Trinidad    Foundry   &

Fabricating, Ltd. v. M/V KAS Camilla, 966 F.2d 613, 614 n.2 (11th

Cir. 1992) ("Necessaries are the items that a prudent owner would

provide to enable a ship to perform the functions for which she has

been engaged").    See also Bradford Marine, Inc. v. M/V Sea Falcon,

                                    -9-
64 F.3d 585, 589-90 (11th Cir. 1995) (discussing definition of

necessaries   and    concluding   that   attorney's      fees   incurred   in

collecting repair charges did not qualify as a necessary).

            The rule of advances, like the doctrine of necessaries,

facilitates reimbursements of those who allow a vessel to perform

its functions.       The difference is that the rule of advances

provides protection not to the person furnishing "necessaries," but

rather to a third person who pays for the goods and services that

would have given rise to a statutory maritime lien, on an assurance

that the vessel will be responsible for the debt.               Wilkins, 153

F.3d at 1276.    See also The Emily Souder, 84 U.S. (17 Wall.) 666

(1873)    (holding   that   company,   which   on   request     of   American

consulate provided funds for repairs to American steamer stranded

in Brazil, had maritime lien on the steamer); Universal Shipping

Inc. v. Panamanian Flag Barge, 563 F.2d 483 (1st Cir. 1976)

(awarding maritime lien to third party that provided funds to allow

a vessel operator's purchase of "supplies and other necessaries").

            On appeal, the Mullanes do not quibble with the district

court's   conclusion   that   their    discharge    of   the    Eastern   Bank

mortgage did not constitute a "necessary" but seek relief only

pursuant to the rule of advances.          We see at least two basic

barriers to the Mullanes' rule of advances theory, both also fatal

to the Mullanes' § 31342(a) argument.

                                  -10-
           First, maritime liens, created pursuant to the rule of

advances   or   any   other   theory,   are   intended   to    safeguard   the

interests of "strangers to the vessel," not vessel owners or those

who can control the vessel's affairs.            Sasportes v. M/V Sol de

Copacabana, 581 F.2d 1204, 1208 (5th Cir. 1978).              "Quite clearly,

owners may not benefit by the advances rule."            2-III Benedict on

Admiralty § 34.       See also Medina v. Marvirazon Compania Naviera,

S.A., 709 F.2d 124, 125 (1st Cir. 1983) (per curiam) (recognizing

that owners are not entitled to maritime liens).          This is because,

as the district court recognized, maritime liens and the admiralty

jurisdiction that comes with them are a way of making the provision

of services to vessels as safe and predictable as the provision of

services to land-based businesses.            A creditor with a maritime

lien, not unlike the holder of a materialman's lien, can seek

payment even if the person she negotiated with has absconded.              The

overarching goal is keeping the channels of maritime commerce open

-- by ensuring that people who service vessels have an efficient

way of demanding reimbursement for their labor and are thus willing

to perform the services necessary to keep vessels in operation.

See Payne, 423 F.2d at 240-41; see generally Benedict on Admiralty,

supra.     The Mullanes' discharge of Murphy's mortgage did not

further these goals.

           Second, even assuming that the Mullanes' purchase of the

vessel effected a maritime lien by "advance," the Mullanes already

                                   -11-
have   received    the   appropriate    compensation      for   that   advance:

ownership of the vessel.           The Mullanes entered into a contract

whereby they agreed to supply the funds to extinguish the Eastern

Bank mortgage in exchange for the vessel.                  Nothing else was

promised.    The Mullanes' ownership rights were compromised not

because the vessel's operator or owner failed to repay them for an

advance, but because, after they had been repaid in full -- and

after any maritime lien had been extinguished by satisfaction --

they   neglected    to   protect    their   rights   by   documenting    their

purchase.

B.   Chambers and Farese's Appeal

            The district court granted the Mullanes' motion for

reimbursement for the cost of storing the vessel during litigation,

an expense they documented to the district court.                Chambers and

Farese contend that the district court abused its discretion in so

doing.

            It is well established that admiralty courts may award

storage charges on equitable grounds.           See The Ponzan, 274 U.S.

117, 120-23 (1927) (recognizing authority of admiralty courts to

award storage charges as flexible and equitable in nature); David

Forsht Assoc., Inc v. Transamerica ICS, Inc., 821 F.2d 1556, 1560-

61 (11th Cir. 1987) (recognizing that storage charges in admiralty

are created through equity).          See also Taino Lines, Inc. v. M/V

Constance Pan Atl., 982 F.2d 20, 24 (1st Cir. 1992) (recognizing

                                     -12-
that any reduction of an award of storage costs in admiralty is an

equitable determination).    The district court has wide discretion

in determining whether equitable relief in admiralty cases is

appropriate.   Id.   We will not, on appeal, weigh the equities anew.

Rather, "if there is a sound reason for the decision of the

[district court], it does not matter that there are also sound

reasons for the opposite result."       Boston & Maine Corp. v. First

Nat. Bank of Boston, 618 F.2d 137, 141 (1st Cir. 1980).      See also

Certain Underwriters at Lloyds v. Kenco Marine Terminal, Inc., 81

F.3d 871, 872-73 (9th Cir. 1996) (reviewing award of storage

expenses for abuse of discretion); Kingstate Oil v. M/V Green Star,

815 F.2d 918, 922 (3d Cir. 1987) (same).

          Essentially, Chambers and Farese argue that it was an

abuse of discretion for the court to award storage charges because

the Mullanes, having posted a bond, could have enjoyed the use of

the vessel during the litigation.       However, there is no evidence

that the Mullanes did employ the vessel while the case was pending.

The record indicates that the vessel was damaged severely in the

initial seizure, and that its usefulness since has been limited.

In any case, we are not persuaded that the district court abused

its discretion in allowing the motion for storage costs.

          Storage costs were an inevitable consequence of the

litigation that we have recounted.      As we have discussed, vessels

subject to ownership disputes ordinarily are held in the custody of

                                 -13-
the court during litigation.    See Fed. R. Civ. P. E; 28 U.S.C. §

1921(a)(1)(E) (2000).   If the Mullanes had not posted security and

served as substitute custodians, the court would have been entitled

to reimbursement for its storage costs.           Id.      And the court's

custodia legis expenses would have created a right superior to

Chambers and Farese's lien.         See 46 U.S.C. § 31326(b)(1); 2-IV

Benedict on Admiralty § 51 (2005).         There is no indication on the

record that the storage costs incurred by the Mullanes were any

greater than those that would have been incurred by the court.            The

Mullanes had an interest in maintaining the damaged vessel (which

they intended to use personally). Their expenditures to insure and

store the vessel during litigation benefitted all parties.            These

were good enough reasons for the district court to appoint them as

the vessel's custodians and to reimburse them for storage charges.

See David Forsht Assoc., 821 F.2d at 1561 (holding that where

multiple parties had claims to a vessel, the party that arrested

the vessel and served as substitute custodian should be entitled to

reimbursement from the others, because that party benefitted all

claimants by safeguarding the vessel during litigation, at a cost

lower than would have been assessed by the marshal).

          Chambers   and   Farese    also    appear   to   argue   that   the

Mullanes should not be entitled to storage charges because they

initiated, but eventually lost, this lawsuit.               Again, we are

unpersuaded.   This was not a frivolous suit.         It was a close case

                                    -14-
that required two district court trials, the first of which the

Mullanes won.        The district court found that the Mullanes were

"innocent" parties, who fought at length, if unsuccessfully, to

prevent their own property from being seized by another person's

creditors.     Their claim to the vessel was a plausible one.                In

light   of   these    facts,   we   discern   no   abuse   of   discretion   in

reimbursing their storage charges.6           See Taino Lines, 982 F.2d at

24 (no abuse of discretion in awarding custodia legis expenses

where partially unsuccessful litigation "was neither frivolous nor

undertaken in bad faith").

                                      III.

             The district court's order is affirmed in all respects.

The parties shall bear their own costs and fees.

                      So ordered.

6
  Chambers and Farese also argue that Dr. Mullane forfeited the
right to storage charges because, they contend, he documented the
vessel's home port as in New Hampshire, where he intended to move
it, rather than in Massachusetts, where it was at the time of the
seizure, to avoid paying state sales tax on it.       We will not
entertain this contention.     Before it allowed the Mullanes'
petition for storage charges, the district court gave Chambers and
Farese an opportunity to submit written objections. Chambers and
Farese submitted a post-trial memorandum that did not include any
reference to the sales tax issue. Accordingly, they waived the
opportunity to make the argument they now attempt.      See In re
Weinstein, 164 F.3d 677, 685 (1st Cir. 1999).

                                      -15-