Eurasia Intl Ltd v. M/V Emilia

• Court: Court of Appeals for the Fifth Circuit
• Decided: July 18, 2005
• Docket: 04-40666
• Status: Published

Opinion

United States Court of Appeals Fifth Circuit F I L E D REVISED JULY 15, 2005 IN THE UNITED STATES COURT OF APPEALS June 7, 2005 FOR THE FIFTH CIRCUIT Charles R. Fulbruge III ____________________ Clerk

No. 04-40666 ____________________

EURASIA INTERNATIONAL LTD, Individually and as Assignee

Plaintiff - Appellant

v.

HOLMAN SHIPPING INC; NORTH AMERICAN MARINE REPAIR & CLEANING INC; OLYMPUS STEAMSHIP AGENCIES; ROYAL BANK OF SCOTLAND; GULF MARINE AND INDUSTRIAL SUPPLIES INC

Intervenor Plaintiffs - Appellees

M/V EMILIA, Etc

Defendant _________________________________________________________________

Appeal from the United States District Court for the Eastern District of Texas, Beaumont _________________________________________________________________

Before KING, Chief Judge, and BARKSDALE and STEWART, Circuit

Judges.

KING, Chief Judge:

Plaintiff-Appellant Eurasia International, Ltd. appeals the

district court’s entry of summary judgment in favor of

Intervenor-Appellee Royal Bank of Scotland. Because we lack in

rem jurisdiction over this matter, under the useless judgment

doctrine, we are compelled to DISMISS Eurasia’s appeal. I. FACTUAL AND PROCEDURAL BACKGROUND

On September 20, 1994, the Royal Bank of Scotland (“RBS”)

entered into a loan agreement with Candour Marine, Ltd., the

former owner of the M/V EMILIA. Pursuant to the loan agreement,

RBS loaned Candour $2,000,000 to finance part of the purchase of

the M/V EMILIA. On September 21, 1994, Candour and RBS entered

into a mortgage and deed of covenant securing the loan agreement.

RBS performed all acts required to perfect the mortgage as a

first preferred ship mortgage.

On November 22, 1998, Candour bareboat chartered the M/V

EMILIA to Sun Rose Shipping, Ltd. (“Sun Rose”). On December 11,

1998, Sun Rose entered into a standard ship management agreement

with Appellant Eurasia International Ltd. (“Eurasia”). The

agreement contained an English choice of law and arbitration

provision.

Eurasia performed its duties under the agreement, but Sun

Rose did not pay Eurasia for its services. Thus, on June 18,

1999, Eurasia filed an in rem claim against the M/V EMILIA to

recover its expenses. First, Eurasia claimed $151,655 in

custodia legis expenses (expenses accumulated in maintaining and

preserving a vessel after it has been seized under a legal

process). Second, Eurasia asserted that it had a maritime lien

in the amount of $161,487 against the M/V EMILIA as assignee for

paid seaman’s wages. Finally, Eurasia claimed $319,323 in

2 assigned expenses for necessaries supplied by foreign and

domestic suppliers and for technical management fees. Eurasia

also filed a motion to arrest the vessel, which the court granted

that same day.

Several claimants (collectively referred to as the

“Intervenors”) intervened in the in rem proceeding, asserting

maritime liens for unpaid goods and services provided to the M/V

EMILIA. Specifically, on June 29, 1999, Holman Shipping, Inc.

(“Holman”), North American Marine Repair & Cleaning Inc. (“North

American”), and Olympus Steamship Agencies (“Olympus”) filed

motions to intervene, asserting maritime liens for necessaries in

the amount of $21,540, $18,500, and $28,165.86, respectively. On

August 6, 1999, RBS also intervened, asserting its status as a

preferred mortgage lien holder of the M/V EMILIA in the amount of

$1,442,183.44. Finally, on October 14, 1999, Gulf Marine and

Industrial Supplies, Inc. (“Gulf”) filed a motion to intervene,

asserting a maritime lien for necessaries in the amount of

$6,079.

On October 16, 1999, the United States Marshal sold the M/V

EMILIA at auction for $195,000. On November 17, 1999, after

collecting his commission from the sale proceeds, the Marshal

deposited $192,060 into the district court’s registry. The

claims far exceeded the sale proceeds, and that shortage led the

claimants to assert their lien priorities.

After the vessel’s sale, Candour brought an in personam

3 claim against Eurasia. On December 21, 2001, the district court

stayed the in rem action brought by Eurasia against the M/V

EMILIA pending the arbitration of the in personam claim between

Eurasia and Candour in London. On March 6, 2003, Eurasia

received an award in the London arbitration. On April 4, 2003,

the district court lifted the stay on the in rem claim and

confirmed the March 6, 2003 arbitration award in favor of Eurasia

and against Candour. The court limited its confirmation of the

arbitration award, stating that the award had no effect with

respect to any remaining issues or claims existing between the

parties and that the award was dispositive only of the claims

between Eurasia and Candour.

On July 1, 2003, Eurasia moved for partial summary judgment

on its claims. A few months later, on November 21, 2003, Eurasia

again moved for summary judgment and distribution of funds,

arguing that it was entitled to the sales proceeds as an assignee

of preferred maritime liens and for custodia legis expenses. In

order to avoid additional costs and attorney’s fees, Eurasia

entered into a conditional agreed distribution settlement with

Gulf, Holman, North American, and Olympus, under which those four

intervenors would receive a predetermined portion of the funds in

the court’s registry if Eurasia were to prevail. On November,

21, 2003, RBS also filed a motion for partial summary judgment,

requesting a determination that the claims filed by Gulf, Holman,

North American, and Olympus were superior to those of RBS, and

4 thus that they were entitled to $74,284.86 of the funds in the

court’s registry. RBS also asserted that, as holder of a

preferred mortgage lien, it was entitled to the remainder of the

funds in the court’s registry.

On April 14, 2004, the magistrate judge recommended that the

district court grant RBS’s motion and deny Eurasia’s motion. The

magistrate judge further recommended that Gulf receive $6,079,

Holman receive $28,165.86, North American receive $21,540,

Olympus receive $18,500, and RBS receive $117,775.14 of the

proceeds of the sale. To arrive at its recommendation, the judge

concluded that RBS’s claims to the proceeds outranked Eurasia’s

claims under both English and U.S. law because Eurasia: (1) did

not have a maritime lien under English law; (2) did not have any

lien rights under U.S. law; and (3) did not incur custodia legis

expenses upon the authority of the court and equitable relief for

those expenses was not justified.

On May 3, 2004, the district court adopted the magistrate

judge’s findings of fact and conclusions of law, granted RBS’s

motion for summary judgment, and denied Eurasia’s motion.

Accordingly, the court entered final summary judgment in favor of

RBS, disposing of the in rem claims and ordering the distribution

of the sale proceeds to the Intervenors. On May 12, 2004,

Eurasia moved the district court for an order staying the

disbursement of the sale proceeds until May 24, 2004. After a

hearing on May 19, Eurasia’s motion was granted to give it time

5 to obtain and file a supersedeas bond. Eurasia was unsuccessful

in filing the bond within the time limit, and the court entered

an order disbursing the sale proceeds on May 24, 2004.

On May 18, 2004, Eurasia appealed the district court’s

judgment, arguing that the district court erred by concluding,

inter alia, that Eurasia did not have a valid maritime lien for

its assigned seaman’s wages or its custodia legis expenses.

Eurasia asserts that its claims have priority and must therefore

be paid before the Intervenors’ claims.

II. DISCUSSION

The Intervenors argue that because Eurasia failed to stay

enforcement of the district court’s final judgment and because

the district clerk disbursed the proceeds from the sale of the

M/V EMILIA to the Intervenors, a judgment in this action would be

useless and that this court thus lacks in rem jurisdiction under

the useless judgment doctrine. Eurasia, on the other hand,

argues that the useless judgment doctrine does not apply because

the court’s jurisdiction is based solely on the appeal from the

district court’s final judgment.

The Supreme Court addressed the useless judgment doctrine in

Republic National Bank of Miami v. United States, 506 U.S. 80

(1992). The issue facing the Court was whether the court of

appeals could continue to exercise in rem jurisdiction in a civil

forfeiture proceeding after the res (i.e., the property), then in

6 the form of cash, was removed by the United States Marshal from

the judicial district and deposited in the United States

Treasury. Republic, 506 U.S. 81-82. In Republic, the government

sought forfeiture of a residence on the basis that the owner had

purchased it with the proceeds of narcotics trafficking.

Republic National Bank of Miami then filed a claim asserting a

lien on the property. The property was sold and the marshal

retained the proceeds pending the disposition of the case. The

district court subsequently entered judgment, denying Republic’s

claim and forfeiting the sale proceeds to the United States.

Republic filed a timely notice of appeal but did not post a

supersedeas bond or seek to stay the execution of judgment. The

proceeds were transferred to the Assets Forfeiture Fund of the

United States Treasury. The government then moved to dismiss the

appeal for lack of jurisdiction, and the court of appeals granted

the motion, reasoning that the removal of the proceeds terminated

the court’s jurisdiction. The Supreme Court reversed, holding

that the court did not lose jurisdiction when the proceeds were

transferred to the Assets Forfeiture Fund of the United States

Treasury. Id. at 93. The Court stated that in The Rio Grande,

90 U.S. 458 (1874):

this Court held that improper release of a ship by a marshal did not divest the Circuit Court of jurisdiction. We do not understand the law to be that an actual and continuous possession of the res is required to sustain the jurisdiction of the court. When the vessel was seized by the order of the court and brought within its control the jurisdiction was complete.

7 Id. at 85. The Court also quoted The Little Charles, 26 F. Cas.

979, 982 (C.C. Va. 1818) (No. 15,612), stating that:

continuance of possession was not necessary to maintain jurisdiction over an in rem forfeiture action [because] jurisdiction, once vested, is not divested, although a state of things should arrive in which original jurisdiction could not be exercised. . . . [I]n some cases there might be an exception to the rule, where the release of the property would render the judgment useless because the thing could neither be delivered to the libellants, nor restored to the claimants. . . . [T]his exception will not apply to any case where the judgment will have any effect whatever.

Id. at 85 (internal citations, quotation marks, and emphasis

omitted). The Court specifically analyzed whether the

Appropriations Clause of the United States Constitution, which

provides that “No money shall be drawn from the treasury, but in

Consequence of Appropriations made by law,” rendered the proceeds

out of reach such that the useless judgment doctrine would apply.

Id. at 93. The Court concluded that the Appropriations Clause

did not render the proceeds unreachable because 31 U.S.C. § 1304

(which provides that funds may be paid out only pursuant to a

judgment based on a substantive right derived from the express

terms of a specific statute) and 28 U.S.C. § 2465 (which provides

that property shall be returned to a claimant upon the entry of

judgment for such claimant in any proceeding to forfeit property

seized under any Act of Congress) provide a specific

appropriation authorizing the payment of funds in the event that

Republic were to prevail in the underlying forfeiture action.

8 Id. at 95-96. Accordingly, the Court held that the court of

appeals had jurisdiction because, although the proceeds were not

present in the court, a judgment would not be useless because the

funds in the Assets Forfeiture Fund of the United States Treasury

could be reached. Id. at 96.

Republic makes clear that the mere payout of the proceeds

from the district court’s registry did not strip this court of

jurisdiction. If, however, the disbursal of those proceeds would

render a judgment from this court useless, then this court does

not have jurisdiction. Thus, our inquiry focuses on whether a

judgment by this court--that the district court erred in

concluding that Eurasia did not have a maritime lien entitling it

to the proceeds--would be useless to Eurasia. As indicated in

Republic, a judgment by this court would be useless if the res,

in this case the proceeds of the M/V EMILIA, could not be

delivered to Eurasia.

To guide our inquiry, we draw upon other cases in this

circuit that have addressed the useless judgment doctrine. See,

e.g., Bargecarib Inc. v. Offshore Supply Ships Inc., 168 F.3d 227

(5th Cir. 1999); Newpark Shipbuilding & Repair, Inc. v. M/V

Trinton Brute, 2 F.3d 572 (5th Cir. 1993) (per curiam). In

Bargecarib, Bargecarib filed an in rem complaint against the M/V

SOVEREIGN for breach of a time charter. 168 F.3d at 228. The

vessel was arrested but released after the district court

concluded that the vessel’s owner did not breach the time

9 charter. Bargecarib appealed the district court’s order vacating

the seizure, and the Fifth Circuit reversed. The court

determined that it had jurisdiction over the appeal even though

the vessel was no longer in the district court’s possession,

reasoning that a judgment that the vessel owner breached the time

charter was not useless because Bargecarib could use the judgment

as a basis for re-siezing the vessel and as a basis for pursuing

the vessel’s owner personally. Id. at 231. Bargecarib is

clearly distinguishable from the case at hand. Here, a judgment

that Eurasia had a maritime lien entitling it to the proceeds of

the M/V EMILIA’s sale could not be the basis for re-seizing the

vessel because the M/V EMILIA was sold, and the sale of a vessel

extinguishes all liens. Newpark, 2 F.3d at 573. Moreover, a

judgment from this court could not serve as the basis for

pursuing the Intervenors personally.

In Newpark, a case decided after Republic, Newpark brought

an in rem action against the M/V TRINTON BRUTE to recover for

repairs it made on the vessel. 2 F.3d at 572. The district

court entered judgment in favor of Newpark and ordered the vessel

to be sold. Newpark was the successful bidder at the sale and

substituted its judgment in lieu of payment for the vessel.

Newpark took title to the vessel and subsequently sold it to the

vessel’s former owner. The owner then appealed the court’s

judgment in favor of Newpark, and Newpark moved to dismiss for

lack of jurisdiction. The court noted that in Republic, the

10 useless judgment exception did not apply because the government

had possession of the specific substitute res (the sale proceeds)

and an appropriations statute authorized the payment of funds in

the event petitioner were to prevail in the underlying forfeiture

action. The court, however, distinguished the case before it

from Republic, stating:

In this case, by contrast, there never was a substitute res. Newpark used its judgment to purchase the TRINTON BRUTE; no money changed hands as a result of the marshal’s sale. Moreover, the vessel is no longer the res; a marshal’s sale discharges all liens against the ship and grants the purchaser title free and clear of liens. Unlike the situation in Republic, we cannot trace the res or its proceeds to a particular fund in Newpark's possession. A judgment in favor of appellant in this case would be effectively unenforceable. . . . [T]here is nothing in Newpark's possession that could be regarded as the res. For [the vessel’s owner] to be able to recover from Newpark, we would effectively have to convert the judgment from one in rem to a judgment in personam. We decline to so extend the holding in Republic.

2 F.3d at 573 (internal citation omitted). Thus, the court

dismissed the vessel owner’s appeal, stating that the case fell

within the useless judgment exception to appellate in rem

jurisdiction. Id. Applying Newpark to the facts at hand, it

becomes clear that a judgment from this court would be useless.

Here, although the substitute res, the proceeds from the sale,

were distributed to the Intervenors, we do not know if they still

have the substitute res in their possession. The difficulty lies

in the fact that the substitute res here is money, which is

fungible, and unlike in Republic, the proceeds here cannot be

traced to a particular fund in the Intervenors’ possession.

11 Moreover, unlike Republic, there is no statute allowing this

court to reach the proceeds once paid out. Thus, a judgment in

this case would be effectively unenforceable because, like

Newpark, there is nothing in the Intervenors’ possession that

could be regarded as the res. If we were to render judgment in

favor of Eurasia, and allowed Eurasia subsequently to recover the

amount it was allegedly owed from the Intervenors, this court

would effectively be rendering a judgment in personam.1 The

Fifth Circuit specifically declined to do that in Newpark.2

In a similar case, the Eleventh Circuit held that it had no

1 A judgment in personam imposes personal liability on a party and may therefore be satisfied out of any of the party’s property within judicial reach. 4 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1064 at 335 (3d ed. 2002) [hereinafter WRIGHT & MILLER]; BLACK’S LAW DICTIONARY 848 (7th ed. 1999). A judgment in rem determines the status or condition of property and operates directly on the property itself. 4A WRIGHT & MILLER, § 1070 at 286; BLACK’S LAW DICTIONARY 847. 2 In American Bank of Wage Claims v. Registry of District Court of Guam, 431 F.2d 1215 (9th Cir. 1970), the Ninth Circuit stated that if the case were “remanded to the district court to recover the ‘res,’ that court would become entangled in an elaborate exercise in tracing, identifying, recovering and then redistributing any recovered monies, . . . an effort caused solely by appellants’ failure to take timely and legal steps to prevent the final disbursement. The district court is not now obligated so to act, nor are we inclined or required so to order it.” The court further stated that “even if ultimately the distributees were successfully determined and located, nevertheless ordering repayment of funds into the Registry would, under the circumstances of this case, implicitly erase the distinction between in personam and in rem jurisdiction and work an unprecedented extension of the latter.” Id. Although American was decided before Republic and is not binding upon this court, it is helpful to illustrate that requiring the Intervenors to return the disbursed proceeds would work effectively to turn this into an in personam action in violation of Newpark.

12 jurisdiction under the useless judgment doctrine. United States

v. 3262 SW 141 Ave., 33 F.3d 1299 (11th Cir. 1994). In 3262 SW

141 Ave., the government filed a civil complaint in rem for

forfeiture of a residence. After the owners failed to appear,

the district court granted default judgment in favor of the

government. The final judgment also adjudicated the rights of

two creditors that had filed claims. The owner then moved to set

aside the default judgment, but a magistrate judge recommended

that the owner’s motion be denied. Before the district court

adopted the magistrate’s recommendation, it granted the owner’s

motion to stay the execution of the forfeiture judgment and

granted the government’s motion to sell the property. The

proceeds of the sale were deposited in the registry of the court.

The district court subsequently adopted the magistrate’s

recommendation to deny the motion to set aside the default and

ordered the distribution of the sale proceeds to the two

creditors. The owner appealed the district court’s judgment

denying his motion to set aside the default judgment. The

government then filed a motion to dismiss the appeal, arguing

that the court no longer had in rem jurisdiction. The court

agreed with the government, reasoning that:

In this case, it is undisputed that the subject real property has been sold and the proceeds disbursed completely to the priority claimants . . . . [The owners] can neither have their home restored to them nor acquire any proceeds from that sale should they obtain a judgment in their favor. Therefore, a judgment for [the owners] would be useless, and we are without jurisdiction to

13 proceed to the merits of their consolidated appeal.

Id. at 1303-04. Similarly, the proceeds here were distributed to

the Intervenors. In addition, Eurasia can neither re-seize the

vessel nor acquire the proceeds from the Intervenors if they

received a judgment from this court. Thus, a judgment from this

court in Eurasia’s favor would be useless.3

Alternatively, Eurasia argues that the useless judgment

doctrine does not apply because the notice of appeal implicitly

contains a stay provision and, in any event, Eurasia filed a

motion to stay the disbursement of funds contingent on its filing

a supersedeas bond. However, FED. R. CIV. P. 62(d) provides that

a party is entitled to an automatic stay of proceedings to

enforce a judgment upon appeal when it posts a supersedeas bond.

See also Hebert v. Exxon Corp., 953 F.2d 936, 938 (5th Cir. 1992)

(per curiam). Because Eurasia did not post a supersedeas bond,

it was not entitled to an automatic stay upon its appeal to this

3 Recognizing that disbursing the proceeds from the court’s registry could divest the court of jurisdiction, the United States District Court for the Eastern District of Louisiana has stayed the disbursement of funds from the court’s registry pending the outcome of an appeal. Silver Star Enters., Inc. v. SARAMACCA M/V, No. 92- 1297, 1994 WL 665792, at *1 (E.D. La. Nov. 29, 1994) (citing Newpark, 2 F.3d at 572) (stating that “disbursing [the] funds to [one party] prior to completion of [the other party’s] appeal could cause [the other party] to effectively lose its right of appeal by divesting the Fifth Circuit Court of Appeals of jurisdiction”). The same court has also applied the useless judgment doctrine, holding that it did not have jurisdiction where the court vacated the seizure of a vessel because a judgment in rem would be unenforceable. Martin v. M/V ELIZA, No. 95-1955, 1995 WL 442073 (E.D. La. July 25, 1995).

14 court.

Under the case law discussed above, it is clear that this

court has no jurisdiction over Eurasia’s appeal under the useless

judgment doctrine. Thus, we do not address the merits of

Eurasia’s appeal.

III. Conclusion

For the foregoing reasons, we DISMISS Eurasia’s appeal.