Horizon Creditcorp v. Oil Screw "Innovation I" , 730 F.2d 1389 ( 1984 )

DUMBAULD, District Judge:

Appellants, Michael R. Spielvogel and Mary E. Spielvogel, his wife, bought a yacht on March 30, 1979, for $82,000 of which they paid $22,000 down and $50,000 was financed by appellee Horizon Credit-corp. The agreement provided for finance charges of $45,177.08, documentary fees of $197.60, resulting in a time balance of $95,-374.08 and a time sales price of $117,-374.08. The first monthly instalment of $662.32 was due on April 30, 1979. At Spielvogel’s request, and in accordance with Horizon’s customary practice, the interest was computed under the “Rule of 78ths,” permitting accelerated deductions. Later, as he apparently had done in connection with an earlier transaction with another lender, he demanded computation of simple interest. By reason of this dispute or otherwise, no part of the debt to appellee was ever paid. On May 16, 1979, approximately 46 days after the purchase of the yacht, the lender exercised its right of repossession, having approximately a week earlier exercised its right of acceleration so as to make the whole debt payable.

The Spielvogels sued Horizon in State court, and in due course the action was removed to the United States District Court for the Southern District of Florida, as Civil No. 79-6309. On April 2, 1980, Horizon filed Civil No. 80-6169, an admiralty proceeding seeking to foreclose a purported “First Preferred Ship Mortgage” on the yacht. Pursuant to the complaint in admiralty a warrant of arrest for seizure of the yacht was issued on April 2, 1980, and was executed a week later. On April 10, 1981, sale of the yacht to one Larry Ziegler for $45,000 was confirmed.

On June 9, 1981, cases No. 79-6309 and No. 80-6169 were consolidated. On March 3, 1982, jury trial began and on March 5, 1983, a verdict was rendered in favor of Horizon. On March 30, 1982, the court entered the judgment herein appealed from in favor of appellee and against appellants, in the amount of $82,452.20 and releasing to appellee the fund in the registry of the court derived from the sale of the yacht. The last paragraph of the judgment stated that “nothing in this final judgmeftt shall affect case number 79-6309-Civ-NCR which shall remain on this court’s trial calendar.” Both case numbers were listed in the caption, with a heading reading “FINAL JUDGMENT for CASE NO. 80-6169 Civ-NCR.” Stay of execution was granted pending appeal.

Appellants at all times have vigorously contended that no admiralty jurisdiction over Case No. 80-6169 exists, and no jurisdiction in personam, justifying the money judgment against them.

In the instant appeal they also argue that entry of the money judgment without a trial as to the amount of damages was a denial of due process; and that remarks by counsel to the jury require a new trial. We do not find either of these points persuasive.

In the context of the issues of the case, clearly presented in the court’s instructions,¹ it is quite far-fetched to argue as appellants do that counsel’s references to “who gets the $50,000” did or could mislead the jury into thinking that Horizon would “forfeit” the whole amount if the jury found that the Spielvogels were not in default. Rather, as appellants argue in the same breath, “HORIZON was either entitled to accelerate or was not entitled to accelerate” (Brief, p. 31). If not entitled to accelerate and declare the whole debt due immediately, Horizon, as appellants say, “Would therefore have to accept monthly payments.” But if, as Horizon’s counsel was arguing, Horizon was entitled to accelerate, it was entirely proper for Horizon’s counsel to talk about “the $50,000” to which his client would then have a just claim under the terms of the agreement.

Likewise, since the debt arises under a written agreement, it is almost equivalent to “liquidated damages.” Once the jury had made the vital determination as to the occurrence of the event of default vel non, the court could readily mold the verdict into a computation of the amount to be awarded to appellee. Certum est quod reddi potest. No separate trial was required. Appellants made no objections to the calculations contained in the affidavit and proposed judgment submitted by appellee. There was no denial of due process.

The written agreement specified clearly the amount due. Appellants did not set forth (either in the court below or in point III of their brief in this Court) any specific objections to the figures as computed in appellee’s affidavit, or any serious contentions with respect to the quantum of damages. We cherish the time-honored right to jury trial as earnestly as the dissent [see, e.g. U.S. v. One 1976 Mercedes Benz, 280S, 618 F.2d 453, 468-69 (7th Cir. 1980)], in cases where the parties have timely raised and preserved any genuinely disputed issues to be tried. Here there were none. Appellants’ demand for “trial by jury on all issues so triable” [dissent, p. 1393] did not generate any issue to be tried by a jury, but merely invoked that mode of trial for whatever issues were raised by the parties. Appellants did not formulate any issues regarding the amount of damages. Appellants’ suggestion [dissent, p. 1394] that judgment be limited to the amount of proceeds of the sale of the vessel, unless a deficiency were subsequently established, raised no question of fact and was appropriately disregarded by the district court since the in rem admiralty case had been consolidated for trial and it was the in personam liability of appellants under the written agreement that was being adjudicated.

The questions whether admiralty jurisdiction had been properly invoked and whether jurisdiction in personam over the Spielvogels could properly be exercised are more serious.

It seems clear that before the Ship Mortgage Act of June 5, 1920, 41 Stat. 988, 1000, 46 U.S.C. § 911, et seq., a mortgage on a vessel and a proceeding to enforce it, did not constitute a maritime matter that could be litigated under admiralty jurisdiction. Detroit Trust Co. v. The Barium, 293 U.S. 21, 32, 55 S.Ct. 31, 33, 79 L.Ed. 176 (1934); The J.E. Rumbell, 148 U.S. 1, 15, 13 S.Ct. 498, 501, 37 L.Ed. 345 (1893); Bogart v. The John Jay, 58 U.S. 399, 15 L.Ed. 95, 17 How. 399, 402 (1854). The Act of 1920 conferred admiralty jurisdiction in rem with respect to a particular class of “preferred mortgages,” 46 U.S.C. § 951. It also provided that upon default of a “preferred mortgage” jurisdiction in personam against the mortgagor could be invoked, 46 U.S.C. § 954.

As stated by Chief Justice Hughes in The Barlum, (293 U.S. at 33, 55 S.Ct. at 32) supra:

The grant is thus one of exclusive jurisdiction to enforce the lien of a “preferred mortgage.” If the mortgage is a preferred mortgage within the definition of the Act, jurisdiction is granted; otherwise not. “Preferred mortgages” are carefully defined in the detailed provisions of ... 46 U.S.C. 922.

The requirements of § 922 are then described in the opinion. These include, inter alia, endorsement of the mortgage upon the vessel’s documents; recording in the office of the collector of customs [now by Executive Order the Secretary of the Treasury]; and filing an affidavit of good faith.

It is highly questionable whether these criteria have been met in the case at bar. The documents executed on March 30, 1979, contemplated that such a preferred mortgage should be executed and delivered for the lender’s protection. Indeed appellants signed a power of attorney authorizing three named individuals, or any of them, to execute and deliver such a mortgage, and one of them did on July 11, 1977, execute such an instrument. But no proof appears in the record that the above-enumerated requirements of the Act were complied with. Indeed, from admissions made by appellee in the course of discovery it appears that as late as November 17, 1979, the yacht had not been officially documented as a vessel of the United States, upon whose documents the fact of recording the mortgage could be noted as required by 46 U.S.C. § 922.

It is not necessary to decide this doubtful question, however, in order to sustain the District Court’s judgment in personam against appellants.² That question indeed has become moot by reason of the consolidation of No. 79-6309 and No. 80-6169 for trial. In No. 79-6309 appellants themselves had invoked the District Court’s jurisdiction, and the Court clearly had jurisdiction in personam over them. The jury’s verdict in favor of Horizon in the consolidated trial conclusively disposed of the controverted issues crucial to both cases, and afforded solid ground for a money judgment in personam against appellants for the amount due and payable to Horizon. Appellants were of course entitled to credit for the amount Horizon received from the registry of the court out of the proceeds of the sale of the yacht as a result of the perhaps irregular proceedings by way of equitable execution which had taken place in the admiralty case (No. 80-6169); and the amount of the judgment against appellants was calculated accordingly.

Apparently by inadvertence or clerical mistake, the judgment was entered at the wrong number. It will therefore be modified by striking out the last paragraph thereof and the last two lines of the caption, and as so modified

AFFIRMED.

1 . In the court’s charge the jury was instructed to determine:

"1. When was the first installment payment due?

2. If Michael R. Spielvogel and Mary E. Spielvogel failed to make the payment when it was due?

3. If so, did their failure to pay the installment at that time constitute a default of the installment contract?” (Tr. 366).

2 . It is likewise unnecessary to consider whether, if the requisites of § 922 were complied with subsequently and before the date of judgment (though there is nothing in the record to show that this is the case), any failure to have complied with them before the suit was filed was cured. Ordinarily the jurisdiction of a federal court must be shown to exist at the time of filing suit.