Eurasia Intl Ltd v. M/V Emilia ( 2005 )

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
v.
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
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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
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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
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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
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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
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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
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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
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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.
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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.
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jurisdiction under the useless judgment doctrine. United States
v. 3262 S.W. 141 Ave., 33 F.3d 1299 (11th Cir. 1994). In 3262 S.W.
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).
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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.
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