Corporativo Grupo v. Marfield Ltd ( 2023 )

Case: 22-20345 Document: 00516688844 Page: 1 Date Filed: 03/24/2023
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
March 24, 2023
No. 22-20345
Lyle W. Cayce
Clerk
Corporativo Grupo R SA DE C.V.,
Plaintiff—Appellant,
versus
Marfield Limited Incorporated; Shanara Maritime
International, S.A.,
Defendants—Appellees,
Caterpillar Financial Services Asia Pte Ltd;
Eksportfinans ASA; The Norwegian Government,
represented by the Norwegian Ministry of Trade and
Industry and Eksportkreditt Norge AS; KFW IPEX-Bank
GmbH,
Intervenors—Appellees.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:19-CV-1963
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No. 22-20345
Before Wiener, Stewart, and Engelhardt, Circuit Judges.
Jacques L. Wiener, Jr., Circuit Judge:
Plaintiff-Appellant Corporativo Grupo R SA DE C.V. (“Grupo R”)
appeals some of the district court’s findings of fact and conclusions of law
following a January 2022 bench trial. Grupo R asserts that the district court
erred by (1) incorrectly interpreting and applying vessel mortgage
recordation requirements under Panamanian law and (2) recognizing specific
lien claims by parties who failed to obtain substitute security following the
judicial sale of a vessel. We AFFIRM.
I. Factual Background
In 2008, Intervenors-Appellees Caterpillar Financial Services Asia
Pte Ltd (“Caterpillar”) and Eksportfinans ASA (“Eksportfinans”) provided
a loan to Marfield Limited Incorporated (“Marfield”) for the construction
of an offshore construction vessel named the M/V CABALLO MAYA
(“MAYA”). To secure payment of this loan, Marfield executed and
delivered a First Preferred Naval Mortgage to Eksportfinans and a Second
Preferred Naval Mortgage to Caterpillar on December 19, 2008. As further
security for outstanding sums owed to Caterpillar, Marfield executed a Third
Preferred Naval Mortgage on April 17, 2014, encumbering the whole of the
MAYA. The MAYA was flagged in Panama, so all three of those mortgages
were submitted to the Panama Maritime Authority Directorate General of
Public Registry of Property of Vessels (“PMA”), which is the central office
for the recordation of Panamanian ship mortgages. The PMA reviewed all
three mortgages twice and accepted them for recordation.
In 2012, Caterpillar and Intervenor-Appellee the Norwegian
Government (“Norway”) provided a loan to Shanara Maritime International
S.A. (“Shanara”) for construction of another offshore construction vessel
named the M/V CABALLO MARANGO (“MARANGO”). To secure this
2
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loan, Shanara executed and delivered a First Preferred Naval Mortgage to
Caterpillar and Norway on February 9, 2012. The following year, KFW
IPEX-Bank GmbH (“KFW”) provided a loan to Shanara to finance the
acquisition of cranes for installation aboard the MARANGO. To secure
payment of this loan, Shanara executed and delivered a Second Preferred
Naval Mortgage to KFW on January 24, 2013. The MAYA was also flagged
in Panama, so both mortgages were submitted to the PMA, which reviewed
the mortgages twice and accepted them for recordation.
Once construction of the MAYA and MARANGO was completed,
Marfield and Shanara chartered the vessels to Oceanografia S.A. de C.V.
(“Oceanografia”) for use in Mexico. The MAYA and the MARANGO were
chartered there until early 2014, when the Mexican government seized the
vessels in conjunction with its criminal investigation of Oceanografia. On
February 28, 2014, Marfield and Shanara terminated their bareboat charters
of the vessels with Oceanografia, and the vessels remained in the Mexican
government’s custody. Shanara and Marfield could not generate revenue on
the vessels and began to fall behind on their loan payments to Intervenors-
Appellees Caterpillar, Norway, KFW, and Eksportfinans (collectively, the
“Lenders”). Shortly after that, bankruptcy proceedings were commenced
against Oceanografia in Mexico, and, on April 10, 2014, the Mexican
government separately seized the MAYA and MARANGO in connection
with the bankruptcy.
In early 2014, Grupo R, a Mexican conglomerate in the oil, gas, and
energy sector, initiated discussions with Marfield and Shanara to purchase
the MAYA and MARANGO. On March 21, 2014, the parties entered into
purchase agreements for the vessels. Shanara and Marfield were
subsequently unable to obtain the release of the vessels from the Mexican
government, which violated the deadlines set forth in the purchase
agreements. Since the agreements are governed by English Law and contain
3
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a London Maritime Arbitration Association dispute resolution clause, Grupo
R initiated a London arbitration against Shanara and Marfield. Grupo R
prevailed, and on May 30, 2019, a London Arbitration Panel entered awards
of $5,000,000 against Marfield and $5,000,000 against Shanara.
From the initial arrest of the vessels until December 2017, the Lenders
executed a number of amendments to the original loan agreements to reaffirm
Marfield’s and Shanara’s payment obligations, which remained unfulfilled.
On July 10, 2015, the Lenders, Marfield, and Shanara executed two Standstill
Agreements in which Shanara and Marfield admitted that their cancellation
of the Oceanografia charters constituted “materially adverse” events of
default under their respective loan agreements. To avoid the imposition of
liens over the MAYA and MARANGO, Caterpillar provided additional
financing to Marfield and Shanara in the form of four “protective advances,”
or loans. In return, Marfield and Shanara executed four Preferred Naval
Mortgages in favor of Caterpillar to secure the outstanding amounts due,
then registered those mortgages with the PMA. The PMA reviewed each of
the mortgages twice, then accepted them for recordation. Since 2014,
Shanara and Marfield have made no loan payments to the Lenders on any of
the nine mortgages issued.
II. Proceedings Below
On May 30, 2019, Grupo R filed suit in the U.S. District Court for the
Southern District of Texas seeking to attach the MAYA and MARANGO
under the Texas Civil Practice and Remedies Code Section 61.001, et seq.
Grupo R requested that the court attach the vessels so they could be sold at
judicial auction to satisfy Grupo R’s arbitration awards. Grupo R attached a
Certificate of Ownership and Encumbrance to its Complaint, identifying the
First, Second, and Third Preferred mortgages over the MAYA and the
4
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MARANGO. At the time, the MAYA and MARANGO had been released
from Mexican seizure and were located in Galveston, Texas.
The district court granted Grupo R’s motion to attach the MAYA and
MARANGO on June 4, 2019. Shortly thereafter, the Lenders moved to
intervene in the case to assert their rights, seeking judgment against Marfield
and Shanara in personam and the MAYA and MARANGO in rem. The
Lenders caused the vessels to be re-arrested pursuant to Rule C of the
Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture
Actions. 1 Marfield and Shanara then filed an answer and counterclaim
against the Lenders for declaratory judgment, fraud, and wrongful arrest.
On April 22, 2020, the district court ordered the United States
Marshals Service to put the MAYA and MARANGO up for sale at a judicial
auction. At the auction, the MAYA was sold to Karadeniz Holding for the
price of $1,700,000, which the district court confirmed on January 7, 2021.
Caterpillar, which had been authorized by the court to credit bid the amount
of its debt, was the successful high bidder on the MARANGO for
$5,000,000. The court ordered Caterpillar to file a security bond in the
amount of $4.95 million to confirm the sale of the MARANGO. Caterpillar
filed the security bond on November 15, 2021, but Grupo R objected to its
language. Grupo R expressed concern that the security bond would prevent
Grupo R from collecting against the bond if the Lenders’ mortgages were
ruled unenforceable against third parties like Grupo R. The district court
directed Caterpillar to amend the bond in open court to assuage Grupo R’s
concerns, and the parties executed an amended bond (the “Amended
Bond”).
1
FED. R. CIV. P. SUPP. R. C.
5
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On January 4, 2022, Grupo R, Marfield, and Shanara filed a
stipulation of various facts, agreeing that the London arbitration awards were
subject to enforcement and recognition under the New York Convention.
The district court then entered an order and judgment recognizing and
confirming the London arbitration awards. With this resolved, the parties
could proceed to trial.
On January 18, 2022, a three-day bench trial commenced to determine
the priority of the Lenders’ foreign ship mortgages and Grupo R’s state-
created liens, as well as the enforceability of the Lenders’ mortgages. At trial,
Marfield and Shanara presented testimony from the parties’ corporate
representatives, while the Lenders and Grupo R presented testimony from
two Panamanian law experts, Jorge Loaiza for Grupo R, and Margareth
Mosquera for Lenders. On June 7, 2022, the court issued its findings of fact
and conclusions of law, holding, in relevant part, that (1) Marfield and
Shanara are in default under the loan agreements; and (2) the Lenders’
preferred ship mortgages related to said default outrank Grupo R’s state-
created liens arising from Grupo R’s attachment of the MAYA and
MARANGO under Texas state law. Grupo R timely appealed. 2
III. Standard of Review
Following a bench trial, the district court’s findings of fact are
reviewed for clear error and its conclusions of law are reviewed de novo. 3 “So
2
Marfield and Shanara are no longer parties to this case because the MAYA and
MARANGO were sold before trial and final judgment. Marfield and Shanara expressly
waived the opportunity to file briefs on behalf of those vessels in a letter to this court dated
November 14, 2022. See Letter from Robert E. Booth in re: Cause No. 22-20345, November
14, 2022.
3
See Barto v. Shore Constr., LLC, 801 F.3d 465, 471 (5th Cir. 2015) (quoting Becker
v. Tidewater, Inc., 586 F.3d 358, 365 (5th Cir. 2009)); Beatriz Ball, L.L.C. v. Barbagallo Co.,
6
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long as the ‘district court’s account of the evidence is plausible in light of the
record viewed in its entirety,’ its findings must be affirmed, even if the court
of appeals might ‘have weighed the evidence differently.’” 4
The district court’s determination of foreign law pursuant to Rule
44.1 of the Federal Rules of Civil Procedure is a question of law subject to de
novo review. 5 When determining an issue of foreign law under Rule 44.1, “the
court may consider any relevant material or source, including testimony,
whether or not submitted by a party or admissible under the Federal Rules of
Evidence.” 6 Although treated as a question of fact at trial, on appeal, “[t]he
court’s determination must be treated as a ruling on a question of law.” 7
IV. Discussion
Grupo R makes two primary arguments on appeal. First, it asserts that
the district court erred by incorrectly applying and interpreting Panamanian
law in its determination of the relative priority of the parties’ lien claims.
Second, Grupo R contends that the district court erred by recognizing
Caterpillar’s and KFW’s lien claims in connection with the credit sale of the
L.L.C., 40 F.4th 308, 315 (5th Cir. 2022) (citing Preston Expl. Co., L.P. v. GSF, L.L.C., 669
F.3d 518 (5th Cir. 2012)).
4
Bates Energy Oil & Gas, L.L.C. v. Complete Oil Field Services, L.L.C., No. 20-
50952, 2021 WL 4840961 (5th Cir. Oct. 15, 2021) (citing Anderson v. Bessemer City, 470
U.S. 564, 574 (1985)).
5
See Iracheta v. Holder, 730 F.3d 419, 423 (5th Cir. 2013); Banco de Credito Indus.,
S.A. v. Tesoreria Gen., 990 F.2d 827, 832-33 (5th Cir. 1993); FED. R. CIV. P. 44.1.
6
FED. R. CIV. P. 44.1.
7
Id.; see also Access Telecom, Inc. v. MCI Telecommunications Corp., 197 F.3d 694, 713
(5th Cir. 1999) (citing FED. R. CIV. P. 44.1); Perez & Compania v. M/V Mexico I, 826 F.2d
1449, 1450 (5th Cir. 1987).
7
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MARANGO when they failed to obtain substitute security following the sale.
These arguments are discussed in turn below.
A. Relative priority of the Lenders’ mortgages as to Grupo R’s state-
created liens
On appeal, the parties dispute whether the Lenders’ liens created by
the nine ship mortgages take priority over Grupo R’s liens that arose from
the attachment of the MAYA and MARANGO under Texas state law. The
relative priorities of the Lenders’ and Grupo R’s rights determine how the
proceeds from the judicial sale of the MAYA and MARANGO should have
been allocated. 8 The law of the forum provides the relative rankings of the
liens, while Panamanian law governs the substance of the liens. 9 The ranking
of liens in the United States, from highest priority to lowest priority, is as
follows:
1. Custodia legis expenses;
2. Seamen’s liens for wages;
3. Salvage and general average liens;
4. Tort liens;
5. Preferred ship mortgage liens;
6. Liens for necessaries under CIMLA;
7. State-created liens that are maritime in nature;
8. Maritime liens for penalty/forfeiture for violation of
federal statutes;
9. Perfected non-maritime liens;
10. Attachment liens;
8
United States v. (One) 1 254 Ft. Freighter, M/V ANDORIA, 570 F. Supp. 413, 415
(E.D. La. 1983), aff'd, 768 F.2d 597 (5th Cir. 1985).
9
Banco de Credito Indus., 990 F.2d at 832.
8
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11. Maritime liens in bankruptcy. 10
“Once competing liens have been ranked according to class, the top priority
liens will of course be paid first.” 11 Moreover, “[i]f the funds are insufficient
to pay the next lower ranked class in full, the available funds will be
distributed among claimants in that class according to rules operating within
that class.” 12
Under this ranking regime, Grupo R’s rights are classified as “state-
created liens that are maritime in nature,” while the Lenders’ liens are
classified as “preferred ship mortgages.” Grupo R’s liens arose when it
caused the MAYA and MARANGO to be attached under Texas state law.
The Lenders’ mortgage liens, on the other hand, arose when Shanara and
Marfield failed to pay the mortgages over the MAYA and MARANGO,
which had been executed in Panama and registered with the PMA. 13 The
Commercial Instruments and Maritime Liens Act (“CIMLA”), 46 U.S.C. §
31301 et seq., defines a preferred ship mortgage as a:
mortgage . . . established as a security on a foreign vessel if the
mortgage . . . was executed under the laws of the foreign country under
whose laws the ownership of the vessel is documented and has been
registered under those laws in a public register at the port of registry
of the vessel or at a central office. 14
10
M/V ANDORIA, 570 F. Supp. at 415.
11
Id. at 415 (citing Rayon Y. Celanese Peruana v. M/V PHGH, 471 F. Supp. 1363(S.D. Ala. 1979)); see also G. Varian, Rank and Priority of Maritime Liens, 47 Tul. L. Rev.
751 (1973); G. GILMORE AND C. BLACK, THE LAW OF ADMIRALTY, 596 (2d ed. 1975).
12
M/V ANDORIA, 570 F. Supp. at 415.
13
46 U.S.C. § 31301(6)(B).
14
Id.9
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The parties do not dispute that the Lenders’ preferred ship mortgage
liens outrank Grupo R’s state-created maritime attachment liens, and the
district court confirmed those rankings in its findings of fact and conclusions
of law. 15 The threshold issue on appeal is whether the Lenders’ mortgages
are valid and enforceable against third parties like Grupo R, allowing Lenders
to exercise their priority over the proceeds of the judicial sale of the MAYA
and MARANGO.
B. Validity and enforceability of the preferred ship mortgages under
CIMLA and Panamanian law
Grupo R and the Lenders agree that CIMLA and Panamanian law are
implicated in the resolution of this lawsuit. At trial, it was undisputed that (1)
the Vessels are registered under Panama’s flag; (2) the PMA is the public
register or central office charged with recording vessel mortgages in Panama;
and (3) all nine of the Lenders’ mortgages were recorded with the PMA,
reviewed and accepted by the PMA before their recordation, and reviewed
again by the PMA when it issued certificates confirming the mortgages’
compliance with Panamanian law.
Under CIMLA, “a mortgage on a foreign vessel is preferred so long
as it was properly (1) executed and (2) recorded under the laws of the nation
in which the foreign vessel is registered.” 16 For a preferred ship mortgage,
CIMLA provides a cause of action in federal court “[o]n default of any term
15
Grupo R acknowledges the ranking of KFW’s preferred ship mortgage lien in
relation to its state-created lien but contends that KFW waived its respective “preferred
ship mortgage” ranking by failing to seek substitute security following Caterpillar’s credit
bid for the MARANGO. This is a separate issue that is discussed further below.
16
Caterpillar Fin. Servs. Corp. v. IZTACCIHUATL, 510 F. Supp. 3d 404 (E.D. La.
2020) (citing Governor & Co. of the Bank of Scotland v. Maria S.J., No. 98-1187, 1999 WL
130632, at *2 (E.D. La. Mar. 10, 1999)); see also 46 U.S.C. § 31301(6)(B).
10
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of the preferred mortgage.” 17 The mortgagee may bring a civil action or an
admiralty action in personam against the mortgagor or guarantors to recover
a deficiency. 18 The mortgagee may also “enforce the preferred mortgage lien
in a civil action in rem for . . . a foreign vessel.” 19 As noted above, the parties
agree that each of the Lender’s mortgages was executed in Panama and
registered with the PMA. Accordingly, the Lenders’ mortgages are properly
classified as “preferred ship mortgages” under CIMLA.
The Lenders contend that the inquiry should end here, asserting that
CIMLA “does not require Lenders to affirmatively establish all facets of
Panama law before their mortgages can be recognized as preferred ship
mortgages.” However, Grupo R takes the position that these preferred ship
mortgages are unenforceable against third parties—such as Grupo R—
because they fail to meet the substantive requirements for vessel mortgages
under Panamanian law. This highly technical argument is discussed further
below.
The parties agree that Article 260 of Law No. 55 of 2008, the
Commercial Maritime Law of Panama, governs the substantive mortgage
recordation requirements under Panamanian law. The Panamanian
government has apparently not issued an official English translation of the
full text of Article 260 from the original Spanish version. The parties’
Panamanian law experts, Loaiza and Mosquera, offered their own competing
English translations of Article 260 at trial and in their expert declarations.
Grupo R also pointed out that in 2011, the PMA published a “Merchant
17
46 U.S.C. § 31325(b)(1).
18
1 SCHOENBAUM, ADMIRALTY & MAR. LAW § 9:5 (6th ed. 2020) (citing 46
U.S.C. § 31325(b)(2)).
19
46 U.S.C. § 31325(b)(1).
11
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Marine Circular MMC-11” in English, which refers to Article 260 and
includes a translation of the mortgage recordation requirements. On appeal,
the parties dispute the meaning of Article 260’s third clause (“Clause 3”),
which in its original form states:
Las fechas de pago del capital o cumplimiento de las
obligaciones garantizadas e intereses, o la forma de determinar
dichas fechas, salvo que la hipoteca se haya constituido para
garantizar obligaciones exigibles a requerimiento, futuras o
sujetas a condición suspensiva.
Loaiza’s translation of Clause 3 of Article 260 is as follows:
Dates of repayment of principal, or for satisfaction of the
secured obligations, and of interest, or the method to
determine such dates, unless the mortgage has been granted to
secure obligations payable on demand, in the future or of
conditional compliance. (emphasis in original).
Mosquera’s translation of Clause 3 is as follows:
The maturity dates of principal or of compliance with the
guaranteed obligations and interest or the form to determine
said dates, unless the mortgage is executed as security for
obligations repayable on demand, obligations subject to
suspensive condition or future obligations.
The Merchant Marine Circular MMC-11’s translation of Clause 3 is as
follows:
The dates for the payment of the capital of fulfilment of the
secured obligation and interest, or the method used to
determine said dates, except if the mortgage is created to
secure obligation payable on demand, future obligations or
obligations subject to precedent conditions.
On appeal, the parties dispute whether the phrase “[l]as fechas de pago del
capital” in the original version means “loan repayment schedule,” thereby
requiring each registered mortgage to include a loan repayment schedule.
12
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Grupo R asserts that all nine of the Lenders’ preferred ship mortgages
are invalid and unenforceable against third parties because they do not
include loan repayment schedules or their corresponding payment dates. At
trial, Loaiza testified that “las fechas” literally translates to the plural phrase
“the dates,” and that none of the preferred ship mortgages include dates of
repayment of the loan interest or principal. Loaiza contended at trial that that
a strict interpretation of Clause 3 is warranted because Article 9 of the
Panamanian Civil Code states: “[w]hen the meaning of the law is clear, its
literal word will not be neglected on the pretext of consulting its intent.” 20
Loaiza asserts that the Lenders improperly attempted to add “maturity date”
into Clause 3 when the literal translation does not support this. Grupo R
claims that “[i]f the Panama legislature had intended Article 260, Clause 3 to
be satisfied by the inclusion of a mortgage’s maturity date alone, they would
have signaled that by writing the term ‘fecha de vencimiento’ into Clause 3’s
text.” Relying on Mobile Marine Sales, Ltd. v. M/V Prodromos, 21 a case from
another circuit, Grupo R contends that the review and certification of the
nine mortgages by the PMA is of little persuasive significance as to their
validity.
The Lenders agree that none of the preferred mortgages include loan
repayment schedules, but they dispute whether Clause 3 requires such
schedules at all. Mosquera took issue with Loaiza’s strict interpretation of
Clause 3, analogizing it to the Spanish translation of the idiom “it’s raining
cats and dogs.” At trial, Mosquera testified that, although Loaiza’s
translation of Clause 3 is technically correct, it does not reflect the true
20
Loaiza relied on his own English interpretation of Article 9 in support of this
assertion.
21
776 F.2d 85, 89 (3d Cir. 1985) (“The certification of due registration by the
Public Registry is of limited persuasiveness.”).
13
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meaning of Clause 3 under Panamanian law. Mosquera testified that the
inclusion of the loan maturity dates in each of the preferred ship mortgages
was sufficient under Clause 3, because “the maturity date is actually the date
of repayment of the capital and interest of any debt.” Mosquera further
testified that inclusion of the maturity date is an acceptable and often-used
way to satisfy the “dates of repayment of principal, or for satisfaction of the
secured obligations, and of interest, or the method to determine such dates”
under Clause 3. Mosquera explained that some lenders may choose to include
a loan repayment schedule, but that most lenders opt to include only the loan
maturity date.
The Lenders alternatively contend that Grupo R had actual and
constructive knowledge of the preferred ship mortgages and has not shown
that it was prejudiced by the exclusion of loan repayment schedules from the
preferred ship mortgages. The Lenders point out that Grupo R
acknowledged that all nine mortgages were recorded with the PMA and
available for review before initiating this lawsuit. The Lenders also point out
that that Grupo R attached Certificates of Ownership and Encumbrance for
the MAYA and MARANGO to the initial complaint, and these certificates
contained information about the mortgages on the vessels. The Lenders thus
contend that Grupo R had both actual and constructive knowledge of the
preferred ship mortgages prior to initiating this lawsuit and that the primary
purpose of mortgage registration—alerting third parties to the preferred ship
mortgages—was achieved.
Under Rule 44.1 of the Federal Rules of Civil Procedure, “[f]ederal
courts are competent to make determinations of foreign law.” 22 Although
22
United States v. One Afghan Urial Ovis Orientalis Blanfordi Fully Mounted Sheep,
964 F.2d 474, 477 (5th Cir. 1992) (citing FED. R. CIV. P. 44.1).
14
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treated as a question of fact at trial, “[t]he court’s determination [of foreign
law] must be treated as a ruling on a question of law” on appeal. 23 To deter-
mine whether a mortgage is valid under foreign law, a court may consider
“any relevant material or source, including testimony, whether or not sub-
mitted by a party or admissible under the Federal Rules of Evidence.” 24
“Courts frequently accept affidavits from foreign-law experts to guide their
analyses of foreign law.” 25 When there are conflicting opinions offered by
experts on foreign law, “it is not the credibility of the experts that is at issue,
it is the persuasive force of the opinions they expressed.” 26
The district court ultimately held that the Lenders’ preferred ship
mortgages are valid and enforceable under Panamanian law. The court con-
sidered testimony from both Loaiza and Mosquera at trial, as well as these
experts’ corresponding declarations. The court pointed out that Loaiza had
contributed to the 2019 and 2021 editions of the Maritime Law Desk Hand-
book, in which he described Clause 3’s requirement as “the terms for the pay-
ment of principal and interest, or of the maturity date or dates for compli-
ance of the obligation secured by the mortgage, except in the case of mort-
gages granted to secure obligations payable on demand, future or conditional
obligations, when such stipulations are not required.” 27 Acknowledging its
23
Id.; see also Access Telecom, 197 F.3d at 713 (citing FED. R. CIV. P. 44.1); Perez, 826
F.2d at 1450.
24
Banco de Credito Indus., 990 F.2d at 833 n.12 (quoting FED. R. CIV. P. 44.1).
25
IZTACCIHUATL, 510 F. Supp. 3d at 410 (citing McGee v. Arkel Int'l, LLC, 671
F.3d 539, 546–47 (5th Cir. 2012) (considering affidavits from experts on Iraqi law);
Authenment v. Ingram Barge Co., 878 F. Supp. 2d 672, 682 (E.D. La. 2012) (considering
affidavit of expert on English law).
26
Itar–Tass Russian News Agency v. Russian Kurier, Inc., 153 F.3d 82, 92 (2d Cir.
1998) (internal citation omitted).
27
CHRISTIAN BREITZKE, JONATHAN S. LUX, MARITIME LAW DESK HANDBOOK,
Part II. Flag and Registration of Vessels and Mortgages of Vessels (Wolters Kluwer 2019,
15
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authority to make determinations of foreign law pursuant to Rule 44.1, the
court stated that it was “not persuaded that a Panama Maritime Court would
invalidate [Lenders’] mortgages.” The court explained that “the credibility
and persuasive force of the opinion of [Lenders’] expert, Margareth Mos-
quera, are greater than that of Plaintiff’s expert, Jorge Loaiza.”
The district court directed the allocation of proceeds of the MAYA
and the MARANGO pursuant to its conclusions regarding the liens’ relative
priorities. The proceeds from judicial sale of the MAYA were to be allocated
as follows: (1) $63,243.90 to Grupo R and $663,745.12 to Caterpillar for their
custodia legis lien claims; and (2) any remaining proceeds to Eksportfinans for
its First Preferred Vessel Mortgage over the MAYA. The proceeds from the
credit sale of the MARANGO were to be allocated to Grupo R in the amount
of $63,243.90 for its custodia legis lien claims, and the remainder of the
Amended Security Bond released to Norway, KFW, and Caterpillar.
Here, the district court sufficiently weighed the experts’ competing
interpretations of Panamanian law and applied the correct meaning of Clause
3. Both Loaiza and Mosquera are highly experienced and well-credentialed
experts in the field of Panamanian law, but the persuasive force of Loaiza’s
testimony was diminished during the district court proceedings. As noted
above, he admitted to publishing a passage in a well-known maritime law
treatise in which he endorsed Mosquera’s proposed interpretation of Clause
3. During trial, Loaiza testified that this interpretation of Clause 3 only
2021) (emphasis added). This text was not introduced into the record as an exhibit, but the
district court was authorized to consider it under Rule 44.1 of the Federal Rules of Civil
Procedure. FED. R. CIV. P. 44.1. During trial, Loaiza testified that he authored this portion
of the treatise.
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applies to mortgages that are payable on demand or call for a single “balloon”
payment, but he does not offer any evidentiary support for this position.
When considered together, Loaiza’s, Mosquera’s, and the PMA’s
translations of Clause 3 do not appear to preclude enforceability solely
because a loan repayment schedule was omitted. Grupo R’s position appears
to ignore the phrase “o cumplimiento de las obligaciones garantizadas e
intereses,” or, as Loaiza translated it, “or for satisfaction of the secured
obligations.” According to Mosquera, the PMA and Panamanian attorneys
interpret this phrase to mean “maturity date.” Thus, it appears that there
are two different avenues to achieve compliance with Clause 3: provide a loan
repayment schedule or provide the maturity date of the loan in question.
We are also not convinced that compliance with Article 260’s highly
technical requirements is dispositive in this case. We previously held that it
is “well established that the validity of a mortgage is dependent only on the
existence of a debt actually secured by the mortgage and not on the
description of the debt contained in the instrument.” 28 Further, other
circuits have explained that foreign law plays a more limited role in
determining the validity and enforceability of foreign mortgages under
CIMLA. 29 In M/V Prodromos, the Third Circuit explained that “the stringent
procedural requirements for perfecting domestic ship mortgages are not
28
Tropicana Shipping, S.A. v. Empresa Nacional “Elcano” de la Marina Mercante,
366 F.2d 729, 733 (5th Cir. 1966) (emphasis added); see also Merchants Nat. Bank of Mobile
v. Ward Rig No. 7, Off. No. 547149, 634 F.2d 952, 958 (5th Cir. 1981) (citing Tropicana
Shipping for this same proposition); State Bank & Tr. Co. v. Lil Al M/V, No. CV 16-5053,
2018 WL 6326448, at *3 (E.D. La. Dec. 4, 2018).
29
Oil Shipping (Bunkering) B.V. v. Sonmez Denizcilik Ve Ticaret A.S., 10 F.3d 1015,
1023 (3d Cir. 1993) (holding that the Ship Mortgage Act—CIMLA’s precursor—
“specifically speaks to a limited role for foreign law by making the preferred status of
foreign mortgages dependent only on their compliance with the execution and registration
requirements of the applicable foreign law”).
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imposed on foreign ship mortgages . . . to provide a simplified procedure for
enforcing mortgages without destroying substantive rights.” 30 In fact, Grupo
R’s heavy reliance on M/V Prodromos appears to work against it because the
Third Circuit ultimately held that the mortgagees’ failure to include a
technical requirement—the vessel’s navigation license number—did not
render the mortgage invalid under Panamanian law. 31
We conclude that the district court correctly held that the nine
preferred ship mortgages at issue are enforceable under CIMLA and
Panamanian law, and that the Lenders’ preferred ship mortgage liens enjoy
priority over Grupo R’s state-created maritime attachment liens.
C. Whether Caterpillar and KFW waived their respective lien
positions in relation to the credit sale of the MARANGO
Grupo R’s second primary contention on appeal is that KFW and
Caterpillar waived their respective lien positions in relation to the judicial
sales of the MAYA and the MARANGO. Grupo R asserts that “Caterpillar
made use of a procedural tactic that allowed it to purchase the MARANGO
via credit bid, such that no actual monies were provided.” Grupo R claims
that this provided an unfair benefit to Caterpillar because it was never
required to exchange or place any money in the court’s registry to stand as
the res, or substitute security, for the MARANGO after the sale. Grupo R
asserts that, by failing to seek substitute security, KFW forfeited its in rem
30
776 F.2d at 89.
31
Id. at 92.
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lien claim against the MARANGO, and that Caterpillar forfeited its custodia
legis claim against the MARANGO.
Grupo R claims that, by moving for substitute security following the
MARANGO’s credit sale, it was the only party to preserve its lien claims.
Grupo R insists that the Amended Security Bond responded only to Grupo
R’s claims and made no exception for Caterpillar’s custodia legis costs, which
arose as a separate claim. Grupo R claims that, as a result, Caterpillar was not
entitled to reduce the Amended Security Bond by the amount of its custodia
legis lien claim. Grupo R further contends that any judgment KFW may now
possess exists solely in personam against Shanara, as it no longer has a valid
lien claim against the Amended Security Bond.
The Lenders counter that it would be absurd to require Caterpillar to
lodge security for its own custodia legis claim. Moreover, the Lenders contend
that KFW’s claim against the MARANGO is subject to a stipulation of pay-
ment amounts between Caterpillar and KFW under an intercreditor agree-
ment, obviating the need for substitute security. In support, the Lenders ref-
erence Rule E(5)(a) of the Supplemental Rules for Admiralty or Maritime
Claims, which states that “[w]henever process of maritime attachment and
garnishment or process in rem is issued the execution of such process shall be
stayed, or the property released, on the giving of security, to be approved by
the court or clerk, or by stipulation of the parties.” 32
The district court agreed with the Lenders, holding that their inter-
pretation of Supplemental Rule E(5)(a) was correct. The court further held
that the intercreditor agreement containing a stipulation of payment between
KFW and Caterpillar was sufficient to secure KFW’s lien claim against the
MARANGO. That court likened the stipulation to a “letter of undertaking,”
32
FED. R. CIV. P. SUPP. R. E(5)(a).
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which “is customary in the maritime industry” and “is the functional equiv-
alent of a bond for the purpose of securing a claim against a vessel.” The
district court also noted that Grupo R did not offer any authority for its as-
sertion that a secured creditor’s failure to seek substitute security constitutes
lien claim forfeiture.
We perceive no merit in Grupo R’s alternative arguments and there-
fore affirm for the same reasons provided by the district court.
V. Conclusion
For the reasons detailed above, we AFFIRM the district court’s
findings of fact and conclusions of law with regard to (1) the validity,
enforceability, and relative priority of the parties’ liens following the judicial
sale of the MAYA and MARANGO, and (2) the status of Caterpillar’s and
KFW’s lien positions following the credit sale of the MARANGO.
20