Monjasa Ltd. v. M/T Megacore Philomena

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS APR 3 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
TMF TRUSTEE LIMITED, No. 19-55532
Plaintiff-Appellee, D.C. No. 2:17-cv-09010-AGR
v.
MEMORANDUM*
MONJASA LTD.,
Intervenor-Plaintiff-
Appellant,
v.
NOVELL INVESTMENTS, INC.; et al.,
Intervenor-Plaintiffs-
Appellees,
v.
M/T MEGACORE PHILOMENA, her
engines, boilers, tackles, and other
appurtenances, etc., in rem; HURRICANE
NAVIGATION, INC., a Marshall Islands
Corporation, in personam,
Defendants-Appellees.
Appeal from the United States District Court
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
for the Central District of California
Alicia G. Rosenberg, Magistrate Judge, Presiding
Submitted April 1, 2020**
Pasadena, California
Before: BEA and BADE, Circuit Judges, and Y. GONZALEZ ROGERS,***
District Judge.
Intervenor-Plaintiff-Appellant Monjasa Ltd. (“Monjasa”) appeals the district
court’s denial of its motion for priority ranking of its maritime lien on the vessel
M/T Megacore Philomena (“Philomena”). This motion was opposed by Plaintiff-
Appellee TMF Trustee Limited (“TMF”), mortgagee of the Philomena, who
initiated this foreclosure action against the Philomena and its owner, Hurricane
Navigation, Inc. (“Hurricane”). We assume familiarity with the facts and discuss
them only as necessary to explain our decision. For the reasons discussed below,
we affirm.
Monjasa does not dispute the district court’s conclusions that TMF is the
valid holder of a preferred mortgage lien on the Philomena within the meaning of
46 U.S.C. § 31325(a), or that TMF’s mortgage lien is superior to Monjasa’s
maritime lien under federal law. See Wardley Int’l Bank, Inc. v. Nasipit Bay
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Yvonne Gonzalez Rogers, United States District Judge
for the Northern District of California, sitting by designation.
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Vessel, 841 F.2d 259, 263 (9th Cir. 1988). Instead, Monjasa argues that “[t]he
preferred mortgage lien should be equitably subordinated to Monjasa’s lien for
necessaries based on Lenders[’] inequitable conduct that gave it an unfair
advantage.” But Monjasa has not made any showing that TMF “engaged in
inequitable conduct,” a showing that is required for equitable subordination. See
id. For example, Monjasa does not challenge the district court’s conclusion that
TMF’s mortgage on the Philomena was valid under Marshall Islands law. Further,
Monjasa has submitted no evidence that, like in Wardley, would suggest that the
lenders and borrowers here were not operating at arm’s length, or that
consideration was not given for the promissory note—or anything else to show that
“the financial transaction was a sham.” Id. at 264.
Monjasa’s arguments that TMF’s timing in arresting the Philomena
constitutes inequitable conduct similarly fail. There is no evidence in the record
that TMF would or should have known that the arrest might have thwarted the
purported sale. Rather, as the district court concluded, the evidence in the record
suggests that TMF was justified in concluding that the sale was unlikely,
particularly because the agreed upon date of sale had passed a month prior to the
Philomena’s arrest. Likewise, Monjasa can point to nothing in the record to
support its argument that TMF knew maritime liens were accumulating and not
being paid. To the contrary, TMF points to uncontroverted evidence that no
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Philomena expense invoices were presented to TMF after October 1, 2017—almost
two months before Monjasa supplied fuel to the vessel. Even if TMF somehow
knew that the Philomena’s debts were not being paid (and there is no evidence to
suggest that it did) and refused to act, “[i]nequitable conduct sufficient to support
equitable subordination cannot be based on mere negligence . . . or indifference.”
Md. Nat’l Bank v. Vessel Madam Chapel, 46 F.3d 895, 901 (9th Cir. 1995).
In the alternative, Monjasa requested that the district court order a
marshaling of assets to “require TMF to pursue the M/T HONAMI before any
payment of any proceeds from the sale of the PHILOMENA.” However, the M/T
Honami was not within the jurisdiction of the district court. Thus, the district court
correctly rejected Monjasa’s request, because “[a] court of equity will not entertain
the question of marshalling assets, unless both funds are within the jurisdiction and
control of the court.” Lewis v. United States, 92 U.S. 618, 623 (1875) (citations
omitted). Further, even if the court had jurisdiction over the M/T Honami,
Monjasa cites to no evidence that would support the district court’s ordering a
marshaling of assets. And courts should refrain from doing so when, as here, the
order would “operate to the detriment of other creditors,” such as those to whom
the M/T Honami likely owes debts. John W. Stone Oil Distrib., Inc. v. M/V Mr. W.
Bruce, 752 F.2d 184, 187 (5th Cir. 1985).
AFFIRMED.
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