Metropolitan News-Enterprise


Friday, November 29, 2019


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Ninth Circuit Affirms Judgment in Favor of  English Lender

Panel Decides Case Involving ‘Arrest’ of Ship Under British Law


By a MetNews Staff Writer


The Ninth U.S. Circuit Court of Appeals, ruling in a case pursuant to English law—while rejecting the premise of a recent British decision involving the same parties in connection with the same dispute—has upheld the sale of a crude oil tanker that, after arriving in Los Angeles and while being unloaded, was “arrested” pursuant to a warrant.

The opinion affirms a summary judgment for damages against the vessel’s owner.

Litigation over the matter has taken place both in the U.S. District Court for the Central District of California and in a court in Great Britain.

The ship, the M/T Megacore Philomena, was seized—or “arrested”—on Dec. 15, 2017, pursuant to a warrant issued by a magistrate upon a showing of probable cause that such was necessary to preserve an asset, which was collateral for a loan by the London lending company, TMF Trustee Limited. The vessel was sold for $232,264.32.

The borrower, Hurricane Navigation, Inc., appealed from the order by Magistrate Judge Alicia G. Rosenberg of the Central District of California that the sale take place and from her grant of summary judgment in favor of the lender on the loan.

Tuesday’s memorandum opinion, by a three-judge panel, acknowledges that the outcome clashes with underpinnings of a recent British decision.

Payment Not Met

It was undisputed that Hurricane failed to make its Dec. 29, 2017 payment on its loan. Hurricane argued on appeal that the arrest of the ship was wrongful because the notice of default was defective and that it was unable to make its final payment because the Dec. 15 arrest of the vessel clouded the title to the ship and spoiled a pending deal for a sale of it.

 At oral argument in Pasadena on Nov. 15, members of the panel expressed doubt that Hurricane had made the point below that the seizure prevented it from making the payment. Judge Paul J. Watford told the borrower’s lawyer:

“If you could show that the arrest of the ship in fact interfered with your ability to ultimately make the last balloon payment in late December, you’d be good to go.”

But, he said, “You haven’t established that,” saying that he “can’t fault” Rosenberg’s finding as to that failure and advising that if his client “had put on a better proof that in fact the arrest of the ship scuttled the sale,” the result could have been different.

The opinion says that “Hurricane has not raised a triable issue as to whether the ship’s allegedly wrongful arrest prevented Hurricane from making the final maturity payment.”

English Court’s Assumption

A footnote observes:

“The English High Court of Justice’s recent opinion in TMF Trustee Limited v. Fire Navigation Inc….is not helpful to Hurricane’s cause, as the court there assumed the evidence would show that the ship’s arrest caused the later breach…, whereas the court here correctly concluded that such evidence was lacking.”

Hurricane contended that TMF wrongfully accelerated the due-date for the payment. The opinion responds:

“….English law is clear that a wrongful acceleration, without more, has no contractual significance….Even if Hurricane were correct that TMF’s allegedly wrongful acceleration and arrest of the ship breached the contract, Hurricane’s appropriate remedy would be to file a counterclaim.

Order for Sale

Tuesday’s opinion also declares that the order for sale of the vessel was valid explaining:

“The district court did not abuse its discretion in ordering the interlocutory sale of the ship. Courts may order an interlocutory sale if there has been ‘unreasonable delay in securing release of the property.’…Courts applying this rule have held that delays as short as four months are unreasonable, even in instances where the owners are actively engaged in defending the underlying litigation.”

It continues:

“Here, by the time the court ordered the ship sold, over six months had passed since the ship’s arrest. At that point, Hurricane had still not posted a bond to secure the ship’s release, nor given any indication that it would be able to post such a bond. This six-month delay in securing the ship’s release was unreasonable, and ordering the sale was thus permissible.”

The case is TMF Trustee Limited v. M/T Megacore Philomena, 18-56189.


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