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Coastal Marine Management, LLC v. Additional Return, LLC

United States District Court, D. Massachusetts

December 20, 2018

Coastal Marine Management, LLC d/b/a Boston Harbor Shipyard and Marina, Plaintiff,
Additional Return, LLC, Intervenor.


          Nathaniel M. Gorton United States District Judge

         This case arises out of a dispute over custodia legis expenses that Boston Harbor Shipyard and Marina has incurred as the custodian of an abandoned vessel under foreclosure. The plaintiff is seeking to enforce an award of custodia legis expenses and claims that it is 1) entitled to the proceeds of the sale of the vessel and 2) that one of the mortgagees, Additional Return, LLC (“Additional Return” or “the intervenor”) is required to pay its pro rata share of expenses as an intervenor in this case.

         I. Background

         In 2008, the purported owners of an abandoned vessel moored at Boston Harbor Shipyard and Marina (“the Shipyard” or “the plaintiff”) failed to make payments to the Shipyard for the storage of the vessel and related fees. In August, 2016, the Shipyard filed a complaint against the owners of the vessel for 1) enforcement of its maritime lien for necessaries against the subject vessel and 2) breach of maritime contract. That month, the United States Marshals served an in rem warrant on the vessel and arrested it. This Court subsequently appointed the Shipyard as custodian of the vessel and, on August 16, 2016 (Docket No. 9), ordered that expenses incurred by the Shipyard as custodian would be subject to the following provisions:

all reasonable expenditures which may be incurred by BHS as substitute custodian, or any party advancing funds to BHS as substitute custodian, in safekeeping or maintaining the vessel while she is in custodia legis, shall be deemed administrative expenses and the first charge on the [v]essel herein, to [be] paid prior to the release of the [v]essel or distribution of the proceeds of its sale;
any intervenor shall owe debt to any party that has previously advanced funds to cover the expenses of the United States Marshals Service and/or substitute custodian, enforceable on motion, consisting of the intervenor's share of such fees and expenses in the proportion that the intervenor's claim bears to the sum of all claims.

         Following that order, Additional Return filed a statement of claim or interest with respect to the vessel for $430, 000 (Docket No. 33). Additional Return submitted that it was filing the claim to inform the Court that 1) it had a duly perfected mortgage on the vessel, 2) it had no intention of waiving its rights and 3) it did not agree to contribute to payment of fees or expenses incurred by the plaintiff. Additional Return further noted that it was not seeking to foreclose its mortgage on the vessel at that time.

         In January, 2017, the Shipyard moved for interlocutory sale of the vessel and for the right to credit bid up to the amount of the indebtedness of the vessel at such sale. Additional Return filed an objection to the sale, whereupon this Court entered an order that allowed plaintiff's motion for interlocutory sale but, at the same time, 1) required an appraisal of the vessel prior to the sale and 2) instructed Additional Return to show cause why the Court should not dismiss its claim of interest in the vessel. Shortly thereafter, in its response, Additional Return asserted that it did not need to intervene in this matter to have standing to object to the sale but then, in a separate pleading on the same day, moved to intervene, provisionally, so that it would have standing to object to the interlocutory sale of the vessel (See Docket No. 66).

         After the initial sale of the vessel, this Court held a confirmation hearing with respect to the sale during which it allowed Additional Return's motion to intervene on condition that the mortgagee share in the custodia legis expenses (See Docket No. 78 and transcript from the hearing). Despite receiving notice of the hearing, counsel for Additional Return did not appear nor did it object to the Court's subsequent ruling.

         Within one week of the confirmation hearing, the plaintiff filed an emergency motion to reopen the sale at foreclosure because a third party had filed an upset bid on the vessel. This Court allowed that motion but spelled out in detail the procedure to be followed with respect to the re-sale (See Docket No. 86). The vessel was eventually sold for $100, 000 and the proceeds of the sale, less the costs incurred by the U.S. Marshals, is currently held in escrow by the Court ($98, 391.90).

         Following the final sale of the vessel, the plaintiff filed a motion for the disbursement of sale proceeds and apportionment of custodia legis expenses, which is pending before this Court.

         II. Legal Analysis

         A. Legal Standard

         Expenses incurred with respect to custodia legis are afforded administrative priority because they are necessary to preserve the res. See The Poznan, 274 U.S. 117, 121 (1927). Interested parties, including the preferred ship mortgagee, were clearly informed about that priority when this Court ...

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