April 21, 2016
Attachable Property under Rule B based on Texas State Common Law
Federal Maritime Jurisprudence Presents Ambiguity—Fifth Circuit Explains what is Attachable Property under Rule B based on Texas State Common Law: Malin International Ship Repair, Inc. v. Oceanografia, S.A.
article originally appeared at https://www.irmi.com/articles/expert-commentary/maritime-law-ambiguity
By: Michael A. Orlando, Meyer Orlando, LLC
Malin, a shipyard, provided work to a vessel owned by Cal-Dive, under ultimate bareboat charter to OSA, a Mexican corporation. The charter agreement stated that at the time of delivery of the vessel to OSA, OSA shall purchase the bunkers in the said vessel at the then current market price as the port of delivery. Two weeks after delivery of the vessel to OSA, Malin attached the bunkers under Rule B (Supplemental Admiralty Rules) to obtain security for its claims and to obtain jurisdiction over OSA. The district court refused to vacate the attachment and granted summary judgment on Malin’s claims for damages and attorney’s fees. The Fifth Circuit affirmed.
Malin supplied work, services, materials and supplies to OSA, at the request of Con-Dive, to the vessel M/V KESTREL. Malin’s emails to OSA regarding the overdue invoices were acknowledged as being owed by OSA. When Malin attached the fuel bunkers, OSA and Cal-Dive sought to vacate the attachment contending that OSA did not have an attachable interest in the bunkers at the time of the attachment because OSA had not yet paid Cal-Dive for the bunkers so title had not yet passed. In fact, Cal-dive had not yet invoiced OSA for the bunkers as delivery had only recently occurred. The district court found OSA’s possessory interest in the bunkers was a sufficient interest under Rule B. (For purposes of this article, the contract or alternative claim of quantum meruit issue is not of consequence.)
Rule B (Fed. R. Civ.P. Supp. R. B(1)(b)) provides:
If a defendant is not found within the district when a verified complaint praying for attachment and the affidavit required by Rule B(1)(b) are filed, a verified complaint may contain a prayer for process to attach the defendant’s tangible or intangible personal property – up to the amount sued for – in the hands of garnishees named in the process.
The Rule has the dual purpose of securing a respondent’s appearance and assuring satisfaction on successful claims. There is obvious room for debate as to what constitutes properly attachable property.
In 1929, the Second Circuit held that possession with conditional right to title was a sufficiently attachable interest. (Kingston Dry Dock Co. v. Lake Champlain Trans. Co., 31 F.2d 265, 267 (2d. Cir. 1929)).
Later, the Third Circuit ruled that a bareboat charterer did not possess an attachable interest because the charterer has no title or expectancy of title, whether conditional or otherwise.
This Court goes on to examine other cases discussing whether ownership, possession, or other characteristics are necessary for there to be an attachable interest and concludes:
The body of federal maritime jurisprudence presents ambiguity as to whether, as the district court held here, a possessory interest is attachable under Rule B. Neither does federal maritime law categorize the type of interest that OSA held in the fuel bunkers at the time of the attachment. Confronted with such a void, other courts “generally look to state law to determine property rights.”
Since the case was filed in Texas, the Court looked to Texas law to determine the nature of the property interest held by OSA in the bunkers at the time of the attachment. The Court determined that this transaction for the bunkers was not a sale of goods under the Uniform Commercial Code, but instead the bunker purchase arose from the bareboat charter. The charter specified that Texas law applied when maritime law was silent on the issue and thus Texas common law had to be examined. Under Texas common law, title to personal property passes from seller to buyer based on the parties’ intent. The evidence indicated the parties intended a credit sale rather than a cash transaction (making the fact the bunkers had not yet been paid for immaterial). Additionally, OSA had possession of the bunkers at the time of the attachment. Thus, the Court concluded that under Texas law title to the bunkers passed on delivery to OSA so the bunkers were properly attachable by Marlin.
The Court holds that title to property unquestionably suffices as an attachable interest under Rule B, therefore it affirmed the Rule B attachment as being valid. The implication of the Court’s holding is that a mere possessory interest would be insufficient, otherwise it would have affirmed the district court’s ruling on that basis.
The lessons from this case are that there are no easy or simple answers to what constitutes an attachable interest under Rule B. The place of the attachment and the particular facts relating to parties’ intent on title, ownership and possession, coupled with state law—or perhaps federal maritime law depending on the circuit—will determine the outcome. The shame of it is that the outcome may be different depending on which coastal state is used for the jurisdiction on the attachment. This is about as far from uniformity as maritime principles can get. This begs for U.S. Supreme Court guidance.