Note: Pursuant to a claim for USD 229,000 for work performed, Malin International; Ship Repair & Drydock, Inc. (Creditor) sued Oceanographia, S.A. DE C.V. (Debtor), a Mexican corporation, owned by Cal Dive (Owner), and attached in rem the bunkers of a vessel charted by Debtor under Admiralty Rule C. The United States District Court for the Southern District of Texas, Freshener, Magistrate Judge, recommended that the action be settled in favor of the Creditor.

Owner argued that the Creditor had not alleged a valid maritime claim because a shipbuilding contract does not equate to a maritime claim under federal law. The Magistrate acknowledged that the law recited by Owner was correct in that shipbuilding contracts are not governed by maritime law but he disagreed with the application. The Magistrate found that Creditor's work was not shipbuilding but rather the "necessaries" that were essential to the protection of the vessel and under the Federal Maritime Lien Act would give rise to a federal cause of action.

Debtor and Owner also argued that Debtor did not own the bunkers at the time they were attached as Debtor had yet to purchase the fuel contained in the bunkers. They further argued that the funds had not been invoiced and title had not passed. However, the Magistrate recommended that Debtor had enough of a possessory interest. The Magistrate reached this recommendation based on the fact that the Debtor and a subsidiary of Owner had already executed a bareboat charter and Debtor had paid USD 1.7 million and provided a letter of credit for USD 800,000. Furthermore, the Magistrate found that there was no retention of title clause in the sale agreement and absent such clause, "Rule B does not identify the specific legal interest in the property a defendant must have before it is subject to attachment and, absent actual payment, the defendant could never literally own the bunkers, the defendant's rights to possess and burn the fuel created a sufficient interest to support a Rule B attachment." The Magistrate also found that the LC Owner's subsidiary had access to would be enough to cover Debtor's costs.

Owner further argued that attachment was precluded under Rule B because Debtor could be found within the district. The Magistrate disagreed, recommending that service upon the Secretary of State would require Creditor to travel into another district and that being found within the district for Rule B purposes "requires the defendant have minimum contacts within the district to meet the due process standard and be able to be served with process in the district." The Magistrate was of the opinion that the United States District Court for the Southern District of Texas would not have in personam jurisdiction over Debtor.

Finally, the Magistrate recommended that Creditor was not at fault for arresting the vessel since they were under the impression that, at the time, it was owned by Debtor and that Owner was not harmed by the arrest.



The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.