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South Lafourche Bank & Trust Co. v. M/V Noonie G

United States District Court, E.D. Louisiana

June 19, 2017

SOUTH LAFOURCHE BANK & TRUST CO., Plaintiff
v.
M/V NOONIE G, in rem, et al., Defendants

         SECTION: “E”

          ORDER AND REASONS

          SUSIE MORGAN UNITED STATES DISTRICT JUDGE.

         Before the Court is a motion to dismiss for lack of subject-matter jurisdiction filed by Defendants[1] and a motion for summary judgment filed by the Plaintiff.[2] Both motions are opposed. For the following reasons, the motion to dismiss for lack of subject-matter jurisdiction is DENIED and the motion for summary judgment is GRANTED IN PART and DEFERRED IN PART.

         BACKGROUND

         Guilbeau Boat Rentals, LLC owns the M/V NOONIE G.[3] Todd Guilbeau, on behalf of Guilbeau Boat Rentals, LLC, executed a first preferred maritime mortgage in the amount of $900, 000 on the M/V NOONIE G (the “mortgage”)[4] and a first preferred ship mortgage note (the “preferred ship mortgage note”) in the amount of $900, 000 on August 14, 2007.[5] The preferred ship mortgage note was signed by Guilbeau Boat Rentals, LLC and endorsed in blank by its member/manager, Todd Guilbeau.[6] The preferred ship mortgage note was pledged to secure a line of credit up to a maximum principle amount of $900, 000.[7]

         On March 27, 2014, Guilbeau Boat Rentals, LLC executed a promissory note for $642, 283.09 (the “promissory note”) payable to the order of South Lafourche Bank and Trust Company (the “Bank”).[8] The Bank contends the debt represented by the promissory note is secured by the mortgage on the M/V NOONIE G and that the mortgage qualifies as a preferred ship mortgage.[9] The Bank alleges Guilbeau Boat Rentals, LLC and Todd Guilbeau have failed to pay the debt owed to the Bank.[10] According to the Bank, no payments have been made by any of the Defendants, and there now remains due $639, 519.60 plus interest on the promissory note.[11] No payment on the principal has been made since August 26, 2014.[12]

         On July 26, 2016, Allied Shipyard, Inc. filed a complaint in intervention, alleging it provided to the M/V NOONIE G materials, repair services, and machinery in the sum of $120, 380.73, which remains due despite amicable demand by Allied upon Guilbeau Boat Rentals, LLC.[13]

         On January 30, 2017, the Bank filed a motion for summary judgment, asking the Court to enter a judgment as follows:

A. In favor of South Lafourche Bank & Trust Company and against the M/V NOONIE G, Official Number 620862, its engines, tackle, apparel, etc., in rem, Guilbeau Boat Rentals, LLC, and Todd Guilbeau, in personam, in solido, in the sum of Six Hundred Thirty Nine Thousand Five Hundred Nineteen and 60/100 ($639, 519.60) Dollars together with interest at the rate of Six and 71/100 (6.71%) per cent per annum from September 30, 2015, until paid, plus attorney's fees and all costs of these proceedings.
B. In favor of South Lafourche Bank & Trust Company and against the defendant, Anthony Guilbeau, Jr., in the sum of One Hundred Twenty-Five Thousand ($125, 000.00) Dollars, together with legal interest from date of judicial demand as well as all costs of these proceedings, said judgment to be in solido with the judgment rendered against the M/V NOONIE G, in rem, and Guilbeau Boat Rentals, L.L.C., Todd Guilbeau and Lorraine G. Guilbeau, in personam.
C. In favor of South Lafourche Bank & Trust Company and against the defendant, Lorraine G. Guilbeau, in the sum of One Hundred Twenty-Five Thousand ($125, 000.00) Dollars, together with legal interest from date of judicial demand as well as all costs of these proceedings, said judgment to be in solido with the judgment rendered against the M/V NOONIE G, in rem, and Guilbeau Boat Rentals, L.L.C., Todd Guilbeau and Anthony Guilbeau, Jr., in personam.
D. Declaring that the first preferred mortgage dated August 14, 2007 is a valid and subsisting lien upon the Oil Screw M/V NOONIE G, Official Number 620862, her engines, tackle, apparel, etc., and all other necessaries thereunto belonging and appertaining as described in said preferred mortgage described prior and superior to the interests, liens or claims of any and all persons, firms or corporations whatsoever.
E. Directing that the M/V NOONIE G, Official Number 620862, its engines, tackle, apparel, in rem, be sold by the United States Marshal of this District to the highest bidder, free and clear of all liens and pre-existing claims on said vessel.
F. Declaring that, in the event that South Lafourche Bank & Trust Company is the successful bidder at the sale of the M/V NOONIE G, Official Number 620862, that South Lafourche Bank & Trust Company be allowed to substitute its mortgage up to the value of that mortgage, in lieu of payment for the cash purchase price at the U.S. Marshal's sale; South Lafourche Bank & Trust Company to pay, in the event that it is the successful bidder, the U.S. Marshal's commission in connection with the sale.
G. Declaring that all claims against the M/V NOONIE G, Official Number 620862, except those of South Lafourche Bank & Trust Company be defaulted and barred by laches.
H. For such other and further relief as the Court deems just and equitable.

         In its motion for summary judgment, the Bank argues the mortgage is a valid preferred ship mortgage under the Ship Mortgage Act. The Defendants and the Intervenor filed oppositions to the motion for summary judgment.[14]

         On February 7, 2017, the Defendants Guilbeau Boat Rentals, LLC (individually and as owner of the M/V NOONIE G) and Todd Guilbeau, Anthony Guilbeau, Jr. and Lorraine Guilbeau (collectively, “Defendants”) filed a motion to dismiss for lack of subject-matter jurisdiction, arguing the mortgage is invalid under Louisiana law, and therefore cannot be a preferred ship mortgage under the Ship Mortgage Act.[15] On April 27, 2017, the Bank filed its opposition to the Defendants' motion to dismiss.[16] The Defendants filed a reply memorandum, [17] to which the Bank filed a sur-reply memorandum.[18]

         On May 19, 2017, the Court heard oral argument on both motions.[19]

         LEGAL STANDARDS

         I. Motion to Dismiss for Lack of Subject-Matter Jurisdiction

          “Federal courts are courts of limited jurisdiction; without jurisdiction conferred by statute, they lack the power to adjudicate claims.”[20] A motion to dismiss under Federal Rules of Civil Procedure 12(b)(1) challenges a federal court's subject-matter jurisdiction.[21] Under Rule 12(b)(1), “[a] case is properly dismissed for lack of subject matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the case.”[22] “Lack of subject-matter jurisdiction may be found in the complaint alone, the complaint supplemented by the undisputed facts as evidenced in the record, or the complaint supplemented by the undisputed facts plus the court's resolution of the disputed facts.”[23]“When, as here, grounds for dismissal may exist under both Rule 12(b)(1) and Rule 12(b)(6), the Court should, if necessary, dismiss only under the former without reaching the question of failure to state a claim.”[24]

         II. Summary Judgment

         Summary judgment is appropriate only “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[25] “An issue is material if its resolution could affect the outcome of the action.”[26]When assessing whether a material factual dispute exists, the Court considers “all of the evidence in the record but refrains from making credibility determinations or weighing the evidence.”[27] All reasonable inferences are drawn in favor of the nonmoving party.[28]There is no genuine issue of material fact if, even viewing the evidence in the light most favorable to the nonmoving party, no reasonable trier of fact could find for the nonmoving party, thus entitling the moving party to judgment as a matter of law.[29]

         If the dispositive issue is one on which the moving party will bear the burden of persuasion at trial, the moving party “must come forward with evidence which would ‘entitle it to a directed verdict if the evidence went uncontroverted at trial.'”[30] If the moving party fails to carry this burden, the motion must be denied. If the moving party successfully carries this burden, the burden of production then shifts to the nonmoving party to direct the Court's attention to something in the pleadings or other evidence in the record setting forth specific facts sufficient to establish that a genuine issue of material fact does indeed exist.[31]

         If the dispositive issue is one on which the nonmoving party will bear the burden of persuasion at trial, the moving party may satisfy its burden of production by either (1) submitting affirmative evidence that negates an essential element of the nonmovant's claim, or (2) demonstrating there is no evidence in the record to establish an essential element of the nonmovant's claim.[32] When proceeding under the first option, if the nonmoving party cannot muster sufficient evidence to dispute the movant's contention that there are no disputed facts, a trial would be useless, and the moving party is entitled to summary judgment as a matter of law.[33] When, however, the movant is proceeding under the second option and is seeking summary judgment on the ground that the nonmovant has no evidence to establish an essential element of the claim, the nonmoving party may defeat a motion for summary judgment by “calling the Court's attention to supporting evidence already in the record that was overlooked or ignored by the moving party.”[34] Under either scenario, the burden then shifts back to the movant to demonstrate the inadequacy of the evidence relied upon by the nonmovant.[35] If the movant meets this burden, “the burden of production shifts [back again] to the nonmoving party, who must either (1) rehabilitate the evidence attacked in the moving party's papers, (2) produce additional evidence showing the existence of a genuine issue for trial as provided in Rule 56(e), or (3) submit an affidavit explaining why further discovery is necessary as provided in Rule 56(f).”[36] “Summary judgment should be granted if the nonmoving party fails to respond in one or more of these ways, or if, after the nonmoving party responds, the court determines that the moving party has met its ultimate burden of persuading the court that there is no genuine issue of material fact for trial.”[37]

         LAW AND ANALYSIS

         The Bank's basis for asserting federal admiralty jurisdiction in this matter is that the mortgage is a preferred ship mortgage under the Ship Mortgage Act.[38] In their Rule 12(b)(1) motion to dismiss, Defendants contend this Court does not have subject-matter jurisdiction to hear this matter because the mortgage is not a preferred ship mortgage.[39]Defendants argue the Ship Mortgage Act does not provide a basis for jurisdiction because the financing documents on which the Bank relies are structured in the form of a collateral chattel mortgage, which the Defendants contend is no longer a valid instrument for mortgaging movable property under Louisiana law.[40] Defendants assert that, if the Bank's mortgage is not valid under Louisiana law, it is not a valid preferred ship mortgage under the Ship Mortgage Act.[41] If the Bank's mortgage is not a valid preferred ship mortgage for the purposes of the Ship Mortgage Act, this Court has no federal question subject-matter jurisdiction.

         The Bank's motion for summary judgment raises the same issue, as the Bank seeks a declaration that the mortgage is a valid preferred ship mortgage, enforceable under the Ship Mortgage Act.[42] Because both motions raise the same issue-whether the Bank's mortgage is a valid preferred ship mortgage-the Court will consider the motions together.

         The Ship Mortgage Act is an integral part of maritime law.[43] Before the passage of the Ship Mortgage Act, a mortgage on a vessel was practically worthless because the enforcement of the mortgage was not a maritime matter that could be litigated in admiralty jurisdiction.[44] In response to this problem, Congress passed the Ship Mortgage Act, which provides for a “preferred ship mortgage” that creates a maritime lien against the mortgaged vessel.[45] The Ship Mortgage Act is designed to “stimulate private investment in U.S. Shipping and to protect the United States as the principal source of credit.”[46] “The primary purpose of the Ship Mortgage Act is to induce private capital to invest in shipping” and to “create ‘certainty in financing' vessels of the United States.”[47]

         In enacting the Ship Mortgage Act, Congress recognized the need for “exclusive jurisdiction of the admiralty court and uniformity of procedure in ship mortgage foreclosure proceedings.”[48] As a result, although state law may supplement maritime law, “it must yield when it interferes with [the Ship Mortgage Act's goals of] harmony and uniformity, or where it would defeat reasonably settled expectations of maritime actors.”[49] Leaving each state to decide whether a mortgage is valid under the Ship Mortgage Act disrupts uniformity in maritime law by interfering with maritime actors' settled expectations.[50]

         The Ship Mortgage Act defines a preferred ship mortgage as one that “(1) includes the whole of the vessel; (2) is filed in substantial compliance with [46 U.S.C. § 31321]; [and] (3) covers a documented vessel . . . .”[51] Section 31321 requires that a preferred ship mortgage:

(1) identify the vessel;
(2) state the name and address of each party to the instrument;
(3) state, if a mortgage, the amount of the direct or contingent obligations . . . that is or may become secured by the mortgage, ...

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