
USCA1 Opinion

	




          December 23, 1992                            United States Court of Appeals                            United States Court of Appeals                                For the First Circuit                                For the First Circuit                                 ____________________        No. 92-1530                                  TAINO LINES, INC.,                                Plaintiffs, Appellees,                                          v.                             M/V CONSTANCE PAN ATLANTIC,                    ITS ENGINES, TACKLE, EQUIPMENT, ETC. ET. AL.,                                Defendants, Appellees.                                _____________________                                CURTIS SHIPPING, INC.,                                Defendant, Appellant.                                 ____________________        No. 92-2133                                  TAINO LINES, INC.,                                Plaintiffs, Appellees,                                          v.                             M/V CONSTANCE PAN ATLANTIC,                    ITS ENGINES, TACKLE, EQUIPMENT, ETC. ET. AL.,                                Defendants, Appellees.                                _____________________                           CURTIS SHIPPING, INC., ET. AL.,                                Defendant, Appellant.                                _____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                     [Hon. Carmen C. Cerezo, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                         Torruella and Stahl, Circuit Judges,                                              ______________                         and Skinner,* Senior District Judge.                                       _____________________                                 ____________________            Harry A. Ezratty for appellant.            ________________            Juan  A.  Lopez-Conway,  with  whom  Herbert  W.  Brown,  III  and            ______________________               ________________________        Calvesbert & Brown, were on brief for appellees.        __________________                                 ____________________                                 ____________________        _____________________        *Of the District of Massachusetts, sitting by designation.                      STAHL, Circuit Judge.   In this appeal,  defendant-                             _____________            appellant Curtis  Shipping,  Inc. ("Curtis")  challenges  the            district court's  award, without a hearing,  of full custodia                                                                 ________            legis   expenses  to  plaintiff-appellee  Taino  Lines,  Inc.            _____            ("Taino")  for   certain  expenditures   made  by  Taino   as            substitute custodian  of defendant  in rem the  M/V Constance                                                __ ___            Pan  Atlantic  ("the vessel").    Finding  no  error  in  the            district court's ruling, we affirm.                                          I.                                          I.                                          __                                      BACKGROUND                                      BACKGROUND                                      __________                      Because the weakness of Curtis's  arguments becomes            more apparent  with a fuller understanding  of the convoluted            history  of  this  litigation,  we  set  forth  the  relevant            background  in some  detail.   This action  began August  15,            1990,  when Taino  filed  a verified  complaint in  admiralty            against the vessel  in rem and against Curtis, Robert Brewis,                                __ ___            and Connie Frazier in personas.1  The  complaint alleged that                               __ ________            Curtis,  the owner  of the  vessel, breached a  1989 Bareboat            Charterparty  Agreement ("the  Agreement") under  which Taino            had chartered the vessel  to carry cargo between the  Port of            Mayaguez,  Puerto Rico,  and certain  ports in  the Dominican            Republic.    The complaint  further  requested  the entry  of                                            ____________________            1.  According to  the complaint, Curtis  is an  alter ego  of                                                            _____ ___            Robert Brewis and Connie Frazier.  Neither Brewis nor Frazier            is a party to this appeal.                                         -3-                                          3            judgment and/or the confirmation  of an arbitration award2 in            an  amount  exceeding  $269,000  to  cover Taino's  damages.3            Finally, the  complaint prayed that the  vessel, as defendant            in rem, "be compelled  to act as security to  the arbitration            __ ___            in Miami."   To  that end, the  complaint asked the  court to            issue a  warrant for the vessel's  arrest.  See 9  U.S.C.   8                                                        ___            (1970).4                      After   reviewing   Taino's   verified   complaint,            Magistrate  Judge Castellanos issued  an order directing that            the  vessel be arrested.   See Rule C(3)  of the Supplemental                                       ___            Rules    for   Certain   Admiralty    and   Maritime   Claims            ("Supplemental Rules").5   He also appointed Taino substitute                                            ____________________            2.  The  Agreement provided that  any dispute  between Curtis            and Taino would be settled by arbitration in Miami, Florida.            3.  The complaint subsequently was amended to request damages            in excess of $910,000.            4.  9 U.S.C.     8  governs proceedings  begun  by  libel  in            admiralty and seizure of a vessel or property.  It provides:                   If the basis of jurisdiction be a cause of action                 otherwise    justiciable   in    admiralty,   then,                 notwithstanding  anything  herein to  the contrary,                 the party  claiming to  be aggrieved may  begin his                 proceeding hereunder  by libel  and seizure of  the                 vessel  or  other  property  of  the   other  party                 according   to  the   usual  course   of  admiralty                 proceedings,   and  the   court  shall   then  have                 jurisdiction to direct the  parties to proceed with                 the  arbitration and  shall retain  jurisdiction to                 enter its decree upon the award.            5.  Rule C of the Supplemental Rules  governs actions in rem.                                                                  __ ___            In relevant  part, the version of Rule  C(3) in effect at the            time Taino filed its complaint provided:                                         -4-                                          4            custodian  of  the  vessel.    On   August  27,  1990,  after            conducting   a   post-arrest   hearing,    Magistrate   Judge            Castellanos ordered defendants to post security in the amount            of $350,000 in  order to  obtain the release  of the  vessel.            See generally Supplemental Rule  E(5) (governing the  posting            ___ _________            of  bonds to release property that has been arrested in rem).                                                                 __ ___            The order specifically  stated:  "The  release of the  vessel            should be  undertaken upon  posting of [$350,000]  within the            next ten  (10) days  or[,] upon  request  of [the]  aggrieved            party[,] the sale of  the arrested vessel shall  be ordered."            Defendants never posted the security.                      On  September 5,  1990, both  the in  rem defendant                                                        __  ___            vessel and defendants Brewis and Frazier requested a stay  of            the proceedings  until the parties' dispute  had proceeded to            arbitration.   On September 10,  1990, Taino objected  to the            request for a stay on the  grounds that no security had  been            posted, and moved for the  interlocutory sale of the  vessel.            On  September 24,  1990, the  district court issued  an order            notifying defendants that Taino's motion for an interlocutory                                            ____________________                 [T]he  verified complaint and any supporting papers                 shall  be  reviewed  by   the  court  and,  if  the                 conditions for an action in rem appear to exist, an                 order so stating and  authorizing a warrant for the                 arrest of  the vessel or other property that is the                 subject of the action  shall issue and be delivered                 to  the clerk  who  shall prepare  the warrant  and                 deliver it to the marshal for service. . . .                                         -5-                                          5            sale  of  the vessel  would be  granted unless  security were            posted  within three  days.   On  September 25,  1990, Curtis            filed a notice of stay advising the court that it had filed a            Chapter  11  petition for  bankruptcy  in  the United  States            Bankruptcy Court  for the  District of Maryland  and invoking            the automatic stay  of 11 U.S.C.    362 (1979 & Supp.  1992).            Attached to the  notice of  stay was a  proposed order  which            apparently contained language  directing that  the arrest  of            the  vessel be  dissolved.6   Evidently,  the proposed  order            never was noticed to or served upon Taino.7                      For  several months, the parties skirmished in both            the  district court  and  in bankruptcy  court over  numerous            issues, i.e.,  whether the interlocutory sale  should proceed            despite the automatic stay of 11 U.S.C.   362, whether the in                                                                       __            rem  action should be stayed, and  whether Curtis's filing of            ___            the  Chapter 11 petition was  sufficient for Curtis to obtain            the  release of  the  vessel even  where  it had  not  posted            security.  Finally, on February 5, 1991, the bankruptcy court            issued an order  which (1)  enjoined Taino  from selling  the            vessel;  (2) directed Taino to turn the vessel over to Curtis            "upon the posting by [Curtis] of a bond in favor of Taino . .                                            ____________________            6.  The notice of stay contained no such language.              7.  Indeed,  it appears  that  Taino only  became aware  that            Curtis was  seeking dissolution  of the vessel's  arrest when            the  court  so  notified it  in  a  margin  order entered  on            Curtis's notice of stay.                                         -6-                                          6            . in the amount of $350,000.00, or such lower  amount or none            as may be established in equity by the United States District            Court for  the District of Puerto  Rico . . .";  (3) enjoined            Taino "from continuing the civil action pending in the United            States District Court  for the District of  Puerto Rico"; and            (4) modified  the automatic stay  so that  Curtis could  both            petition  the district court to  have its bond lowered and/or            changed in nature  and request  that Taino "post  a bond  for            damages which [Curtis] alleges it has suffered[.]"8                      Although the  record is not clear  on exactly when,            sometime  in February  1991, Curtis  filed with  the district            court  a motion to compel Taino to arbitrate.9  Taino opposed            the  motion,  arguing (1)  that it  should  not be  forced to            arbitration without  obtaining security from Curtis,  and (2)            that, in  light of the  bankruptcy court's February  5, 1991,            order, Curtis should  be directed to  seek relief before  the            bankruptcy  court and not  the district court.   The district                                            ____________________            8.  Although not a part of the district court record, we take            judicial  notice of  the  proceedings before  the  bankruptcy            court per the request of Curtis.  See Fed. R. Evid. 201(d).                  ___                         ___            9.  The copy  of the  motion in  Curtis's  appendix is  dated            February  13, 1991.  The motion itself is not, however, date-            stamped.  Nor does  the district court docket  sheet indicate            that any such motion was filed on February 13, 1991.  Rather,            the  docket  sheet reflects  that  the  motion  was filed  on            February 25, 1991.                                         -7-                                          7            court  did  not respond  specifically  to  Curtis's motion,10            and on March 15,  1991, Curtis filed a second  motion seeking            to  compel Taino  to  proceed to  arbitration.   Again  Taino            opposed, arguing  that the bankruptcy court was  the forum in            which Curtis should be  pressing its argument.  On  April 16,            1991, the district court denied Curtis's motion.                      Meanwhile,  on  April  11, 1991,  Taino  had  moved            before  the district court  for the  interim approval  of the            fees  and expenses it  had thus far  incurred in  its role as            custodia legis of  the vessel.   Curtis  opposed the  motion,            ________ _____            arguing that the automatic stay of 11 U.S.C.   362 prohibited            such approval.   On May  10, 1991, the  court denied  Taino's            motion.11                      On  May 7,  1991,  after  considering the  parties'            arguments on the question of whether Taino could be compelled            to arbitration where  Curtis had not yet posted security, the            bankruptcy   court  ordered   the   parties  to   proceed  to            arbitration.  Arbitration commenced on May 30, 1991.  On June            19,  1991, the arbitrators found  for Taino in  the amount of            $144,206 plus  prejudgment interest,  taxable costs,  and the                                            ____________________            10.  On February  27, 1991, the district  court did, however,            issue an order staying the action before it, stating that the            arrest of  the vessel  would  remain in  effect until  either            Curtis posted  security or the bankruptcy  court "vacates the            automatic  stay  of  this  action,  avoid[s]  the  liens,  or            otherwise act[s] according to its jurisdiction."            11.  The basis  of the  district court's denial  is not  made            clear by the record.                                         -8-                                          8            arbitrators' fees.  On July 5, 1991, Taino requested that the            district  court confirm  the  arbitration award.   The  court            confirmed the arbitrator's award on July 29, 1992.                      Though nothing in  the record documents  such fact,            Taino  represents that,  on August  31, 1991,  the bankruptcy            court  lifted the automatic stay and  permitted Taino to move            for  the interlocutory sale of  the vessel.   On September 3,            1991,  Taino   so  moved  before  the   district  court,  and            simultaneously  moved  for  taxation  of  its custodia  legis                                                          ________  _____            expenses.  On September 19, 1991,  the district court ordered            the interlocutory  sale of  the vessel.   The district  court            confirmed  the  sale of  the  vessel  on November  15,  1991.            Pursuant  to  court order,  proceeds  from the  sale,  in the            amount of  $331,887, were subsequently placed  in an interest            bearing savings account.                      Needless  to  say,  the  parties  were   unable  to            successfully determine the amount to which Taino was entitled            as custodia  legis.  Thus,  the district court  directed that               ________  _____            the parties file legal  memoranda on the issue.   The parties            complied with the district court's request, and presented the            court with yet  another volley  of motions and  replies.   On            March 30, 1992,  after considering  the documentation  before            it, the court, without a  hearing, granted Taino's motion for            taxation  of costs  in  the amount  of $220,438.52,  the full            amount requested.  This appeal followed.                                         -9-                                          9                                         II.                                         II.                                         ___                                      DISCUSSION                                      DISCUSSION                                      __________                      On  appeal,  Curtis  does  not  dispute  either the            confirmation  of  the arbitrators'  award  or  that Taino  is            entitled  to some  custodia legis  expenses.   Rather, Curtis                               ________ _____            argues:  (1) that  the  district court  erred in  refusing to            exercise its  equitable powers  to deny Taino  those custodia                                                                 ________            legis  expenses  which accrued  during  that  period when  it            _____            unreasonably  and unjustly refused  to submit to arbitration,            and  (2) that the district court erred in foregoing a hearing            on Curtis's challenge to certain of the custodia legis costs.                                                    ________ _____            Both of Curtis's arguments are singularly without merit.            A.  The Court's Refusal To Award Equitable Relief            _________________________________________________                      As  noted above,  Curtis argues  that the  district            court  erred in declining to  award Taino less  than its full            custodia  legis expenses.   More specifically, Curtis asserts            ________  _____            that the district court was obliged to exercise its equitable            powers and to  reduce its  custodia legis award  to Taino  by                                       ________ _____            some unspecified sum  in order  to prevent  Taino from  being            unjustly enriched by its  obstructionist behavior in refusing            to proceed to arbitration until May 1991.  We disagree.                      It  has  long been  settled  that  "[e]quity is  no            stranger   in  admiralty;   admiralty  courts   are,  indeed,            authorized to grant equitable  relief."  Vaughan v. Atkinson,                                                     _______    ________            369  U.S.  527, 530  (1962);  see  also  Pino  v.  Protection                                          ___  ____  ____      __________                                         -10-                                          10            Maritime  Ins. Co., Ltd., 599  F.2d 10, 15  (1st Cir.), cert.            ________________________                                _____            denied, 444 U.S. 900  (1979).  Of course, a  court's decision            ______            on  whether  or  not  to exercise  its  equitable  powers  is            committed  to its sound discretion.  See Roland M. v. Concord                                                 ___ _________    _______            Sch.  Comm., 910 F.2d 983, 999 (1st Cir. 1990), cert. denied,            ___________                                     _____ ______            111 S. Ct. 1122 (1991); see also  Reyes v. Supervisor of Drug                                    ___ ____  _____    __________________            Enforcement Admin.,  834 F.2d 1093, 1098-99  (1st Cir. 1987).            __________________            Therefore,  we  review  such  a decision  only  for  abuse of            discretion.   See,  e.g., Ferrofluidics  v.  Advanced  Vacuum                          ___   ____  _____________      ________________            Components,  Inc.,  968  F.2d  1463, 1471  (1st  Cir.  1992);            _________________            Hiraldo-Cancel v. Aponte,  925 F.2d 10, 13 (1st  Cir.), cert.            ______________    ______                                _____            denied, 112 S. Ct. 637 (1991); see also Kingstate  Oil v. M/V            ______                         ___ ____ ______________    ___            Green  Star, 815 F.2d 918,  922 (3rd Cir.  1987) (decision on            ___________            whether  to allow  application  for  custodia legis  expenses                                                 ________ _____            reviewed for abuse of discretion).                      Here,  Curtis's  argument that  the  district court            abused its discretion in  refusing to reduce Taino's custodia                                                                 ________            legis  award strains  credulity.   The record  amply reflects            _____            that  Taino was prepared to proceed to arbitration as soon as            Curtis  posted  security.   Despite  the  bankruptcy  court's            eventual  ruling to  the contrary,12  it appears  to us  that                                            ____________________            12.  We  do not, of course, express an opinion on whether the            bankruptcy court  was correct in compelling  Taino to proceed            to arbitration  despite  the fact  that  Curtis had  not  yet            posted security.                                         -11-                                          11            Taino's  position  was neither  frivolous  nor  taken in  bad            faith.13   Furthermore, when  the bankruptcy  court seemingly            rejected  Taino's  argument  by  ordering it  to  proceed  to            arbitration  in May  1991, Taino  promptly complied  with the            bankruptcy court's order.                      More     importantly,    however,     the    record            overwhelmingly  indicates   that  Curtis   is  at   least  as            responsible as Taino for  the length of time that  the vessel            was under arrest.  It was Curtis who never posted security to            release  the  vessel  in  the  manner  provided  for  in  the            Supplemental  Rules.   Moreover, it  was  Curtis who  filed a            Chapter 11 petition in order to prevent the vessel from being            sold in September 1990, and then alternated between defensive            invocations  of the  automatic stay  of 11  U.S.C.    362 and            affirmative attempts  both to release the  vessel from arrest            and to compel Taino to proceed  to arbitration.  In light  of            these facts,  Curtis's lamentations about the  length of time            between the seizure of  the vessel and its eventual  sale can            most charitably be described as unpersuasive.                      In  sum, we find that the district court acted well            within its  discretion in refusing to  exercise its equitable                                            ____________________            13.  Taino argues that Congress's use of the word "then" in 9            U.S.C.    8, see supra note 4,  evinces an intent that courts                         ___ _____            should not  direct parties to proceed  with arbitration until            such time as bond is posted since the  posting of bond occurs            during "the usual course" of an admiralty arrest.  Regardless            of whether Taino's position is correct, it strikes us that it            is based upon at least a plausible reading of the statute.                                         -12-                                          12            powers to reduce Taino's  custodia legis award.  Accordingly,                                      ________ _____            we affirm the district court's ruling awarding Taino its full            custodia legis expenses.            ________ _____            B.  The Court's Refusal To Hold A Hearing            _________________________________________                      Curtis also  contends that the district court erred            in failing to  hold a  hearing on its  challenges to  certain            custodia  legis costs.14   This  contention does  not warrant            ________  _____            extended discussion.                      In support  of  its position,  Curtis advances  one            general argument and one  piece of evidence.   Curtis asserts            that Alejandro Ortiz  Cardona, who acted as custodian  of the            vessel on behalf of  Taino, could not have made  cash outlays            of $172,610.97 over fifteen  months since he, as owner  of an            auto  repair  shop,  could  not  have  access  to  that  much            cash.15   Curtis also submits  the affidavit  of Benjamin  B.            Gifter  as evidence  that  the custodial  care delineated  by                                            ____________________            14.  Curtis  neither argues  nor points  us to  any authority            suggesting  that a hearing is always necessary before a court            can award custodia legis  expenses.  Accordingly, we construe                      ________ _____            Curtis's argument as being that the court's failure to hold a            hearing in this instance was an abuse of its discretion.                    __ ____ ________            15.  We  note  that  in  support  of  his  claimed  custodial            expenses, Ortiz Cardona submitted to the court both copies of            cash  receipts  and a  sworn statement  that the  expenses at            issue were "necessarily incurred in the custody of the vessel            and  the services for which  the fees have  been charged were            actually and necessarily performed."                                         -13-                                          13            Taino in its  expense submissions to  the district court  was            not really provided.16                      Simply put, Curtis's argument and evidence are  far            from sufficient for us to find that the district court abused            its  discretion in  failing  to hold  the requested  hearing.            Curtis  has  submitted  no evidence  supporting  its  blanket            assertion  about Ortiz  Cardona's alleged  lack of  access to            cash.   Nor  has it  specifically  called into  question  the            veracity    of   any    of    Ortiz   Cardona's    supporting            documentation.17   The  Gifter  affidavit tends  to establish            nothing  other than the fact that on three occasions during a                                            ____________________            16.  Gifter is  a rabbi  who, while in  Mayaguez "supervising            special Kosher productions at the Star Kist Tuna plant,"  had            occasion to visit the area where the vessel was docked during            the period of its  arrest.  Gifter asserts that  during three            visits to  the dock area,  he did  not observe any  guards on            board  the  vessel.    Gifter  further  states  that  on  two            subsequent  visits, he observed  a male person  sleeping on a            hammock on board the vessel.            17.  In fact, the only specific item challenged  by Curtis is            a  claim for  12%  interest on  cash  outlays made  by  Ortiz            Cardona in his sworn  statement.  Curtis argues that  the 12%            interest figure is outrageously high.                 Curtis's  challenge  to the  interest  claimed  by Ortiz            Cardona does not alter our conclusion that the district court            was  not required  to hold  a hearing.   First  of all,  this            argument was not  made before the district court.  Therefore,            Curtis  is precluded from making it here.  See, e.g., Federal                                                       ___  ____  _______            Deposit Ins. Corp. v. World Univ., No. 92-1389, slip op. at 5            __________________    ___________            (1st Cir. Oct. 22, 1992) (arguments ordinarily cannot be made            for the first time on appeal) (citations omitted).  Moreover,            even if the  argument were not procedurally  defaulted, it is            apparent  that  it  lacks  substantive  merit.    The  record            reflects  that, in  the  end, Taino  never  submitted to  the            district court  Ortiz Cardona's  request for 12%  interest in            its final claim for custodia legis expenses.                                 ________ _____                                         -14-                                          14            fifteen  month period, no person was on the vessel's deck and            thus visible  from the  dock area.   Obviously, the  district            court acted well within its  discretion in viewing such fact,            even  if  accepted, as  insufficient  to  call into  question            whether Taino actually provided the custodial care claimed in            its expense submissions.                      In  light of  the foregoing,  we conclude  that the            district  court did not  abuse its  discretion in  failing to            hold  a hearing  on  Curtis's challenge  to certain  custodia                                                                 ________            legis expenses claimed by Taino.            _____                                         III.                                         III.                                         ____                                      CONCLUSION                                      CONCLUSION                                      __________                      Because we find that Curtis's arguments are without            merit, we affirm the judgment of the district court.                      Affirmed.  Costs to appellee.                      _____________________________                                                                                                                                          -15-                                          15
