United States Court of Appeals
For the First Circuit
No. 02-1791
DAVID E. MULLANE; JOAN-LESLIE MULLANE,
Plaintiffs, Appellees/Cross-Appellants,
v.
ADELE CHAMBERS; JEAN FARESE,
Defendants, Appellants/Cross-Appellees,
FRANK COUSINS, SHERIFF, ESSEX COUNTY SHERIFF'S DEPARTMENT;
M/Y CENT'ANNI, (O.N. 967917) HER ENGINES, TACKLE,
EQUIPMENT AND FURNISHINGS, IN REM.
Defendants.
No. 02-2043
DAVID E. MULLANE; JOAN-LESLIE MULLANE,
Plaintiffs, Appellants,
V.
ADELE CHAMBERS; JEAN FARESE; FRANK COUSINS, SHERIFF, ESSEX
COUNTY SHERIFF'S DEPARTMENT; M/Y CENT'ANNI, (O.N. 967917)
HER ENGINES, TACKLE, EQUIPMENT AND FURNISHINGS, IN REM.
Defendants, Appellees.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Robert E. Keeton, U.S. District Judge]
Before
Lynch, Circuit Judge,
Cyr, Senior Circuit Judge,
and Stahl, Senior Circuit Judge.
Paul L. Kenny, with whom Salim Rodriguez Tabit and Broadhurst,
Lakin & Lakin, were on brief for appellants.
Thomas E. Clinton, with whom Robert E. Collins and Clinton &
Muzyka, P.C., were on brief for appellee Mullane.
Robert Ciampitti, Jr., with whom Law Offices of Robert
Ciampitti, Jr., P.C., was on brief for appellee Sheriff's
Department.
June 27, 2003
STAHL, Senior Circuit Judge. This case requires us to
determine whether an unrecorded bill of sale purporting to convey
a federally documented yacht, the M/Y Cent'Anni, is valid as
against a judgment creditor and to review an award of $100,000.00
in punitive damages and an assessment of $43,720.44 in attorneys'
fees. We reverse and remand for further proceedings consistent
with this opinion.
I
On November 24, 1997, Dr. John J. Walsh, Jr. and Beatrice
M. Walsh conveyed the vessel, the M/Y Lady B., to David and Angela
Murphy, who, on December 8, 1997, documented the conveyance with
the Department of Transportation ("DOT") pursuant to the United
States Vessel Documentation System, 46 U.S.C. §§ 12101-12124 and
31321 (2002), and changed the vessel's name to "Lady B Gone." On
July 2, 1998, Dr. David Mullane, plaintiff-appellee/cross-
appellant, purchased the vessel from the Murphys but failed to
record the bill of sale or conveyance with the DOT until September
2, 1998.
In the meantime, Adele Chambers and Jean Farese,
defendants-appellants/cross-appellees, sought to levy on the vessel
to satisfy two Massachusetts state court writs of execution they
held against the Murphys, whom they believed to still own the
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vessel.1 On August 28, 1998, the Essex County Sheriff's Department
("Sheriff's Department"), defendant-appellee, with the two
executions in hand, seized the vessel, which at this point had the
name Cent'Anni painted on it, at the Seaport Marina in Lynn,
Massachusetts. The Murphys were on the vessel at the time of the
seizure. When asked by the Sheriff's Department whether they owned
the vessel, the Murphys responded that they had conveyed the vessel
back to the previous owners, i.e., the Walshes. The Mullanes were
never mentioned.
The Sheriff's Department was accompanied by a member of
the United States Coast Guard, who verified that the DOT records
showed that Angela and David Murphy were the registered owners. As
we noted, the July 1998 conveyance to the Mullanes (and the change
in the vessel's name from Lady B. Gone to Cent'Anni) was not
recorded with the DOT until September 2, 1998--five days after the
seizure.
On September 4, 1998, the Mullanes filed an amended
complaint2 in admiralty against Chambers, Farese, Sheriff Frank
Cousins, the Sheriff's Department, and the Cent'Anni seeking
1
Chambers and Farese each loaned money to David and Angela
Murphy and to several trucking companies owned by David Murphy.
After the Murphys and the other entities defaulted on the two
loans, on November 1, 1996, Farese obtained a money judgment of
$27,612.00, and on April 22, 1998, Chambers obtained a money
judgment of $70,123.32.
2
The original complaint was filed on September 1, 1998.
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repossession of the vessel and compensatory damages for harm to the
vessel allegedly sustained as a result of the seizure. Pursuant to
Rules D and E, the Mullanes also filed an emergency motion for
immediate arrest of the vessel and a motion to appoint substitute
custodian, which the court allowed. The United States Marshals
Service arrested the vessel, and after the Mullanes posted security
in the amount of $125,000.00, the vessel was released to them.
Chambers and Farese filed an answer and counterclaim on October 5,
1998. In their counterclaim, Chambers and Farese sought to have
the transfer to the Mullanes set aside as a fraudulent transfer to
defraud creditors under the Uniform Fraudulent Transfer Act, Mass.
Gen. Laws ch. 109A, §§ 1-12.
On February 29, 2000, Cousins and the Sheriff's
Department filed a motion for summary judgment, contending that
they had exercised due diligence in determining the record owner of
the vessel by relying upon the DOT records and by confirming
ownership through the Coast Guard. The Mullanes opposed the motion
on the grounds that the arrest was improper under state law and
that the Sheriff's Department was liable for the claimed damages to
the vessel under a bailment theory. While the motion was under
advisement, on March 22, 2000, the Sheriff's Department filed a
motion to enter and inspect the vessel, which the court allowed.
Claiming that the Mullanes had engaged in bad faith conduct by
failing to launch the vessel or provide adequate electrical supply
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as required by the March 22 order, on June 1, 2000, the Department
filed a motion to bar the Mullanes' claims regarding claimed
damages to the mechanical, electrical, and plumbing systems of the
vessel. On June 21, the court allowed the motion for summary
judgment and the motion to bar such claims. The Sheriff's
Department also filed a motion for attorneys' fees, seeking
$43,720.44, an amount equal to the all of the Department's
litigation expenses accrued up to that point in the case. The
court allowed the fee motion on March 9, 2001.
In December 2001, the court conducted a four-day bench
trial, and on June 6, 2002, issued an opinion and order and entered
final judgment. It determined that the Mullanes were bona fide
purchasers of the vessel as of July 2, 1998 and thus took the
vessel free of any interests held by Chambers and Farese. The
court also found that the vessel was damaged while in the Sheriff's
Department's care, but that the Mullanes had failed to prove the
amount of damages, and that, in any event, the Sheriff's Department
was immune from damages. Finally, the court imposed $100,000.00 in
punitive damages against Chambers and Farese, finding that they had
intentionally disregarded the Mullanes' rights to the vessel by
continuing to assert a claim to the vessel after learning of the
Mullanes' unrecorded bill of sale.
Chambers and Farese appeal from the district court's
judgment and award of punitive damages, and the Mullanes cross-
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appeal from the district court's order of attorneys' fees and
costs.3
II
As an initial matter, Chambers and Farese challenge the
district court's jurisdiction, which we review de novo. See Bull
HN Info. Sys., Inc. v. Hutson, 229 F.3d 321, 328 (1st Cir. 2000).
The amended complaint invoked the district court's admiralty
jurisdiction pursuant to 28 U.S.C. § 1333(1). Subsection 1333(1),
28 U.S.C. § 1333(1), grants to federal "district courts . . .
original jurisdiction, exclusive of the courts of the States, of:
(1) Any civil case of admiralty or maritime jurisdiction, saving to
suitors in all cases all other remedies to which they are otherwise
entitled."4 It is beyond dispute that admiralty jurisdiction
3
In their appellate brief, the Mullanes claimed to appeal the
district court's rulings in favor of the Sheriff's Department,
including its motion for summary judgment and to bar claims. It
appears that we lack jurisdiction to review this claim, as the
Mullanes failed to file a timely notice of appeal--the Mullanes
filed their notice of appeal on August 16, 2002, seventy-one days
after the judgment became final on June 6, 2002. Fed. R. App. P.
4(a)(1) (providing that the notice of appeal must be filed within
30 days after the judgment is entered). We need not decide this
issue since, at oral argument, the Mullanes' counsel made clear
that they were not pursuing any claims against Cousins or the
Department, but rather were appealing only the district court's
award of attorneys' fees.
4
While the first clause of 1333(1) grants to the district
court original subject matter jurisdiction over admiralty and
maritime cases, the "saving clause" reserves the right of a common
law remedy to be brought in state court or on the law side of the
federal district court. Thus, where there is a remedy available
both in admiralty and at common law, a claimant may (1) proceed in
admiralty in a federal district court or (2) commence a common law
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extends to possessory and petitory actions. Ward v. Peck, 59 U.S.
(18 How.) 267, 267 (1855) ("In this country . . . the ancient
jurisdiction over petitory suits or causes of property has been
retained [by courts of admiralty]."); Matsuda v. Wada, 128 F. Supp.
2d 659, 669 (D. Haw. 2000) (collecting cases); see also 1 S.F.
Friedell, Benedict on Admiralty § 201, at 13-3 (7th ed. 2002). A
possessory action is one in which a party seeks to recover
possession of a vessel of which she has been wrongfully deprived.
Gallagher v. Unenrolled M/V River Queen, 475 F.2d 117, 119 (5th
Cir. 1973); Friedell, supra, § 201, at 13-2. A petitory suit, on
the other hand, is one to assert legal title to a vessel. Jones v.
One Fifty Foot Gulfstar Motor Sailing Yacht, 625 F.2d 44, 47 (5th
Cir. 1980); Matsuda, 128 F. Supp. 2d at 669; Friedell, supra, §
201, at 13-1. The procedure to be followed in such cases is set
out in Rule D of the Supplemental Rules of the Federal Rules of
Civil Procedure, which provides, in relevant part, "In all actions
for possession, partition, and to try title . . . with respect to
a vessel, . . . the process shall be by a warrant of arrest of the
vessel."
Here, the Mullanes asserted legal title and sought
immediate repossession of their vessel, which allegedly had been
wrongfully taken by Chambers, Farese, and Cousins. And pursuant to
action, either in state court or in a federal district court under
diversity. 14A C. Wright, A. Miller, & E. Cooper, Federal Practice
and Procedure § 3672, at 303-10 (3d ed. 1998) (collecting cases).
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Rule D, they successfully moved the district court to arrest the
vessel. The district court, therefore, had original subject matter
jurisdiction under 28 U.S.C. § 1333(1).
Chambers and Farese rely upon a line of cases holding
that actions seeking original possession of the vessel premised
upon breach of a purchase agreement for the sale of a vessel fall
outside admiralty jurisdiction. See, e.g., Richard Bertram & Co.
v. The Yacht, Wanda, 447 F.2d 966, 967 (5th Cir. 1971). Chamber's
and Farese's reliance on those cases is misplaced. Those cases
stand for the "well established general rule that admiralty will
not entertain suits where the substantive rights of the parties
flow from a contract to sell or construct a vessel." Jones, 625
F.2d at 47. By contradistinction, the Mullanes had no contractual
relationship with Chambers and Farese and alleged that they held
legal title to the vessel and sought immediate repossession of and
damages for harm caused to their vessel. Cf. id.
Chambers and Farese also contend that the court lacked
admiralty jurisdiction because the vessel no longer had status as
a "vessel," as it was "out of service" at the Windward Yacht Yard
in Newburyport, Massachusetts, and thus "not operating commercially
or otherwise on a maritime venture or purpose." Chambers and
Farese appear to be invoking the "dead ship doctrine," under which
a ship loses its status as a vessel when its "function is so
changed that it has no further navigation function." Goodman v.
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1973 26 Foot Trojan Vessel, Ark. Registration No. AR1439SN, 859
F.2d 71, 73 (8th Cir. 1988); see also Dluhos v. Floating and
Abandoned Vessel, Known as New York, 162 F.3d 63, 71 (2d Cir.
1998). Simply taking a vessel temporarily out of service, however,
does not render it a dead ship: as the Supreme Court has
instructed, "it is generally accepted that a vessel does not cease
to be a vessel when she is not voyaging, but is at anchor, berthed,
or at dockside." Chandris, Inc. v. Latsis, 515 U.S. 347, 373
(1995) (internal quotation marks omitted). Chambers and Farese
offer no authority for the proposition that the duration and
location of the Cent'Anni's storage takes it out of admiralty
jurisdiction. In any event, the Sheriff's Department seized the
vessel at the Seaport Marina in Lynn, Massachusetts; only later was
the vessel moved to Newburyport, where it was temporarily taken out
of navigation for security purposes.
III
We now turn to the merits. First, we address Chambers'
and Farese's appeal of the district court's ruling that the
Mullanes' unrecorded bill of sale was valid against them. We then
turn to their challenge to the award of $100,000.00 in punitive
damages. Finally, we address the Mullanes' appeal of the district
court's award of $43,720.44 in attorneys' fees.
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A
Chambers and Farese appeal on the theory that the
unrecorded conveyance is invalid as against them under the plain
language of 46 U.S.C. § 31321(a)(1).5 Before determining this
issue, however, we first address the Mullanes' claim that the levy
was not properly issued under state law.
After finding that the Sheriff's Department was required
to comply with Mass. Gen. Laws ch. 223, § 44 (2000)6 before seizing
the vessel, the district court held that the seizure "was contrary
to state law" because "[n]o order or affidavit was attached to the
execution, nor was any writ of attachment filed with th[e]
5
At oral argument, the Mullanes argued that Chambers and
Farese were barred from enforcing their state court judgments by
levy of execution and instead were required to file an in rem
action in admiralty. This is not the law. A state court can
enforce its judgment by levy on a vessel owned by the judgment
debtor under the "saving to suitors" clause. Rounds v. Cloverport
Foundry & Mach. Co., 237 U.S. 303 (1915); Friedell, supra, § 125,
at 8-17; G. Gilmore & C.L. Black, Jr., The Law of Admiralty 38 (2d
ed. 1975).
6
Mass. Gen. Laws ch. 223, § 44 provides in full:
No ship or vessel shall be attached in a civil
action unless the plaintiff or a person on his
behalf makes affidavit and proves to the
satisfaction of a justice of a court that he
has a good claim and reasonable expectation of
recovering an amount, exclusive of all costs,
equal at least to one-third of the amount of
damages claimed, which affidavit shall be
annexed to the writ of attachment, and the
certificate of the justice that he is
satisfied that the same is true shall be
annexed to the writ of attachment or endorsed
thereon.
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[district] court." We disagree. Section 44 simply does not apply
to levies of execution: Section 44 applies only to prejudgment
attachments. A prejudgment attachment is a process issued by the
court before judgment has been rendered, authorizing the seizure of
the real and personal property of the defendant to be held as
security for any judgment the plaintiff may recover in the action.
Such attachments are governed by Mass. Gen. Laws ch. 223, §§ 42-59
and Mass. R. Civ. P. 4.1.
In contrast, a writ of execution is the process by which
the judgment creditor satisfies a money judgment against the
judgment debtor. Mass. R. Civ. P. 69; Miller v. London, 1 N.E.2d
198, 200 (Mass. 1936). It constitutes a court order to a sheriff
or other authorized officer to seize and sell the "property, real
or personal, of the debtor, and in some cases in default of
property to take the body of the debtor and commit him to jail."
Miller, 1 N.E.2d at 200. Executions, in general, are governed by
Mass. Gen. Laws ch. 235, §§ 3-23 and Mass. R. Civ. P. 69, and
levies of executions on personal property are governed by Mass.
Gen. Laws. ch. 235, §§ 28-45. Other than pointing to the
requirements of Mass. Gen. Laws. ch. 223, § 44, the Mullanes rely
on no other statute or case law, and we found none, that requires
the Sheriff's Department to do more than what they did in this
case. In short the levy of the vessel was proper, and thus
Chambers and Farese perfected their interest in the vessel by
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taking possession of it before the Mullanes had recorded their
prior purchase agreement.
B
This brings us to the central issue of the case: whether
the recording statute relating to federally documented vessels, 46
U.S.C. § 31321, renders an unrecorded bill of sale or conveyance
invalid as against a seller's judgment creditors who levy the
vessel without notice. Subsection 31321(a)(1), 46 U.S.C. §
31321(a)(1), states:
A bill of sale, conveyance, mortgage,
assignment, or related instrument, whenever
made, that includes any part of a documented
vessel or a vessel for which an application
for documentation is filed, must be filed with
the Secretary of Transportation to be valid,
to the extent the vessel is involved, against
any person except–
(A) the grantor, mortgagor, or assignor;
(B) the heir or devisee of the grantor,
mortgagor, or assignor; and
(C) a person having actual notice of the sale,
conveyance, mortgage, assignment, or related
instrument.
(emphasis added). Despite the unambiguous language of the statute,
the Mullanes essentially ask that we rewrite it to read, "against
any person excluding judgment creditors." Certainly an argument
can be made that the drafters intended to protect only subsequent
purchasers, mortgagees, and possibly creditors who had something in
the nature of a specific lien on the vessel and to exclude other
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general creditors of the vendor, like Chambers and Farese.
Nonetheless, strictly as a matter of policy, Congress could have
decided also to protect general creditors. See, e.g., Graeber v.
Hickel Inv. Co., 803 P.2d 871 (Ala. 1990) (discussing policy
reasons for protecting judgment/execution creditors who rely on
title records before levying). In fact, as we demonstrate below,
Congress has excluded judgment creditors from the protections of
other recording statutes. Here, we are faced with plain and
unambiguous language that extends the protections of the recording
statute to "any person," and like other courts that have considered
the issue, we find no extraordinary circumstances sufficient to
require us to look beyond its plain meaning. The parties in this
controversy failed to brief the issue in any helpful manner:
neither brief provides developed argumentation or cites to any case
law supporting the respective positions, even though such case law
is available and listed in the annotations to the statute. And the
subsection is never mentioned in the district court's opinion. In
sum, given the plain and unambiguous language of the statute, we
hold that the Mullanes' unrecorded bill of sale is invalid against
Chambers and Farese unless they had actual notice.
In construing the terms of a statute, we start with the
statutory text, according it its ordinary meaning by reference to
the "specific context in which that language is used, and the
broader context of the statute as a whole." Robinson v. Shell Oil
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Co., 519 U.S. 337, 341 (1997); see also In re Bajgar, 104 F.3d 495,
497 (1st Cir. 1997). When the statutory language is plain and
unambiguous, "judicial inquiry is complete, except in rare and
exceptional circumstances." Rubin v. United States, 449 U.S. 424,
430 (1981) (internal quotations and citations omitted); see also
Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 (2002); Pritzker v.
Yari, 42 F.3d 53, 67-68 (1st Cir. 1994) ("We will not depart from,
or otherwise embellish, the language of a statute absent either
undeniable textual ambiguity or some other extraordinary
consideration, such as the prospect of yielding a patently absurd
result.").7 This is not one of those cases.
There is nothing ambiguous about the term "any person."
Congress chose the broadest possible term to describe the third
parties it intended to protect, and did not qualify the term in any
way. The statute as written thus extends protection to any
creditors, including judgment creditors like Chambers and Farese,
who rely upon the record title of the vessel. Several state
supreme courts have applied the statute accordingly. Graeber v.
Hickel Inv. Co., 803 P.2d 871 (Ala. 1990); Benner v. Scandinavian
7
As instructed by the House Report to the 1998 Act to which
subsection 31321(a)(1) was a part, "the literal language of the
statute should control the disposition of the cases. There is no
mandate in logic or in case law for reliance on legislative history
to reach a result contrary to the plain meaning of the statute,
particularly where that plain meaning is in no way unreasonable."
H.R. Rep. No. 100-918, at 16 (1988), reprinted in 1988 U.S.C.C.A.N.
6104, 6109.
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Am. Bank, 131 P. 1149 (Wash. 1913); Secrist v. German Ins. Co., 19
Ohio St. 476 (1869); Potter v. Irish, 76 Mass. 416 (1858); see also
Ellis v. Rickett, 164 N.Y.S. 243 (N.Y. App. Div. 1917) (citing
Parker Mills v. Jacot, 21 N.Y. Super. Ct. 161 (1861)); cf.
Lewistown Propane Co. v. Ford, 308 Mont. 243, 245-47 (2002)
(construing similar provision of Federal Aviation Act as protecting
judgment creditors); Bank of Honolulu v. Davids, 709 P.2d 613, 619
(Haw. Ct. App. 1985) (same); Marsden v. S. Flight Serv., 227 F.
Supp. 411, 415, 418-19 (M.D.N.C. 1961) (same). These courts
reasoned that Congress intended to protect any third party,
including attachment or judgment creditors, who relies upon the
title records and found no evidence that Congress intended to
exclude any class of persons from the term "any person." Neither
have we.
This reading of the subsection is reinforced when
considering its remarkable breadth when compared with the language
Congress has used in other recording statutes. See, e.g., 7 U.S.C.
§ 2531(d) ("[C]onveyance . . . shall be void as against any
subsequent purchaser or mortgagee for a valuable consideration,
without notice, unless it . . . is filed for recording in the Plant
Variety Protection Office . . . .") (emphasis added); 17 U.S.C. §
1320(d) ("[C]onveyance . . . shall be void as against any
subsequent purchaser or mortgagee for a valuable consideration,
unless it is recorded in the Office of the Administrator . . . .")
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(emphasis added); 35 U.S.C. § 261 ("[C]onveyance shall be void as
against any subsequent purchaser or mortgagee for a valuable
consideration, without notice, unless it is recorded in the Patent
and Trademark Office . . . ."). If Congress meant to exclude a
particular class of persons from the protection of § 31321(a)(1),
it certainly knew how and could have done so clearly and
explicitly.
Our acceptance of the term "any person" at face value is
further buttressed by the overall purpose of the subsection. The
language of subsection 31321(a)(1), like that of other recording
statutes, reveals a legislative intent to protect third parties who
rely upon the title records of the vessel. Like other creditors,
judgment creditors rely upon these documents at expense and risk.
If a wrongful levy is made on a vessel, which is then sold at a
sheriff's sale, they could be held liable for trespass, conversion,
and damages, and would be responsible for their own legal fees in
defending the levy against unrecorded interests. This case
presents an apt illustration. In addition to being responsible for
their own legal fees in defending the levy, Chambers and Farese
were held responsible for $100,000.00 in punitive damages for
pressing their claim to the vessel. Furthermore, as a unanimous
Alaska Supreme Court reasoned, an attaching or judgment creditor
could "be injured by their reliance on the erroneous [title]
record[: the creditor] might be liable to [the holder of the
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unrecorded bill of sale] for damages resulting from the sinking of
the vessel or for its lost use even though [the creditor] seized
the vessel in reliance on the record of ownership exactly as it
should have." Graeber, 803 P.2d at 873.
It is also worth noting that, despite the case law
extending protection to attachment and judgment creditors and the
use of more specific terms in other recording statutes, see, e.g.,
35 U.S.C. § 261 ("[C]onveyance shall be void as against any
subsequent purchaser or mortgagee for a valuable consideration,
without notice, unless it is recorded . . . ."), Congress has twice
reenacted the recording statute and retained the term "any person"
to describe the third parties it intended to protect.8
We recognize that two state courts have reached a
different conclusion, holding that the statute was intended to
protect only subsequent purchasers and mortgagees. These courts
relied on the general common law rule that the rights of an
attaching or judgment creditor are no greater than those held by
the debtor; in other words, the creditor's rights are limited to
8
The recording statute traces its roots back to the Vessel
Sales and Mortgage Recording Act of July 29, 1850, ch. 27, § 1, 9
Stat. 440. The Act of 1850 was passed, in part, to establish a
federal clearing house of recorded instruments affecting title to
federally documented vessels so that third parties had one place to
look to for reliable information as to what claims, liens, or other
encumbrances exist against the vessel. White's Bank v. Smith, 74
U.S. (7 Wall.) 646, 651 (1868). The recording statute was
reenacted in 1920, Ship Mortgage Act of 1920, ch. 250, § 30, 41
Stat. 1000, and again in 1988, Pub. L. No. 100-710, 102 Stat. 4741,
virtually unchanged from its original form.
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the debtor's actual title in the property. Fort Pitt Nat'l Bank v.
Williams, 9 So. 117, 118-19 (La. 1891); Richardson v. Montgomery,
49 Pa. 203, 206-10 (1865). The Williams court further reasoned
that the vessel recording statute was passed "simply to protect
persons who have dealt on the faith of the recorded title, and as
to whom it would be fraud to give effect to unrecorded titles to
their detriment," a group which would not include judgment
creditors. 9 So. at 119.
Simply relying upon the common law principle of "first in
time, first in right" is unpersuasive. At common law, without the
benefit of recording statutes, this same principle applied to
subsequent purchasers and mortgagees. 5 H.T. Tiffany & B. Jones,
Tiffany Real Prop. Ch. 34, § 1257 (2002). If A conveyed property
to B and then made an identical conveyance to C, B prevailed over
C on the theory that A no longer had any interest to convey.
Taking the argument to its logical terminus then would lead to the
unpalatable result that subsequent purchasers would not be
protected by the vessel statute on the ground that when they
purchased the vessel, the vendor no longer had an interest to sell.
But the recording act changed this result. Moreover, while it is
ordinarily true that the rights of an attaching or judgment
creditor do not have priority over a prior unrecorded conveyance,
many states have abrogated this principle by protecting creditor's
rights through a recording statute. See, e.g., Muller v.
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Waldschmidt, 185 B.R. 522, 554-55 (Bankr. M.D. Tenn. 1995)
(construing Tenn. Code Ann. § 66-26-103 as protecting judgment
creditors); Whitaker v. Hill, 179 S.W. 539 (Tex. App. 1915)
(holding that former version of Tex. Property Code Ann. § 13.001
changed the common law rule by protecting execution creditors); see
also Sky Harbor, Inc. v. Jenner, 435 P.2d 894, 896-97 (Colo. 1968);
Hillside Coop. Bank v. Cavanaugh, 122 N.E. 187, 189 (Mass. 1919);
Blum v. Schwartz, 20 S.W. 54, 55-56 (Tex. 1892); Hitz v. Nat'l
Metro. Bank, 111 U.S. 722, 728 (1884). And to say that judgment
creditors who rely "on the faith of the recorded title" when
levying their execution do not do so "to their detriment" is
baseless. As we said, judgment creditors may rely upon title
records at the risk of being held liable for trespass, conversion,
and any damage sustained to the vessel during a wrongful levy.
Most important, these courts point to no textual basis
for saying that subsection 31321(a)(1) applies to purchasers and
mortgagees alone. Certainly Congress is not required to list every
"person" it had in mind when it says that it is protecting "any
person." In short, without some indication from Congress that it
intended to exclude judgment creditors, we will not engraft such a
policy limitation on the statute. As instructed by the Supreme
Court, "courts must presume that a legislature says in a statute
what it means and means in a statute what it says there. When the
words of a statute are unambiguous, then, this first canon is also
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the last: 'judicial inquiry is complete.'" Conn. Nat'l Bank v.
Germain, 503 U.S. 249, 253-54 (1992) (quoting Rubin, 449 U.S. at
430). Because subsection 31321(a)(1) is explicit as to whom it
protects, our inquiry is at an end.9
Chambers and Farese are not yet out of the deep,
however. The recording statute protects only those persons having
no actual notice of the unrecorded conveyance at the time their
interests attached. 42 U.S.C. § 31321(a)(1)(C). The district
court found that Chambers and Farese had notice of the unrecorded
conveyance either at the time of the seizure or soon thereafter.
The crucial question, however, is whether they had actual notice
either before or at the time of the levy. It is not sufficient
that they learned of the unrecorded conveyance after they levied
upon the vessel. Because the district court did not apply
subsection 31321(a)(1) and did not make a factual finding as to
whether Chambers and Farese had actual notice at the time of the
levy, we remand the case for further proceedings consistent with
this opinion. If Chambers and Farese did not have actual notice,
then the Mullanes' complaint against them should be dismissed, and
their seizure of the vessel was valid to enforce a judgment debt
against the Murphys. Because the vessel has now been released
9
We recognize that in many instances, recording statutes like
this one prove to be a harsh reality for purchasers like the
Mullanes, but the Mullanes had a means to protect their interests:
they could have filed their bill of sale with the Secretary
pursuant to subsection 31321(1)(1). This they failed to do.
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under what would in those circumstances be an erroneous order, we
leave it to the district court on remand to sort through the
remaining issues.
We make one final note. If the district court finds that
Chambers and Farese had actual notice of the transfer, there
remains the issue of whether the transfer was fraudulent as defined
by section 5 of the Uniform Fraudulent Transfer Act, Mass. Gen.
Laws. ch. 109A, § 5, which would allow Chambers and Farese to avoid
it under Mass. Gen. Laws. ch. 109A, § 8. Despite being raised in
Chambers' and Farese's counterclaim, the district court never cited
to or analyzed Chapter 109A, presumably because of its holding that
the validity of the transfer was governed by federal law, not state
law. See Mullane, 206 F. Supp. 2d at 109-10. However, we agree
with Chambers and Farese that state law governs the validity of the
transfer and that the district court should have considered whether
the transfer was avoidable under Mass. Gen. Laws. ch. 109A, § 8,
and/or whether the Mullanes had any defenses under Mass. Gen. Laws.
ch. 109A, § 9. See Chase Manhattan Fin. Servs. v. McMillian, 896
F.2d 452, 460 (10th Cir. 1990) (holding that state law, not
admiralty, governs the validity of transfers of title); St. Paul
Fire & Marine Ins. Co. v. Vest Transp. Co., 666 F.2d 932, 938 (5th
Cir. 1982); Jones, 625 F.2d at 47-49 (applying Florida law to
determine title); S.C. Loveland, Inc. v. East West Towing, Inc.,
608 F.2d 160, 164 (5th Cir. 1979); Gilmore & Black, supra, at 26 &
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n.90 (noting that contracts for the sale of a vessel are non-
maritime); cf. Stewart & Co. v. Rivara, 274 U.S. 614, 618 (1927).
We recognize that Mass. Gen. Laws ch. 109A, §9 provides
several defenses to "a person who took in good-faith," which vary
depending on whether the person had paid "reasonably equivalent
value" for the property, and that the district court found that Dr.
Mullane was a bona fide purchaser for value without notice of any
adverse claims to the vessel and thus concluded that whether the
underlying transaction was fraudulent was immaterial. In making
this ruling, however, the court failed to consider the specific
sections of or the case law interpreting Chapter 109A and instead
patched together definitions and elements from the Massachusetts
Uniform Commercial Code in determining whether a defense to a
fraudulent transfer existed. It also made its ruling without ever
determining whether the underlying transfer to Mullane was
fraudulent under Mass. Gen. Laws. ch. 109A, § 5. We cannot say
from the district court's opinion whether its use of a hodgepodge
of definitions and standards and its failure to make an initial
determination of whether the transfer was, in fact, fraudulent made
any difference in this case. We believe that it is in the
interests of all concerned to have the entire fraudulent transfer
claim decided by the district court in the first instance. We
therefore vacate the district court's ruling on this issue and
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remand the case to the district court so that it may ascertain
whether the sale was a fraudulent transfer.
C
Chambers and Farese also appeal the district court's
award of $100,000.00 in punitive damages. Even though the
plaintiffs did not seek punitive damages, the court sua sponte
awarded them, reasoning that
defendants' conduct in this case constituted
an intentional and conscious disregard for the
rights of plaintiffs. When the defendants had
the vessel seized they were either aware, or
soon became aware, that [Murphy] had sold his
ownership interest in the vessel to Dr.
Mullane. They nevertheless continued to
assert a right to the vessel in satisfaction
of David Murphy's debt, and by that course of
action deprived Dr. Mullane of his rights with
respect to possession and use of the vessel.
Mullane v. Chambers, 206 F. Supp. 2d 105, 119 (D. Mass. 2002).
Essentially, the court awarded punitive damages merely because
Chambers and Farese continued to assert their legal claims to the
vessel after the Mullanes finally presented their bill of sale.
Given our holding above, there is no longer a basis for the award.
But it is important to note that we would have reversed even if we
had found in favor of the Mullanes. It is true that punitive
damages are available in admiralty "where defendant's intentional
or wanton and reckless conduct amounted to a conscious disregard of
the rights of others." CEH, Inc. v. F/V Seafarer, 70 F.3d 694, 699
(1st Cir. 1995) (collecting cases). However, it is equally true
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that punitive damages are "rarely imposed." Id. It should go
without saying that simply presenting a defense in a lawsuit is not
the type of conduct that warrants punitive damages. This was not
a case by the Mullanes of abuse of process or malicious
prosecution, nor was there any finding of a violation of Rule 11 of
the Federal Rules of Civil Procedure. Tellingly, at oral argument
the Mullanes agreed that there was nothing in the record to support
punitive damages and that they could not defend such an award.
Thus, we reverse the award of $100,000.00 in punitive damages.
D
Finally, we turn to the Mullanes' appeal of the district
court's award of attorneys' fees to the Sheriff's Department.10
There is a nagging issue of jurisdiction since the Mullanes filed
their notice of appeal more than thirty days after the June 6 final
judgment was entered. Fed. R. App. P. 4(a)(1) (providing that
notice of appeal must be filed within 30 days after the judgment or
order has been entered); id. 4(a)(7) ("A judgment or order is
entered for purposes of this Rule 4(a) when it is entered in
compliance with Rules 58 and 79(a) of the Federal Rules of Civil
Procedure.").11
10
Chambers and Farese raise other sundry arguments and
challenges. We have considered them and find that they are without
merit and not deserving discussion.
11
Rule 4(a)(7) was amended in 2000 to read,
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We think it helpful to sketch the procedural background.
After the district court granted the Sheriff's Department motion to
bar claims concerning damages to the mechanical, electrical, and
plumbing systems on the ground that the Mullanes had engaged in bad
faith conduct to prevent the Sheriff's Department from mounting a
defense, the Department filed a motion for attorneys' fees under
Rule 54(d)(2) of the Federal Rules of Civil Procedure, invoking the
court's inherent powers to sanction the Mullanes. On March 9,
2001, the court issued an opinion and order, in which it awarded
attorneys' fees, made a presumptive finding that a reasonable fee
award was $43,720.44 (the amount of the entire litigation up to
(A) A judgment or order is entered for
purposes of this Rule 4(a):
(i) if Federal Rule of Civil Procedure
58(a)(1) does not require a separate document,
when the judgment or order is entered in the
civil docket under Federal Rule of Civil
Procedure 79(a); or
(ii) if Federal Rule of Civil Procedure
58(a)(1) requires a separate document, when
the judgment or order is entered in the civil
docket under Federal Rule of Civil Procedure
79(a) and when the earlier of these events
occurs:
• the judgment or order is set forth on a
separate document, or
• 150 days have run from entry of the judgment
or order in the civil docket under Federal
Rule of Civil Procedure 79(a).
The amendments became effective December 1, 2002 and thus have no
bearing on this appeal.
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that point), and allowed each party five weeks to file a motion for
a modification. The order also provided that if no party filed
such a motion, the clerk was "authorized to make an Order awarding
attorneys' fees in the amount of the court's presumptive finding,
together with taxable costs." The court's opinion and order were
entered on the docket on March 9. On April 17, 2001, the Mullanes
filed a motion to modify, which the court denied at a case
management conference on July 31, 2001. Although the clerk made a
notation of the court's denial on the docket, it did not issue a
separate order or judgment.
On the first day of trial, on December 11, 2001, the
Sheriff's Department filed a motion for final judgment as to less
than all parties under Fed. R. Civ. P. 54(b) on the order granting
its motions for summary judgment, to bar claims, and for attorneys'
fees. The Mullanes filed an opposition. Finally, on June 6, 2002,
the court issued an opinion and order, in which it, among other
things, ordered the Sheriff's Department's Rule 54(b) motion to be
dismissed as moot and ordered the clerk to enter a final judgment
on a separate document as follows: "For the reasons explained in
the Opinion and Order of June 6, 2002, it is ORDERED, Plaintiffs
are hereby declared and adjudged to be the true owners of the
Motorized Yacht Cent'Anni. Judgment for the plaintiffs in the
amount of $100,000.00, plus costs." The clerk entered the final
judgment accordingly on June 6.
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On July 18, 2002, after the time for filing a notice of
appeal had expired, the Mullanes filed a motion requesting a
separate entry of judgment on the orders granting the Sheriff's
Department motions for summary judgment and for attorneys' fees,
or, in the alternative, for leave to file a notice of appeal late.
In a memorandum and order issued on August 6, 2002, the court
denied the motion. According to the court, taking together the
orders of June 21, 2000 (allowing in part motion for summary
judgment), March 9, 2001 (allowing motion for attorneys' fees), and
June 6 (ruling in favor of the Sheriff's Department on immunity
grounds), established that the Mullanes "won nothing . . . against
the [Sheriff's Department] and that the [Sheriff's Department] won
attorneys' fees of $43,720.44." The court concluded that "[w]hen
the Final Judgment of June 6, 2002 closed the case, the previous
interlocutory orders in favor of the sheriff in some respects and
against him in other became final because the case was declared
closed by a Final Judgment." We disagree.
Our starting point is Rule 54(d). Rule 54(d)(A)
provides, in part, that upon granting a motion for attorneys' fees,
"[t]he court shall find the facts and state its conclusions of law
as provided in Rule 52(a), and a judgment shall be set forth in a
separate document as provided in Rule 58." Fed. R. Civ. P.
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54(d)(2)(C) (emphasis added). Former Rule 5812 required that
"[e]very judgment . . . be set forth on a separate document" and
provided that a "judgment is effective only when so set forth and
when entered as provided in Rule 79(a)." The time then for filing
a notice of appeal on the order awarding attorneys' fees did not
start to run unless and until a separate judgment was entered.
See, e.g., Green v. Nevers, 196 F.3d 627, 630-31 (6th Cir. 1999).
Although Rule 58 does not require that a separate
judgment use any particular words or form of words, nonetheless, we
interpret Rule 58 fairly strictly; as the Supreme Court has
instructed, Rule 58 "must be mechanically applied to avoid new
uncertainties as to the date on which a judgment is entered."
United States v. Indrelunas, 411 U.S. 216, 222 (1973). In general,
the judgment should be self-sufficient, complete, and describe the
parties and the relief to which the party is entitled. Willhauck
v. Halpin, 919 F.2d 788, 792-794 (1st Cir. 1990); Reytblatt v.
Denton, 812 F.2d 1042, 1043-44 (7th Cir. 1987) (collecting cases);
Claybrook Drilling Co. v. Divanco, Inc., 336 F.2d 697, 699 (10th
Cir. 1964); 11 C. Wright, A. Miller, & E. Cooper, Federal Practice
and Procedure § 2785, at 22 (2d ed. 1995) ("[T]he separate judgment
12
Rule 58 was amended in 2002 to read, in relevant part, "Every
judgment and amended judgment must be set forth on a separate
document, but a separate document is not required for an order
disposing of a motion: . . . (C) for attorney fees under Rule 54."
The 2000 amendments became effective December 1, 2002 and thus are
not relevant to our decision.
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. . . should be self-sufficient and should not merely incorporate
other documents by reference . . . .").
In its order denying the Mullanes' motion for entry of
judgment on a separate document, the district court seemed to say
that the June 6 Final Judgment was such a document. We agree that
it is the only relevant document, as the court's March 9, 2001,
conditional order allowing fees and the clerk's notation regarding
the court's denial of the motion to modify clearly do not suffice
for Rule 58 purposes. See Domegan v. Ponte, 972 F.2d 401, 405 (1st
Cir. 1992) (noting that separate judgment must be separate and
distinct from any opinion or memorandum); accord Green, 196 F.3d at
630 (same and noting that "a docket entry is not sufficient."). We
hold that the June 6 Final Judgment was insufficient to serve as a
separate judgment on the award of attorneys' fees: the Final
Judgment simply failed to make any mention of the award. We
recognize that courts have been willing to accept judgments as
sufficient for Rule 58 purposes where they incorporate by reference
the underlying opinion or order. 11 Wright, Miller & Cooper,
supra, § 2785, 22-23 (collecting cases but observing that this is
"inconsistent with the Supreme Court's . . . pronouncement that the
separate document requirement of Rule 58 is to be 'mechanically
applied'"). However, this does not change the result in this case.
In the June 6 opinion and order, after acknowledging that it had
issued interlocutory orders (1) allowing in part the Sheriff's
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Department's motion for summary judgment and (2) the motion to bar
claims, the court stated that those rulings did not dispose of all
claims against the Department, and went on to hold that the
Department's seizure of the vessel violated state law but that it
was immune from damages. In no place in the opinion did the court
discuss the award of attorneys' fees or intimate that such fees had
ever been awarded. It was simply silent on the issue.
Because no separate judgment has been "entered" under
Rule 58, the time for filing a notice of appeal has not yet begun
to run. See Fed. R. App. P. 4(a)(7) (providing that a judgment or
order is "entered . . . when it is entered in compliance with Rules
58"). Given that the district court treated the order allowing
attorneys' fees as an appealable order and that the parties do not
object to treating it as such, we find no reason to remand for
formal compliance with Rule 58. Domegan, 972 F.2d 401 (holding
that court had jurisdiction where no separate judgment had been
entered, even though notice of appeal was not timely filed as
measured from the final decision), vacated on other grounds, 507
U.S. 956 (1993); see also Green, 196 F.3d at 631 (finding timely
appeal, even though notice of appeal was filed 33 days after the
entry of the appealable order); M. Zachary, Rules 58 and 79(a) of
the Federal Rules of Civil Procedure: Appellate Jurisdiction and
the Separate Judgment and Docket Entry Requirements, 40 N.Y.L. Sch.
L. Rev. 409, 426 (1996); but see Fiore v. Washington Cty. Cmty.
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Mental Health Center, 960 F.2d 229, 236 (1st Cir. 1992) (en banc)
(noting that a party can waive separate judgment requirement where
the party fails to act within three months). Therefore, the
Mullanes' appeal is timely and we have jurisdiction. We now
proceed to the merits.
Under the well-established "American Rule," attorneys'
fees are not recoverable by a party unless statutorily or
contractually authorized. However, a court possesses inherent
equitable powers to award attorneys' fees against a party that "has
'acted in bad faith, vexatiously, wantonly, or for oppressive
reasons.'" Whitney Bros. Co. v. Sprafkin, 60 F.3d 8, 13 (1st Cir.
1995) (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991)).
We review such awards for abuse of discretion, Chambers, 501 U.S.
at 55, and recognize that district courts are given broad deference
in order to "streamline the litigation process by freeing the
appellate courts from the duty of reweighing evidence . . . already
weighed and considered by the district court," Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 404 (1990)). Nevertheless,
"[b]ecause of their very potency, inherent powers must be exercised
with restraint and discretion," Chambers, 501 U.S. at 44 (citation
omitted), and thus "'should be used sparingly and reserved for
egregious circumstances,'" Whitney Bros. Co., 60 F.3d at 13
(quoting Jones v. Winnepesaukee Realty, 990 F.2d 1, 4 (1st Cir.
1993)). We, therefore, require that a district court "describe the
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bad faith conduct with 'sufficient specificity,' accompanied by a
'detailed explanation of the reasons justifying the award.'" Id.
(quoting Gradmann & Holler v. Cont'l, 679 F.2d 272, 274 (1st Cir.
1982)).
Here, the district court provided conclusory statements,
without specificity, in support of awarding attorneys' fees:
On the record before me, I find that
the combined conduct of plaintiffs and their
attorneys egregiously increased the
contentiousness of communications bearing on
disclosure, discovery, and delay, and resulted
in needless and unreasonable added burdens of
expense, delay, and increased hours of
attorney time in the representation of
defendant Cousins and others acting for him or
in association with him.
In these circumstances I make a
presumptive finding, on the record before me,
that an award of $43,720.44, as proposed in
Docket No. 23, at page 10, is reasonable. A
reasonable time will be allowed, in the order
below, to challenge this presumptive finding.
This is not sufficient for meaningful appellate review, as it makes
no attempt to describe "the bad faith conduct with sufficient
specificity," or to provide a "detailed explanation of the reasons
justifying the award." Whitney Bros. Co., 60 F.3d at 13 (internal
quotation marks and citation omitted). Although there may be
circumstances where we would vacate an award and remand to the
district court for a fuller explanation for the award, this case
does not warrant such proceedings. As support for attorneys' fees,
the Sheriff's Department relies solely on the Mullanes' alleged
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failure to comply with the district court's March 22, 2000 order,
in which the district court ordered the Mullanes to put the vessel
in the water and to provide an adequate electrical supply. When
the Sheriff's Department arrived to inspect the vessel on May 26,
2000, it remained dry-docked and without an adequate electrical
supply. The Sheriff's Department points to no other actions on the
part of the Mullanes or their attorneys that are relevant to the
award. While the Mullanes' and their attorneys' failure to abide
by the district court's March 22 order might have been grounds for
discovery sanctions, including attorneys' fees caused by the
failure, we think it insufficient alone to support a finding that
the Mullanes or their attorneys "'acted in bad faith, vexatiously,
wantonly, or for oppressive reasons.'" Whitney Bros. Co. v.
Sprafkin, 60 F.3d 8, 13 (1st Cir. 1995) (quoting Chambers v. NASCO,
Inc., 501 U.S. 32, 45-46 (1991)). We, therefore, vacate the
entirety of the attorneys' fees award.
IV
For the foregoing reasons, we REVERSE and REMAND the
district court's decision in favor of the Mullanes for further
proceedings consistent with this opinion, REVERSE the district
court's award of $100,000 in punitive damages, and REVERSE the
district court's award of attorneys' fees.
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