Fall 2004-05 Owner of arrested boat not entitled to bond

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Number 57
Fall 2004
U.S. District Court for the District of Puerto Rico

Owner of arrested boat not entitled to bond

A bank that arrests a mortgaged vessel to collect a secured credit need not post a bond to cover alleged damages resulting from depreciation and deterioration. Scotiabank de Puerto Rico v. M/V Atuti, 326 F. Supp 2d 282 (D.P.R. 2004).

Per a national action in admiralty against the M/V Atuti, its engine, tackle, equipment and furnishings, Luis Miguel García Passalacqua, his wife, Margarita Juarez Iturregui, and the conjugal partnership constituted between them, Scotiabank de Puerto Rico requested the maritime attachment and garnishment of defendants' property.

Dry dock

Defendants requested from the court that Scotiabank post a bond in the amount of $200,000 to cover damages for the alleged depreciation to the Atuti as well as expenses incurred for the vessel's arrest and custody as a result of this action. The defendants alleged that the decision of Scotiabank to remove the Atuti to dry dockage was arbitrary and unnecessary and created "great deterioration" to the vessel. Defendants further claimed that the costs in getting the vessel out of the water should not be deducted from the proceeds of the sale.

In support of their opposition to defendants' requests, Scotiabank presented evidence that the removal of the vessel to a dry dockage reduced the risk of the vessel being sunk. Moreover, the removal also prevented the oxidation and the corrosion of the electric cable systems in parts of the motor, that occurs due to continuous exposure to seawater.

Reasonable step

The court concluded that the removal of the Atuti to the dry dockage was a reasonable step in order to preserve the asset. In addition, it concluded that pursuant to 28 U.S.C. § 1921 the expenses incurred in removing the vessel to dry dockage are routinely collected by the court marshal or substitute custodian. Therefore, defendants' request was denied.

Duty of care

The court also concluded that the substitute custodian exercised his duty of care and kept the Atuti in a safe and secure manner. The defendants had alleged-without offering any supporting evidence-that at the time of the arrest the Atuti was in "mint" condition. In its opposition to defendants' motion, Scotiabank presented proof that the vessel had work done in its motor prior to the arrest, and that its wear and tear was not caused by the substitute custodian. The court concluded that the subsequent effects of the motor repairs, as well as a the reductions in value and the alleged difficulties in selling the Atuti were not caused by the substitute custodian.

Dingy motor

The only damage to the vessel that occurred while under the care of the substitute custodian was the theft of the small motor of the dingy, which the court ordered the substitute custodian to replace.

Bond

In light of all the foregoing, and since Scotiabank did not have to compensate the defendants for normal wear and tear, the District Court denied their request for the bank to post an arrest bond.


© 2004 Goldman Antonetti