1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 DRISCOLL MISSION BAY, LLC, dba Case No.: 3:24-cv-1396-JES-SBC DRISCOLL MISSION BAY, a California 12 Limited Liability Company, IN ADMIRALTY 13 Plaintiff, 14 ORDER DIRECTING VESSEL SALE v.

AND AUTHORIZING CREDIT BID

15 M/Y NEW HORIZON, U.S.C.G. Official 16 No. 1102966, a 37.5-Foot Carver Motor [ECF No. 15] Yacht, AND ALL OF HER ENGINES, 17

TACKLE, ACCESSORIES,

18 EQUIPMENT, FURNISHINGS AND APPURTENANCES, in rem, 19 Defendant. 20

21

ORDER DIRECTING VESSEL SALE AND AUTHORIZING CREDIT BID

22 Pending before the Court is Plaintiff DRISCOLL MISSION BAY, LLC’s Motion 23 for Interlocutory Vessel Sale and Authorization to Credit Bid ("Motion for Vessel Sale"). 24 For the reasons stated below, the Court GRANTS the unopposed Motion and VACATES 25 the hearing set for January 15, 2025. 26 / / / 27 / / / 28 1 I. BACKGROUND 2 A. Factual Background 3 On February 13, 2018, Michael J. Rauch executed a Maritime Contract for Private 4 Wharfage (the “Wharfage Contract”). Verified Complaint (“VC”) at ¶ 5. On February 23, 5 2018, a representative of Plaintiff also executed the Wharfage Contract, pursuant to which 6 Michael J. Rauch berthed the Defendant Vessel in a slip at Plaintiff’s marina. Id. 7 Pursuant to Paragraph 6 of the Wharfage Contract, the charges and fees specified 8 therein were due and payable each month on the first day. VC at ¶ 6. 9 Plaintiff received a payment due under the Wharfage Contract on or about July 5, 10 2023. All payments thereafter ceased, and the account for the Defendant Vessel fell 11 progressively into arrears. No part of such arrearages has been paid to date. VC at ¶ 7. 12 Plaintiff is informed and believes that Michael J. Rauch passed away. VC at ¶ 8. On 13 October 16, 2023, Austin Rauch, who Plaintiff understands is Michael J. Rauch’s son, 14 advised Plaintiff’s Marina Manager in an email that: “I wanted to let you know we [Austin 15 Rauch and his brother Patrick Rauch] are comfortable letting the boat go through the lean 16 [sic] process,” and he thanked the Marina Manager “for your help navigating through this 17 process [and] everything you have done for us thus far.” Id. 18 On March 15, 2024, in a final attempt to avoid bringing this vessel arrest action, 19 Plaintiff’s attorney sent the Estate of Michael J. Rauch a letter advising that due to a failure 20 to pay wharfage fees the Defendant Vessel was subject to arrest pursuant to the 21 Commercial Instruments and Maritime Liens Act and Supplemental Admiralty Rules C 22 and E, and offering an opportunity to pay the arrearages and take possession of the 23 Defendant Vessel. VC at ¶ 9. Austin Rauch subsequently called Plaintiff’s attorney and 24 reiterated that the Estate was not interested in paying the arrearages and taking possession 25 of the Defendant Vessel. Id. The above-described letter was also sent to Ms. Audra Rivera, 26 who Plaintiff understands was a friend of Michael J. Rauch, and who might claim an 27 interest in the Defendant Vessel. Id. She did not respond to counsel’s letter. Id. 28 1 Wharfage fees that are due pursuant to the Wharfage Contract and which remained 2 unpaid, calculated through August 4, 2024, total a sum of not less than $58,761.50. VC at 3 ¶ 10. 4 Plaintiff avers in its Verified Complaint that it provided wharfage services in a 5 workmanlike manner, consistent with the requirements of the Wharfage Contract and the 6 prevailing industry standards in San Diego, and it has otherwise fully satisfied all 7 contractual obligations required of it as a maritime services provider. VC at ¶ 11. 8 Notwithstanding Plaintiff’s demands for payment of monies due and owing for 9 services provided for the benefit of the Defendant Vessel, the Defendant Vessel and her 10 owner failed to bring the account current and satisfy Plaintiff’s maritime "necessaries" lien. 11 VC at ¶ 12. 12 The statutory maritime law confers a maritime lien in favor of those who provide 13 necessaries for the benefit of a vessel. See, 46 U.S.C. § 31342(a), which provides that, apart 14 from public vessels, "a person providing necessaries to a vessel on the order of the owner 15 or a person authorized by the owner - (1) has a maritime lien on the vessel; and (2) may 16 bring a civil action in rem to enforce the lien." Pursuant to the General Maritime Law of 17 the United States the provision of vessel wharfage services gives rise to a maritime lien 18 against the vessel to which such services are provided. See, e.g., Ex Parte Easton, 95 U.S. 19 68, 75-77 (1877) ("contract for wharfage is a maritime contract [and a] maritime lien arises 20 against the ship or vessel in favor of the proprietor of the wharf"). Thus, a maritime 21 necessaries lien subsists and encumbers the Defendant Vessel in favor of Plaintiff in an 22 amount of not less than the sum specified in the Verified Complaint, no part of which has 23 been paid by the Defendant Vessel or her owner. VC at ¶ 14. 24 Plaintiff alleges that as a result of the foregoing, it has been damaged in an amount 25 of not less than $58,761.50, plus interest and the costs of suit. VC at ¶ 15. 26 B. Procedural Background 27 On August 6, 2024, Plaintiff filed its Verified Complaint against the Defendant 28 Vessel and all of her engines, tackle, accessories, equipment, furnishings, dinghies and 1 appurtenances, in rem for vessel arrest, interlocutory sale, and money damages for breach 2 of maritime contract, trespass, and quantum meruit. ECF No. 1. On August 13, 2024, this 3 Court issued Orders authorizing the arrest of the Defendant Vessel and appointing Plaintiff 4 as Substitute Custodian. ECF Nos. 6, 7. The default of Defendant Vessel was entered on 5 November 29, 2024. ECF No. 14. Plaintiff filed the instant Motion for Interlocutory Vessel 6 Sale and Authorization to Credit Bid on December 16, 2024. ECF No. 15. 7 II. DISCUSSION 8 A. Interlocutory Sale 9 "The interlocutory sale of a vessel is not a deprivation of property but rather a 10 necessary substitution of the proceeds of the sale, with all of the constitutional safeguards 11 necessitated by the in rem process." Ferrous Fin. Servs. Co. v. O/S Arctic Producer, 567 12 F. Supp. 400, 401 (W.D. Wash. 1983). The Federal Rules of Civil Procedure Supplemental 13 Rules for Admiralty or Maritime Claims provide that upon application of a party having 14 custody of the subject property, the Court may order the property sold if the property is 15 "liable to deterioration" while in custody pending the action, "there is an unreasonable 16 delay in securing the release of the property," or if "the expense of keeping the property is 17 excessive or disproportionate." Fed. R. Civ. P. Supp. R. E(9)(a).1. The applicant is required 18 to satisfy only one of the three listed criteria to justify an interlocutory sale. California 19 Yacht Marina-Chula Vista, LLC v. S/V OPILY, No. 14-cv-01215-BAS(BGS), 2015 WL 20 1197540, at *2 (S.D. Cal. Mar. 16, 2015) (citing Merchants Nat'l Bank of Mobile v. Dredge 21 Gen. G. L. Gillespie, 663 F.2d 1338, 1341 (5th Cir. 1981)). Plaintiff moves for 22 interlocutory sale on all three grounds. See Motion for Vessel sale at 6-13. 23 Plaintiff first argues that as the Defendant Vessel's machinery, equipment and 24 general condition deteriorate while in custody, her value is commensurately decreasing. 25 Motion for Vessel sale at 7. To support this contention, Plaintiff submits a Declaration 26 from Ray Jones ("Jones Decl."), a licensed yacht broker of 42 years who has sold thousands 27 of vessels and offered expert opinion in dozens of cases involving arrested vessels. Jones 28 Decl. at ¶ 2. Jones stated that "vessels inevitably deteriorate in condition and value over 1 time," especially when, as in this case, the vessel sits idle for extended periods in salt water. 2 Id. at ¶ 4. Based upon Jones's testimony, the Court finds that the Defendant Vessel is liable 3 to deterioration within the meaning of Rule E(9)(a) while in custody pending this action. 4 See Bartell Hotels v. S/L Talus, 445 F. Supp. 3d 983, 987-88 (S.D. Cal. 2020) (relying on 5 Jones's testimony to conclude that a vessel sitting idle in salt water is liable to 6 deterioration); California Yacht Marina-Chula Vista, LLC, 2015 WL 1197540, at *3 7 (same); Shelter Cove Marina, Ltd. v. M/Y Isabella, Case No. 17-cv-1578-GPC-BLM, 2017 8 WL 5906673, at *2 (S.D. Cal. Nov. 30, 2017) (same). 9 Next, Plaintiff argues that since the Defendant Vessel's arrest there has been no effort 10 to secure its release which has resulted in an unreasonable delay. Motion for Vessel Sale 11 at p. 9. "Courts generally allow at least four months for the provision of a bond to secure 12 the release of a vessel before granting an interlocutory sale on grounds of unreasonable 13 delay." GB Cap. Holdings, LLC v. S/V Glori B, No. 18cv312-WQH-AGS, 2019 WL 14 277387, at *4 (S.D. Cal. Jan. 22, 2019) (citing Vineyard Bank v. M/Y Elizabeth I, U.S.C.G. 15 Off. No. 1130283, No. 08CV2044 BTM (WMC), 2009 WL 799304, at *2 (S.D. Cal. Mar. 16 23, 2009)), aff'd sub nom. GB Cap. Holdings, LLC v. Heston, 802 F. App'x 304 (9th Cir. 17 2020). 18 The Defendant Vessel was arrested on September 4, 2024. ECF No. 7. Calculated 19 from the arrest date through January 15, 2025, the hearing date for Plaintiff’s Motion for 20 Interlocutory Vessel Sale, the Defendant Vessel has been under arrest for 133 days – a 21 period of approximately 4.4 months. The record does not show any attempt to secure the 22 Defendant Vessel's release. Thus, the Court finds that there has been an unreasonable delay 23 within the meaning of Rule E(9)(a). See Ferrous Fin. Servs. Co., 567 F. Supp. at 401 24 (finding no attempt to secure vessel's release within four months of arrest was unreasonable 25 delay); and Vineyard Bank, 2009 W.L. 799304 at *2 (finding unreasonable delay because 26 "[m]ore than four months ha[d] passed since the Defendant Vessel’s arrest.”) 27 Finally, Plaintiff argues that the cost of keeping the Defendant Vessel in custody is 28 excessive and disproportionate. Motion for Vessel Sale at 10. Plaintiff presents evidence 1 that while the Defendant Vessel is in custody Substitute Custodian fees will continue to 2 accrue in an amount not less than $187.50 per day for wharfage and general custodial 3 services, plus $50.00 per week for inspections of the interior of the Defendant Vessel, and 4 that Substitute Custodian fees now total at least $25,887.50. Id. at 11. 5 Plaintiff also presents evidence that the fair market value of the Defendant Vessel is 6 approximately $20,000.00. Id. at 11. Thus, Substitute Custodian fees now exceed the fair 7 market value of the Defendant Vessel. "Maintenance expenses of several thousand dollars 8 per month, particularly where [no attempt has been made] to answer Plaintiff's Complaint 9 or secure the Vessel's release, are excessive and disproportionate." Vineyard Bank, 2009 10 WL 799304, at *2. Accordingly, the Court finds that the cost of keeping the Defendant 11 Vessel in custody is excessive and disproportionate under Rule E(9)(a). See GB Cap. 12 Holdings, LLC, 2019 WL 277387, at *4 (holding accrued costs of $2,430.00 per month 13 excessive and disproportionate to vessel's $6,000.00 fair market value). 14 In the light of the Defendant Vessel's likelihood of deterioration, the unreasonable 15 delay in securing her release, and the excessive and disproportionate cost of keeping her in 16 custody, the Court finds interlocutory sale warranted under Rule E(9)(a) and grants 17 Plaintiff's motion in this regard. 18 B. Authorization to Credit Bid 19 Plaintiff asks the Court to authorize a credit bid at the Defendant Vessel's auction up 20 to the lien amount in the Verified Complaint ($58,761.50) to be established by affidavit, 21 plus its actual and demonstrable costs of suit, including U.S. Marshal, substitute custodian, 22 and other custodia legis expenses to be calculated through the date of sale. Motion for 23 Vessel Sale at 14. Plaintiff asserts that as the only maritime lien claimant, it is by definition 24 senior to all other claims in this action. Id. 25 Under the Civil Local Rules, when the court determines on the merits that a plaintiff 26 or plaintiff in intervention has a valid claim senior in priority to all other parties, that 27 plaintiff in intervention foreclosing a properly recorded and endorsed preferred mortgage 28 on, or other valid security interest in the vessel may bid, without payment of cash, certified 1 check or cashier's check, up to the total amount of the secured indebtedness as established 2 by affidavit filed and served on all other parties no later than seven (7) days prior to the 3 date of sale. Civ. L.R. E.1(e)(2). There is nothing in the record to indicate that a party aside 4 from Plaintiff has asserted any maritime lien claim against the Defendant Vessel. It follows 5 that Plaintiff has a valid claim senior in priority to all other parties and thus the Court finds 6 it appropriate to grant Plaintiff's request to credit bid at the Defendant Vessel's auction. 7 III. CONCLUSION 8 Based on the foregoing, the Court GRANTS Plaintiff's motion for interlocutory sale 9 and credit authorization as follows: 10 IT IS HEREBY ORDERED that, consistent with Rule E(9)(b) and Civil Local 11 Rule E.1(e) the United States Marshal be and hereby is directed and empowered to sell said 12 Defendant Vessel and her engines, tackle, accessories, equipment, furnishings and 13 appurtenances, as is, where is, at public sale at the first available time and date, after having 14 first caused notice of said sale to be published daily in a newspaper of general circulation 15 within the City of San Diego, California for at least seven days immediately before the date 16 of sale; and 17 IT IS FURTHER ORDERED that, such public notice specify the date, time and 18 location for the sale of the Defendant Vessel; and 19 IT IS FURTHER ORDERED that, consistent with Civil Local Rule E.1(e)(2), such 20 public notice specify that the last and highest bidder at the sale will be required to deposit 21 with the U.S. Marshal a certified check or a cashier's check in the amount of the full 22 purchase price not to exceed $500, and otherwise $500 or ten percent (10%) of the bid, 23 whichever is greater, and that the balance, if any, of the purchase price shall be paid by 24 certified check or cashier's check before confirmation of the sale or within three days of 25 dismissal of any opposition which may have been filed, exclusive of Saturdays, Sundays 26 and legal holidays; and 27 28 1 IT IS FURTHER ORDERED that any proceeds of said sale shall be held by the 2 United States Marshal or deposited by the United States Marshal in the Registry of this 3 Court, pending further order of this Court; and 4 IT IS FURTHER ORDERED that Plaintiff, having a secured maritime lien 5 interest in the Defendant Vessel pursuant to the Commercial Instruments and Federal 6 Maritime Lien Act (46 U.S.C. §§ 31301-31343) and being the only claimant in this action 7 asserting a maritime claim against her, is authorized pursuant to Civil Local Rule E.1(e)(2) 8 to credit bid at the auction of the Defendant Vessel, without payment of cash, a sum equal 9 to its secured interest in the Defendant Vessel, consisting of the lien amount specified in 10 Plaintiff's Verified Complaint ($58,761.50), plus its actual costs of suit through the date of 11 the sale, including U.S. Marshal and other custodia legis expenses, with such costs and 12 expenses to be calculated at the rates specified and authorized in the Order Appointing 13 Substitute Custodian and Authorizing Movement of Defendant Vessel. However, as 14 Plaintiff's maritime necessaries lien interest in the Defendant Vessel does not, as a matter 15 of law, include attorneys' fees, such fees are not to be included in any credit bid Plaintiff 16 makes; and 17 IT IS FURTHER ORDERED that should Plaintiff elect to credit bid, it shall file 18 and serve any appearing parties with its Notice of Intent to Credit Bid no later than seven 19 (7) days prior to the date of the sale of the Defendant Vessel, as required by Civil Local 20 Rule E.1(e)(2); and 21 IT IS FURTHER ORDERED, pursuant to Civil Local Rule E.1(e)(2), that if within 22 three days of the auction date, exclusive of Saturdays, Sundays, and legal holidays, no 23 written objection is filed, the sale shall stand confirmed as of course, without the necessity 24 of any affirmative action thereon by a judge, except that no sale shall stand confirmed until 25 the buyer has complied fully with the terms of the purchase; and 26 IT IS FURTHER ORDERED, that if no objection to the sale of the Defendant 27 Vessel is filed within three days of the auction date, exclusive of Saturdays, Sundays and 28 1 || legal holidays, the U.S. Marshal shall forthwith issue to the high and successful bidder a 2 || Bill of Sale for the Defendant Vessel. 3 IT IS SO ORDERED. 4 ; Dated: January 7, 2025 “4 we SH 4, 6 Honorable James E. Simmons Jr. 7 United States District Judge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28