TMF Trustee Limited v. M/T Megacore Philomena

Martime law

Central District of California

U.S. Magistrate Judge Alicia G. Rosenberg

$16.027 million

Plaintiff's Lawyers: Flynn, Delich & Wise LLP, Erich P. Wise, Zachary J. Politis, Nicholas S. Politis

Defense Lawyers: Kaye, Rose & Partners LLP, Frank C. Brucculeri, Bradley M. Rose

TMF Trustee Limited, a London-based Security Trustee, won a $16.027 million bench decision against M/T Megacore Philomena's 42,298-ton tank vessel registered in the Marshall Islands.

The plaintiff, TMF, contended it held a preferred mortgage under the Republic of the Marshall Islands and the Commercial Instruments and Maritime Lien Act over the defendant's vessel following an amendment and an addendum to the original mortgage agreed to by the ship's owner, Hurricane Navigation Inc.

Erich P. Wise of Flynn, Delich & Wise LLP, attorney for the plaintiff, filed the lawsuit in December 2017. Wise declined to comment on the September ruling. TMF Trustee Limited v. M/T Megacore Philomena, et al. 17-CV09010 (C.D. Cal., filed Dec. 15, 2017).

The plaintiff secured a seizure of the vessel by the U.S. marshal in Los Angeles based on allegations that the defendant breached the loan-to-value provisions of the loan secured by the mortgage.

The defendant denied a breach of the loan, which amounted to over $34 million, and also claimed it was wrongfully prevented from selling the vessel or obtaining other financing to pay off the loan balance by the due date after the plaintiff had obtained the seizure, known as an arrest, of the vessel.

When the due date had passed after the arrest, the plaintiff amended its complaint to include a claim of default based on a failure to pay the loan amount and accrued interest in the total amount of approximately $35 million.

U. S. Magistrate Judge Alicia G. Rosenberg approved the sale of the ship in 2018 and the vessel was sold at auction for $19,000,000.

The 9th U.S. Circuit Court of Appeals affirmed the sale in November 2019 and Rosenberg's order of summary judgment, after the defendant had appealed.

The court ordered that the remaining principal of the sale should be distributed to the plaintiff. After the deduction for the claims of trade creditors and expenses during the extended period of custody of the vessel, the plaintiff recovered $16 million.

-- Henrik Nilsson