United States District Court, W.D. Kentucky, Bowling Green Division
MEMORANDUM OPINION & ORDER
N. Stivers, Judge.
matter comes before the Court on Plaintiff Green River
Marina, LLC's Motion for Confirmation of Sale and
Disbursement of Funds (DN 44), Defendant Bank of America,
N.A.'s Objections (DN 45), Plaintiff's Updated Report
of Costs (DN 50), and Defendant's Objections to the
Updated Report of Costs (DN 51). For the reasons outlined
below, the motion is GRANTED, and the
objections are OVERRULED.
Green River Marina, LLC (“GRM”) filed this action
in Taylor Circuit Court against Defendants Don Meredith
(“Meredith”) and Bank of America, N.A.
(“BANA”) seeking to enforce its rights in a lien
on the vessel Copacetic, Hull No. MWC60352L586 (“the
Vessel”). (Notice of Removal Ex. A, DN 1-1 [hereinafter
Compl.]). BANA subsequently removed the case to this Court.
(Notice of Removal, DN 1). On May 26, 2016, this Court
granted a default judgment against Meredith and awarded a
first lien on the Vessel to BANA and a second lien to GRM.
(Default J. & Order of Sale 2, DN 35). In the Order, the
Court ordered the public sale of the Vessel and directed the
Marshal to deliver the proceeds of the sale, “after
first deducting Marshal's expenses, court costs and
attorney's fees, first to Defendant Bank of America,
N.A., and secondly to the Plaintiff, Green River
Marina.” (Default J. & Order of Sale 4-5).
Thereafter, the Clerk of the Court issued a warrant of arrest
in rem on the Vessel to the Marshal of the Western
District of Kentucky. (Warrant of Arrest In Rem, DN
38). The Court appointed GRM as substitute custodian of the
Vessel to be compensated at a rate of $25.00 per day. (Order
Appointing Substitute Custodian, DN 42).
public sale of the Vessel was held on September 23, 2016, at
the William H. Natcher Federal Building in Bowling Green,
with prior published notice. (Marshal's Report of Sale 1,
DN 47). The only and highest bidder was GRM, and the Vessel
was thereby sold to GRM for $10, 000. (Marshal's Report
of Sale 1). GRM subsequently filed a motion for disbursement
of funds seeking confirmation of the sale, an authorization
of payment of costs and fees, direction of the bill of sale
and distribution of proceeds. (Pl.'s Mot. Disbursement
Funds, DN 44, [hereinafter Pl.'s Mot.]). BANA filed its
objections thereto. (Def.'s Obj. Pl.'s Mot.
Funds, DN 45 [hereinafter Def.'s Obj.]).
BANA's lien is extinguished upon sale of the
argues that its preferred mortgage lien in the Vessel is not
extinguished by the sale because this Court previously ruled
that BANA holds “a preferred mortgage in Copacetic that
is superior to any lien or claim that [GRM] may have on the
proceeds from the sale of the
watercraft.” (Order 4, DN 19). This Court's ruling
that BANA had priority in the proceeds of the Vessel does not
equate with the notion that BANA's lien remains on the
Vessel after the sale is completed.
contention is answered by 46 U.S.C. § 31326(a), which
When a vessel is sold by order of a district court in a civil
action in rem brought to enforce a preferred
mortgage lien or a maritime lien, any claim in the vessel
existing on the date of sale is terminated, including a
possessory common law lien of which a person is deprived
under section 31325(e)(2) of this title, and the vessel is
sold free of all those claims.
46 U.S.C. § 31326(a) (emphasis added); see also
United States v. The Zarco, 187 F.Supp. 371, 374 (S.D.
Cal. 1960) (“It is hornbook law that a sale of a vessel
in rem passes title thereto free of all
liens.”); Avondale Shipyards v. Tank Barge ETS
2303, No. CIV.A. 82-1347, 1987 WL 4858, at *6 (E.D. La.
May 27, 1987) (“In addition, there is little question
but that the judicial sale of a vessel automatically
discharges all prior liens against that vessel.”
(citations omitted)). GRM brought this action to enforce its
“contractual and statutory lien on the vessel.”
(Compl. ¶ 10; Warrant Arrest In Rem). The sale
of the Vessel occurred on September 23, 2016, pursuant to
this Court's Order of Sale. (Mot. Confirmation Sale, DN
44; Order Sale, DN 35). Thus, in accordance with 46 U.S.C.
§ 31326, BANA's preferred mortgage lien in the
Vessel was terminated on September 23, 2016, and attached to
the proceeds of the sale. See 46 U.S.C. §
31326(b) (“Each of the claims terminated under
subsection (a) of this section attaches, in the same amount
and in accordance with their priorities to the proceeds of
the sale . . . .”).
Costs of Sale and Custodial Fees
does not dispute that BANA has priority in the proceeds of
the sale, but contends that it is entitled to a total of $3,
653.52 from the distribution of the proceeds because of this
Court's Order. (Default J. & Order Sale 4-5).
Specifically, GRM claims $1, 853.52 in expenses associated
with the sale of the Vessel which were advanced to the
Marshal (i.e., insurance, advertising, and auction costs) and
custodial fees at a rate of $25 per day starting August 2,
2016, and ending October 13, 2016 (the date GRM filed its
motion for disbursement of funds) for an additional $1, 800.
(Pl.'s Mot. ¶ 5; Updated Report Costs, Ex. B, DN
50-2). Section 31326 provides that “the preferred
mortgage lien . . . has priority over all claims ...