Judge orders sale of M/V Luta

A federal judge ordered yesterday the sale of cargo ship M/V Luta, in the minimum bid amount of $550,000.

U.S. District Court for the NMI designated judge Frances M. Tydingco-Gatewood approved the vessel’s sale, citing its expensive upkeep and the delay in securing its release.

Tydingco-Gatewood ordered the U.S. Marshal to sell the ship on Feb. 8, 2017, at 10am. Notice of the sale shall be published in the Saipan Tribune, Marianas Variety, and the Guam Pacific Daily News at least three times 21 days prior to the sale.

The defendants in the lawsuit, Luta Mermaid LLC and its president Abelina T. Mendiola and operators Deron T. Mendiola, and Fidel S. Mendiola III, through counsel William M. Fitzgerald, have suggested that a sale would be unnecessary if the vessel were released into their custody, with a court order not to sell it, transfer it, or remove it from the jurisdiction.

Tydingco-Gatewood said the sale can be avoided if the parties in the case reach a stipulation to that effect. The judge said she would accept such a stipulation.

Japanese investor Takahisa Yamamoto, through counsel George Lloyd Hasselback, is suing Lt. Gov. Victor Hocog and the owner/operators of M/V Luta for allegedly refusing to pay back the $3.4 million that he put up for the vessel.

After Yamamoto filed the lawsuit last Oct. 25, the U.S. Marshal Service seized M/V Luta and the National Maritime Services Inc. was named custodian. The ship’s former captain, Michael Brochon, and its six crewmembers, as well as Norton Lilly International Inc. and Long Consulting, intervened in Yamamoto’s lawsuit to collect payments for alleged unpaid wages and services from the M/V Luta owner.

Yamamoto and intervenors then asked the court to sell the vessel. Brochon and Long Consulting joined in Yamamoto’s motion for the vessel’s sale.

Luta Mermaid LLC, Abelina Mendiola, Deron Mendiola, and Fisel S. Mendiola III opposed the sale.

Capt. Brochon and the crewmembers submitted a request that the minimum bid be $550,000. Brochon and the crewmembers are demanding payment for wages totaling at least $199,147.77.

No other requests for minimum bid have been submitted.

In her order yesterday granting the motion for sale, Tydingco-Gatewood said the Supplemental Rules for Admiralty or Maritime Claims permit the district court to order the sale of arrested property, with the proceeds paid into the court to satisfy a possible judgment.

Defendants argued that the motion to sell should be denied because Yamamoto had no right to arrest the vessel in the first place because Yamamoto is not a creditor but an investor—a joint venture owning an interest in M/V Luta.

Tydingco-Gatewood said the court does not have to decide the validity of Yamamoto’s claim to a maritime lien before deciding whether to order a sale of the vessel.

Tydingco-Gatewood said more than two months have now passed since M/V Luta was arrested, and still the defendants who oppose the sale have not filed verified statements of interest, answered the complaints, or moved to vacate the vessel’s arrest.

The judge said Yamamoto and the intervenors have followed the proper procedures to arrest M/V Luta and now, as the cost of maintaining it mounts with every passing day, they exercise their right to seek an interlocutory sale.

Tydingco-Gatewood said she does not find that Yamamoto and the intervenors have shown that the vessel is so liable to deterioration that it must be sold immediately.

Tydingco-Gatewood said the custodial costs are rapidly eating away at the vessel’s value to its creditors. The judge said she finds that the expense of keeping M/V Luta is clearly excessive and disproportionate to its value.

More than two months have passed since M/V Luta was arrested and the owners have not posted bond to release the vessel and that the parties have not entered into stipulation for the vessel’s release.

“Therefore, the court finds unreasonable delay in securing the vessel’s release,” the judge said.