Summary
In Caterpillar, the court analyzed the totality of the circumstances and found that, as opposed to a sale, the transaction at issue was not the sale of the vessel for an amount of money, but the cancellation of a debt owed in exchange for the property.
Summary of this case from SMALL BUSINESS LOAN SOURCE, INC. v. F/V MISS KAITLINOpinion
CIVIL ACTION NO: 03-228 NO:, 03-228, SECTION: "J"(3)
August 19, 2003
ORDER AND REASONS
Before the Court is the plaintiff's Motion to Compel Marshal to Deliver Bill of Sale. Rec. Doc. 29. The United States Marshal opposes the motion. The motion, set for hearing on August 6, 2003, is before the Court on briefs without oral argument.
BACKGROUND
On January 23, 2003, plaintiff sought the aid of this Court in seizing the defendant vessel in satisfaction of a ship mortgage owed it in the amount of $1,443,895.60. The seizure was effected in accordance with Rule C of the Supplemental Rules for Certain Admiralty and Maritime Claims, and subsequently, on May 29, 2003, the vessel was sold at auction by the United States Marshal. Rec. Doc. 24. Plaintiff was the high bidder at $10,000.00. That bid was apparently made subject to a settlement agreement between the parties that any sale price paid would be returned to plaintiff following conclusion of the sale. Thus, following the sale, plaintiff would have possession of the Mr. C II, and the $10,000 sale price would be returned to it. The defendants would have satisfied their debt to plaintiff by turning over the vessel.
See Plaintiff's Motion, Rec. Doc. 28, Exh. E (requesting return of all funds on deposit with U.S. Marshal except for the $165 commission).
The instant dispute has arisen with respect to the commission owed to the Marshal for the sale. Plaintiff argues that the sale was a cash sale for $10,000.00, and thus that the commission due to the Marshal should be calculated on that basis, yielding a total commission due of $165.00. In contrast, the Marshal contends that the transaction actually involved a setoff of the debt owed to plaintiff in the amount of $1,444,000, and thus the commission should be calculated on the lesser of the judgment lien extinguished by the sale (which would be $21,675), or the appraised value of the vessel. In this vein, the Marshal invited plaintiff to obtain an appraisal, so that in the event the appraised amount of the vessel was less than the amount of plaintiff's lien it could pay a commission on a lesser amount. Plaintiff declined to do so, instead filing the instant motion seeking to compel the Marshal to deliver the bill of sale after deducting a $165.00 commission from the amounts already on deposit with the Marshal.
DISCUSSION
Commissions on Marshal's sales are calculated in accordance with 28 U.S.C. § 1921, which provides in part:
(c)(1) The United States Marshals Service shall collect a commission of 3 percent of the first $1,000 collected and 11/2 percent on the excess of any sum over $1,000, for seizing or levying on property (including seizures in admiralty), disposing of such property by sale, setoff, or otherwise, and receiving and paying over money, except that the amount of commission shall be within the range set by the Attorney General.
The federal regulations supplementing § 1921 explain that the "U.S. Marshal's commission shall apply to all judicially ordered sales and/or execution sales, including but not limited to all private mortgage foreclosure sales." 28 C.F.R. § 0, 114(h).
In addition, the Department of Justice has issued an interpretive regulation addressing the calculation of a commission when a foreclosing mortgagee makes a nominal bid in an attempt to avoid the Marshal's commission. It provides:
D. Credit bid. A credit bid submitted by judgment creditor constitutes "receipt and pay over of money" withing the meaning of 28 U.S.C. § 1921. Thus, a judgment creditor will generally be liable for paying the U.S. Marshal's statutory commission when a credit bid is submitted at a U-SMS sale. In some cases (commonly in private mortgage foreclosure actions), a judgement creditor may submit a credit bid of a nominal sum, such as $1.00, in an attempt to avoid payment of the U.S. Marshal's commission. In such a case, the U.S. Marshal's commission should be calculated on the basis of the amount of the judgment lien or, if established the appraised value of the property under levy, whichever is smaller. For example, if a creditor holding a $1 million dollar judgment directs the U.S. Marshal to execute a levy on a parcel of real estate worth $500,000.00 and the judgment creditor submits a credit bid of "$1.00 plus costs," the U.S. Marshal commission should be based on $500,000.00, which amounts to $7,515.00.
DOJ Interpretive Regs., "Fees, Expenses and Commissions" 6-4(D). (Attached as Exh. G to plaintiff's motion, Rec. Doc. 28).
While plaintiff argues strenuously that its payment of $10,000.00 for the vessel demonstrates that this matter involves a cash sale, the totality of the circumstances indicate otherwise. By the terms of the agreement between the parties, the $10,000.00 was to be returned to plaintiff Caterpillar, less any commission owed the Marshal. Thus, what was actually taking place via the transaction at issue was not the sale of the vessel to Caterpillar for $10,000.00, but the cancellation of the defendant's $1,444,000 judgment lien in favor of Caterpillar in exchange for the vessel. No real transfer of funds was intended to take place; rather, the plaintiff/mortgagee agreed to offset the debt owed in exchange for receipt of the property. The Court finds that this transaction walks and talks like a setoff in satisfaction of a private mortgage as contemplated by 28 U.S.C. § 1921 and the interpretive regulations, and therefore concludes that it was a setoff. Further, to calculate the commission owed based on the $10,000.00 bid would allow plaintiff precisely the windfall prohibited by DOJ Regulation 6-4(D) concerning credit bids. Whether or not $10,000 is fairly termed a "nominal bid," it has no relation to the value of the thing exchanged in this transaction, and thus it should not be used as a basis for calculating the commission. Rather, the commission owed to the Marshal should be calculated on the value of what was received by Caterpillar in the transaction — either the amount of its judgment lien, or the fair market value of the vessel.
Plaintiff objects that there is no statutory basis for equating the extinguishment of its foreclosure claim with a set-off, and thus there is no other way to view the transaction as anything but a cash sale for $10,000.00. However, the foregoing analysis demonstrates that the value given by defendant (extinguishment of a $1,444,000 debt) and value received by plaintiff (a vessel presumably worth somewhere in the neighborhood $1,444,000) far exceed $10,000.00, so whatever innominate transaction might have occurred, it was not a $10,000.00 cash sale. Moreover, the statute states specifically that it applies to dispositions "by sale, setoff, or otherwise;" if plaintiff objects to having the transaction classified as a setoff, it may consider it as falling into the "or otherwise" category, in conformity with the terms of the statute which appear to be intentionally broad.
Plaintiff also argues that this result works a violation of the Equal Protection guarantees of mortgagees, because a third-party (non-creditor) bidding $10,000.00 cash at a Marshal's sale would pay a commission on that amount. This argument is unavailing because it overlooks the simple fact that a third-party's bid of $10,000.00 would never be accepted — the third-party would have to bid at a minimum the value of the lien, which in this case is the amount the Marshal has used to calculate the commission. Thus, plaintiff's Equal Protection argument is misplaced.
Accordingly,
IT IS ORDERED that plaintiff's Motion to Compel Marshal to Deliver Bill of Sale (Rec. Doc. 29.) should be and is hereby DENIED.