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Portland Development Corporation v. M/V Nova Star

United States District Court, D. Maine

September 7, 2016

PORTLAND DEVELOPMENT CORPORATION, Plaintiff
v.
M/V NOVA STAR, in rem, Defendant

          FINDINGS OF FACT AND CONCLUSIONS OF LAW

          D. Brock Hornby United States District Judge.

         On August 23, 2016, I conducted a bench trial of the Portland Development Corporation (“PDC”)'s claim to a maritime lien on the M/V Nova Star (“Nova Star”). I heard closing arguments the next day. The following are my findings of fact and conclusions of law. See Fed.R.Civ.P. 52.

         Findings of Fact

         1. In 2013, Singapore Technologies Marine Ltd. (“ST Marine”) and Quest Navigation, Inc. (“Quest”) entered into a joint venture to operate a ferry service between Yarmouth, Nova Scotia and Portland, Maine.

         2. ST Marine and Quest incorporated Nova Star Cruises Ltd. in Nova Scotia to operate the ferry service. ST Marine owned ten percent of the company.

         3. Nova Star Cruises Ltd. chartered a vessel owned by ST Marine, the M/V Nova Star, to make the crossing.

         4. The City of Portland wanted to restore Yarmouth-Portland ferry service, which had lapsed in 2009.

         5. The City of Portland owned premises on the Portland waterfront called Ocean Gateway.

         6. The City of Portland leased Ocean Gateway to Nova Star Cruises Ltd. to serve as a location where the ferry could embark and disembark passengers, passenger vehicles, and commercial vehicles. The lease granted Nova Star Cruises Ltd. unrestricted exclusive use over the office and ticketing space at the Ocean Gateway departure building to be used for ticketing operations and general passenger support purposes. It also granted Nova Star Cruises Ltd. time-limited use-from the hours of 5:00 p.m. to 11:00 p.m. during ferry season-over the “queuing area” where cars, commercial vehicles, and passengers would pass through U.S. Customs as they embarked and disembarked the ferry. The lease granted Nova Star Cruises Ltd. time-limited use-between 7:00 p.m. and 11:00 p.m. during ferry season-of the berthing channel at Ocean Gateway. Nova Star Cruises Ltd. was also able to access the berthing channel outside those hours if the channel was reasonably available, but the City of Portland had a right to assign a secondary berth to Nova Star Cruises Ltd. The lease granted Nova Star Cruises Ltd. time-limited use-5:00 p.m. to 9:00 p.m. during ferry season-of the terminal building at Ocean Gateway for the processing of passengers and related functions by U.S. Customs.

         7. Because the Portland-Yarmouth crossing is an international crossing, the parties needed to accommodate United States Border Patrol and Customs requirements, which included alterations and additions to Ocean Gateway.

         8. The PDC, a nonprofit corporation operated by the City of Portland, decided to enter into a loan agreement with Nova Star Cruises Ltd. Initially, the PDC sought guarantees from each of ST Marine and Quest. When that request was rebuffed, the PDC sought a purchase money security interest in all assets being financed, acquired, or installed under the loan and a third security position on all business assets of Nova Star Cruises Ltd. as collateral for its loan to Nova Star Cruises Ltd. That request, too, was rebuffed. The staff of the PDC recommended that the PDC nevertheless proceed with the loan on an “unsecured” basis, because the benefit to the City (improvements to Ocean Gateway, employment, and the local economy) supported resuming ferry service between Yarmouth and Portland. Ultimately the PDC agreed that it would take no security interest in any business assets of Nova Star Cruises Ltd., but that the City of Portland would have actual ownership over the assets at Ocean Gateway that the PDC loan financed.

         9. The PDC agreed to advance up to $250, 000 as an unsecured loan to fund the alterations and additions to Ocean Gateway required for the ferry service. Nova Star Cruises Ltd. signed a promissory note to repay the advances at five percent interest over a period of six years, the first payment scheduled for May 1, 2014 and the final payment scheduled for May 1, 2020. Nova Star Cruises Ltd. executed the loan agreement and the promissory note through its President, Mark Amundsen. Nova Star Cruises Ltd. designated the City of Portland its agent to make the alterations and improvements at Ocean Gateway and to advance the money for materials and labor accordingly.

         10. As it turned out, Nova Star Cruises Ltd. terminated the ferry service in 2015 after just two seasons.

         11. A number of creditors seized the M/V Nova Star through process originating in this court, asserting maritime liens against it. Most of the claims have been resolved, and ST Marine as owner of the vessel posted a bond that allowed the vessel to ...


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