The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge
VACATE ORDER OF ARREST ORDER DENYING MOTION TO
Defendants move to vacate an order of arrest pursuant to Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions E(4)(f). For the reasons that follow, Plaintiff has established probable cause for the order of arrest. Accordingly, Defendants motion to vacate the order is DENIED.
On June 30, 2010, the parties executed a loan agreement whereby Plaintiff Sea Prestigio, LLC, would loan Defendants $21 million in two disbursements. (Gonzalez Dec., Exh. D) Defendants executed a promissory note in the principal sum of $21 million concurrently with the loan agreement. (Opp. at 3; Gonzalez Dec., Exh. E) To secure payment, Defendants granted Plaintiff a preferred ship's mortgage on the M/Y TRITON ("the vessel"), a 163-foot yacht, which would allow Plaintiff to take possession of the vessel in the event of default. (Id., Sec. 5.01) On June 30, 2010, Plaintiff paid the first $15.5 million disbursement into an escrow account. (Opp. at 15; Gonzalez Dec. at ¶ 15)
The loan agreement contemplates that several actions taken by borrowers can result in default, including:
(A) Borrowers fail to make any payment of principal or interest when due, or deposit funds demanded by Lender, pursuant to and under this Agreement, the Note or any other Loan Document;
(B) The Conditions Precedent to Second Disbursement are not satisfied.
(Gonzalez Dec., Exh. D, Sec. 4.1)*fn1 Conditions precedent to second disbursement include in relevant part:
(i) Borrowers' representation and warranties set forth in this Agreement and all of the Loan Documents shall be true and correct as of the Second Disbursement Closing Date;
(ii) there shall not exist any Event of Default under this Agreement or any of the Loan Documents; . . .
(v) the Cabo Property Title Insurance Company shall have committed to issue Lender the Cabo Property Title Insurance Policy, subject to no liens, encumbrances or interests. (Id., Art. I)
Plaintiff's complaint for breach of contract to foreclose on a preferred ship's mortgage and its ex parte application for an order authorizing arrest of the vessel is based, in part, on Defendants' failure to pay interest on the loan. The parties do not dispute that Defendants made only one interest payment and refused to make subsequent payments.*fn2
Supplemental Rule E(4)(f) provides that "[w]henever property is arrested or attached, any person claiming an interest in it shall be entitled to a prompt hearing at which the plaintiff shall be required to ...