Veverica v. Drill Barge Buccaneer No. 7

• Decision Date: 22 February 1974
• Docket Number: No. 73-1211.,73-1211.
• Citation: 488 F.2d 880
• Parties: A. L. VEVERICA, d/b/a A. L. Veverica Salvage Co., Plaintiff-Appellant, v. DRILL BARGE BUCCANEER NO. 7, her engines, furniture, tackle, apparel, etc., In Rem, and Jerry D. Ward, d/b/a Buccaneer Drilling Company, In Personam, Defendants-Appellees, American Bank & Trust Co. of Lafayette et al., Intervenors-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

488 F.2d 880 (1974)

A. L. VEVERICA, d/b/a A. L. Veverica Salvage Co., Plaintiff-Appellant, v. DRILL BARGE BUCCANEER NO. 7, her engines, furniture, tackle, apparel, etc., In Rem, and Jerry D. Ward, d/b/a Buccaneer Drilling Company, In Personam, Defendants-Appellees, American Bank & Trust Co. of Lafayette et al., Intervenors-Appellees.

No. 73-1211.

United States Court of Appeals, Fifth Circuit.

January 25, 1974.

Rehearing Denied February 22, 1974.

James L. Wheeler, New Orleans, La., for plaintiff-appellant.

Jim Ortego, New Orleans, La., for Jerry Ward.

W. Gerald Gaudet, Lafayette, La., H. Barton Williams, Overton T. Harrington, Jr., New Orleans, La., for American Bank & Trust.

Roger I. Dallam, Gretna, La., for Independent Towing.

N. B. Barkley, Jr., W. J. Larzelere, Jr., Terrence C. Forstall, New Orleans, La., for Hunt Tool Co.

Alvin W. La Coste, New Orleans, La., for M & L Boat, T & L Boat, Guidry Enterprises, Galliano Towing, Les-Tie, TBS Towing, and Independent Towing.

William S. Stone, New Orleans, La., John W. Hutchinson, Lafayette, La., Ronald J. Rakosky, New Orleans, La., for Drill Barge Buccaneer No. 7 and Jerry D. Ward.

Before BELL, COLEMAN and RONEY, Circuit Judges.

BELL, Circuit Judge:

This appeal involves the validity and ranking of claims on sale proceeds of a vessel seized in rem. Under the lower court's judgment there would remain for the owner,¹ after payment of costs and lien claims deemed valid, about $17,000 of the $50,000 proceeds. We affirm in part and reverse in part, ruling that appellant, a contract salvor who has lost his maritime lien, may take remnants and surplus ahead of the owner.

The Buccaneer #7 is a floating drill barge which capsized and partially sank in shallow inland waters in May, 1970. In late June, 1970, appellant entered an agreement with the vessel's charterer² by which he would salvage the Buccaneer for $75,000 on a no-cure no-pay basis. On July 3, after work had commenced, the agreement was amended to recognize that it would take some time for the owner to obtain insurance proceeds, and that therefore right to payment would be deferred until the insurance proceeds were received, but not longer than 12 months. The salvage operation proceeded to a successful conclusion over a period of two weeks.

During the latter part of July, 1970, appellant engaged in discussions with Edgewater Oil Company concerning assignment of the salvage contract. On August 3, 1970, appellant filed this action and seized the vessel. On August 6, he signed an agreement finalizing the Edgewater assignment for $28,000.

Appellant's interest in the vessel was contested not only by the owner, appearing as claimant, but also by various intervenors who filed in rem claims. Several of these intervening claims were liquidated by default and consent judgments to which neither the owner nor appellant objected. In May, 1971, the vessel was sold and the proceeds were deposited in the court's registry pending determination of the validity and ranking of the various claims. The case was referred to a magistrate as special master, and the district court adopted his findings, conclusions and recommendations. The resulting order permitted recovery by certain of the intervenors, with the remnants and surplus of and from the proceeds going to the owner. Appellant was treated as a general creditor and was denied all participation in the proceeds. This appeal followed, with victorious intervenors responding as appellees.

The decision of the lower court was based upon four alternative grounds, any one of which would have been sufficient to preclude appellant's recovery. For one, it was concluded that no lien had been created by either the salvage contract or the salvage operation itself. The court also found that if a lien had been created, it was waived by appellant's failure to abide by the agreement to defer payment — the vessel was seized within one month of the salvage. Further, the lower court concluded that even if a lien had been created and was not otherwise waived, salvage liens are extinguished by assignment. Finally, recovery was denied on the theory that appellant was not the real party in interest within the meaning of Rule 17, F.R.Civ. P., in that he had assigned his lien rights, if any, contemporaneously with filing the complaint.

Despite these multiple bases for completely denying appellant's claim, the district court also ruled that if there were an enforceable lien it could be for no more than $28,000, the price paid by Edgewater. This was done on the theory that while a salvage contract may be binding between the parties, as to prior lienholders it is subject to an equitable determination of reasonableness.

Our view of the case is that the salvage contract created a lien, but that the remedies accorded by the lien were suspended until payment was due. Thus, appellant had no right during the suspension period to seize the vessel, and also no right to participate in the proceeds as a lienor. However, we also hold that appellant's claim is one which may be satisfied from remnants and surplus. Finally, we rule that neither the real party in interest issue nor the assignment to Edgewater defeat appellant's claim.

I.

The initial question is whether appellant's services gave rise to a salvage lien against the Buccaneer #7. As indicated by 46 U.S.C.A. § 953,³ admiralty recognizes two methods of creating a lien for salvage services, by pure salvage and by contract. The first of these is discussed in The Sabine, 1880, 101 U.S. 384, 25 L.Ed. 982. See also Fort Myers Shell and Dredging Co. v. The Barge NBC 512, 5 Cir., 1968, 404 F.2d 137, 139. As is consonant with the theory of the pure salvage lien, the cases require not only success in the salvage operation, but also that it be performed in the face of marine peril, and that the service be rendered voluntarily and not to fulfil a contractual duty. The Sabine, supra. To dismiss appellant's contention that he has a pure salvage lien we need only note that his services were provided pursuant to a contractual duty.

Appellant's claim to a contractually based salvage lien is countered by two arguments. The first is that under the contract's terms credit was extended to the owner, not the ship. See The President Arthur, 1929, 279 U.S. 564, 49 S.Ct. 420, 73 L.Ed. 846. The intervenors support this argument by pointing to the facts that the contract does not specifically bind the ship, and that appellant was expecting payment from insurance proceeds. We think these facts inadequate to defeat the lien in light of Point Landing, Inc. v. Alabama Dry Dock & Shipbuilding Co., 5 Cir., 1958, 261 F.2d 861. In that case, the materialman sold his goods directly to the vessel's owner, and not only obtained a promissory note and a chattel mortgage on the vessel, but also a mortgage on real estate "as additional security for the said obligation." The documents did not specify that any maritime lien was retained. On the basis of 46 U.S.C.A. § 971 (which declares that to create a maritime lien it shall not be necessary to allege or prove that credit was given to the vessel), the court ruled that a lien arises from the furnishing of services to a vessel "unless it is affirmatively established that it was done solely on personal credit." 261 F.2d at 867. Under this authority, the intervenors must point to evidence which "might permit the inference that the supplier purposefully intended to forego the valuable privilege which the law accords and look solely to the owner's personal credit." Id. This they have failed to do, so we must recognize a lien. See also The Crustacea, 5 Cir., 1966, 369 F.2d 656, 660.

The intervenors also contend that the deferral of payment for up to a year operated to waive the lien. We are convinced to the contrary. The very purpose of maritime liens is to encourage necessary services to ships whose owners are unable to make contemporaneous payment. Piedmont & George's Creek Coal Co. v. Seaboard Fisheries Co., 1920, 254 U.S. 1, 9, 41 S.Ct. 1, 3, 65 L.Ed. 97, 101. In order to preserve this source of credit, and in order to facilitate ordinary and reasonable commercial practices, we align ourselves with those early cases which held that credit of a duration consistent with the lien does not waive the lien, but merely suspends the remedy on the lien until its expiration. See The Napoleon, E.D.Wis., 1877, 17 F.Cas. 1150 (No. 10,011); The Kearsarge, D.Maine, 1855, 14 F.Cas. 165 (No. 7,634); The Antarctic, D.Mass., 1852, 1 F.Cas. 1037 (No. 479); The Nestor, C.C.D.Maine, 1831, 18 F.Cas. 9 (No. 10,126). Further, we find no inconsistency between a salvage lien and a year's credit.⁴

II.

Had appellant honored the credit he extended we would have no difficulty recognizing and enforcing his lien. He chose, however, to prematurely seize the vessel, and we therefore must determine the effect of that action. As will be seen, we conclude that by so doing appellant waived his salvage lien.

The concept of a premature libel arose in three early cases. See The Falcon, S.D.N.Y., 1874, 9 F.Cas. 743 (No. 5,078a); The Antarctic, supra; The Nestor, supra. These cases recognized that failure to honor an agreed period of credit was a defense to an in rem proceeding. They permitted liens subject to an extension of credit, but they treated them as inchoate, remediless liens until the credit periods expired. On the basis of both equitable and commercial considerations, we think that these principles are wholly applicable to appellant's case. He cut off the possibility that after repair the ship's earnings could be used to pay its lienors. By so doing he has deprived the owner of a promised grace period, and he has prejudiced any subsequent suppliers who might have relied on the salvor's willingness to defer action on his superior lien. We are unwilling to open the extraordinary and costly in rem remedy to those who have so little regard for their own agreements...