FIRST NAT. BANK & TRUST CO., ETC. v. OIL SCREW, ETC.

• Decision Date: 14 November 1973
• Docket Number: No. M-17-73 C.A.,M-17-73 C.A.
• Citation: 379 F. Supp. 1382
• Parties: FIRST NATIONAL BANK & TRUST COMPANY OF ESCANABA, a banking corporation, Plaintiff, v. OIL SCREW OLIVE L. MOORE and BARGE WILTRANCO I and their respective engines, boilers, boats, machinery, tackle, apparel, and furniture and Escanaba Towing Company, Inc., a Michigan corporation, Defendants.
• Court: U.S. District Court — Western District of Michigan

379 F. Supp. 1382

FIRST NATIONAL BANK & TRUST COMPANY OF ESCANABA, a banking corporation, Plaintiff, v. OIL SCREW OLIVE L. MOORE and BARGE WILTRANCO I and their respective engines, boilers, boats, machinery, tackle, apparel, and furniture and Escanaba Towing Company, Inc., a Michigan corporation, Defendants.

No. M-17-73 C.A.

United States District Court, W. D. Michigan, S. D.

November 14, 1973.

COPYRIGHT MATERIAL OMITTED

Richard E. Fleury, Detroit, Mich., John R. Beauchamp, Hansley, Neiman, Peterson & Beauchamp, Escanaba, Mich., for defendants.

Thos. Butch, Escanaba, Mich., Miller, Canfield, Paddock & Stone, by Wolfgang Hoppe, Christopher J. Dunsky, Detroit, Mich., for plaintiff.

Hansley, Neiman, Peterson & Beauchamp by Arthur A. Neiman, Escanaba, Mich., for claimant Frank Stropich, d/b/a Stropich Oil Co.

Ernest L. Olivares, Escanaba, Mich., Charles D. Meadows, Foster, Meadows & Ballard, Detroit, Mich., for claimant Seagulf Marine & Industrial Products, Ltd., Montreal, Canada.

John G. Wildermuth, Beverly Hills, Cal., for claimant, Litton Systems, Inc.

John T. Mitchell, Bay City, Mich., for claimants Robert Bosk, d/b/a Bosk Paint & Sandblast, Delta Home Improvement, Inc., Est. of Henry Feathers, Dec., Iola Feathers, wife of deceased, and others, Wm. W. Stender.

Robert E. LeMire, Jr., Escanaba, Mich., for claimant Walter F. Johnson, d/b/a Walt's Welding Service.

Hansley, Neiman, Peterson & Beauchamp, by Frank A. Stupak, Jr., Escanaba, Mich., for claimant Ray Pakarinen and Don Killoran.

Hansley, Neiman, Peterson & Beauchamp, Escanaba, Mich., for claimant Employers Ins. of Wausau.

Robert E. LeMire Jr., Escanaba, Mich., for claimant Fred I. Costell, d/b/a C. & H. Contracting Co.

Robert J. DeGrand, Escanaba, Mich., for claimant B. L. & G. Boiler Works, Inc.

Robert W. Hansley, Escanaba, Mich., for claimant Verner Newmann.

Chris Cain pro se.

OPINION AND ORDER

FOX, Chief Judge.

On April 30, 1971 defendant Escanaba Towing Company (hereinafter, the Company) executed and delivered to plaintiff First National Bank and Trust Company of Escanaba (hereinafter, the Bank) a preferred fleet mortgage covering the defendant vessels "Olive L. Moore" and "Wiltranco I," owned by the Company. The mortgage secured loans from the Bank to the Company evidenced by a promissory note in the amount of $243,000, executed on or about the same date. On June 6, 1972 this note was replaced by a second promissory note in the amount of $241,359.81 secured by the mortgage. Upon default of payment by the Company, plaintiff Bank brought this action in admiralty against the two vessels and the Company, to foreclose its preferred ship mortgage. A number of intervening parties have filed additional claims against the defendants.¹

On March 28, 1973, the United States Marshal seized the vessels in Escanaba, Michigan pursuant to court order. Aboard the Wiltranco at the time of seizure was an Airman air compressor, Model PDR 600 CFM, Serial No. 14-60107, a claim to which has been filed by Seagulf Marine and Industrial Products, Ltd. (hereinafter, Seagulf).

An order of this court filed April 26, 1973 adjudged the Bank's mortgage to be a valid and subsisting preferred mortgage lien upon the vessels and their appurtenances in the amount of $241,359.81, entered the default of Escanaba Towing, foreclosed the mortgage and ordered the sale of the vessels together with their appurtenances by the Marshal. The order also authorized the Bank to bid at the sale by offering to execute a full or partial satisfaction of its judgment.

The Marshal sold the vessels on May 17, 1973 in three separate lots: first, the Airman air compressor on board the Wiltranco; second, the Wiltranco and all her appurtenances less the air compressor; and finally, the Olive L. Moore and all her appurtenances. The air compressor and the Olive L. Moore were sold to the Bank in exchange for its offer to execute partial satisfaction of judgment, $32,000 for the Olive L. Moore and $9,500 for the air compressor. The Wiltranco was sold to a third party for $61,000.

The sales of the Olive L. Moore and the Wiltranco were confirmed upon the Bank's motion by orders of this court filed May 25, 1973. The sale of the air compressor was not confirmed, in view of the claim to the compressor put forth by Seagulf. The court released the compressor to the Bank to hold for disposition according to further orders of the court, a stipulation having been filed by the Bank in the amount of $20,000 to secure its compliance.

Seagulf moved for summary judgment on its claim to recover the compressor; in opposition, the Bank moved for summary judgment dismissing Seagulf's claim. Additionally the Bank requested that its previously filed motion for confirmation of the sale of the compressor be decided at the same time as the summary judgment motions. The Bank also moved for an order declaring its preferred ship mortgage to be prior to Seagulf's lien, if any, for unpaid rent and/or for the value of the compressor. The matter is presently before the court on these motions.

The facts relating to the compressor are essentially uncontested.

While the Wiltranco was located in the vicinity of the St. Catherine Locks near Montreal, her steam boiler burst. The boiler was used to provide power for operation of the barge's winches. The barge could not proceed through the St. Lawrence Seaway on its return voyage to Michigan without operative winches for hauling lines in accordance with Seaway regulations. To enable the barge to move through the Seaway, Escanaba Towing entered into a rental agreement with Seagulf on October 24, 1972 by which Seagulf would provide the air compressor on board the barge to serve as a temporary source of power for the winches until the vessel could be brought to port for repairs to its boiler. It was agreed that the compressor was to be returned to Seagulf upon the vessel's arrival at port.

Once the compressor was brought aboard, the Wiltranco proceeded through the Seaway. When the Marshal seized the vessel the compressor was still on board because previous attempts to remove it had proven unsuccessful — adequate crane facilities to lift the compressor from the barge at the place it was then moored were unavailable.

Three affidavits have been filed by Seagulf in conjunction with its motion. The affidavit of Clyde Van Enkevort, president of Escanaba Towing, affirms the facts as related above, emphasizing that the use of the leased compressor was merely a temporary or "stop gap" addition to the permanent boiler and that all parties understood that normal operation of the boiler would resume as soon as repairs could be made. It further states that the lease agreement was for only a specifically stated time period, renewable only by agreement with the lessor, that the agreement did not contain a purchase option clause and that Escanaba Towing at no time acquired or sought to acquire any interest in the compressor except that of a lessee. Regarding the unsuccessful attempt at removal, Van Enkevort states that in December 1972 the captain of the Wiltranco had docked the vessel without regard to the inconvenience in removing the unit caused by his positioning of the vessel. That in several attempts at removal the crane could not be made to reach the far side of the barge where the compressor was located. That only by moving crane equipment onto the ice could the removal be effected and this was considered too great a risk due to the possibility of a breakthrough on the ice. Finally, he states that the court proceedings in this matter began before the ice melted and the barge could be turned around.

The affidavit of Edward Zeagman, president of Seagulf, states that Seagulf is lessee of the air compressor it leased to Escanaba Towing; that the compressor is owned by Perco, Ltd., and was leased by Perco to Welding Engineers, Ltd. who in turn leased it to Seagulf. Seagulf enclosed copies of the leases from Perco to Welding and from Welding to Seagulf.

In addition, Seagulf submitted the joint affidavit of William Blaxall, an officer of Welding Engineers, Sam Hasegawa, an officer of Perco, and Zeagman. This document affirms that the leases involved herein are valid and subsisting as leases and have not been annulled or cancelled in any manner. It is further stated that Seagulf is authorized on the part of all affiants to pursue the claim for return of the compressor.²

I.

Seagulf claims it has the right to recover the air compressor in question because the unit is not subject to the Bank's preferred ship mortgage on the Wiltranco. Seagulf argues that: (1) Such equipment is not subject to a preferred ship mortgage covering the vessel upon which it is installed when the equipment is not owned by the vessel owner but merely leased, with title remaining in a third party; (2) even if, arguendo, such equipment might become subject to traditional non-mortgage maritime liens against the vessel, it does not become subject to a preferred ship mortgage because a preferred ship mortgage is essentially different from a maritime lien and does not extend to property not owned by the vessel owner.

The Bank's opposing argument runs as follows: The compressor, used to power the winches on the Wiltranco, was necessary to the operation and navigation of the vessel because of Seaway regulations requiring ships passing through the Seaway to have powered winches for hauling lines and additionally because a vessel cannot be moved without powered winches for use in docking at the end of its voyage. Since it was necessary to the vessel's navigation and operation, the compressor became an appurtenance of the vessel and therefore subject to all maritime liens against the vessel itself, despite the fact the compressor was not owned by the vessel owner. A preferred ship mortgage has the status of a maritime lien by virtue of the Ship Mortgage Act of 1920. Therefore, the compressor became subject to the Bank's...