Brandon v. Denton

• Decision Date: 10 April 1962
• Docket Number: No. 18899.,18899.
• Citation: 302 F.2d 404
• Parties: Russell H. BRANDON, Trustee, et al., Appellants, v. S. S. DENTON, Her Engines, Etc., Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

302 F.2d 404 (1962)

Russell H. BRANDON, Trustee, et al., Appellants, v. S. S. DENTON, Her Engines, Etc., Appellee.

No. 18899.

United States Court of Appeals Fifth Circuit.

April 10, 1962.

T. G. Schirmeyer, L. G. Kratochvil, Houston, Tex., Horace Gray, Gray & Wythe, New York City, for Augusta Oil Bunkering, S.p.A.

Jack H. Taylor, Houston, Tex., Chas. B. Smith, Galveston, Tex., Malant, Martin, Rafferty, Taylor & Kepner, Houston, Tex., for appellants MEBA Pension & Welfare Plan and MEBA Tanker Vacation Plan.

Newton B. Schwartz, Schwartz & Lapin, Houston, Tex., for Russell H. Brandon, trustee, et al., William G. Mullins, trustee, et al., and Seafarers Sea Chest Corp.

Robert Eikel, Thomas A. Brown, Jr., Houston, Tex., Theodore Goller, Jr., Houston, Tex., of counsel, for appellee.

Before TUTTLE, Chief Judge, and HUTCHESON and RIVES, Circuit Judges.

RIVES, Circuit Judge.

Meridian Trading Corporation, hereafter Meridian, filed its libel seeking foreclosure of a preferred mortgage, so classified under the Ship Mortgage Act of 1920, 46 U.S.C.A. § 911 et seq. Augusta Oil Bunkering, S.p.A., hereafter Augusta, intervened to protect and foreclose a maritime lien for fuel oil or bunkers furnished the vessel at the Port of Augusta, Sicily. The other appellants filed either intervening libels or original libels which were consolidated with the libel filed by Augusta, in which they sought to enforce claims on behalf of various special funds set up to promote the welfare of seamen, upon the theory that such claims were secured by preferred maritime liens under 46 U.S.C.A. § 953 "for wages of the crew of the vessel."

The district court, pursuant to its Local Admiralty Rule 23, appointed a Commissioner to ascertain the amounts due to the libellants and the priorities thereof and to report to the Court. The Commissioner rendered a very able, full and comprehensive report. The district court overruled the various exceptions to the Commissioner's report and entered its final decree accordingly. The present appeals followed.

Meridian's mortgage on the Tankship (T/S) Denton made to secure a debt in the original principal amount of $400,000.00, and on which there is past due and owing more than $300,000.00, was perfected on January 16, 1959, as a valid Preferred Mortgage under the Ship Mortgage Act of 1920, 46 U.S.C.A. § 911 et seq. That fact is not contested by any of the appellants.

The ship was sold by the United States Marshal for the sum of $216,000.00, and, after payment of the Marshal's costs and an uncontested earned wage claim, the balance of that sum was $206,281.90, much less than the balance due on the original debt secured by Meridian's mortgage. The Commissioner found that:

"The valid amounts of claims established by the evidence are as follows:

                  Meridian Trading Corporation               More than $300,000.00
                  Augusta Oil Bunkering S.p.A.               $11,976.04
                  Joseph A. Quinn                              1,634.81
                  Egbert C. Palmer                               668.68
                  MM&P Pension & Welfare Plan                  3,375.45
                  MM&P Tanker Vacation Plan                   12,228.27
                  SIU Pension & Welfare Plan                  10,560.06
                  SIU Vacation Plan                           11,518.82
                  MEBA Pension & Welfare Plan                  2,711.76
                  MEBA Tanker Vacation Plan                   11,552.32
                  ROU Pension & Welfare Plan                     532.25
                  ROU Vacation Plan                            1,250.00
                  Plan of Atlantic & Gulf Contract Companies     486.77
                                                                        ___________
                  Total exclusive of Meridian's claim                   $68,495.23"
                

Augusta argues that the priority of the mortgage was waived because Meridian did not prove that Augusta was given notice of the existence of the preferred ship mortgage prior to the time it furnished bunkers to the vessel as required by the statute, Section 923 of Title 46 U.S.C.A.:

"§ 923. Certified copies of mortgage; exhibition

"The collector of customs upon the recording of a preferred mortgage shall deliver two certified copies thereof to the mortgagor who shall place, and use due diligence to retain, one copy on board the mortgaged vessel and cause such copy and the documents of the vessel to be exhibited by the master to any person having business with the vessel, which may give rise to a maritime lien upon the vessel or to the sale, conveyance, or mortgage thereof. The master of the vessel shall, upon the request of any such person, exhibit to him the documents of the vessel and the copy of any preferred mortgage of the vessel placed on board thereof."

A similar contention made by a domestic supplier was decided by this Court adversely to the supplier. Pascagoula Dock Station v. Merchants & Marine Bank, 5 Cir., 1959, 271 F.2d 53, 55-56.

Another section provides as a condition to the preferred status of the mortgage that:

"(1) The mortgage is endorsed upon the vessel\'s documents in accordance with the provisions of this section;

* * * * * *

"(c) There shall be indorsed upon the documents of a vessel covered by a preferred mortgage —

"(1) The names of the mortgagor and mortgagee;

"(2) The time and date the indorsement is made;

"(3) The amount and date of maturity of the mortgage; and

"(4) Any amount required to be indorsed by the provisions of subsection (e) or (f) of this section.

"(d) Such indorsement shall be made (1) by the collector of customs of the port of documentation of the mortgaged vessel, or (2) by the collector of customs of any port in which the vessel is found, if such collector is directed to make the indorsement by the collector of customs of the port of documentation; and no clearance shall be issued to the vessel until such indorsement is made. The collector of customs of the port of documentation shall give such direction by wire or letter at the request of the mortgagee and upon the tender of the cost of communication of such direction. Whenever any new document is issued for the vessel, such indorsement shall be transferred to and indorsed upon the new document by the collector of customs." 46 U.S. C.A. § 922.

The Supreme Court held in Morse Dry Dock & Repair Co. v. Northern Star, 1926, 271 U.S. 552, 46 S.Ct. 589, 70 L.Ed. 1082, that such an endorsement upon the ship's papers is essential to give the mortgage preferred status over a subsequent lienor who did not have actual notice. The Commissioner in the present case overruled an objection based on the requirement of such an endorsement, and found that: "Since the filing of the objection * * * Meridian filed a certified copy of the vessel's Permanent Certificate of Enrollment and License showing the mortgage was endorsed on the vessel's documents on January 16, 1959, at 9:00 p. m. at the Port of Jacksonville, Florida."

We agree with what is so well stated in Gilmore and Black on Admiralty at pages 589 and 590:

"In addition to recordation and indorsement the Mortgage Act sets a third requirement which may be dealt with under the head of `public notice\': the collector of customs, on recordation, is required to deliver two certified copies of the mortgage to the mortgagor who `shall place, and use due diligence to retain, one copy on board the mortgaged vessel.\'287 Both the copy of the mortgage and the ship\'s documents are to be exhibited by the master to any person legitimately interested. The mortgagor is made liable to any person who suffers loss as a result of his failure to comply with the certified copy provision,288 but it is hard to see how such loss could ever arise: if the indorsement on the ship\'s documents has not been made, the lienor or purchaser is protected by the Supreme Court\'s holding in the Northern Star case; if it has been made, he certainly knows of the mortgage and can hardly claim to have been misled because the certified copy was not with the ship\'s papers. The certified copy provision makes no kind of sense in view of the indorsement provisions. It has properly been held that the certified copy requirement is not jurisdictional, so that the mortgage does not lose its preferred status for noncompliance.289

"287 § 923.

"288 § 941(c).

"289 The Oconee, 280 F. 927 (E.D.Va.1921); The Frances C. Denehy, 94 F.Supp. 807, 1951 A. M.C. 712 (D.Me.1950). In The Bethlehem, 4 F.2d 308, 1925 A.M.C. 569 (3d Cir. 1925) a mortgage was held not to be preferred where no certified copy was kept with the ship\'s papers, but the court also states that a search of the ship\'s documents would not have revealed the mortgage; thus it is apparent that no indorsement had been made, so that the mortgage would fail under the Northern Star case, supra note 285."

The present record is silent upon the question of what inquiry was made by Augusta concerning the existence of the mortgage, or whether Augusta had actual knowledge or notice of its existence at the time it supplied the bunkers. Since the mortgage was endorsed on the vessel's documents available for inspection upon request, Augusta was charged with notice of its existence. It follows that the priority of Meridian's mortgage has not been waived by failure to prove that the master exhibited a certified copy of the mortgage to Augusta before it supplied the bunkers; and Meridian's mortgage is a valid and existing preferred mortgage under the Ship Mortgage Act of 1920, 46 U.S.C.A. § 911 et seq.

The mortgage was perfected on January 16, 1959. Augusta proved that on October 8 and 9, 1959 the master of the T/S Denton ordered and received the fuel oil or "Bunker C" aboard the vessel at Augusta, Sicily. To make out its claim for a preferred maritime lien, Augusta took the deposition of Doctor Enrico L. Pavia, a prominent member of the Italian Bar and a foreign law consultant. Dr. Pavia testified that the present basic text of Italian law relating to maritime liens on ships is a Code of Navigation which was enacted March 30, 1942; that Article 552 of that Code relates to...