In re Dean
| Decision Date | 27 November 1985 |
| Docket Number | Adv. No. 7-84-0132.,Bankruptcy No. 7-83-01395 |
| Citation | 55 BR 332 |
| Parties | In re Dwight L. DEAN, Debtor. BLUE RIDGE RECREATION, INC., Plaintiff, v. Dwight L. DEAN, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Western District of Virginia |
Jolly, Place, Fralin & Prillaman, Roanoke, Va., for debtor/defendant.
Key & Tatel, Roanoke, Va., for plaintiff.
Copenhaver & Ellett, Roanoke, Va., for defendant Colonial American Bank.
John Alderson, U.S. Atty., W.D. Va., Roanoke, Va., for U.S. Coast Guard.
Michael J. Aheron, Salem, Va., Trustee/defendant.
The issue before the Court is a determination of the validity, extent, and priority of liens on the proceeds from sale of an asset of the Debtor.
The Debtor filed his Chapter 7 petition in this Court on December 22, 1983. On June 18, 1984, this Court entered an Order directing sale of a 38-foot Criscraft boat named "The Destiny", an asset of the estate, for the sum of $5,000.00 cash, which is held by the Trustee subject to any liens that Blue Ridge Recreation, Inc., the Plaintiff herein, may have against the boat. Colonial American National Bank ("Colonial American") also claims a security interest in the boat.
On July 12, 1984, the Plaintiff filed this adversary proceeding against the Debtor, the Trustee, and Colonial American. Plaintiff seeks a determination that its claim for services performed on the boat and rental and storage fees were valid and superior to the interest of Colonial American. It contends that it is entitled to the entire amount of the proceeds in satisfaction of its claim for $5,027.29. The Plaintiff has also made application for allowance of administrative expenses in the sum of $797.50 for rental and maintenance fees that have accrued since the filing of the petition in this Court.
The Debtor contends that the amount of the indebtedness is only in the neighborhood of $1,500.00, and seeks dismissal from the suit. The Trustee denies that Colonial American has a security interest in the boat or that Plaintiff has a lien. Colonial American contends that Plaintiff did not have a lien or, alternatively, any lien is inferior to that of Colonial American.
The Court heard evidence on October 29, 1984, at which time the Plaintiff presented an itemized statement indicating rental and storage fees and charges for supplies and services rendered on the vessel for a total amount of $5,027.29. Individual receipts for the supplies and services were also tendered.1 Colonial American introduced into evidence a copy of a security agreement naming the boat as collateral and securing an interest in any proceeds of the collateral. Two Financing Statements were also tendered, indicating filing with the State Corporation Commission in Richmond and the Office of the Clerk of the Circuit Court of the City of Roanoke. The matter was taken under advisement. Counsel were requested to tender an Order, subsequently entered, requiring a representative of the United States Coast Guard in charge of documentation to produce or file Certified copies of documents indicating registration of the boat with the Coast Guard. Such documentation was alleged to be necessary to the claim of the Plaintiff in order to show that the case is one arising under admiralty law. No documents have been produced, and the parties have not sought further enforcement of this Court's Order to produce. In September, 1985, Counsel for Plaintiff and Colonial American filed letters indicating that no documents would be filed and requesting the Court to rule on the evidence presented. Further hearing was held on November 18, 1985, and the matter was taken under advisement for determination.
Counsel for Blue Ridge Recreation contends that admiralty law governs the disposition of this case. 28 U.S.C. § 1333 grants the District Courts "original jurisdiction, exclusive of the courts of the States, of any civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled." § 1333(1). The test of admiralty jurisdiction under § 1333 is whether the body of water is navigable. Bond v. Doig, 433 F.Supp. 243 (D.C. NJ 1977). Waters are navigable when they are, in their ordinary condition, used or susceptible of use as highways for commerce, over which trade and travel may be conducted in their customary modes. 2 Am.Jur.2d, Admiralty § 22.
In applying the concept of navigability, early Supreme Court cases have taken a position of historic navigability, i.e., once a waterway has been navigable in the past, it remains so even though it is not presently used for maritime commerce. See The Daniel Ball, 77 U.S. (10 Wall.) 557, 19 L.Ed. 999 (1870); The Montello, 87 U.S. (20 Wall.) 430, 22 L.Ed. 391 (1874); Economy Light and Power Co. v. U.S., 256 U.S. 113, 41 S.Ct. 409, 65 L.Ed. 847 (1921); U.S. v. Appalachian Electric Power Co., 311 U.S. 377, 61 S.Ct. 291, 85 L.Ed. 243 (1940). The Fourth Circuit found this historical use appropriate in State Water Control Board v. Hoffman, 574 F.2d 191 (4th Cir.1978), affirming in part, reversing in part 427 F.Supp. 585 (W.D.Va.1977).
More recently, the Supreme Court has indicated that the concept of navigable waters is a pragmatic one. In Kaiser Aetna v. U.S., 444 U.S. 164, 170, 100 S.Ct. 383, 388, 62 L.Ed.2d 332 (1979), the Court rejected the argument that the concept of navigable waters "has a fixed meaning that remains unchanged in whatever concept it is being applied." It is necessary to make a "careful appraisal of the `purpose' for which the concept of navigability was invoked ..." Id. at 171, 100 S.Ct. at 388.
In recent decisions, three Circuit Courts of Appeals have found that the appropriate test for navigability for purposes of admiralty jurisdiction is navigability in fact. See Livingston v. U.S., 627 F.2d 165 (8th Cir.1980), cert. denied, 450 U.S. 914, 101 S.Ct. 1354, 67 L.Ed.2d 338 (1981); Chapman v. U.S., 575 F.2d 147 (7th Cir.1978), cert. denied, 439 U.S. 893, 99 S.Ct. 251, 58 L.Ed.2d 239 (1978); Adams v. Montana Power Co., 528 F.2d 437 (9th Cir.1975). In Motley v. Hale, 567 F.Supp. 39 (W.D.Va. 1983), the United States District Court for the Western District of Virginia reached the same conclusion. The Motley case involved the question of admiralty jurisdiction with respect to a fatality arising from a boating accident which occurred on Smith Mountain Lake. Having reviewed the Circuit Court decisions and the language of Kaiser Aetna, the court concluded that current navigability rather than historic navigability is the appropriate test for determining admiralty jurisdiction. The court did not feel bound by the Fourth Circuit's language in Hoffman on historic navigability. According to the court, the Hoffman Opinion was distinguishable for, in that case, the question of admiralty jurisdiction was not before the court.
In light of the findings in Motley and Hoffman, we conclude that Smith Mountain Lake, the location where the subject collateral was stored, is not navigable in the sense of current navigability to invoke admiralty jurisdiction. "If the damming of a waterway has the practical effect of eliminating commercial maritime activity, no federal interest is served by the exercise of admiralty jurisdiction over the events transpiring on that body of water, whether or not it was originally navigable ..." Adams v. Montana Power Co., supra, at 440-1.
In order to determine the validity and priority of liens in this case, it is first necessary to determine whether state or federal law will govern the interests. Virginia Code § 8.9-104(a) of the Uniform Commercial Code states in part that "This title does not apply to a security interest subject to any statute of the United States such as the Ship Mortgage Act, 1920 ..." 46 U.S.C. §§ 911-984 comprise the Ship Mortgage Act, 1920. The statute governs mortgages on vessels registered or enrolled as vessels of the United States, provides for recordation of bills of sale, conveyances, and maritime liens for necessities. Section 971 of the Act provides that:
"Any person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel ..."
The effect of 46 U.S.C. § 911, et seq., is to supersede the provisions of all state statutes conferring liens on vessels, insofar as such statutes purport to create rights of action to be enforced by suits in rem in admiralty against vessels for repairs, supplies, towage, use of dry dock or marine railway, and other necessaries. 46 U.S.C. § 975; Rounds v. Cloverport Foundry and Machines, 237 U.S. 303, 35 S.Ct. 596, 59 L.Ed. 966 (1915) (); The Juniata, 277 F. 438 (D.C.Md.1922); The F.S. Loop, 63 F.Supp. 105 (D.C.Ca.1945).
However, the Federal Ship Mortgage Act, 1920, 46 U.S.C. §§ 911-984, applies only to larger vessels; so-called "undocumented" vessels are not within the federal statute. Smaller commercial vessels and pleasure vessels are "undocumented". 68 Am.Jur.2d, Secured Transactions § 30 (1973). The financing of pleasure craft and yachts, except those of rather large size, is within the Uniform Commercial Code. Id.
The boat in this case is a pleasure boat which was used by the Debtor for recreational purposes. The provisions of the Ship Mortgage Act, 1920, including § 971 creating maritime liens, are not applicable to it. Since the Act does not govern, the transaction is not excluded under the language of Virginia Code § 8.9-104(a). Accordingly, Article 9 of the Uniform Commercial Code will control the creation, validity, and priority of a security interest in the property.
As in any secured...
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