Matter of Topgallant Lines, Inc.

• Decision Date: 27 April 1993
• Docket Number: No. CV 492-053 to 492-056 and CV 492-092.,CV 492-053 to 492-056 and CV 492-092.
• Citation: 154 BR 368
• Parties: In the Matter of TOPGALLANT LINES, INC., Debtor. McALLISTER TOWING, et al., Appellant and Cross-Appellee, v. AMBASSADOR FACTORS, DIVISION FLEET FACTORS CORPORATION, Appellee and Cross-Appellant. ITEL CONTAINERS, Appellant and Cross-Appellee, v. AMBASSADOR FACTORS, DIVISION FLEET FACTORS CORPORATION, Appellee and Cross-Appellant. CERES MARINE TERMINALS, et al., Appellant and Cross-Appellee, v. AMBASSADOR FACTORS, DIVISION FLEET FACTORS CORPORATION, Appellee and Cross-Appellant. FIRST AMERICAN BULK CARRIER CORPORATION, et al., Appellant and Cross-Appellee, v. AMBASSADOR FACTORS, DIVISION FLEET FACTORS CORPORATION, Appellee and Cross-Appellant. EUROPE COMBINE TERMINALS, et al., Appellant and Cross-Appellee, v. AMBASSADOR FACTORS, DIVISION FLEET FACTORS CORPORATION, Appellee and Cross-Appellant.
• Court: U.S. District Court — Southern District of Georgia

154 B.R. 368 (1993)

In the Matter of TOPGALLANT LINES, INC., Debtor.

McALLISTER TOWING, et al., Appellant and Cross-Appellee, v. AMBASSADOR FACTORS, DIVISION FLEET FACTORS CORPORATION, Appellee and Cross-Appellant.

ITEL CONTAINERS, Appellant and Cross-Appellee, v. AMBASSADOR FACTORS, DIVISION FLEET FACTORS CORPORATION, Appellee and Cross-Appellant.

CERES MARINE TERMINALS, et al., Appellant and Cross-Appellee, v. AMBASSADOR FACTORS, DIVISION FLEET FACTORS CORPORATION, Appellee and Cross-Appellant.

FIRST AMERICAN BULK CARRIER CORPORATION, et al., Appellant and Cross-Appellee, v. AMBASSADOR FACTORS, DIVISION FLEET FACTORS CORPORATION, Appellee and Cross-Appellant.

EUROPE COMBINE TERMINALS, et al., Appellant and Cross-Appellee, v. AMBASSADOR FACTORS, DIVISION FLEET FACTORS CORPORATION, Appellee and Cross-Appellant.

Nos. CV 492-053 to 492-056 and CV 492-092.

United States District Court, S.D. Georgia, Savannah Division.

April 27, 1993.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Gordon D. Schreck, Charleston, SC, George H. Chamlee, Savannah, GA, Robert S. Glenn, Jr., Savannah, GA, Kathleen Horne, Mark Bulovic, Savannah, GA.

John M. Tatum, Savannah, GA, Joseph Moscou, Mineola, NY.

ORDER AND MEMORANDUM

NANGLE, District Judge.

Ambassador Factors, the appellee/cross-appellant, appeals the February 4, 1991, decision of the bankruptcy court¹ which granted appellants' Motion for Summary Judgment on the ground that valid maritime liens are superior to perfected Uniform Commercial Code (UCC) security interests in the same collateral. See In the Matter of Topgallant Lines, Inc., 125 B.R. 682 (Bankr.S.D.Ga.1991) (hereinafter referred to as "Topgallant I"). First American Bulk Carrier Corporation and various maritime lien claimants, appellants/cross-appellees, appeal the February 5, 1992, decision of the bankruptcy court which granted the appellee's Motion for Summary Judgment on the ground that the appellants are not entitled to maritime lien status. See In the Matter of Topgallant Lines, Inc., 138 B.R. 314 (Bankr.S.D.Ga. 1992) (hereinafter referred to as "Topgallant II"). The Court heard oral arguments in this matter on September 15, 1992, and has considered the parties' pleadings, letter briefs, exhibits, and record on appeal. For the reasons described below, the decisions of the bankruptcy court will be affirmed in part and remanded in part for specific findings.

FACTS

First American Bulk Carrier Corporation (FABC) chartered the M/V CHESAPEAKE BAY and the M/V DELAWARE BAY from the Connecticut National Bank in accordance with two bareboat charter parties.² On or about April 21, 1987, Topgallant Group, Inc., predecessor in interest to the Debtor in this action, subchartered the vessels in accordance with two subbareboat charter parties from FABC. By separate addenda dated June 30, 1989, the two subbareboat charter parties were amended and assigned by Topgallant Group to the Debtor, Topgallant Lines, Inc.

On April 19, 1989, the Debtor and Ambassador Factors (Ambassador) entered into a security agreement covering accounts receivable, inventory, and equipment of the Debtor. On April 28, 1989, Ambassador recorded two Uniform Commercial Code (UCC) Financing Statements in the Office of the Clerk of Superior Court of Chatham County, Georgia, covering "all present and hereafter created and/or acquired accounts receivable, inventory, machinery and equipment and general intangibles of the debtor . . ." On August 30, 1989, Ambassador filed a similar UCC financing statement with the Secretary of State of New Jersey.³

On December 13, 1989, the Debtor filed its voluntary petition under Chapter 11 of the bankruptcy code in the United States Bankruptcy Court for the Southern District of Georgia. In its findings of fact in Topgallant I, the bankruptcy court found that there was some dispute as to whether FABC affirmatively terminated the charters on or before the filing date, or whether FABC and the Debtor had mutually agreed to operate under the terms of the charters after that date. Nonetheless, at the time that the Debtor filed its petition, the M/V CHESAPEAKE BAY was in Bremerhaven, West Germany, and the M/V DELAWARE BAY was en route to Europe from Charleston, South Carolina.

On December 18, 1989, the Association of Maryland Pilots and the Pilots Association for the Bay and River Delaware obtained an order for the seizure of the M/V DELAWARE BAY and the M/V CHESAPEAKE BAY in the municipal court in Bremerhaven, West Germany. In fall 1990, FABC furnished bank guarantees to secure the release of the two vessels from the attachment of nine creditors ("the German claimants"). The bank guarantees issued to the German claimants provided in pertinent part as follows:

In the seizure proceedings case reference . . . the decision of 12/18/89 has ordered the seizure of the M/V CHESAPEAKE BAY in the harbor of Bremerhaven. According to this resolution, the respondent FABC is entitled to have the seizure lifted by depositing a total of DM 300,000.00 . . . We hereby unconditionally, inevocably and absolutely and without time limit, stand security for the respondent . . . as surety for all claims for which the seizure was ordered.

___________ /s/ Deutsche Bank, A.G. in Hamburg

When the M/V CHESAPEAKE BAY and the M/V DELAWARE BAY departed from Bremerhaven in fall 1990, they resumed trading between Europe and the United States. At times when the vessels were scheduled to call at ports in the United States, maritime lien claimants threatened to commence proceedings in rem against the vessels. To avoid arrest of the vessels, FABC furnished sixteen parties ("the United States claimants") with letters of undertaking between September 25, 1990, and October 15, 1990. These letters of undertaking provided as follows:

In consideration of the claimant refraining from arresting or attaching the above-named vessel or any other vessels or property of the registered owner . . . with respect to claims in rem against the vessel arising from goods or services furnished by claimant pursuant to orders from Topgallant . . . the undersigned company hereby agrees . . .

(2) in the event a final decree . . . be entered in favor of claimant against the vessel . . . then the undersigned company agrees to pay and satisfy, up to but not exceeding .

____________ /s/ St. Paul Fire and Maritime Insurance Co.

Pursuant to an Order of the bankruptcy court, a fund of money is being held in an interest-bearing sequestered account. This fund includes all collections on the Debtor's accounts, all freight⁴ monies for cargoes carried by the vessels, and all other monies received by the Debtor or Ambassador for the Debtor's account. All funds in the sequestered account are deemed to retain the character that they held prior to deposit; for example, any freight monies deposited in the account pursuant to that Order maintain their character as freights for maritime lien purposes. The bankruptcy court found a dispute as to whether all the freights of the final voyage were earned by the Debtor.

FABC and other creditors have filed proofs of claim in the bankruptcy court asserting that their claims are, in whole or in part, secured by maritime liens on the Debtor's freights, including those freights held in the sequestered account. Ambassador disputes the lien status and priority of these claims, and alleges that its perfected UCC security interest takes priority over the interests of the maritime liens claimants.

DISCUSSION

This Court has jurisdiction of the appeal and cross-appeal pursuant to 28 U.S.C. § 158(a), and reviews the bankruptcy court's grant of summary judgment de novo. In re Diamond Mfg. Co., 123 B.R. 125 (S.D.Ga.1990), aff'd sub nom. Moore v. Diamond Mfg. Co., 959 F.2d 972 (11th Cir. 1992).

The parties raise the following issues on appeal:

I. Whether Ambassador\'s perfected Uniform Commercial Code security interest in a debtor\'s accounts, which include freights earned by a chartered ocean-going vessel, has priority over maritime liens for necessaries subsequently furnished to the vessel.

II. Whether valid maritime liens on freights are extinguished by the subsequent posting of security to release the vessels from in rem arrest or by the acceptance of security by maritime lien creditors to refrain from the in rem arrest of the vessels.

III. Whether valid maritime liens on freights are extinguished by the posting of bank guarantees to release the vessels from attachment in an in personam action.

IV. Whether FABC, pursuant to 11 U.S.C. § 509, may be subrogated to the rights of maritime lien claimants whose claims it satisfied.

V. Whether the freights of the last voyage of the M/V DELAWARE BAY are subject to Ambassador\'s security interest.

VI. Whether freights remain subject to maritime liens even though paid to Ambassador or an agent of the debtor.

VII. Whether the single voyage rule affects only the priority of maritime liens on freights.

Each claim will be addressed in turn.

I. MARITIME LIENS HAVE PRIORITY OVER UCC SECURITY INTERESTS.

Ambassador contests the bankruptcy court's holding that ". . . valid maritime liens as hereafter allowed will be afforded priority over perfected UCC security interests . . ." Topgallant I, 125 B.R. at 687. In reaching this conclusion, the bankruptcy court first held that the Federal Maritime Lien Act, 46 U.S.C. § 31301 et seq., does not specifically supersede the UCC. Id. at 685. The priority provisions of the UCC, however, have no effect on the maritime liens created under the Act since O.C.G.A. § 11-9-104(a)⁵ makes the UCC inapplicable to a security interest subject to any statute of the United States. Id. at 686. Alternatively, the bankruptcy court found that the UCC applies only to consensual transactions, while "the claim of maritime lien holders, by definition, is not consensual." Id.

Ambassador contends that the creation and validity of maritime liens are excluded from the UCC, but that priority issues...