Matter of Topgallant Lines, Inc.
| Citation | 125 BR 682 |
| Decision Date | 04 February 1991 |
| Docket Number | Adv. P. No. 90-4072. |
| Parties | In the Matter of TOPGALLANT LINES, INC. (Chapter 11 Case 89-41996), Debtor. AMBASSADOR FACTORS, DIVISION FLEET FACTORS CORPORATION, Plaintiff, v. FIRST AMERICAN BULK CARRIER CORPORATION, et al., Defendants. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Southern District of Georgia |
John M. Tatum, Miller, Simpson & Tatum, Savannah, Ga., Joseph Moscou, Mineola, N.Y., for plaintiff-movant.
Thomas A. Dillon, Jr., New York City, Stephen R. Beckham (co-counsel), Chattanooga, Tenn., Kathleen Horne, Savannah, Ga., for First American Bulk Carrier.
MEMORANDUM AND ORDER ON MOTION FOR SUMMARY JUDGMENT
On December 10, 1990, a hearing was held upon cross motions for summary judgment arising from a Complaint to Determine Validity, Extent and Priority of Liens related to the above-styled case pending before this Court under Chapter 11 of the Bankruptcy Code. Upon consideration of the evidence, the voluminous briefs and other documentation submitted by the parties as well as applicable authorities, I make the following Findings of Fact and Conclusions of Law.
The Debtor, Topgallant Lines, Inc., was the sub-charterer of two vessels, the M/V Chesapeake Bay and the M/V Delaware Bay. Its predecessor in interest sub-chartered the vessels from the disponent1 owner, First American Bulk Carriers ("FABC") on or about April 21, 1987, in accordance with two sub-bareboat charter parties. By separate addenda dated June 30, 1989, the foregoing charter parties were amended and assigned by Topgallant Group, Inc., to the Debtor, Topgallant Lines, Inc. Exhibits "A" and "B" to Plaintiff's Statement of Uncontradicted Material Facts, filed September 14, 1990 )
On April 19, 1989, the Debtor and the Plaintiff, Ambassador Factors, Division of Fleet Factors Corporation ("Ambassador"), entered into a Security Agreement covering accounts receivable, inventory, and equipment of the Debtor. . There has been no stipulation as to the validity of that agreement. On April 28, 1989, Ambassador recorded two Uniform Commercial Code Financing Statements in the Office of the Clerk of the 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 . . ." .
There is some dispute whether FABC affirmatively terminated the charters on or before December 13, 1989, or whether FABC and the Debtor had mutually agreed to operate under the terms of the charters after that date. In any event, the Debtor filed its voluntary petition under Chapter 11 of the Bankruptcy Code with this Court on that date. At the time, the M/V Chesapeake Bay had been arrested in Bremerhaven, West Germany, by certain parties asserting maritime liens and the M/V Delaware Bay had set sail for Europe from Charleston, South Carolina. Upon arrival at Bremerhaven, the M/V Delaware Bay was also arrested under German law by parties asserting maritime liens. See Exhibit "1", Plaintiff's Second Supplement to Statement of Uncontested Material Facts
Pursuant to Order of this Court dated December 29, 1989, as amended by subsequent Orders, a fund of money is being held in an interest bearing segregated account (the "Fund"). The Fund includes all collections on the Debtor's accounts, all freight2 monies for cargoes carried by the vessels, and all other monies received by the Debtor or by Ambassador for the Debtor's account. By Order of this Court, all Funds are deemed to retain the character they held prior to deposit to the Fund and thus any freight monies deposited in the Fund following that Order maintain their character as freights for maritime lien purposes. It is disputed whether all the freights of the final voyage were earned by the Debtor, but it is not disputed that some of the money in the Fund does constitute freights earned by the Debtor to which the Ambassador security interest and the maritime liens of various creditors attach.
FABC and other creditors have filed proofs of claim totalling in the millions of dollars, asserting that their claims are, in whole or in part, secured by maritime liens on the Debtor's freights, including those deposited in the Fund and others which have not yet been collected. The validity and amount of individual lien claims are not at issue now and are not within the scope of this Order.
Topgallant Lines' accounts included freights and other monies due from the Military Sealift Command ("MSC") pursuant to a government contract. Ambassador did not comply with the execution formalities, the notice, or other requirements prescribed by the Federal Assignment of Claims Act, 31 U.S.C. Section 3727(b), insofar as assignment of its interest in the MSC monies is concerned. The MSC claims had not been allowed, their amounts had not been determined and warrants for their payment had not been issued prior to December 13, 1989, the date of Debtor's filing. However, on April 30, 1990, the MSC paid $708,326.00 into the sequestered Fund and a claim for more than that amount is still outstanding.
It has not yet been established but is alleged that the Debtor's outstanding debt to Ambassador as of the date of filing was $4,021,476.55.3
Ambassador moves for summary judgment on five separate grounds. First, for a ruling that Ambassador has a valid perfected security interest in freights of the two vessels as against the Debtor-in-Possession and other creditors. Second, that FABC has no lien or other claim to freight of the two vessels. Third, that monies paid to the Debtor or its agent are not subject to maritime liens. Fourth, that maritime lien claims of creditors are limited to freights earned on the specific voyage for which each such creditor furnished supplies or rendered services. Finally, for a ruling that Ambassador's security interest in the Debtor's accounts, including freights, has priority over all conflicting liens.
FABC moves for partial summary judgment on two grounds. First, for an Order declaring that maritime liens on freights have priority over consensual non-maritime security interests therein. Second, that collateral assignments of claims against the United States Government are unenforceable in the absence of compliance with the Federal Assignment of Claims Act. Pursuant to Fed.R.Civ.P. 56(d),4 I will grant partial summary judgment to FABC on the maritime lien versus UCC security interest priority issue and deny summary judgment to FABC on the Assignment of Claims Act issue. This ruling will have the effect of granting Ambassador partial summary judgment on its first and fifth enumerated issues as will be further clarified in this Opinion. Ambassador's Summary Judgment Motion on the other enumerated grounds will be treated as continued, until the record is supplemented by all parties as directed at the hearing in this matter.
The first issue before the Court is whether a perfected security interest pursuant to the Uniform Commercial Code is superior to the interest of a maritime lien claimant with respect to maritime freights earned by the Debtor. I find that a valid maritime lien is superior to a perfected non-maritime UCC security interest in the same collateral.
The Federal Maritime Lien Act, 46 U.S.C. Section 31342, provides "a person providing necessaries to a vessel on the order of the owner or a person authorized by the owner has a maritime lien on the vessel." This section recodified the former provision of 46 U.S.C. Section 971 which provided "any person furnishing repairs, supplies, use of drydock or marine railways, or other necessaries, to any vessel . . . upon the order of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel." The Federal Maritime Lien Act has been construed by a number of courts in such a way that the term "vessel" includes freights since the general rule is that if a maritime lien attaches to a vessel it also attaches to its freights which are incident to the vessel. Schirmer Stevedoring Co. v. Seaboard Stevedoring Corp., 306 F.2d 188 (9th Cir. 1962). See also, In re Surico, 42 F.2d 935 (D.Wash.1930); Atlantic, Gulf and Pacific S.S. Co., 3 F.2d 311 (D.Md.1923), aff'd 3 F.2d 438 (4th Cir.1925). Similarly, the UCC as adopted in Georgia and indeed in 49 of 50 states applies "to any transaction which is intended to create a security interest . . . in general intangibles . . . or accounts." O.C.G.A. § 11-9-102. Accounts and general intangibles are defined in Section 9-106 as including "any right to payment for goods sold or leased or for services rendered . . . as well as all rights to payment earned or unearned under a charter or other contract involving the use or hire of a vessel . . ." The Maritime Lien Act supercedes, by its terms "any state statute conferring a lien on a vessel to the extent the statute establishes a claim to be enforced by a civil action in rem against vessels for necessaries." 46 U.S.C. § 31307. I find no provision in the Uniform Commercial Code which provides for a civil action in rem against a vessel or its freights. To the extent that O.C.G.A. Section 11-9-501 et seq. provides that after default a party may proceed under the terms of its security agreement and to the extent that the security agreement provides for self-help repossession, attachment or other remedies against the collateral, it could be argued that the UCC permits contractual remedies in rem on behalf of the secured lender. However, there is no specific provision creating an in rem action against the vessel or its freights for necessaries as contemplated in the Federal Maritime Lien Statute. Therefore, the Maritime Lien Statute does not by its terms explicitly...
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