Pacific Caribbean Shipping (U.S.A.), Inc., Matter of, 85-1937

• Decision Date: 20 May 1986
• Docket Number: No. 85-1937,85-1937
• Citation: 789 F.2d 1406
• Parties: , 54 USLW 2623, 1 UCC Rep.Serv.2d 904 In the Matter of PACIFIC CARIBBEAN SHIPPING (U.S.A.), INC., Debtor. Edward M. WALSH, Trustee, Plaintiff-Appellant, v. PLACEDO SHIPPING CORPORATION OF LIBERIA, a corporation, and Metal Transport Corporation, a corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1406

789 F.2d 1406

1986 A.M.C. 2308, 54 USLW 2623, 1 UCC

Rep.Serv.2d 904

In the Matter of PACIFIC CARIBBEAN SHIPPING (U.S.A.), INC., Debtor Edward M. WALSH, Trustee, Plaintiff-Appellant, v. PLACEDO SHIPPING CORPORATION OF LIBERIA, a corporation, and Metal Transport Corporation, a corporation Defendants-Appellees.

No. 85-1937.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 13, 1986.

Decided May 20, 1986.

Merle C. Meyers, Goldberg, Stinnett, & McDonald, San Francisco, Cal., for plaintiff-appellant.

Charles S. Donovan, Walsh, Donovan, Lindh, & Keech, San Francisco, Cal., David A. Nourse, Nourse & Bowles, New York City, John A. Edginton, Graham & James, San Francisco, Cal., for Meadow Transport, for defendants Placedo.

Philip A. Berns, Dept. of Justice, Civil Div., San Francisco, Cal., for Maritime Law Association of the U.S.

Francis J. O'Brien, Emery W. Harper, New York City, David R. Owen, Baltimore, Md., for amicus curiae MLA.

Appeal from the United States District Court for the Northern District of California.

Before GOODWIN, HUG, and REINHARDT, Circuit Judges.

PER CURIAM:

A trustee in bankruptcy appeals a district court ruling that a shipowner's charter lien upon subfreights earned by the charterer prevails against the trustee even though the lien was not perfected by filing as required by the California version of the Uniform Commercial Code. We have jurisdiction under 28 U.S.C.A. Sec. 158(d) (West Supp.1985). We affirm.

Placedo Shipping Corporation chartered its ship to the debtor, Pacific Caribbean Shipping, Inc. A standard clause in the form agreement gave Placedo a lien upon subfreights earned by Pacific. Subfreights are money that the charterer of a ship earns by carrying cargo. See G. Gilmore & C. Black, The Law of Admiralty 232 (2d ed. 1975). Pacific then subchartered the vessel to the Metal Transport Corporation. ¹ The amount owed to Pacific under the contract, the subfreights in issue, is claimed both by Pacific and by Placedo.

Placedo withdrew the ship from Pacific's service for nonpayment of its charter obligations. Two days later, Pacific filed a chapter 7 bankruptcy petition. Its trustee in bankruptcy sought to set aside Placedo's interest in the subfreights earned by Pacific by carrying cargo shipped by the Metal Transport Corporation because the interest was not perfected by filing, which the trustee claims was required by the California version of the Uniform Commercial Code. Placedo and the Metal Transport Corporation urge that the Uniform Commercial Code does not apply to this transaction by its terms, and that if it did, it would be invalid because it conflicts with federal maritime law.

The bankruptcy court ruled in favor of Placedo, holding that the Uniform Commercial Code did not apply by its terms, and therefore the court did not need to decide whether federal maritime law governed. The trustee appealed to the district court, which affirmed on the basis of the bankruptcy court's conclusions and findings and permitted the immediate appeal of this matter under Fed.R.Civ.P. 54(b).

The parties agree that a security interest in accounts can be perfected under the Code only by filing. Thus, we must first decide whether subfreights come within the definition of accounts contained in California Commercial Code Sec. 9106 (West Supp.1986). Only if they do must we then decide whether federal maritime law pre-empts the Code.

Section 9-106 of the U.C.C. (Cal.Comm.Code Sec. 9106) provides that:

"Account" means any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper, whether or not it has been earned by performance.... All rights to payment earned or unearned under a charter or other contract involving the use or hire of a vessel and all rights incident to the charter or contract are accounts.

Subfreights are included within the literal terms of this provision both because they are a right to payment for services rendered, and because they are a right incident to a vessel charter.

Placedo argues that section 9-106 is intended to specify exactly the sort of interest ship charters created, and so to eliminate confusion as to whether they are accounts, chattel paper, or general intangibles. Thus, its argument continues, the Code does not govern the right to subfreights, but only assignments of charters. The trustee disagrees, arguing that section 9-106 makes it clear that the U.C.C. does apply to maritime liens on subfreights, and that Placedo failed to comply with the provisions of Article 9.

In the leading treatise on maritime law, it is pointed out that maritime liens have extraordinarily little in common with land liens, including consensual security interests. G. Gilmore & C. Black, The Law of Admiralty 586-89 (2d ed. 1975). Land liens and maritime liens are "two unlike things ... called by the same name." Id. at 589. In particular, it is well-established that maritime liens are secret and...