RC Craig Limited v. Ships of Sea Incorporated

• Decision Date: 12 July 1972
• Docket Number: Civ. A. No. 2850.
• Citation: 345 F. Supp. 1066
• Parties: R. C. CRAIG LIMITED, Plaintiff, v. SHIPS OF the SEA INCORPORATED, Defendant.
• Court: U.S. District Court — Southern District of Georgia

345 F. Supp. 1066

R. C. CRAIG LIMITED, Plaintiff, v. SHIPS OF the SEA INCORPORATED, Defendant.

Civ. A. No. 2850.

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

July 12, 1972.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Barnard M. Portman, Smith & Portman, Savannah, Ga., for plaintiff.

Edward T. Brennan, M. Lane Morrison, Adams, Adams, Brennan & Gardner, Savannah, Ga., for defendant.

ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

LAWRENCE, Chief Judge.

In this diversity action R. C. Craig Limited, a Canadian corporation, seeks specific performance and damages from the defendant as the result of an alleged breach of an agreement dated July 30, 1971, to sell the barkentine "Cruz del Sur." The complaint was brought jointly by the alien corporation and Ronald C. Craig, its apparent organizer, against Ships of the Sea, Incorporated and Mills B. Lane, Jr. as an individual and as trustee. The action by the individual plaintiff and that against the individual defendant was dismissed, neither being a formal party to the contract of sale.¹

Ships of the Sea has moved for summary judgment. Both sides have presented affidavits and exhibits in support and opposition. The record includes a transcript of a preliminary hearing in the Municipal Court of Savannah involving a criminal trespass charge against Ronald Craig in 1971 for refusing to leave the "Cruz del Sur" when directed. Briefs have been filed and oral argument heard.

A reading of the record and the briefs leaves me with a distinct impression that this is not a proper case for summary disposition. Such is particularly true in a Circuit where the mortality rate of summary judgments on appeal is so high. "Summary judgment is a lethal weapon, and courts must be mindful of its aims and targets and beware of overkill in its use." Brunswick Corporation v. Vineberg, 370 F.2d 605, 612 (5 Cir.). The short-cutting of trials often proves "the longest way around is the shortest way through." Gray Tool Co. v. Humble Oil & Refining Co., 186 F.2d 365 (5 Cir.). To warrant summary disposition there must be no genuine issue of fact and the moving party must be entitled to judgment as a matter of law. The burden of clearly showing this is on movant. The slightest doubt as to the facts requires denial of the motion. See St. John v. New Amsterdam Casualty Company, 357 F.2d 327 (5 Cir.); Liberty Leasing Co., Inc. v. Hillsum Sales Corporation, 380 F.2d 1013 (5 Cir.); Gauck v. Meleski, 346 F.2d 433 (5 Cir.); Scott v. Great Atlantic & Pacific Tea Company, 338 F.2d 661 (5 Cir.); National Screen Service Corporation v. The Poster Exchange, Inc., 305 F.2d 647 (5 Cir.).

Defendant insists that there is no genuine factual issue concerning plaintiff's breach of the agreement to purchase the "Cruz del Sur." The interpretation of contracts ordinarily raises an issue of law and such cases are generally a proper subject for summary judgment. United States v. Manufacturers Casualty Insurance Company, 158 F.Supp. 319. The instant case is not as simple as that. In fact, it is quite complicated and there are disputes as to the facts in several areas.

The alleged breach by Craig relates to its failure to furnish a preferred ship's mortgage and hull and protection and indemnity insurance at the time of closing. Such a mortgage was of great importance to the seller which agreed to deliver the "Cruz del Sur" without any partial payment. The purchase price was $250,000 payable in quarterly installments beginning six months after the date of sale. The agreement of July 30, 1971, provided that the 5% note was to be secured by a First Preferred Ship Mortgage as defined in the United States Ship Mortgage Act. The existence of hull insurance and protection and indemnity coverage was equally important to seller. Neither was tendered by the buyer. As an undocumented foreign-built vessel the "Cruz del Sur" could not be so mortgaged. As an alien corporation, Craig could not grant a preferred mortgage on her even if she had been properly registered or enrolled in the United States.

To be eligible for a preferred mortgage the ship must be a "vessel of the United States." 46 U.S.C.A. §§ 921, 922. Only vessels registered pursuant to law are "vessels of the United States." 46 U.S.C.A. § 221. Foreign-built vessels can be owned by citizens of the United States. However, they are not entitled to registry, enrollment and license as American vessels since they were not built in this country. The Conqueror, 166 U.S. 110, 17 S.Ct. 510, 41 L.Ed. 937. No preferred mortgage can be recorded unless the vessel covered was documented as a vessel of the United States at the time the mortgage was made. 46 C. F.R. § 67.47-7. "Documented" means "registered, enrolled and licensed . . . by the U.S. Coast Guard." 19 C.F.R. § 4(b), (c).

Generally, registry applies to vessels in foreign commerce; enrollment to coastwise navigation. They involve similar qualifications and requirements. Registry endows a ship with a national character and affords the protection of such nationality. Registry and enrollment are similar in character but differ in that they apply under different statutes to vessels engaged in distinct pursuits. See 48 Am.Jur. Shipping §§ 46, 47, 53, 218; 80 C.J.S. Shipping § 3, pp. 574-578. See also Gilmore and Black, The Law of Admiralty (1957), p. 574f.

Since the "Cruz del Sur" was built in Spain she could not be registered or enrolled in the United States even though owned by a citizen of this country. Unless so documented the vessel is not the subject of a preferred ship's mortgage. "A preferred mortgage may not be placed upon any vessel which is not a documented vessel. . . ." 46 C.F.R. § 67.49-1(b).²

Without a preferred mortgage the seller of a ship has unsatisfactory security for the purchase price. The Ship Mortgage Act of 1920 accords preferred status to security instruments that comply with its terms. The lien thereof is superior to all except preferred maritime liens, such as seamen's wages. 46 U.S.C.A. § 953. A common-law mortgage on a vessel confers no right of access to the admiralty courts of the United States. Such an instrument does not constitute a maritime contract. Commercial Banking Corporation v. One Approximately 30-Foot Motor Boat et al., 86 F.Supp. 618; North American Continental Co. v. The El Cuis, 107 F. Supp. 436; Port Welcome Cruises, Inc. v. S. S. Bay Belle, 215 F. Supp. 72, aff'd. 324 F.2d 954 (4 Cir.). The only mortgage on a ship which may invoke the admiralty jurisdiction for its foreclosure is one executed in accordance with the Ship Mortgage Act. Hirsch v. The San Pablo, 81 F.Supp. 292.

The "Cruz del Sur" was not registered or enrolled in the United States and carried no ship's papers except a Georgia Motorboat license. See Ga. Code Ann. § 17-605. Her papers had been left in possession of the authorities at Nassau where she had been registered as a British vessel by a previous owner. The certificate of registration in the Bahamas which Twentieth Century Fox had obtained from the Registrar of Shipping was cancelled in 1967 and the registry of the vessel closed because of her sale to an American citizen.

Seller says the buyer breached its contract to purchase the vessel by not furnishing a preferred ship's mortgage as it was required to do. Buyer replies that such was impossible since the vessel was not registered in the United States, and that, as long as she was not, a preferred ship's mortgage could not be granted or recorded. Seller says that as a foreign corporation Craig was ineligible to purchase an American-owned vessel without approval of the Maritime Administration and would not grant a United States preferred mortgage.

A look at the background of the matter in controversy may be helpful to a better understanding of the legal questions. The "Cruz del Sur" was built at Valencia, Spain in 1947. She was a three-masted barkentine with an auxiliary diesel engine. Her burden was about 150 tons and she had an overall length of around 158 feet. She appears to have been used for a time as a Spanish training ship. Later she was acquired by Twentieth Century Fox Productions, Limited, a British corporation.³

Mills B. Lane, Jr. had created a maritime museum on the riverfront at Savannah which houses a superb collection of model ships. It is owned and operated by Ships of the Sea, Inc., a non-profit organization of which he is a trustee. He became interested in the "Cruz del Sur" and in 1965 Lane Enterprises purchased the vessel from Twentieth Century Fox. She was brought to Savannah and tied up near the Ships of the Sea Museum. Subsequently, there were extensive repairs and refitting of the vessel, including considerable work on the hull and interior. New masts and new engines were installed.⁴ In 1968 the vessel was transferred to Ships of the Sea as a gift from Lane Enterprises.

Except for short trips in the Savannah River the only time the "Cruz del Sur" put to sea, at least until this year, was on July 30, 1971, when Mr. Craig and a small group, without Lane's permission, took her ten miles beyond Tybee and anchored overnight near the Savannah light tower. On the same day the Canadian corporation had signed the contract to purchase the vessel. Craig claimed that the "trial run" was authorized by a provision in the sales agreement which permitted inspecting and testing pending closing. Apparently Mr. Craig regarded himself as the owner. Lane entertained decidedly different notions about taking a convivial cruise on his uninsured vessel. A criminal warrant was sworn out⁵ and a restraining order obtained in the Superior Court enjoining Craig from going aboard. Plaintiff contends that these activities constituted an anticipatory repudiation of the contract which relieved the buyer from further obligations prior to litigation. See Ga.Code Ann. § 109A-2-609. I disagree.

The "Cruz del Sur" proved a picturesque addition to the waterfront. She was also...