Southern Reef Fisheries v. O/S Broadfire Leader

• Decision Date: 21 April 1986
• Docket Number: No. 85-3254,85-3254
• Citation: 786 F.2d 1523
• Parties: SOUTHERN REEF FISHERIES, a Florida General Partnership comprised of John E. Turregano, Betty M. Turregano, S.T. Miller, Martha S. Miller, Arnold D. Barr and Beverly Jo Barr, Plaintiffs- Appellants, and Borg-Warner Acceptance Corporation, Intervening Plaintiff-Appellee, v. O/S BROADFIRE LEADER, etc., in rem, and Broadfire International, Inc., in personam, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1523

786 F.2d 1523

SOUTHERN REEF FISHERIES, a Florida General Partnership comprised of John E. Turregano, Betty M Turregano, S.T. Miller, Martha S Miller, Arnold D. Barr and Beverly Jo Barr Plaintiffs- Appellants and Borg-Warner Acceptance Corporation, Intervening Plaintiff-Appellee, v. O/S BROADFIRE LEADER, etc., in rem, and Broadfire International, Inc., in personam, Defendants-Appellees.

No. 85-3254.

United States Court of Appeals, Eleventh Circuit.

April 21, 1986.

Nathaniel G.W. Pieper, Tampa, Fla., for plaintiffs-appellants.

Edward F. Gerace, Tampa, Fla., for defendants-appellees.

Appeal from the United States District Court for the Middle District of Florida.

Before HILL, Circuit Judge, TUTTLE and HENDERSON, ^* Senior Circuit Judges.

HILL, Circuit Judge:

FACTS

On April 27, 1982, the owner of the O/S BROADFIRE LEADER executed a preferred ship mortgage in favor of Borg-Warner Acceptance Corp. ("Borg-Warner") in the principal amount of $107,763.80 ("Borg-Warner Mortgage 2"), which replaced and increased the principal amount of an earlier mortgage. Borg-Warner Mortgage 2 was endorsed on the vessel's General Abstract of Title and recorded on April 29, 1982.

On July 1, 1982, the owner executed a second preferred ship mortgage in favor of appellant, Southern Reef Fisheries, in the principal amount of $100,000. That mortgage was received for record by the Coast Guard on September 2, 1982, but was not endorsed and recorded until February 8, 1983.

On December 30, 1982, the owner executed another preferred ship mortgage in favor of Borg-Warner ("Borg-Warner Mortgage 3"). Borg-Warner Mortgage 2 was released and Borg-Warner Mortgage 3 was endorsed and recorded on February 8, 1983, a few minutes after the Southern Reef Fisheries mortgage. The parties dispute the principal amount of Borg-Warner Mortgage 3. Appellant claims the amount is $192,443.16 because that figure appears at the top of the mortgage document and the Coast Guard entered that amount on the General Abstract of Title as "consideration or amount and discharge amount." Borg-Warner contends that Borg-Warner Mortgage 3 secured the principal amount of $106,557.52, as indicated in the body of the mortgage instrument and the accompanying note and security agreement. In answer to appellant's claim, Borg-Warner asserts that the $192,443.16 figure at the top of the mortgage represents the total pay-out over the life of the mortgage, including both principal and interest. Aside from their principal amounts, Borg-Warner Mortgages 2 and 3 differed in the interest rate charged (2% over prime on Borg-Warner Mortgage 2 versus 18.5% on Borg-Warner Mortgage 3) and in their maturity dates (April 22 or May 1, 1989 for Borg-Warner Mortgage 2 versus February 14, 1990 for Borg-Warner Mortgage 3).

Appellant filed suit to foreclose its preferred ship mortgage, seeking sale of the vessel to satisfy appellant's lien plus interest, costs and reasonable attorneys' fees, as well as a personal judgment against the owner. Borg-Warner intervened to seek similar relief. On April 10, 1984, the district court granted Borg-Warner's motion for summary judgment, finding "that the mortgages of Borg-Warner Acceptance Corp. cover the same debt and are, in fact, a renewal and continuation with the same security, that Borg-Warner has the first preferred ship's mortgage and priority over Southern Reef Fisheries." (R1-25-76). The vessel was thereafter sold at interlocutory sale to Borg-Warner for $75,000. On March 28, 1985, the court entered final judgment against the in rem defendant O/S BROADFIRE LEADER on behalf of Borg-Warner in the amount of $160,324.67, and on behalf of Southern Reef Fisheries in the amount of $92,762.82, according to the plaintiffs' stipulated claims.

DISCUSSION

The issue is whether the district court erred in granting summary judgment in favor of Borg-Warner based on its conclusion that Borg-Warner Mortgage 3 was a renewal and continuation of Borg-Warner Mortgage 2. The rule in this circuit regarding renewal mortgages is clear:

The accepted rule is that unless a contrary intention of the parties clearly appears, the execution and delivery of a new mortgage in renewal of a former one, even though accompanied by a formal satisfaction and discharge of the initial mortgage, does not have the effect of extinguishing the priority which the initial mortgage carries. The subsequent mortgage given in renewal is prior to liens which arose or would otherwise have come into being during the period of the initial mortgage. A comprehensive annotation states that it is the general rule that "where the holder of a senior mortgage discharges it of record, and contemporaneously therewith takes a new mortgage, he will not, in the absence of paramount equities, be held to have subordinated his security to an intervening lien unless the circumstances of the transaction indicate this to...