United States v. Fishing Vessel Mary Ann, 71-1640.

• Decision Date: 08 September 1972
• Docket Number: No. 71-1640.,71-1640.
• Citation: 466 F.2d 63
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. FISHING VESSEL MARY ANN, her engines, machinery, masts, anchors, etc., in rem, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

466 F.2d 63 (1972)

UNITED STATES of America, Plaintiff-Appellee, v. FISHING VESSEL MARY ANN, her engines, machinery, masts, anchors, etc., in rem, et al., Defendants-Appellants.

No. 71-1640.

United States Court of Appeals, Fifth Circuit.

July 27, 1972.

Rehearing and Rehearing Denied September 8, 1972.

L. Glen Kratochvil, T. G. Schirmeyer, Houston, Tex., Schirmeyer & Kratochvil, Houston, Tex., of counsel, for defendants-appellants.

Anthony J. P. Farris, U.S. Atty., Houston, Tex., David V. Hutchinson, Admiralty & Shipping Section, Dept. of Justice, Morton Hollander, Chief, Appellant Section, Civil Div., Dept. of Justice, Washington, D.C., L. Patrick Gray, III, Asst. Atty. Gen., Kathryn H. Baldwin, Atty., Dept. of Justice, Washington, D. C., for plaintiff-appellee.

Before JONES, BELL and AINSWORTH, Circuit Judges.

Rehearing and Rehearing En Banc Denied September 8, 1972.

JONES, Circuit Judge:

Ahto Walter, one of the appellants, had built for him a vessel for fishing and freezing. To complete the vessel Walter borrowed $397,506 from the United States through the United States Bureau of Commercial Fisheries pursuant to the authorization of the Fish and Wildlife Act, 16 U.S.C.A. §§ 742a-742k. To evidence the indebtedness Walter and his wife, Lucy A. Walter, gave a promissory note payable to the order of the United States of America and secured by a preferred ship mortgage on the vessel under construction, the MARY ANN. Ewen Duff Walter, the son of Ahto Walter, gave a written guaranty of payment of the note. A builder's risk insurance policy was procured by Walter. The policy had a mortgagee loss payable clause endorsement attached, payable to the United States. Another builder's risk policy was procured by the shipyard, St. Charles Steel Works, Inc., in which Walter was named as a loss payee.

The MARY ANN capsized. Walter had the necessary repairs made at a cost of over seventy-seven thousand dollars. Walter filed claims with the insurance carriers which denied liability on several grounds but primarily on the asserted ground that the vessel did not capsize at the shipyard or while on a trial run. Walter requested the United States to bring an action upon the policy affording coverage to it, taking the position that the defenses which might be asserted against him could not prevail against the United States. It declined to sue on the asserted ground that Walter was not then in default. This Court has been told that an action has been brought on one or both policies in a court which is withholding its decision.

Walter subsequently defaulted in making payments to the United States. It foreclosed and purchased the MARY ANN at foreclosure sale. In the foreclosure Walter defended and counterclaimed, alleging that the United States had wrongfully refused to bring a suit on the insurance policy containing the loss payable mortgagee clause. The defense was rejected and a summary judgment against Walter was entered on the counterclaim, 330 F.Supp. 1102.

Lucy A. Walter was made a party defendant in the foreclosure action by reason of her joinder in the execution of the promissory note. Ewen Duff Walter was made a party defendant in the foreclosure and a claim was made against him on the guaranty. Neither Lucy A. Walter nor Ewen Duff Walter was served with process in the action. Each of them had answered the complaint asserting defenses on the merits. The district court held that Lucy A. Walter and Ewen Duff Walter had submitted themselves to the jurisdiction of the court. A deficiency judgment of more than two hundred thousand dollars and interest was entered against the Walters, husband, wife and son. All have appealed.

It is contended, in a number of different ways, that the refusal of the United States to pursue the insurance company under the provisions of the loss payable mortgagee clause was a breach of a duty owed by it to Walter. The mortgagee clause creates an independent agreement between the insurer and the mortgagee for the...