Recent Development by Erin M. Bruce
The M/V MARIA S.J. entered the Mississippi River in April 1998 subject to liens greater than the value of the vessel. The Governor and Company of the Bank of Scotland (Bank) filed suit in federal court on April 17 against the MARIA, in rem, and its owner, Golden Lines Shipping, Inc. (Golden Lines), in personam, to foreclose its preferred mortgage lien on the MARIA. Seeking unpaid wages, former crewmembers of the MARIA filed suit against Golden Lines and Kosmas Marine Line, Inc. (Kosmas Marine), the operator of the vessel, in personam, in Louisiana state court on April 22. The vessel was arrested on April 29. In May, the seamen assigned to the Bank their liens for wages due at the time the vessel was arrested in exchange for payment of these wages. The two actions were consolidated when Kosmas Marine and Golden Lines removed the seamen's suit to federal court. In June, the seamen intervened in the Bank's foreclosure proceeding to claim penalty double wages and past wages due against the MARIA. The Bank then bought the MARIA at a judicial auction for a credit bid of $3.7 million, with more than $15 million outstanding on the mortgage at that time. The Bank agreed to pay any liens with priority over its preferred mortgage up to the total proceeds of the sale less the expenses incurred while in custodia legis.
Ruling that the seamen had enforceable preferred maritime liens for payment of their past wages and penalty wages, the district court granted, in part, the Bank's motion for summary judgment. The court held that the seamen were entitled to payment of their past wages from the proceeds of the sale, but because the penalty wages statute imposes liability only on the “master or owner” of the vessel, the court held that their penalty wages could not be enforced. The owner had no interest in the proceeds of the sale of the MARIA because these proceeds were insufficient to cover the outstanding claims against the vessel. Hence, there were no funds from which the penalty wages could be recovered. In June 1999, the district court granted summary judgment to the seamen against the MARIA in rem for $261,000 in unpaid wages. The United States Court of Appeals for the Fifth Circuit held that because the seamen's preferred maritime lien for penalty wages was to be paid by the master or owner of the vessel and because the proceeds of the sale were not enough to fulfill the outstanding preferred mortgage lien against the vessel, leaving the owner or master no interest in the proceeds of the sale, the seamen were not entitled to recover penalty wages from the proceeds of the MARIA. Governor & Co. of the Bank of Scotland v. Sabay, 211 F.3d 261, 275-76, 2000 AMC 1532, 1551 (5th Cir.), cert. denied, 121 S. Ct. 384 (2000).
About the Author
Erin M. Bruce.
Citation
75 Tul. L. Rev. 1809 (2001)