Dietrich v. Key Bank, N. A.

United States Court of Appeals,
Eleventh Circuit.
No. 94-4093.
Leslie S. DIETRICH, Plaintiff-Counter Defendant-Appellant,
v.
KEY BANK, N.A., Defendant-Counter Plaintiff-Appellee,
Gilman Yacht Sales, Inc., Jeffrey Shearer, Cracker Boy Marina,
Inc., Defendants.
Jan. 3, 1996.
Appeal from the United States District Court for the Southern
District of Florida. (No. 87-8407-CIV), Jose A. Gonzalez, Jr.,
Judge.
Before TJOFLAT, Chief Judge, ANDERSON, Circuit Judge, and FAY,
Senior Circuit Judge.
ANDERSON, Circuit Judge:
This case involves the construction of the Ship Mortgage Act
of 1920, 46 U.S.C.A. § 31301-31343 (West Supp.1995) (former version
at 46 U.S.C.A. § 911-984 (West 1995))1 ("the Act"). The question
1
Although the former version was in place and in effect
until January 1, 1989, we refer to the version now in existence,
i.e., 46 U.S.C.A. § 31301-31343. In reorganizing the Ship
Mortgage Act, Congress made some substantive changes. However,
none of those changes have any bearing on the issues in this
case. Also important for our analysis is that the coverage of
the Act, i.e., its scope, is substantially the same as before the
1988 Act.
The section of the Act central to the issue in this
appeal is § 31325(b). The House Report indicates that the
only major substantive change Congress made to that
subsection was "by allowing a nonadmiralty civil action to
be brought against the mortgagor, comaker, or guarantor for
the amount of the outstanding indebtedness secured by the
vessel or any deficiency in paying off that indebtedness."
H.R.Rep. No. 918, 100th Cong., 2d Sess., at 44, 1988
U.S.Code Cong. & Ad.News at pp. 6104, 6137. The report
notes that "[t]his change allows an action to be brought
even when the vessel is outside U.S. jurisdiction. This
section will also allow the action to be brought against the
presented here has not been decided by any other circuit: whether
the provisions for enforcement of the Ship Mortgage Act set forth
at 46 U.S.C.A. § 31325 provide the exclusive procedures for the
enforcement of preferred ship mortgage liens or whether parties to
preferred ship mortgages can contract to use state self-help
repossession and resale procedures. We hold that the Ship Mortgage
Act does not prohibit state self-help enforcement procedures when
they are authorized by the underlying contracts.
I. FACTUAL BACKGROUND
On April 30, 1982, Key Bank, N.A. ("Key Bank") financed Leslie
Dietrich's purchase of a thirty-five foot, 1980 Mako sport fishing
boat. Dietrich signed a security agreement giving Key Bank a
security interest in the boat and promising to repay $97,300.00 in
monthly installments at an annual interest rate of 18%. The
security agreement was to protect the lender until the First
Preferred Ship Mortgage was duly recorded. On August 30, 1983,
over a year later, Dietrich executed the First Preferred Ship
Mortgage.2 Among other things, that mortgage provided for payment
of the debt on the same monthly installment terms and with the same
interest provided in the security agreement, and for acceleration
of the entire debt in the event of default. In the summer of 1986,
Dietrich defaulted on her note. After notifying her of the
payments she owed, Key Bank accelerated the note and then
peacefully repossessed the vessel in December, 1986. The vessel
comaker or guarantor of the mortgage." Id.
2
The parties agree that the preferred mortgage executed by
Dietrich was validly recorded and had the status of a preferred
mortgage under the statute.
was then sold by Key Bank in a private sale to one of three bidders
for $40,000.
Afterwards, Dietrich filed suit against Key Bank alleging
3
breach of contract and conversion, and Key Bank filed a
counterclaim seeking a deficiency judgment. Dietrich moved for
partial summary judgment on Key Bank's counterclaim contending that
under the Ship Mortgage Act, Key Bank was prohibited from using
self-help repossession to enforce the preferred mortgage. She also
contended that even if it were lawful to contract for self-help
repossession and resale, the contracts in this case did not make
such provisions. The district court decided that the contracts
between the parties did authorize Key Bank to use Florida law to
repossess peacefully and sell its collateral upon the debtor's
default and that the Ship Mortgage Act did not prohibit Key Bank
from pursuing these contracted for state remedies.4 After a
non-jury trial in December of 1993 on the remaining claims, 5 the
district court entered a deficiency judgment against Dietrich, the
amount of which is not at issue in this appeal.
On appeal, Dietrich reasserts the grounds of her summary
judgment motion. She contends that the Ship Mortgage Act's
statutory enforcement scheme, i.e., foreclosure either in rem or in
3
Dietrich originally filed suit in Palm Beach County Circuit
Court. The action was removed to the district court.
4
The district court's thoughtful opinion is published. 693
F. Supp. 1112 (S.D.Fla.1988).
5
These issues included Key Bank's deficiency claim as well
as Dietrich's affirmative defenses that the bank failed to give
proper notice and that the resale of the collateral was not done
in a commercially reasonable manner.
personam in admiralty, is the exclusive remedy for default of a
preferred mortgage lien. She also argues that the district court
erred in concluding that the underlying contracts provided for
state self-help repossession and resale remedies.
We first address whether the underlying contracts provide for
state law self-help repossession and resale, and then we determine
whether the Ship Mortgage Act precludes such remedies.
II. CONSTRUCTION OF THE UNDERLYING CONTRACTS
Dietrich argues that she did not contract for state law
self-help repossession and resale in the mortgage contracts. Her
argument fails. It is uncontested that once perfected, the terms
of the First Preferred Ship Mortgage governed, 6 and that document
contemplated repossession and resale. At least three paragraphs in
the document explicitly mention the availability of repossession
and two mentioned resale after repossession. For example,
Paragraph 20 states:
SALE OR USE OF REPOSSESSED VESSEL. If you repossess the
Vessel, you may, in my name, lease, charter, operate or
otherwise use the Vessel as you think advisable, being
accountable for net profits, if any, and keep the Vessel free
of charge at my premises or elsewhere, at my expense. For
such purpose and subject to any applicable state regulation,
you and your agents are irrevocably appointed my true and
6
Dietrich contends that the lower court mistakenly relied on
language set forth in the Security Agreement in determining that
she had contracted for self-help remedies. (Under its
"Additional Terms and Conditions", the Security Agreement stated,
"To protect you until a First Preferred Ship Mortgage is duly
recorded, I give you a security interest under the Uniform
Commercial Code in the Vessel and any equipment which may become
a part of the Vessel in the Future....") She argues that that
reliance was misplaced because the Security Agreement was not
binding after the execution of the First Preferred Ship Mortgage.
However, the First Preferred Ship Mortgage itself allowed for
self-help repossession and sale; therefore, her argument is
misplaced.
lawful attorneys-in-fact to make all necessary transfers of
the Vessel upon resale after repossession, in my name and
stead.
This paragraph unequivocally anticipates both self-help
repossession and self-help resale. Both are provided for under
7
Florida law. Fla.Stat.Ann. § 679.503. Furthermore, this
paragraph specifically provides that state regulation would govern
the mortgagee's transfer of vessel upon resale after repossession.
Other language in the document contemplates repossession and
resale. Paragraph 16 of the First Preferred Ship Mortgage required
Dietrich to sign and deliver those documents to the purchaser which
would help the mortgagee "carry out a resale of the Vessel in the
event it becomes necessary for [the mortgagee] to repossess it."
At paragraph 19, the document set forth how the mortgagor might
redeem the vessel should it be repossessed and stated that the
mortgagor's "right to redeem will end when the repossessed Vessel
has been sold."
Thus, we reject Dietrich's argument that the contracts did not
7
Section 679.503, entitled "Secured party's right to take
possession after default" states in part:
Unless otherwise agreed a secured party has on default
the right to take possession of the collateral. In
taking possession a secured party may proceed without
judicial process if this can be done without breach of
the peace or may proceed by action.
Section 679.504, entitled "Secured party's right to dispose
of collateral after default; effect of disposition", states
in part:
A secured party after default may sell, lease or
otherwise dispose of any or all of the collateral in
its then condition or following any commercially
reasonable preparation or processing. Any sale of
goods is subject to chapter 672.
allow for self-help repossession and resale upon default. We
therefore turn to the Ship Mortgage Act issue.
III. THE SHIP MORTGAGE ACT OF 1920
A. Background
Before the passage of the Ship Mortgage Act of 1920, vessel
mortgage liens could not be enforced in admiralty court. See The
Thomas Barluum, 293 U.S. 21, 32, 55 S. Ct. 31, 33, 79 L. Ed. 176
(1934). State court enforcement was ineffective because state
courts could not affect maritime liens. Thus, a ship mortgagee's
security interest was not satisfactorily protected. See id. at 39,
55 S.Ct. at 36 (pointing out that mortgage security on ships was
practically worthless). The Ship Mortgage Act provided a means
through which vessel mortgages could be given a preferred status
and could be enforced in admiralty. The underlying purpose of the
Act was to encourage investment in shipping. See id. at 40, 55
S.Ct. at 37 (indicating fundamental purpose of Congress was to
promote confidence in ship mortgages); Merchants & Marine Bank v.
The T.E. Welles, 289 F.2d 188, 193-194 (5th Cir.1961) ("[P]assage
of the Ship Mortgage Act came about primarily from the necessity of
affording substantial security to persons supplying essential
financing to the shipping industry.")
The Act itself did at least three important things—it set
forth the requirements for recording preferred mortgages,
established that only maritime liens would have priority over ship
mortgages, and provided for a means of enforcing preferred mortgage
liens in admiralty.
B. Federal Preemption
Dietrich argues that the statutory provisions for enforcement
of preferred mortgage liens under the Act, 46 U.S.C.A. § 31325(b)
(formerly 46 U.S.C.A. §§ 951, 954), are exclusive remedies and
that, as such, they preempt state law remedies. Specifically, 46
U.S.C.A. § 31325(b) provides:
(b) On default of any term of the preferred mortgage, the
mortgage[e] may—
(1) enforce the preferred mortgage lien in a civil
action in rem for a documented vessel, a vessel to be
documented under chapter 121 of this title, or a foreign
vessel; and
(2) enforce a claim for the outstanding indebtedness
secured by the mortgaged vessel in—
(A) a civil action in personam in admiralty against
the mortgagor, maker, comaker, or guarantor for the
amount of the outstanding indebtedness or any
deficiency in full payment of that indebtedness;
and
(B) a civil action against the mortgagor, maker,
comaker, or guarantor for the amount of the
outstanding indebtedness or any deficiency in full
payment of that indebtedness....
The statute itself makes no statement with respect to state
law except in § 31307, which established that the statute
superseded the provisions of state law conferring liens for
necessaries on vessels insofar as such statutes purported to create
rights of action to be enforced by suits in rem in admiralty:
This chapter supersedes any State statute conferring a lien on
a vessel to the extent the statute establishes a claim to be
enforced by a civil action in rem against the vessel for
necessaries.
46 U.S.C.A. § 31307. That limited preemption does not affect the
self-help remedies at issue here. The Ship Mortgage Act contains
no direct expression of congressional intent to preempt state law
allowing for self-help repossession and resale.
The question presented is whether these provisions for
enforcement of preferred mortgage liens preempt state law.
Recently, the Supreme Court stated:
In the absence of an express congressional command, state law
is pre-empted if that law actually conflicts with federal law
[cit.] or if federal law so thoroughly occupies a legislative
field " "as to make reasonable the inference that Congress
left no room for the States to supplement it.' "
Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S. Ct.
2608, 2617, 120 L. Ed. 2d 407 (1992) (citations omitted). Because we
find no express congressional command, we must determine whether
state law actually conflicts with the federal statute or,
alternatively, whether federal law thoroughly occupies the
legislative field.
1. Whether State Self-help Repossession and Sale Conflicts with
Federal Law.
We first determine whether state law is preempted because "
"it actually conflicts with a federal statute.' " International
Paper Co. v. Ouellette, 479 U.S. 481, 491, 107 S. Ct. 805, 811, 93
L. Ed. 2d 883 (1987) (quoting Ray v. Atlantic Richfield Co., 435 U.S.
151, 158, 98 S. Ct. 988, 991, 55 L. Ed. 2d 179 (1978)).
"Such a conflict arises when "compliance with both federal and
state regulations is a physical impossibility,' ... or when
state law stands as an obstacle to the accomplishment and
execution of the full purposes and objectives of Congress...."
Hillsborough County, Fla. v. Auto. Med., 471 U.S. 707, 713, 105
S. Ct. 2371, 2375, 85 L. Ed. 2d 714 (1985) (citations omitted). In
the case at bar, there is no direct conflict between the state and
federal law. Cf. Nat G. Harrison Overseas Corp. v. American Barge
Sun Coaster, 475 F.2d 504, 506 (5th Cir.1974) (where direct
conflict existed between the state usury laws and the federal
statutory provision that the mortgage may bear such rate of
interest as may be agreed upon); J. Ray McDermott & Co., Inc. v.
The Vessel Morning Star, 457 F.2d 815 (5th Cir.) (en banc), cert.
denied, 409 U.S. 948, 93 S. Ct. 292, 34 L. Ed. 2d 218 (1972) (where
direct conflict existed because under state law any deficiency
judgment was forfeited by conducting a public sale without an
appraisal, whereas under federal law an appraisal was not
required).
The federal statute provides procedures for judicial
foreclosure and sale. As discussed previously, 46 U.S.C.A. §
31325(b) allows for enforcement of a preferred mortgage lien in a
civil action in rem or a civil action in personam and sets forth
procedures for judicial enforcement.8 However, the Act nowhere
describes the procedures to be followed when parties to a preferred
ship mortgage seek to enforce the mortgage using nonjudicial,
self-help remedies. Thus, no direct conflict exists. 2 Benedict
on Admiralty § 70f (7th ed. 1995).
It cannot be argued that state law stands as an obstacle to
the full accomplishment of the purposes and objectives of Congress.
The purpose of Congress was to create a means of enforcing
mortgages in admiralty in order to promote ship financing.
Allowing financiers to contract for state law self-help remedies in
addition to their statutory right to foreclose in admiralty does
8
The Act provides for the termination of all liens upon a
judicial sale in rem, the lien then attaching to the sale
proceeds. 46 U.S.C.A. § 31326. Because these remedies are
judicial, any sale held pursuant to these remedies would be
court-ordered and, as such, governed by 28 U.S.C.A. §§ 2001 and
2004.
not undermine this purpose. Rather, allowing for supplementation
through state law furthers the objectives of Congress by providing
another avenue for enforcement of vessel mortgage liens.
2. Whether the Ship Mortgage Act Occupies the Field.
Having determined that the Act did not explicitly preempt
state law, and that there is no conflict between the state and
federal law, we must determine whether Congress intended to occupy
the field. We can infer an "intent to occupy a given field to the
exclusion of state law ... where the pervasiveness of the federal
regulation precludes supplementation by the States" or "where the
federal interest in the field is sufficiently dominant...."
Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 300, 108 S. Ct.
1145, 1150, 99 L. Ed. 2d 316 (1988). We can also infer an intent to
preempt where " "the object sought to be obtained by the federal
law and the character of the obligations imposed by it' " reveal a
purpose to preclude the enforcement of the state laws on the same
subject. Id. (citation omitted).
Although enforcement of preferred mortgage liens is a federal
interest, it is not the sort of uniquely federal interest which is
so dominant it would create an inference that Congress intended to
preempt state law in that field. Cf. Hines v. Davidowitz, 312 U.S.
52, 61 S. Ct. 399, 85 L. Ed. 581 (1941) (concluding that immigration
and foreign affairs were such predominant federal interest). Nor
is this a situation in which the enforcement of state law, i.e.,
self-help repossession and resale, poses a serious danger to the
administration of the federal program. Rather, a mortgagee remains
free to pursue a federal remedy notwithstanding the fact that he
contracted for the option to use a state law remedy. As long as
the conveyances and sales are properly recorded with the customs
officials, the federal scheme is not endangered.9
It cannot be said that the object sought to be obtained by
the Act and the character of the obligations imposed reveal a
purpose to preclude enforcement of nonconflicting state law on the
same subject. While it is true that Congress sought to provide a
remedy in an area in which state law was insufficient, neither the
object sought to be obtained by the Act, i.e., preferred status of
mortgage liens enforceable in admiralty, nor the obligations
imposed by the statute, i.e., various statutory conditions and
documentation requirements, indicate that Congress's purpose was to
preclude state law enforcement of preferred mortgages in the manner
proposed in this case. Cf. Howard v. Uniroyal, Inc., 719 F.2d 1552
(11th Cir.1983) ("[P]re-emption and implied private cause of action
analyses are distinct modes of divining Congressional intent.")
The appellant seems to rely on the argument that the
pervasiveness of federal regulation precludes supplementation by
the states. Her argument is undermined by a close look at the
statute itself. The fact that the statute does provide two means
to enforce preferred mortgage liens does not, without more,
indicate that the federal statute is pervasive.10 Compare
9
Passing of title by extra-judicial repossession and resale
is provided for in the Coast Guard regulations. 46 C.F.R. §
67.83 (1994).
10
The statute provides for enforcement in a civil action in
rem and also in a civil action in personam. With respect to the
former, the jurisdiction of the federal courts is exclusive, but
with respect to the latter, there is concurrent jurisdiction with
the state courts.
International Paper Co. v. Ouellette, 479 U.S. 481, 107 S. Ct. 805,
93 L. Ed. 2d 883 (1987) (finding that Congress intended Clean Water
Act to establish all-encompassing program of water-pollution
regulation where Act applied to all point sources and virtually all
bodies of water) and Capital Cities Cable, Inc. v. Crisp, 467 U.S.
691, 104 S. Ct. 2694, 81 L. Ed. 2d 580 (1984) (deciding FCC occupied
field where it pervasively regulated importation of distant
broadcast signals, signal carriage generally, and technical
standards) with Pac. Gas & Elec. v. St. Energy Resources. Conserv.,
461 U.S. 19, 103 S. Ct. 1713, 75 L. Ed. 2d 752 (1983) (finding that
despite comprehensiveness in safety regulations in Atomic Energy
Act of 1954, Congress intended states to retain its other
traditional roles in regulating utilities, and concluding it almost
inconceivable that Congress would leave regulatory vacuum).
Because the language of the Act is permissive—i.e., the Act
uses the permissive "may" rather than exclusive "must" with respect
to its enforcement procedures—and because the Act is silent with
respect to self-help repossession and resale, we are drawn to the
conclusion that the federal law is not so pervasive that it
thoroughly occupies the field. This reasoning accords with that of
a majority of the cases and treatises which have squarely addressed
the question. See Merchants & Marine Bank v. T.E. Welles, 289 F.2d
188, 194 (5th Cir.1961) ("With all of its statutory protections,
[the Ship Mortgage Act] still has infirmities in contrast to
land-based securities" and "the approach ought to be one of harmony
with usual security principles."); First Federal Sav. F.S.B. v.
M/Y Sweet Retreat, 844 F. Supp. 99, 102 (D.R.I.1994) ("The text of
the act indicates that it is not exclusive."); Maryland National
Bank v. Darovec, 820 F. Supp. 1083, 1087 (N.D.Ill.1993) (concluding
that the Act "stops short of pre-empting extra-judicial
repossessions and private sales"); Pee Dee State Bank v. The F/V
Wild Turkey, 1992 A.M.C. 1896, 1991 WL 355221 (D.S.C.1991);
Southland Financial Corp. v. O/S MARY EVELYN, 248 F. Supp. 520, 522
(E.D.La.1965); Chemical Bank v. United States Lines, S.A. (In Re
McLean Ind.), 132 B.R. 271 (Bankr.S.D.N.Y.1991); Price v. Seattle-
First Nat'l Bank, 582 F. Supp. 1568 (W.D.Wash.1983); see also 8
Benedict on Admiralty § 1.06[C] (7th ed. 1995); Grant, Gilmore &
Charles L. Black, Jr., The Law of Admiralty, 721 (2d ed. 1975).
The appellant contends that this circuit's precedent controls
and that such precedent has held that the Ship Mortgage Act is
comprehensive and pre-empts state law enforcement remedies. She
cites two cases, J. Ray McDermott & Co., Inc. v. The Vessel Morning
Star, 457 F.2d 815 (5th Cir.) (en banc),11 cert. denied, 409 U.S.
948, 93 S. Ct. 292, 34 L. Ed. 2d 218 (1972), and Nat G. Harrison Over.
Corp. v. American Barge Sun Coaster, 475 F.2d 504 (5th Cir.1974).
However, both cases can be distinguished from the case at bar.
In J. Ray McDermott, the en banc court addressed whether the
Ship Mortgage Act preempted state law with respect to federal
judicial sales and the resulting deficiency judgments. Id. at 816-
17. In that case there was a judicial foreclosure and a public,
judicially-supervised sale; there was no appraisal before sale.
11
In Bonner v. City of Prichard, 661 F.2d 1206 (11th
Cir.1981) (en banc), this court adopted as binding precedent all
of the decisions of the former Fifth Circuit handed down prior to
the close of business on September 30, 1981. Id. at 1209.
The district court granted a deficiency judgment in favor of the
mortgagee after the judicial sale of a vessel. Id. at 816. The
panel of the circuit court on appeal concluded that no deficiency
judgment was due because Louisiana law provided that the sale of
mortgaged property without an appraisal and under a waiver of
appraisal fully satisfies and discharges the debt and the personal
obligation of the debtor, thus forfeiting any deficiency judgment.
Disagreeing with that opinion, the en banc court concluded that
there was no void in the statutory scheme governing the judicial
sale procedure such that supplementation by state law could be
allowed. Id. at 818. The en banc court noted that the relevant
12
federal statutes, 28 U.S.C.A. §§ 2001, 2004, provided all the
necessary requisites for judicial sales. Section 2001 specifically
requires appraisal at judicially supervised private sales, but
there was no provision for an appraisal in judicially-supervised
public sales. Having expressly provided for appraisal in one
context and not in another context, Congress implicitly excluded
the necessity for appraisal at public sales. The en banc court
then concluded that state law could not supplement the
comprehensive federal provisions for sales held pursuant to court
order because state and federal law conflicted. Id. at 818-19.
That holding does not control our decision in this case. This
is not a situation in which a party has attempted to supplement the
provisions governing the judicial sale of a vessel. Rather, here
the mortgagee has chosen to forego judicial foreclosure and sale
12
These two sections, though not referenced in the Ship
Mortgage Act, govern judicial sales by federal courts.
altogether, opting instead for a self-help remedy. Here there is
no direct conflict of law. Although the provisions for judicially
supervised sales might be comprehensive, the statute is silent with
regard to self-help remedies which do not invoke judicial
supervision.
Despite the narrowness of its holding, the J. Ray McDermott
decision did employ broad language in its description of the scope
of the Ship Mortgage Act, specifically the following:
It is clear that Congress intended that the ready availability
of credit to support interstate commerce should not be impeded
by parochial limitations and that the Act would wholly and
completely supersede state law and practice in every respect.
Id. at 818. Although J. Ray McDermott represents in effect an en
banc decision of this court (sitting then as the former Fifth
Circuit), the quoted language is dicta13 and is not controlling in
this case. J. Ray McDermott involved a judicially-supervised
foreclosure and a direct conflict between federal and state law.
Nor is Nat G. Harrison Overseas Corp., 475 F.2d 504 (5th
Cir.1974), controlling. The issue in that case was whether the
federal court's deficiency judgment should be purged of interest
and or barred because the mortgage interest was usurious under the
laws of Georgia. The court concluded that U.S.C.A. § 926(d) (the
substantive provision is now located at 46 U.S.C.A. § 31322(b))
controlled. That subsection specifically allowed for "such rate of
interest as is agreed by the parties" to the preferred mortgage.
The court noted that state law not only introduced " "an
13
See also other dicta to the opposite effect: "state law
may occasionally fill the gaps in an incomplete and less than
perfect maritime system." J. Ray McDermott, 457 F.2d at 818.
undesirable lack of uniformity' " into the Act but that application
of state law "flatly conflict[ed] with Section 926(d)". 475 F.2d
at 506. Again, though some language of this case might imply that
the Act preempts state law in every respect, that is not its
holding. Like J. Ray McDermott, Nat G. Harrison involved a direct
conflict between federal and state law.
Thus, neither J. Ray McDermott nor Nat G. Harrison foreclose
our holding that the Ship Mortgage Act is not pervasive; we hold
that the Act does leave room for the operation of state law
self-help remedies when authorized by contract. We acknowledge
that our holding is in conflict with Bank of American National
Trust & Savings Ass'n v. Fogle, 637 F. Supp. 305 (N.D.Cal.1985), and
Nate Leasing Co., Inc. v. Wiggins, 114 Wash.2d 508, 789 P.2d 89
(1990). Contrary to our holding, the Fogle court held that the
Ship Mortgage Act exclusively governs all foreclosures of preferred
ship mortgages, and thus preempts any state law provisions allowing
for self-help, nonjudicial foreclosure sales. The Fogle court
reasoned that because the statute provided for private sales as
well as public sales within its procedures for judicially
supervised foreclosure, Congress necessarily intended to preclude
the use of self-help procedures which also include private sale.
In Nate Leasing, the Supreme Court of Washington followed Fogle and
relied upon the dicta in J. Ray McDermott, which we have now
disavowed.
In our opinion, the better reasoned cases support our holding,
and not that of Fogle and Nate Leasing. As noted above, we see no
direct conflict between the state law self-help provisions and the
federal scheme; we disagree with theFogle court's suggestion that
Congress intended to preclude the use of nonjudicial, self-help
remedies merely because Congress permitted private sales as well as
public sales within its overall scheme of judicially supervised
foreclosures. Although the federal scheme may well be
comprehensive with respect to judicial foreclosure, the Act is
silent with respect to self-help repossession and resale. As noted
above, the self-help repossession and resale procedure poses no
threat to the administration of the federal program, but rather is
entirely consistent with the congressional purpose. The
congressional purpose was to facilitate and promote financing for
vessels, and in particular to provide an effective means for
enforcing ship mortgages. We believe our holding is consistent
with and supportive of that purpose. Our holding merely recognizes
the availability of an optional remedy—one which may be less
cumbersome and expensive in some circumstances14—in addition to the
remedies provided by the federal statute. Nor do we believe our
holding will undermine any congressional goal of providing
uniformity. Not only is the self-help remedy optional, the
relevant state law is now itself largely uniform as a result of the
widespread adoption of the Uniform Commercial Code.
Finally, our holding is supported by the permissive language
used by the federal statute in providing for its foreclosure
remedies. We note also that our holding is supported by leading
treatises on admiralty law. See 2 Benedict on Admiralty § 70f (7th
14
Of course, the self-help remedy could not affect maritime
liens, and thus will not be effective in many situations.
ed. 1995) (criticizing15 the reasoning in Fogle and the dicta in J.
Ray McDermott and indicating that the cases holding that the
federal judicial remedies are not exclusive appear to be better
reasoned). Accord, Grant Gilmore and Charles L. Black, Jr., The
Law of Admiralty, 718-27 (2d ed. 1975).16
For the foregoing reasons, we hold that the Ship Mortgage Act
does not prohibit a mortgagee's use of state law self-help
enforcement procedures when the parties have authorized those
procedures by contract.
AFFIRMED.
15
Benedict on Admiralty also recognizes that self-help
repossession and resale was "generally acknowledged as an
available remedy prior to the Fogle decision." Id. at n. 129.
16
In addition, we note that the Coast Guard regulations
apparently recognize the availability of self-help repossession
and resale remedies. See 46 C.F.R. § 67.83 ("When title to a
documented vessel has passed by reason of an extra-judicial
repossession and sale, such passage must be established by....").
Because we reach our interpretation of the Act independently, we
need not decide whether the Coast Guard regulations are entitled
to deference.