Dietrich v. Key Bank, N. A.

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
No. 94-4093
D. C. Docket No. 87-8407-CIV-GONZALEZ
LESLIE S. DIETRICH,
Plaintiff-Counter
Defendant-Appellant,
versus
KEY BANK, N.A.,
Defendant-Counter
Plaintiff-Appellee,
GILMAN YACHT SALES, INC., JEFFREY SHEARER,
CRACKER BOY MARINA, INC.,
Defendants.
Appeal from the United States District Court
for the Southern of Florida
(January 3, 1996)
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 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
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). 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 comaker or guarantor of the
mortgage." Id.
2
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 Deitrich'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 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
breach of contract and conversion,3 and Key Bank filed a
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.
3
Dietrich originally filed suit in Palm Beach County
Circuit Court. The action was removed to the district court.
3
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 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.
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 Deitrich'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.
4
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 lawful attorneys-
in-fact to make all necessary transfers of the Vessel
upon resale after repossession, in my name and stead.
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.
5
This paragraph unequivocally anticipates both self-help
repossession and self-help resale. Both are provided for under
Florida law. Fla.Stat.Ann. §679.503.7 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 allow for self-help repossession and resale upon default. We
therefore turn to the Ship Mortgage Act issue.
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.
6
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 (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
7
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.
8
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., 499 U.S. 935, 112 S. Ct. 2608,
2617 (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 (1987) (quoting Ray v. Atlantic Richfield Co., 435
U.S. 151, 158, 98 S. Ct. 988, 991 (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 ...."
9
Hillsborough County, Fla. v. Auto. Med., 471 U.S. 710, 713, 105
S. Ct. 2371, 2375 (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 (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).
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.
10
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 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 (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
11
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 (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-
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).
12
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
International Paper Co. v. Ouellette, 479 U.S. 481, 107 S. Ct. 805
(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 (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 (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).
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.
13
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. (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).
14
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 (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. 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
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.
15
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 federal statutes, 28 U.S.C.A. §§ 2001,
2004,12 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 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.
12
These two sections, though not referenced in the Ship
Mortgage Act, govern judicial sales by federal courts.
16
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 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
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.
17
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, 789 P.2d 89 (Wash. 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 the Fogle
court's suggestion that Congress intended to preclude the use of
18
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
14
Of course, the self-help remedy could not affect
maritime liens, and thus will not be effective in many
situations.
19
(7th 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.
20