UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
THE GOVERNOR AND COMPANY OF
THE BANK OF SCOTLAND,
HECTOR SABAY; VOLODYMYR SHEVCHUK;
NORMAN SOLIS; NOEL SOMOSIERRA; GERRY SUYAT,
MARIA S. J. MV, her engines, tackle, lifeboats,
anchor, chain, equipment and appurtenances,
in rem, ET AL.,
Appeal from the United States District
for the Eastern District of Louisiana
April 28, 2000
Before JONES, BARKSDALE, and DENNIS, Circuit
RHESA HAWKINS BARKSDALE, Circuit Judge:
For this 28 U.S.C. § 1292(a)(3) interlocutory
appeal, the issue is one of first impression: can a seaman's preferred
maritime lien for 46 U.S.C. § 10313(g) "penalty" wages be enforced
against the proceeds from the sale of the vessel on which he served, when
those proceeds are less than the indebtedness secured by a preferred mortgage
for the vessel, and in the light of the plain language of the penalty wages
statute, which imposes liability on only the vessel's master or
owner (if wages not paid within specified time "without sufficient
cause, the master or owner shall pay to the seaman 2 days' wages
for each day payment is delayed") (emphasis added). The district court
held the lien could
not be enforced. We AFFIRM.
On 30 July 1996, Golden Lines Shipping, Inc.,
owner of the M/V MARIA S.J., and Golden Mediterranean Lines, Inc., owner
of the M/V NINA S, were loaned approximately $15 million by the Governor
and Company of the Bank of Scotland. The loan amount was not to
"exceed ... 70% of the [vessels'] aggregate market value", with a satisfactory
valuation for each being required; Golden Lines was to notify the Bank
when any legal action, likely to have a material adverse effect on Golden
Lines or the operation of its vessel, was either threatened or instituted;
and the Bank received a first preferred ship mortgage on each vessel.
In the mortgage, Golden Lines covenanted that
it would, inter alia, "promptly pay and discharge all debts, damages
and liabilities whatsoever which have given or may give rise to maritime
or possessory liens on or claims enforceable against" the MARIA, and "furnish
satisfactory evidence that the wages ... of the ... crew are being regularly
In addition to the mortgages, security for
the loan included the assignment of proceeds from charter party agreements
covering the MARIA and NINA, and a personal guarantee from Nikolaos Mazarakis,
president and sole shareholder of Golden Lines, who was also the manager
of Kosmas Marine Line, Inc., which managed the MARIA, NINA, and M/V NORSE
TRADER. (The NORSE TRADER, owned by Konim Shipping Co., Ltd., was subject
to a separate loan agreement and mortgage in favor of the Bank.)
In March 1997, while the MARIA was in the
Mississippi River in Louisiana, its seamen complained about being underpaid
and retained counsel. Following negotiations with Golden Lines, a settlement
agreement was reached later that month.
As consideration for the seamen not having
the vessel arrested, Golden Lines agreed, inter alia, to make a
partial payment that day against the wage arrearage, with the balance to
be paid at the next port of call (Houston, Texas). Golden Lines stipulated
that, if the agreement was not satisfied punctually, it was in violation
of 46 U.S.C. § 10313 (penalty wages) as of 24 March 1997, the day
of the settlement, "and that penalty wages shall commence to run as
of" that date. (Emphasis added.) Golden Lines failed to pay the wages due.
On 30 March 1998, approximately a year after
the wages-settlement, the Bank issued notices of default for the loans
secured by the three vessels. On 7 April, in response to Mazarakis' request
for release from his personal guarantees for the loans secured by those
vessels, the Bank advised that release would be recommended if he
cooperated in their arrest and sale.
The MARIA re-entered the Mississippi River
in the spring of 1998. All on 22 April, the seamen aboard filed an unpaid
wages action in Louisiana state court against Golden Lines and Kosmas Marine
Line; the court issued a writ of attachment; and the MARIA was taken into
the custody of the sheriff.
Five days earlier, on 17 April, the Bank had
filed a complaint in federal court against the MARIA, in rem, and
Golden Lines, in personam, to foreclose its mortgage on the vessel.
That same day, the district court issued an arrest warrant for the vessel;
it was served on 29 April. In mid-May, Kosmas Marine Line and Golden Lines
removed the seamen's state court action to federal court, where it was
consolidated with the Bank's foreclosure proceeding.
That May, the Bank paid the wages owed the
seamen aboard the MARIA at the time of arrest, and they were repatriated;
the Bank took an assignment of their wage liens. Seamen still claimed to
be owed past due wages in excess of $250,000. (As discussed infra,
such wages were paid from the sale proceeds a year later, in May 1999.)
In June 1998, the seamen filed a complaint
in intervention in the Bank's foreclosure proceeding, seeking to enforce
maritime liens against the vessel for unpaid wages and penalty wages
for each day of delay in payment of earned wages.
That July, the MARIA was sold at a judicial
auction to the Bank, which bid $3.7 million. The Bank agreed to satisfy
any liens determined to have priority over the mortgage, up to the amount
of sale proceeds, less custodia legis expenses. (The prior month,
the NINA had been sold at auction; that September, the Bank received approximately
$3.6 million from the sale proceeds.)
The MARIA seamen asserting penalty wages liens
consist of two groups: (1) 22 serving on 24 March 1997, covered by the
settlement agreement of that date with Golden Lines; and (2) 25 serving
on 20 April 1998, the day they formally demanded payment of past-due wages,
two days prior to filing the state court action.
The Bank's motion for partial summary judgment
was granted in part. The court ruled that: the seamen had preferred maritime
liens for wages and penalty wages; the latter had the same priority as
the former; the wages liens were entitled to priority over the Bank's preferred
ship mortgage; but, the seamen could not enforce their penalty
wages liens against the vessel sale proceeds. The court reasoned that:
the vessel's master and owner had no interest in those proceeds,
because the amount owed the Bank exceeded that realized from the sale;
and permitting a penalty wages claim against the proceeds was the functional
equivalent of allowing the claim against a party other than the master
or owner, contrary to the penalty wages statute, which expressly imposes
liability only against them. See 46 U.S.C. § 10313(g).
In June 1999, after this appeal was filed,
the district court granted the seamen summary judgment against Golden Lines,
in personam, and the MARIA, in rem, for approximately $261,000
in unpaid wages, plus pre-judgment interest. The unpaid wages lien was
satisfied from the vessel sale proceeds. (Therefore, penalty wages ceased
when those wages were paid.) In addition, the seamen's unopposed summary
judgment motion against Golden Lines, in personam, for penalty wages
of approximately $7 million was granted.(2)
The seamen contend that the district court
erred in holding they cannot enforce their preferred maritime lien
for penalty wages against the MARIA sale proceeds, without determining
whether, when the wages were due, Golden Lines had "sufficient cause" for
their non-payment; and in failing to consider evidence that the Bank failed
to mitigate its losses by not enforcing guarantees securing the
loan.(3) The Bank counters that allowing
the seamen to recover penalty wages from the sale proceeds would violate
the Due Process Clause of the Fifth Amendment and create conflicts between
Supreme Court decisions and between the penalty wages statute and the Ship
Mortgage Act, while not advancing Congress' intent to impose penalty
wages liability only on vessel masters or owners.
A summary judgment is reviewed de novo,
using the standard applied by the district court. E.g., Forsyth
v. Barr, 19 F.3d 1527, 1533 (5th Cir.), cert. denied, 513
U.S. 871 (1994). Such judgment is mandated when the summary judgment record,
viewed in the light most favorable to the non-movant, reveals that "there
is no genuine issue as to any material fact and ... the moving party is
entitled to a judgment as a matter of law". Fed. R. Civ. P. 56(c); Forsyth,
19 F.3d at 1533. Resolution of this issue of first impression requires
an examination of the language, history, and purposes of the penalty wages
statute, 46 U.S.C. § 10313(g), and the Ship Mortgage Act, 46 U.S.C.
§§ 31301-31343, as well as the jurisprudence interpreting them.
In truth, no authority really need
be cited for the fact that seamen, the "wards of admiralty", historically
have received favored treatment from the Congress and the admiralty courts.
Bainbridge v. Merchants' & Miners' Transp. Co., 287
U.S. 278, 282 (1932) ("Seamen have always been regarded as wards of the
admiralty, and their rights, wrongs, and injuries a special subject of
the admiralty jurisdiction. The policy of Congress, as evidenced by its
legislation, has been to deal with them as a favored class." (citation
omitted)); Hume v. Moore-McCormack Lines, 121 F.2d 336, 340-41
& n.13 (2d Cir.) (discussing historical background of judicial solicitude
for seamen's rights, including the writings of Lord Stowell and Justice
Story), cert. denied, 314 U.S. 684 (1941); see also 1B Benedict
on Admiralty, § 61, at 5-1 (7th ed. 1997); Thomas J. Schoenbaum, Admiralty
and Maritime Law, Vol. 1, § 6-1, at 239 (2d ed. 1994) ("The protection
of seamen was one of the principal reasons for the development of admiralty
as a distinct branch of law."); Martin J. Norris, The Law of Seamen, Vol.
1, § 12:1, at 424-26 (4th ed. 1985).
Legislation enacted for seamen's benefit is
to be liberally construed in their favor. See Isbrandtsen Co. v.
Johnson, 343 U.S. 779, 782 (1952) ("Whenever congressional
legislation in aid of seamen has been considered here since 1872, this
Court has emphasized that such legislation is largely remedial and calls
for liberal interpretation in favor of the seamen."); Bainbridge,
287 U.S. at 282 (statutes enacted for seamen's benefit should be liberally
This applies to statutes concerning their
wages. Arguelles v. U.S. Bulk Carriers, Inc., 408 F.2d 1065,
1070 (4th Cir. 1969) ("The wage statutes are to be liberally construed
in favor of the seaman."), aff'd, 400 U.S. 351 (1971). It also holds
true for penalty wages. Forster v. ORO Navigation Co., 228
F.2d 319, 319-20 (2d Cir. 1955) (penalty wages "statute, designed to protect
seamen, must be liberally interpreted for their benefit"); 1B Benedict
on Admiralty, § 66, at 5-16 ("[The penalty wages] statute, like most
other statutes protecting the rights of seamen, is liberally construed
by the courts.").
The rationale for such concern about seamen's
wages was stated in The David Pratt, 7 F. Cas. 22, 25 (D.
Seamen are not a class of men who ordinarily
make provision against the future. On their return from a voyage they are
usually dependent on their wages for present support, and if they are withheld
they ordinarily find themselves in a state of entire destitution, not only
without present means to provide for their immediate and most pressing
necessities, but without credit.
Our court has stated that "[w]ages due seamen
are given utmost protection by admiralty courts". First Nat'l Bank
of Jefferson Parish v. M/V Lightning Power, 776 F.2d 1258, 1262
(5th Cir. 1985);
see also Brandon v. S.S. Denton, 302 F.2d
404, 416 (5th Cir. 1962) ("Wages of seamen occupy a unique status. The
statutory provision extending them the protection of a preferred maritime
lien is deeply rooted in history.").
Seamen's wages were the subject of legislation
enacted by the first Congress, giving seamen the right to collect their
wages "as soon as the voyage is ended". Act of July 20, 1790, ch. 29, §
6, 1 Stat. 133-34. And, Congress established penalty wages approximately
80 years later, in 1872: a master or owner neglecting or refusing to timely
pay a seaman's wages as specified in the statute "without sufficient
cause shall pay to the seaman a sum not exceeding the amount of two
days' pay for each of the days, not exceeding ten days, during which payment
is delayed ...; and such sum shall be recoverable as wages in any claim
made before the court". Shipping Commissioners Act of 1872, ch. 322, §
35, 17 Stat. 269 (emphasis added).
The 1790 and 1872 statutes were the basis
for § 4529 of the Revised Statutes, which contained language substantially
identical to that in the 1872 statute. Rev. Stat. § 4529 (2d ed. 1878).
In 1898, when the statute was amended, Congress eliminated the ten-day
limitation for penalty wages, but decreased the penalty from two to one
day's pay for each day of delay. Act of Dec. 21, 1898, ch. 28, § 4,
30 Stat. 756 ("[e]very master or owner who refuses or neglects to make
payment in manner hereinbefore mentioned without sufficient cause shall
pay to the seaman a sum equal to one day's pay for each and every day during
which payment is delayed beyond the respective periods"). In 1915, the
penalty was doubled to the present two days' pay for each delay-day. Seamen's
Act of 1915, ch. 153, § 3, 38 Stat. 1164-65, codified at 46
U.S.C. § 596.
The language at issue was amended for the
last time in 1983, when the maritime laws were recodified. See Pub.
L. No. 98-89, 97 Stat. 566 (1983). The current version, found in 46 U.S.C.
§ 10313, provides, in pertinent part:
(f) At the end of a voyage, the master shall
pay each seaman the balance of wages due the seaman within 24 hours after
the cargo has been discharged or within 4 days after the seaman is discharged,
whichever is earlier. When a seaman is discharged and final payment of
wages is delayed for the period permitted by this subsection, the seaman
is entitled at the time of discharge to one-third of the wages due the
(g) When payment is not made as provided
under subsection (f) of this section without sufficient cause, the
master or owner shall pay to the seaman 2 days' wages for each day
payment is delayed.
(i) This section applies to a seaman on a
foreign vessel when in a harbor of the United States. The courts are available
to the seaman for the enforcement of this section.
As described in numerous opinions, penalty
wages are "to secure prompt payment of seamen's wages ... and thus to protect
them from the harsh consequences of arbitrary and unscrupulous action
of their employers, to which, as a class, they are peculiarly exposed".
Collie v. Fergusson, 281 U.S. 52, 55 (1930) (emphasis added).
That purpose was to be accomplished "by the imposition of a liability which
is not exclusively compensatory, but designed to prevent, by its coercive
effect, arbitrary refusals to pay wages, and to induce prompt payment when
payment is possible". Id. at 55-56 (emphasis added).(4)
As discussed infra, a seaman has a
maritime lien for penalty wages. The maritime lien is "a unique security
device, serving the dual purpose of keeping ships moving in commerce while
not allowing them to escape their debts by sailing away". Equilease
Corp. v. M/V Sampson, 793 F.2d 598, 602 (5th Cir.) (en banc), cert.
denied, 479 U.S. 984 (1986).
The lien is a special property right in the
vessel, arising in favor of the creditor by operation of law as security
for a debt or claim. The lien arises when the debt arises, and grants the
creditor the right to appropriate the vessel, have it sold, and be repaid
the debt from the proceeds.... Thus the maritime lien may be defined as
a property right that adheres to the vessel wherever it may go.... Such
a lien has been held to follow the vessel even after it is sold to an innocent
purchaser.... The maritime lien is a lien on the vessel, and only indirectly,
inasmuch as it conflicts with the owner's rights in the vessel, it is connected
with the owner.... The maritime lien concept thus somewhat personifies
a vessel as an entity with potential liabilities independent and apart
from the personal liability of its owner.
Id. (internal quotation marks
and citations omitted).
Under the common law, seamen had a maritime
lien against the vessel to secure their wages, enforceable by an action
in rem. See
Leon v. Galceran, 78 U.S. (11 Wall.) 185,
187 (1870); Sheppard v. Taylor, 30 U.S. (5 Pet.) 675,
709-10 (1831); Irving Trust Co. v. The Golden Sail,
197 F. Supp. 777, 779 (D. Ore. 1961) ("It is legend that the unpaid 'wages
of the crew' is a libel against the vessel in rem.").
Moreover, under the Ship Mortgage Act, as
discussed infra, seamen's wages liens are "preferred maritime liens",
having priority over preferred ship mortgages. See 46 U.S.C. §
31326(b)(1); M/V Lightning Power, 776 F.2d at 1262; Brandon,
302 F.2d at 415;
Crabtree v. The SS Julia, 290 F.2d 478,
482 (5th Cir. 1961);
Scrofani v. Miami Rare Bird Farm, Inc.,
208 F.2d 461, 464 (5th Cir. 1953); United States v. ZP Chandon,
889 F.2d 233, 237 (9th Cir. 1989).
The reasons for the seamen's wages lien include
The ship may be the only valuable security
on which the seamen can rely. The seaman is the traditional ward of the
admiralty court. Finally, without the seaman's efforts in bringing the
ship safely to port, there would be no res against which other creditors
could assert claims.
International Paint Co. v. M/V Mission
Viking, 637 F.2d 382, 385 (5th Cir. 1981); see also Norris,
The Law of Seamen, Vol. 1, § 20:7, at 584-85.
Like other maritime liens, a seaman's wages
lien, as noted, is enforceable in an action in rem. See Fed.
R. Civ. P. Supplemental Rule for Certain Admiralty & Maritime Claims
(C)(1) ("An action in rem may be brought ... [t]o enforce any maritime
lien"); Riffe Petroleum Co. v. Cibro Sales Corp., 601 F.2d
1385, 1389 (10th Cir. 1979). And, as discussed, a maritime lien "arises
when the debt arises, and grants the creditor the right to appropriate
the vessel, have it sold, and be repaid the debt from the proceeds". Equilease,
793 F.2d at 602; see also Norris, The Law of Seamen, Vol. 1, §
20:2, at 578 ("The maritime lien is a privileged claim giving to the creditor
a special right in the ship which arises from the moment when the claim
attaches and which he can enforce by an action in rem, i.e.,
having the ship sold so that the debt might be paid out of the proceeds
of the sale."); Schoenbaum, Admiralty and Maritime Law, Vol. 1, §
9-1, at 490 ("A maritime lien arises from the moment of the service or
occurrence that provides its basis.").
Seamen's wages liens have been referred to
as "sacred" liens:
Wages of seamen occupy a unique status. The
statutory provision extending them the protection of a preferred maritime
lien is deeply rooted in history. Seamen's wages, "according to the favorite
saying of Lord Stowell and of Mr. Justice Story, are sacred liens, and,
as long as a plank of the ship remains, the sailor is entitled, against
all other persons, to the proceeds as a security for his wages." The statutes
throw around seamen's wages most definite, detailed, and stringent protections
from faraway owners of vessels, from shipmasters, and from
the seaman himself....
Brandon, 302 F.2d at 416 (quoting
The John G. Stevens, 170 U.S. 113, 119 (1898)) (emphasis
added). Accordingly, a maritime lien for seamen's wages is not subject
to any filing or recording requirements. ZP Chandon, 889
F.2d at 238.
Several courts (including the district court
in this case) have ruled not only that seamen also have a maritime lien
for penalty wages, see The Great Canton, 299 F. 953 (E.D.N.Y.
1924) (rejecting contention that seaman's entitlement to penalty wages
is only against master or owner and not a lien against the vessel),
but also that the penalty wages lien has the same priority as one for earned
wages. See Collie, 281 U.S. at 54 ("[t]he claim for
double wages which, when valid, is by the terms of the statute 'recoverable
as wages,' has been held to be embraced in the seaman's lien for wages,
with priority over other liens, and governed by the procedure applicable
to suits for the recovery of seamen's wages"); Peterson v. S.S. Wahcondah,
331 F.2d 44, 48 (5th Cir. 1964) (quoting Collie for proposition
that penalty wages lien has same priority as wages lien).(5)
In district court, the Bank noted that the
current penalty wages statute does not include the following language
found in the provisions first enacted in 1872 and repeated in each version
preceding the current one: "which sum shall be recoverable as wages in
any claim made before the court". Accordingly, it urged there was no longer
any basis for a penalty wages lien having the same priority as one for
We agree with the district court's rejection
of this contention, for two reasons. First, the current statute describes
the penalty as "2 days' wages", 46 U.S.C. § 10313(g) (emphasis
added), rather than, as in its predecessors, "a sum equal to two days'
pay ..., which sum shall be recoverable as wages". See Seamen's
Act of 1915, ch. 153, § 3, 38 Stat. 1164-65. Second, the legislative
history reflects that no change in the substantive law was intended.
See S. Rep. 98-56, 98th Cong., 1st Sess. 1, 10 (1983) ("There are
no substantive changes of a controversial nature intended to be made by
this bill.... In a codification statute, ... no change in law is intended
unless clearly expressed.").
Prior to the enactment in 1920 of the Ship
Mortgage Act (now codified at 46 U.S.C. §§ 31301-31343), a ship
mortgage was not a maritime contract and was not within admiralty
The Thomas Barlum, 293 U.S. 21, 32 (1934);
Bogart v. The John Jay, 58 U.S. (17 How.) 399, 402 (1854);
Brandon, 302 F.2d at 412. Accordingly, "mortgage security
on ships was practically worthless",
Barlum, 293 U.S. at
39 (internal quotation marks and citations omitted), because "ship mortgages
were not entitled to enforcement by maritime liens and were subordinate
to all of the many maritime liens a ship might incur". Long Island
Tankers Corp. v. S.S. Kaimana, 265 F. Supp. 723, 725 (N.D. Cal.
1967) (emphasis added),
aff'd, 401 F.2d 182 (9th Cir. 1968), cert.
denied, 393 U.S. 1095 (1969); see also 2 Benedict on Admiralty,
§ 69a, at 6-18 - 6-21 (discussing history and purpose of Ship Mortgage
The Ship Mortgage Act was intended to remedy
this problem. It was to "provide for the promotion and maintenance of the
American merchant marine", by making ship mortgagees more secure than under
the existing law. Long Island Tankers, 265 F. Supp. at 725.(6)
Under the Ship Mortgage Act, a valid ship
mortgage meeting the requirements of 46 U.S.C. § 31322 is a "preferred
mortgage", which "is a lien on the mortgaged vessel in the amount of the
outstanding mortgage indebtedness secured by the vessel". 46 U.S.C. §
31325(a). Upon default, the mortgagee may, inter alia, "enforce
the preferred mortgage lien in a civil action in rem". 46 U.S.C. §
31325(b)(1). When a vessel is sold to enforce either a preferred mortgage
lien or a maritime lien, all claims in the vessel are terminated.
46 U.S.C. § 31326(a). But, such terminated claims "attach, in the
same amount and in accordance with their priorities to the proceeds of
the sale". 46 U.S.C. § 31326(b).(7)
A preferred ship mortgage "has priority over
all claims against the vessel (except for expenses and fees allowed
by the court, costs imposed by the court, and preferred maritime liens)".
46 U.S.C. § 31326(b)(1) (emphasis added). And, of particular interest
here, a "preferred maritime lien" includes "a maritime lien on a vessel
... for wages of the crew of the vessel". 46 U.S.C. § 31301(5)(D).
Kopac Int'l, Inc. v. M/V Bold Venture, 638 F. Supp. 87,
90 (W.D. Wash. 1986), the court reasoned that wages liens were given priority
over a preferred ship mortgage "generally because these liens must be favored
to ensure that the vessel is kept moving in trade ... [and such priority]
serves indirectly to protect the mortgagee's interests because the mortgagee
wants the vessel to operate".
For the precise factual context at issue,
we have found no
cases applying the penalty wages statute and the
Ship Mortgage Act. The plain language of the penalty wages statute imposes
only on the "master or owner"; the jurisprudence interpreting
it gives seamen a maritime lien against the vessel for such wages, which
attaches at the moment earned wages are not timely paid pursuant
to the statute; and the plain language of the Ship Mortgage Act gives wages
liens preferred status, including priority over a preferred ship mortgage.
But, on sale of the vessel, can that penalty wages lien be enforced against
the proceeds if they are less than the amount secured by the preferred
ship mortgage, so that no
interest is then held by the owner, the
entity liable under the plain language of the penalty wages statute?
The district court agreed with the Bank that
penalty wages liens are not enforceable against the proceeds unless
the owner has an interest in them at the time of attempted enforcement
of the penalty wages lien. Because Golden Lines' indebtedness, secured
by the Bank's preferred ship mortgage, exceeded the sale proceeds, the
court concluded that the seamen could not recover penalty wages
from them, because Golden Lines had no interest in them.
The seamen contend that, instead, the court
should have focused on whether the owner had an interest in the vessel
at the time the penalty wages lien attached; in other words, in
the language of the statute's subpart (g), whether the owner had "sufficient
cause" for non-payment of earned wages when they became due. See
46 U.S.C. § 10313(g).
As discussed, it is well-settled that a maritime
lien "creates an interest in the vessel, and the vessel itself, as an entity
apart from its owner, may be seized and held liable to enforce the lien".
Merchants Nat'l Bank of Mobile v. Dredge Gen. G.L. Gillespie,
663 F.2d 1338, 1345 (5th Cir. 1981), cert. dismissed, 456 U.S. 966
(1982). Justice Story stated in The Nestor, 18 F. Cas. 9
(D. Me. 1831):
The lien for seamen's wages attaches ordinarily
on the ship during the voyage, although no wages are strictly due until
the end of the voyage. A sale of the ship, pending the voyage, would not
defeat this inchoate lien; and when the voyage was completed, the lien
would have relation back to the commencement of the voyage.
Id. at 14.
Subsequent cases are, of course, to the same
effect. See The John G. Stevens, 170 U.S. at 117 ("a
maritime lien is created as soon as the claim comes into being"); McCrea
v. United States, 294 U.S. 23, 32 (1935) ("[L]iability for double
wages accrues, if at all, from the end of the period within which payment
should have been made. It must be determined by the happening of an event
within the period, failure to pay wages without sufficient cause.");
793 F.2d at 602 ("[maritime] lien arises when the debt arises").
And, under our precedent, a penalty wages
lien has the same priority as a wages lien. Peterson, 331
F.2d at 48. The penalty wages lien attached to the vessel when, without
sufficient cause, Golden Lines failed to timely pay the wages.
Pursuant to the Ship Mortgage Act, that lien
was terminated by the judicial sale of the vessel, 46 U.S.C. § 31326(a).
But, it attached to the sale proceeds, as a preferred maritime lien with
priority over the Bank's preferred ship mortgage. 46 U.S.C. §§
Language in several cases supports the seamen's
contention that the owner's interest in the vessel should be determined
when the penalty wages lien attaches, rather than later, on attempted lien
enforcement. See Alier v. Sea Land Serv., Inc., 465
F. Supp. 1106, 1110 (D.P.R. 1979) ("the essential spirit and purpose of
the [penalty wages] statute is to financially punish the vessel,
its owner and/or its master, as the case may be, for the neglectful failure
to pay wages" (emphasis added)); Peterson v. S.S. Wahcondah,
235 F. Supp. 698, 700 (E.D. La. 1964) ("Inherent in the language of the
statute then is a pre-requisite that some fund exist out of which the owner
or its agents could have paid the regular wages when they became due,
or paid them sometime thereafter" (emphasis added)); see also
1B Benedict on Admiralty, § 66, at 5-16 ("The vessel owner will
not have to pay double wages if, at the time wages are due,
the master withholds payment for sufficient cause." (emphasis added)).
On the other hand, it bears repeating that
the penalty wages statute imposes liability only on the vessel's
"master or owner". 46 U.S.C. § 10313(g) ("When payment is not made
as provided under subsection (f) of this section without sufficient cause,
the master or owner shall pay to the seaman 2 days' wages for each
day payment is delayed." (emphasis added)). Moreover, the purpose of the
statute is to coerce the master or owner to promptly pay seamen's
wages, unless there is sufficient cause for non-payment.
In support of its contention that penalty
wages are not recoverable from the sale proceeds unless the
owner has an interest in those proceeds when seamen seek to enforce
a penalty wages lien,
rather than when the lien attaches, the Bank
relies heavily on the Supreme Court's opinion in Collie.
There, seamen sought to recover unpaid and penalty wages from sale proceeds.
Because the delay in wages payment was "due to the insolvency of the owner
and the arrest of the vessel, subject to accrued claims beyond its value",
the Court held the seamen were not entitled to penalty wages because
there was "sufficient cause" for the non-payment of earned wages. It reasoned:
The words "refuses or neglects to make payment
... without sufficient cause" connote, either conduct which is in some
sense arbitrary or willful, or at least a failure not attributable to impossibility
of payment. We think the use of this language indicates a purpose to protect
seamen from delayed payments of wages by the imposition of a liability
which is not exclusively compensatory, but designed to prevent, by its
coercive effect, arbitrary refusals to pay wages, and to induce prompt
payment when payment is possible. Hence we conclude that the liability
is not imposed regardless of the fault of the master or owner, or his retention
of any interest in the vessel from which payment could be made. It can
afford no such protection and exert no coercive force where delay in payment,
as here, is due to the insolvency of the owner and the arrest of the vessel,
subject to accrued claims beyond its value. Together these obstacles to
payment of wages must be taken to be a sufficient cause to relieve from
the statutory liability.... Otherwise, it would not be imposed on the
owner directly or through his interest in the ship, but only upon the lienors,
who are neither within the letter nor the spirit of the statute.
That the liability is not incurred where
the refusal to pay is in some reasonable degree morally justified, or where
the demand for wages cannot be satisfied either by the owner or his interest
in the ship, has been the conclusion reached with practical unanimity
by the lower federal courts....
281 U.S. at 55-56 (citations omitted; emphasis
added). The decisions referenced by Collie are discussed
Because the owner's insolvency and the arrest
of the vessel, taken together, were held in Collie to constitute
sufficient cause for wages non-payment, the subsequent above-emphasized
statement that, otherwise, the penalty would be imposed only on the lienors,
is dictum. Moreover, the above-emphasized statement that "liability [for
penalty wages] is not incurred ... where the demand for wages cannot be
satisfied either by the owner or his interest in the ship", id.
at 56, implies that liability for penalty wages is incurred when
the wages demand can be satisfied either by the owner
interest in the ship, i.e., when the owner does not have
"sufficient cause" for non-payment of earned wages. All but one of the
cases cited by Collie support that implication.(8)
Most of them held seamen were not entitled
to recover penalty wages because the owner or master had sufficient cause
for wages non-payment, or delay in payment. See Feldman v. American
Palestine Line, Inc. (The President Arthur), 25 F.2d 1002, 1003
(S.D.N.Y. 1926); The Trader, 17 F.2d 623, 626 (E.D.S.C. 1926);
The Acropolis, 8 F.2d 110, 110 (E.D.N.Y. 1923) (holding that
owner's bankruptcy constituted sufficient cause for non-payment, but stating
in dictum that, because "the intent of the statute is to punish the refusal
or neglect of the master or owner, and is personal to them[,] therefore
subsequent lienors should not have the fund to which they must look
for payment depleted to pay a penalty which, if even properly allowable,
should be paid by the master or owner" (emphasis added)); Villigas
v. United States, 8 F.2d 300, 301 (E.D.N.Y. 1922);
152 F. 564, 565 (E.D.N.Y. 1907); The Amazon, 144 F. 153,
155 (W.D. Wash. 1906); The Sadie C. Sumner, 142 F. 611, 612
(D. Mass. 1905); The Express, 129 F. 655, 656 (S.D.N.Y. 1904);
The George W. Wells, 118 F. 761, 763 (D. Mass. 1902); The
Alice B. Phillips, 106 F. 956, 956 (S.D.N.Y. 1901); The Gen.
McPherson, 100 F. 860, 864 (D. Wash. 1900); The Wenonah,
29 F. Cas. 697, 701 (D. Me. 1875).
In others, because non-payment was held to
be without sufficient cause, penalty wages were allowed; but none of
those cases involved competing liens against vessel sale proceeds. See
v. Spencer, 278 F. 886, 889-90 (9th Cir. 1922); Burns v.
Fred L. Davis Co., 271 F. 439, 444 (1st Cir. 1921); Pacific
Mail S.S. Co. v. Schmidt, 214 F. 513, 520 (9th Cir. 1914), rev'd,
241 U.S. 245 (1916); The City of Montgomery, 210 F. 673,
676 (S.D.N.Y. 1913). Cf. The Lake Galewood, 21 F.2d
987, 988-89 (D. Md. 1927) (although master and owner had sufficient cause
for delay in payment, penalty wages allowed because wages were not
aff'd, 25 F.2d 1020 (4th Cir.), cert.
denied, 278 U.S. 637 (1928).
The only case cited in Collie
that refused to allow penalty wages recovery from vessel sale proceeds,
without relying on finding sufficient cause, is The Moshulu,
276 F. 35 (N.D. Cal. 1921). The court's order allowed penalty wages; but,
on entry, the court had
no knowledge of other outstanding liens
against the proceeds. Thereafter, the court disallowed the penalty wages,
[N]either the master nor the owner has any
interest in the fund now in the registry of the court resulting from the
sale of the vessel. To allow the penalties would be to transfer the burden
thereof from the master and owner to the lienholders and the mortgagee.
This I do not believe was ever contemplated, or intended, by Congress in
enacting the statute in question.
Id. at 36. Thus, The Moshulu
is the only case that supports the Bank's contention that, whether the
owner has an interest in the sale proceeds is the determinative factor,
not whether there was sufficient cause for wages non-payment when
they became due.
The Collie dictum has been treated
as persuasive in several cases. Nadle v. M.V. Tequilla, 1973
A.M.C. 909 (S.D.N.Y. 1973), held that, because the sale proceeds were less
than the preferred ship mortgage lien, the penalty wages statute was "presumptively
not applicable, for the burden would fall 'only upon the lienors
who are neither within the letter nor the spirit of the statute'". Id.
at 912 (quoting Collie, 281 U.S. at 56) (emphasis added).
Nevertheless, the court held the penalty wages claims in abeyance, and
referred the case to the magistrate judge to determine whether the owner
was solvent when the vessel was arrested, stating:
It may be, of course, that if the shipowner
not insolvent recourse may be had against its other assets by
the preferred ship mortgagee under his judgment in personam. In
that event it may appear that the failure to pay wages was, indeed, "without
sufficient cause" and that the remaining proceeds from the sale of the
vessel would exceed the amount of the maritime liens making a portion available
to the crew without imposing the penalty on the lienors.
The matter will, therefore, be referred to
[the magistrate] to take evidence and report on the single issue of whether
the owner ... was solvent at the time of arrest and now has available
assets to satisfy the claim of [the mortgagee] and leave enough for a penalty
on behalf of the wage claimants.
Id. (emphasis added).
And, George v. Kramo Ltd., 796
F. Supp. 1541 (E.D. La. 1992), citing Collie, held the equitable
owner of a vessel, which was the parent corporation of the legal owner
and the seaman's employer, was
not liable for penalty wages. Id.
at 1545-47. See also Schoenbaum, admiralty and Maritime Law, Vol.
1, § 6-4, at 248 (penalty wages statute places "obligations only on
'the master or owner' of a vessel, not
other parties who may be
involved such as lenders" (emphasis added)).
Several other post-Collie cases
have refused to impose penalty wages liability on a party other than the
owner or master. In
Caldwell v. Solus Ocean Sys., Inc., 734
F.2d 1121 (5th Cir.), cert. denied, 469 U.S. 1019 (1984), cited
by the district court, a seaman brought an in personam action against
his employer to recover penalty wages. Our court held that, because the
employer was neither the owner nor master of the vessel on which the seaman
served, he could not recover penalty wages from the employer. Id.
at 1121. To the same effect is Sam v. Keystone Shipping Co.,
913 F. Supp. 514 (S.D. Tex. 1996), in which a seaman filed an in personam
action to recover penalty wages from his employer, which managed, for the
vessel's owner, the vessel on which the seaman served. The court granted
summary judgment for the employer, stating:
By its plain language, the penalty wage statute
imposes liability only upon the vessel's owner or master. It does not
impose liability upon the master's employer or the injured seaman's
employer.... Accordingly, the [sued employer], who is neither the master
nor the owner of the vessel, as a matter of law cannot be liable for penalty
wages pursuant to ... the plain language of the statute.
Id. at 515-16 (emphasis added).
Contra Smith v. Western Offshore, Inc., 590 F. Supp. 670,
674-77 (E.D. La. 1984) (seamen could not sue non-employer vessel
owner in personam for wages, but were entitled to recover wages
and penalty wages from their employer in personam).
In Caparelli v. Proceeds of Freight,
390 F. Supp. 1345 (S.D.N.Y. 1974), also cited by the district court, seamen
asserted an in rem claim against freight proceeds and an in personam
claim against the bank, which held a first preferred ship mortgage and
was claimed to possess or control those proceeds; they also sought leave
to amend their complaint to assert a penalty wages claim against the
bank. Id. at 1347. In denying the requested amendment,
the court stated:
[The bank] was not a master or owner,
but a mortgagee. Plaintiffs concede that they have found no case
in which liability for double wages has been applied to a mortgagee. Since
there appears no basis on which to hold [the bank], as holder of
a first preferred mortgage on each of the vessels, liable for penalty wages
..., [the seamen's] motions to amend ... are denied.
Id. at 1351 (emphasis added).(9)
As noted, the seamen maintain that, for determining
whether their penalty wages lien can be enforced against the proceeds,
the district court should have focused on whether Golden Lines had sufficient
cause for wages non-payment when due. In support, they rely on the Supreme
Court's most recent case concerning the penalty wages statute, Griffin
v. Oceanic Contractors, Inc., 458 U.S. 564 (1982).
Griffin involved an in personam
action by a seaman against the vessel owner, which was also his former
employer. The district court found the owner's refusal to pay earned wages
was without sufficient cause, but imposed the wages penalty only for the
period of nonpayment during which the seaman was unemployed.
The Supreme Court stated that the statute
provided for payment of the wages penalty upon satisfaction of two conditions:
First, the master or owner must have refused
or failed to pay the seaman his wages within the periods specified. Second,
this failure or refusal must be "without sufficient cause." Once these
conditions are satisfied, however, the unadorned language of the statute
dictates that the master or owner "shall pay to the seaman" the
sums specified "for each and every day during which payment is delayed."
Id. at 570 (emphasis in original).
The Court thus concluded that district courts have no discretion
to limit the period during which the penalty is assessed, and that its
imposition is mandatory for each day of delay unless further delay is justified
by sufficient cause. Id. at 574-75 & n.9, 577. Accordingly,
the seaman recovered over $300,000 for the owner's delay in paying but
$412.50 in wages. Id. at 574-75.
Griffin is not particularly
helpful in resolving the issues in this case, because, unlike the present
in rem action, it was an in personam action against the vessel
owner. Moreover, unlike the case at hand, it did not involve competing
liens against sale proceeds insufficient to satisfy those liens.
Based on the facts at hand, and our exhaustive
review of the statutes and related jurisprudence, the district court held
correctly that the penalty wages statute's plain language precludes enforcement
of the penalty wages liens at issue against the sale proceeds. The statute
imposes liability for such wages only on the vessel master or owner.
Its purpose is to coerce them to promptly pay seamen's wages. When, as
here, sale proceeds are insufficient to satisfy all of the liens against
the vessel, the owner has no
interest in those proceeds. Therefore,
because it has no interest, it has no proceeds against which
the lien can be enforced. Concomitantly, the purpose of the statute is
not furthered by enforcing a penalty wages lien against such sale
To enforce the lien against proceeds in which
the owner has no interest would be to act contrary to the plain
language of the statute. As discussed, seamen, "wards of admiralty", have
received favored treatment from Congress, and legislation enacted for their
benefit is to be liberally construed in their favor. But, when interpreting
legislation, we must always seek to give effect to the plain language chosen
by Congress. E.g., Griffin, 458 U.S. at 570("[o]ur task is
to give effect to the will of Congress, and where its will has been expressed
in reasonably plain terms, that language must ordinarily be regarded as
conclusive" (internal quotation marks and citation omitted)).
And, we also must assume that Congress knew
what it was doing when it selected the objects for penalty wages liability.
Lien law regarding seamen's wages had been established long before enactment
of the first penalty wages statute in 1872. E.g., The Nestor,
18 F. Cas. at 14. Accordingly, we must presume that Congress was aware
of that well-settled law when it made the policy decision to make only
owner and master liable for such wages. See Keene Corp. v. United
States, 508 U.S. 200, 212 (1993) (Congress is presumed to be aware
of settled judicial interpretations). Had Congress desired to allow enforcement
of penalty wages liens against vessel sale proceeds, when neither the
owner nor the master has an interest in those proceeds, it easily could
have said so. E.g., Humana, Inc. v. Forsyth, 525 U.S.
299, 309 (1999).
For the foregoing reasons, the partial summary
DENNIS, Circuit Judge, dissenting.
Because I believe that the district
court erred in granting the Bank of Scotland's motion for partial summary
judgment, I respectfully dissent.
On April 22, 1998 the seamen for the
M/V MARIA filed suit in Louisiana state court against Golden Lines Shipping,
Inc., the owner of the vessel, and Kosmas Marine Line, Inc., the manager
of the vessel, for unpaid wages. The state court issued a writ of attachment
and the M/V MARIA was seized by the sheriff on April 22. The Bank of Scotland,
holder of a preferred mortgage lien on the M/V MARIA, also filed suit in
April 1998 in federal court to foreclose its mortgage on the vessel. An
arrest warrant issued by the district court was served on the vessel on
April 29, 1998. The following month, Golden Lines Shipping and Kosmas Marine
Line removed the seamen's suit to federal court. The two causes of action
were consolidated and the seamen intervened in the federal action.
The Bank of Scotland subsequently purchased
the vessel at an auction conducted by the United States Marshal for $3.7
million, an amount less than the outstanding debt secured by the mortgage.
According to the Bank of Scotland, the seamen's maritime liens for back
wages and penalty wages were subordinate to its mortgage lien and would
not be paid because the sale proceeds were insufficient to satisfy the
mortgage lien. Although the district court determined that the seamen's
maritime liens were not subordinate to the Bank of Scotland's preferred
mortgage lien, the district court also ruled that the maritime lien for
penalty wages was not enforceable against the proceeds of the vessel sale
because the owner had no interest in the vessel or the proceeds after the
auction sale. The district court based its decision on the penalty wage
statute which states, in pertinent part, that "[w]hen payment is not made
as provided . . . without sufficient cause, the master or owner shall pay
to the seaman 2 days' wages for each day payment is delayed." 46 U.S.C.
§ 10313(g). Based on the language in the penalty wage statute, the
district court refused to enforce the seamen's maritime lien against the
sale proceeds because neither the master nor owner had an interest in the
The seamen contend that they have a
maritime lien which is superior to the Bank of Scotland's mortgage lien
based upon the ship mortgage act. The ship mortgage act does not limit
liability for maritime liens to a vessel's owner or master. Rather, it
states that when a vessel is sold to enforce a preferred mortgage lien
all claims in the vessel existing on the date of the sale are terminated.
See 46 U.S.C. § 31326(a). These terminated claims "attach,
in the same amount and in accordance with their priorities to the proceeds
of the sale", 46 U.S.C. § 31326(b), except that preferred maritime
liens have priority over a preferred ship mortgage. Preferred maritime
liens include "a maritime lien on a vessel . . . for wages of the crew
of the vessel." 46 U.S.C. § 31301(5)(D). A penalty wage lien has the
same priority as a wages lien. See Collie v. Fergusson, 281 U.S.
52, 54 (1930; Peterson v. S.S. Wahcondah, 331 F.2d 44, 48 (5th
In addition to the penalty wage statute,
the district court cited two cases in determining that penalty wages should
not be assessed against a party that is neither the owner nor the master
of a vessel. Both cases are distinguishable from the facts of the present
appeal. In Caldwell v. Solus Ocean Systems, Inc., 734 F.2d 1121,
1122 (5th Cir. 1984), a Solus employee who worked on a vessel
that Solus chartered brought suit against Solus pursuant to the penalty
wage statute. The court determined that the penalty wage statute did not
extend to an employer. See id. ("Because it is undisputed that Solus
was not the master or the owner of the vessel on which Caldwell was employed,
but was Caldwell's employer, the sole issue before us is whether section
 extends to 'employers' as well as those parties enumerated in the
statute. We hold that it does not."). Likewise, Caparelli v. Proceeds
of Freight, 390 F. Supp. 1345 (S.D.N.Y. 1974) did not state that seamen
were not entitled to assert their maritime lien for penalty wages against
the proceeds from the sale of a vessel. The district court refused to allow
the seamen to amend their pleadings to state a cause of action for penalty
wages under 46 U.S.C. §596 [now §10313] directly against a ship
mortgagee because the statute does not grant a cause of action against
the holder of a mortgage on a vessel, rather than a vessel owner or master.
See id. at 1351.
The majority opinion attempts to justify
the result of the district's court judgment on the ground that the seamen
are limited to a suit in personam to satisfy their maritime lien. However,
it is well established that seamen may seek to satisfy their liens by both
in rem and personam proceedings:
[M]ariners' wages, salvage, freight
and bottomry are maritime causes of action [and] the court of admiralty
has jurisdiction and may use any of its appointed modes to give the party
any remedy to which the law entitles him. The substratum of the action
is the liability of one party to respond to another and the court may enforce
it against the person, or against a particular portion of his property,
or against his property generally, as the law may have provided the right.
If the claim, which is the cause of action, be, by law, alien upon a vessel,
her cargo, freight, the proceeds of the same, or the remnants and surplus
thereof, the court may enforce that lien by a suit in rem, or, without
reference to the lien may compel the party himself to pay the demand. Remedies
in rem and in personam may co-exist or one may be independent of the other,
e.g., a right of action in personam may be recognized where no lien is
given by the maritime law.
2 Benedict on Admiralty § 25, at
2-18 (1999). Hence, the seamen are not limited to a suit in personam to
satisfy their maritime lien. Whether the proceeding is in rem or in personam
has no bearing in our determination of whether the seamen's maritime lien
has priority over the Bank of Scotland's mortgage lien following the sale
of the vessel.
Since the in rem/in personam distinction
does not resolve the merits of this case, the court must analyze the terms
of the penalty wage statute and the ship mortgage act. Equilease Corp.
v. M/V SAMPSON, 793 F.2d 598 (5th Cir. 1986), discussed
the history of the ship mortgage act. Equilease Corp. states, in
The federal maritime lien is a unique
security device, serving the dual purpose of keeping ships moving in commerce
while not allowing them to escape their debts by sailing away. The lien
is a special property right in the vessel, arising in favor of the creditor
by operation of law as security for a debt or claim. The lien arises when
the debt arises, and grants the creditor the right to appropriate the vessel,
have it sold, and be repaid the debt from the proceeds. Thus the maritime
lien may be defined as a property right that adheres to the vessel wherever
it may go. Such a lien has been held to follow the vessel even after it
is sold to an innocent purchaser. The maritime lien is a lien on the vessel,
"and only indirectly, inasmuch as it conflicts with the owner's rights
in the vessel, it is connected with the owner." The maritime lien concept
thus somewhat personifies a vessel as an entity with potential liabilities
independent and apart from the personal liability of its owner . . . The
Act provides a right to a federal maritime lien to "any person furnishing
repairs, supplies, ... or any other necessaries, to any vessel ...." .
. . Necessaries are the things that a prudent owner would provide to enable
a ship to perform well the functions for which she has been engaged. These
"things" may be money, labor and skill, and personal services as well as
Id. at 602-03 (internal citations
omitted). Thus, there is a distinction between the creation and the enforcement
of a maritime lien. See also The Nestor, 18 F. Cas. 9, 14 (C.C.D.
Me. 1831), which states, in pertinent part:
If seamen's wages were by the contract
not payable until ten days after the voyage was completed, it would not
disturb the lien on the ship for those wages. The lien has in all such
cases an inchoate existence from the moment of the contract, and attaches
sub modo on the ship. The lien for seamen's wages attaches ordinarily on
the ship during the voyage, although no wages are strictly due until the
end of the voyage. A sale of the ship, pending the voyage, would not defeat
this inchoate lien; and when the voyage was completed, the lien would have
relation back to the commencement of the voyage.
By furnishing their labor and personal
services to the M/V MARIA, the seamen were entitled to a maritime lien
which was created by operation of law when their wages were due and payable.
This lien "follow[ed] the vessel even after it [was] sold to [the Bank
of Scotland]. Based upon the plain language of the ship mortgage act, the
seamen's penalty wage lien attached to the proceeds from the sale of the
vessel as a preferred maritime lien with priority over the Bank of Scotland's
preferred ship mortgage. See 46 U.S.C. § 31326(b)(1). Thus,
the district court erred in ruling that the seamen's maritime lien for
penalty wages was not enforceable against the proceeds of the vessel.
The seamen's maritime lien for penalty
wages, in excess of $6.8 million, exceeds the lien for their unpaid wages
of $260,618. In
Griffin v. Oceanic Contractors, Inc., 458 U.S. 564
(1982), the petitioner was entitled to more than $300,000 in penalty wages
as a result of the improper withholding of $412.50 by the vessel owner.
The vessel owner argued that a literal interpretation of the penalty wage
statute "would produce an absurd and unjust result which Congress could
not have intended." Griffin, 458 U.S. at 574. The Supreme Court
rejected this argument, stating that:
In refusing to nullify statutes, however
hard or unexpected the particular effect, this Court has said: "Laws enacted
with good intention, when put to the test, frequently, and to the surprise
of the law maker himself, turn out to be mischievous, absurd or otherwise
objectionable. But in such case the remedy lies with the law making authority,
and not with the courts." . . . It is enough that Congress intended that
the language it enacted would be applied as we have applied it. The remedy
for any dissatisfaction with the results in particular cases lies with
Congress and not with this Court . . . As we explained earlier, a condition
to the imposition of the wage penalty is a finding that the delay in payment
is "without sufficient cause." To the extent that the equities of the situation
are to be considered, they bear on that finding, and not on the calculation
of the penalty period once that finding has been made.
Id. at 575-77 (internal citations
In addition, neither the majority opinion
nor the district court considered whether there was a genuine issue as
to the material fact of the owner's insolvency when the unpaid wages began
to accrue and the seamen's maritime lien attached to the owner's vessel.
The seamen raised a genuine issue of material fact concerning the solvency
of the vessel owner that should have permitted the case to go to trial.
A district court's decision to grant
or deny summary judgment is reviewed de novo, applying the same criteria
employed by the trial court in the first instance. See Burge v. Parish
of St. Tammany, 187 F.3d 452, 464 (5th Cir. 1999). Summary
judgment is proper when the pleadings, depositions, admissions, and answers
to interrogatories, together with affidavits, demonstrate that no genuine
issue exists as to any material fact and that the movant is entitled to
judgment or partial judgment as a matter of law. See Fed.R.Civ.P.
56(c); Burns v. Harris County Bail Bond Bd., 139 F.3d 513, 517-18
(5th Cir. 1998). We view all facts in the light most favorable
to the non-movant and draw all reasonable inferences in the non-movant's
favor. See Coleman v. Houston Indep. Sch. Dist., 113 F.3d 528, 533
(5th Cir. 1997). If the non-movant sets forth specific facts
in support of allegations essential to her claim, a genuine issue of material
fact is presented and summary judgment is inappropriate. See id.
Seamen must be paid their wages within
24 hours after the cargo has been discharged or within four days after
the seamen have been discharged. See 46 U.S.C. § 10313(f).
If the seamen do not receive their wages "without sufficient cause, the
master or owner shall pay to the [seamen] 2 days' wages for each day payment
is delayed." 46 U.S.C. § 10313(g). The Supreme Court discussed the
requirements for payment of delay wages in Griffin. Two conditions
must be satisfied before seamen are entitled to delay wages:
First, the master or owner must have
refused or failed to pay the seaman his wages within the periods specified.
Second, this failure or refusal must be "without sufficient cause." Once
these conditions are satisfied, however, the unadorned language of the
statute dictates that the master or owner "shall pay to the seaman" the
sums specified "for each and every day during which payment is delayed."
The words chosen by Congress, given their plain meaning, leave no room
for the exercise of discretion either in deciding whether to exact payment
or in choosing the period of days by which the payment is to be calculated.
Griffin, 458 U.S. at 570.
In determining the seamen's entitlement
to delay wages, the district court should not consider whether there was
sufficient cause for delay in payment after a suit has been filed.
Rather, "liability for double wages accrues, if at all, from the end of
the period within which payment should have been made." McCrea v. United
States, 294 U.S. 23, 31-32 (1935). The mere fact of late payment of
wages does not entitle the seamen to delay wages, however. If wages are
not paid in a timely fashion "due to the insolvency of the owner and the
arrest of the vessel", the owner has shown sufficient cause for nonpayment
and is relieved of statutory liability for delay wages. Collie v. Fergusson,
281 U.S. 52, 56 (1930).
The district court had evidence that
the seamen were not paid in a timely fashion and that the owner did not
have sufficient cause for nonpayment of wages when the wages were owed.
The seamen introduced evidence that they were not paid wages on two occasions,
March 24, 1997 and April 20, 1998. They also produced audited financial
statements for the M/V MARIA stating that the vessel's profit in 1997 was
$113,000. Based upon these financial statements, the seamen argue that
the owner was not insolvent on March 24, 1997 when they should have received
their wages. The Bank of Scotland arrested the M/V MARIA on April 29, 1998
to foreclose on its mortgage. Thus, the evidence indicates that on March
24, 1997, one of the dates when wages were owed to the seamen, the owner
of the vessel was not insolvent and the M/V MARIA had not been arrested.
At that time, the seamen's maritime lien attached and the owner had an
interest in the vessel. The owner failed to show sufficient cause for nonpayment
and has not been relieved of statutory liability for delay wages according
The district court failed to analyze
the requirements for payment of delay wages and mistakenly considered the
insolvency of the vessel owner at the time of the sale as being crucial,
not when the maritime lien attached upon the penalty wages becoming due
and payable to the seamen. Based upon these shortcomings, I would REVERSE
the judgment of the district court and remand the case for a trial on the
disputed material issues of fact.
1. Judge Dennis reserves
the right to file an opinion.
2. The in personam
judgment against Golden Lines is, in all likelihood, uncollectible. At
a hearing in December 1998, its counsel stated that the corporation no
longer existed, because it had no assets and was conducting no
operations. And, in January 1999, its counsel was allowed to withdraw,
having advised the court that Golden Lines had advised him that, as a result
of its severe financial condition, it would cease all operations.
3. The seamen also contend,
for the first time on appeal, that the Bank's claim should be equitably
subordinated to their penalty wages liens, claiming the Bank's collusive
conduct with Mazarakis conferred an unfair advantage on the Bank and harmed
the seamen, who, unlike the Bank, had no other security from which
to obtain satisfaction of their liens. Because this claim was not presented
in district court, the seamen must show the existence of a plain error
that affected their substantial rights, and also must persuade us to exercise
our discretion to correct it. SeeHighlands Ins. Co. v. National Union
Fire Ins. Co., 27 F.3d 1027, 1032 (5th Cir. 1994), cert. denied,
513 U.S. 1112 (1995). They have not done so. Cf. Custom
Fuel Servs., Inc. v. Lombas Indus., Inc., 805 F.2d 561, 566-67
(5th Cir. 1986) (applying equitable subordination to subordinate Bank's
preferred ship mortgage to claims of other maritime lienors where bank
transferred title to vessel to its wholly owned, undercapitalized subsidiary
and took preferred ship mortgage, and bank controlled subsidiary, using
it as mere instrumentality to accomplish lease of vessel to charterer).
Even assuming that the issue was preserved
by the seamen, through their contention in district court that, prior to
foreclosing on the mortgage, the Bank should have been required to mitigate
its losses by enforcing its other security interests, including Mazarakis'
personal guarantee, the district court did not
err by rejecting
it. Neither the statutes nor the terms of the mortgage condition the Bank's
right to foreclose on its pursuing other means of repayment.
4. See also Henry
v. S/S Bermuda Star, 863 F.2d 1225, 1240 (5th Cir. 1989) ("more
recently the Supreme Court has emphasized that Congress sought to prevent
the unjust enrichment of shipowners who denied seamen wages and
benefits rightfully earned" (emphasis added)); Chung, Yong Il v.
Overseas Navigation Co., 774 F.2d 1043, 1049 (11th Cir. 1985) (purpose
of statute "is to provide for the prompt payment of wages to a discharged
seaman ... and to ensure that a seaman is not turned ashore with
little or no money" (emphasis added)), cert. denied, 475 U.S. 1147
(1986); Mavromatis v. United Greek Shipowners Corp., 179
F.2d 310, 315 (1st Cir. 1950) ("[t]hese paternalistic provisions in favor
of seamen ... were designed to protect from overreaching a generally impecunious
and improvident class of persons, and to insure that seamen will not be
turned ashore with little or nothing").
5. See also Chung,
Yong Il, 774 F.2d at 1049 ("the penalty wage provision is fully
consistent with the notion that a seaman has a 'sacred lien' against a
vessel for his earnings"); Buckley v. Oceanic S.S. Co., 5
F.2d 545, 546 (9th Cir. 1925) (because penalty wages claim "is for extra
wages as incidental to the wages proper, it stands upon no different basis
than does the claim for wages proper"); Gerber v. Spencer,
278 F. 886, 889 (9th Cir. 1922) (penalty wages are "an incident to the
claim of wages proper" and lien has same priority as lien for earned wages);
Peterson v. S.S. Wahcondah, 235 F. Supp. 698, 700 (E.D. La.
1964) (on remand: "[t]he seamen's lien for penalty wages is accorded the
same sacred priority as the lien for wages, and attaches to proceeds from
both the sale of the vessel and the earned 'freight'"); The Chester,
25 F.2d 908, 910 (D. Md. 1928) ("[M]oney payable ... as [penalty] wages
... is payable essentially as wages, and not penalties.... [I]t is axiomatic
that seamen have a lien upon the vessel for their wages. Thus it follows
that they must also have a lien for any and all sums payable under [the
penalty wages statute], and not merely a right to enforce a personal claim
against the master or owner.");
The Fort Gaines, 18 F.2d
413, 414 (D. Md. 1927) (penalty wages lien has same priority as lien for
wages); Feldman v. American Palestine Line, Inc. (The President Arthur),
25 F.2d 1002, 1002-03 (S.D.N.Y. 1926) ("the law is settled ... that extra
pay allowed under [the penalty wages statute], is an incident to wages
proper, is recoverable as wages, and ranks with wages as a prior lien");
The Trader, 17 F.2d 623, 625 (E.D.S.C. 1926) (Penalty wages
"are an incident to and a part of the actual wages, just as much as interest
is an incident to and a part of a debt. They are intended as compensation
for the delay in payment, and, inasmuch as they are an incident to and
a part of the wages, they will constitute a maritime lien on the vessel,
the same as wages."); The Chas. L. Baylis, 25 F. 862, 863
(S.D.N.Y. 1885) (penalty wages are "an incident to ... claim of wages proper,
and rank with ... wages as a prior lien"); Cox v. Lykes Bros.,
143 N.E. 226, 227 (N.Y. 1924) (in penalty wages statute, "Congress, imposing
a liability for the benefit of seamen, has put it on the same plane as
a liability for wages, and has said that the two shall be enforceable together");
Covert v. The British Brig Wexford, 3 F. 577, 578-79 (S.D.N.Y.
1880) (interpreting British merchant shipping act's penalty wages provision
as providing lien for penalty wages with same priority as wages lien).
6. See also Custom
Fuel Servs., 805 F.2d at 568 ("[t]he primary purpose of the Ship
Mortgage Act is to induce private capital to invest in shipping"); Equilease,
793 F.2d at 602 ("History shows that the merchant marine industry was faltering
in 1910; Congress passed the Act in an attempt to spur incentive for the
financing of shipowners by making private investment in shipping more attractive
than it had been."); First Nat'l Bank & Trust Co. of Escanaba
v. Oil Screw Olive L. Moore, 379 F. Supp. 1382, 1390 (W.D. Mich.
1973) ("Clearly the policy of the Ship Mortgage Act was to spur incentive
for the financing of shipowners in an effort to strengthen a faltering
merchant marine."), aff'd, 521 F.2d 1401 (6th Cir. 1975).
7. See also Sheppard,
30 U.S. (5 Pet.) at 710 (seamen's wages lien attaches to proceeds of vessel);
Barlum, 293 U.S. at 35 ("on foreclosure and sale in admiralty,
all pre-existing claims in the vessel are to be held terminated and thereafter
are to attach to the proceeds of the sale"); American Bank of Wage
Claims v. Registry of Dist. Ct. of Guam, 431 F.2d 1215, 1218 (9th
Cir. 1970) ("The proceeds from the judicial sale of a vessel, or security
furnished in lieu thereof, are deemed a jurisdictional substitute for the
8. One of the cited cases
did not involve penalty wages. The St. Paul, 77 F.
998 (S.D.N.Y. 1897) (seamen discharged before commencement of voyage entitled
to recover compensation in rem for 15 days, as provided in former
46 U.S.C. § 594).
9. See also Chung,
Yong Il, 774 F.2d at 1052 ("allowing a shipowner to avoid penalty
wages liability through a contract would contravene the public policy implicit
in the statute", which "speaks in terms of assessing penalty wages against
only a vessel owner or a master"); Parcel Tankers, Inc. v. M/T Stolt
Luisa Pando, 787 F. Supp. 614, 621 (E.D. La. 1992) (finding sufficient
cause for alleged wrongful withholding, but stating that mortgagee was
not liable for penalty wages because "[t]he statute places obligations
on 'the master or owner'" (emphasis added)), aff'd, 990 F.2d 827
(5th Cir. 1993), cert. denied, 510 U.S. 1071 (1994).