Baldwin Haspel Burke & Mayer LLC

Maritime Update: Collateral Chattel Mortgage Meets the Requirements of the Ship Mortgage Act

Bill Schwartz - 

In the case of State Bank & Trust Co. v. C&G Liftboats, L.L.C., an appeal was filed by defendants seeking to overturn a District court determination that a collateral chattel mortgage, which was not valid under Louisiana law, could still be valid for purposes of a preferred ship mortgage under the Ship Mortgage Act. The Fifth Circuit, on October 16, 2018, dismissed the appeal on the grounds that the decision by the District Court was not a final judgment necessary for appeal.

Factually, State Bank & Trust Company had sought to foreclose on four ship mortgages and seize three vessels owned by defendants C&G Liftboats, LLC and AMC Liftboats, Inc. The defendant boat owners argued in the District Court that there was no subject matter jurisdiction to hear State Bank’s claim in admiralty. This was based on the argument that the underlying mortgages used to secure the vessels were not valid under Louisiana law. It was therefore argued such could not be valid preferred ship mortgages under the Ship Mortgage Act.

The District Court denied the defendants’ motion to dismiss. The District Court also granted, in part, State Bank’s motion for summary judgment. That summary judgment held the collateral chattel mortgage, even if invalid under Louisiana law, met the requirements of the Ship Mortgage Act. Of greatest interest in the appeal was the fact the District Court did not grant judgment on State Bank’s claim that the defendants defaulted. Nor did the District Court decision hold that the relevant mortgage was enforceable.

The defendants appealed the District Court’s decision, claiming jurisdiction under 28 U.S.C. § 1292(a)(3). However, because § 1292(a)(3)’s finality requirement was not met, the Fifth Circuit dismissed the appeal. They found that the District Court’s order permitted State Bank to continue in its foreclosure action. It explicitly deferred all of its other requests for relief. Therefore, the District Court’s order did not ultimately determine the “rights and liabilities of the parties.” 28 U.S.C. § 1292(a)(3) and the appeal was not yet “ripe”.

The full decision can be found here.

If you have any questions regarding this maritime matter, please contact Bill Schwartz at (504) 569-2900 or wschwartz@bhbmlaw.com.


  |  

Meritas

Connect with us