Governor & Co. of the Bank of Scotland v. Sabay

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________

No. 99-30102
_____________________

THE GOVERNOR AND COMPANY OF
THE BANK OF SCOTLAND,

Plaintiff-Appellee,

versus

HECTOR SABAY; VOLODYMYR SHEVCHUK;
NORMAN SOLIS; NOEL SOMOSIERRA; GERRY SUYAT, ET AL.,

Intervenors-Appellants,

versus

MARIA S. J. MV, her engines, tackle, lifeboats,
anchor, chain, equipment and appurtenances, in rem, ET AL.,

Defendants.
_________________________________________________________________

Appeal from the United States District Court
for the Eastern District of Louisiana

_________________________________________________________________
April 28, 2000
Before JONES, BARKSDALE, and DENNIS, Circuit Judges.1

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

1
Judge Dennis reserves the right to file an opinion.
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.

I.

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 paid”.

2
 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

3
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

4
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

5
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

II.

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

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.

6
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

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. See
Highlands 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.

7
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.

A.

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. See

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,

8
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 construed).

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. Me. 1839):

9
 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).

10
 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 seaman.

(g) When payment is not made as provided
under subsection (f) of this section without
sufficient cause, the master or owner shall

11
 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.

(Emphasis added.)

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

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”).

12
 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

13
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 following:

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

14
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.

15
 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

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

16
 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 earned wages.

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

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”);
cf. 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).

17
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.”).

B.

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 jurisdiction. See

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 Act).

The Ship Mortgage Act was intended to remedy this problem. It

was to “provide for the promotion and maintenance of the American

18
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

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 vessel itself.”).

19
 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). In

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”.

C.

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 liability

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

20
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

21
 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.”);

Equilease, 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. §§

31301(5)(D), 31326(b)(1).

Language in several cases supports the seamen’s contention that

the owner’s interest in the vessel should be determined when the

22
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

23
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.

24
 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 infra.

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

or his 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

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).

25
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);

The Sentinel, 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

Gerber 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.

26
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 tendered unconditionally),

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, stating:

[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

27
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 is
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

28
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).

29
 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

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).

30
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

31
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 proceeds.

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

32
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

the 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).

III.

For the foregoing reasons, the partial summary judgment is

AFFIRMED.

33
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

34
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 proceeds.

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

35
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 Cir. 1964).

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 [10313] extends to

‘employers’ as well as those parties enumerated in the statute. We

36
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

37
 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 pertinent part:

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

38
 “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 materials.

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

39
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 omitted).

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 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

41
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.

42
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

43
cause for nonpayment and has not been relieved of statutory

liability for delay wages according to Collie.

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.

44