In-Depth Look at Maritime Salvage

 In Law Planet, Maritime Law

cargo shipIn our previous post discussing the basics of maritime salvage, we touched upon the fundamentals of the salvage award. The following information gives a more precise account of these points with emphasis on salvage awards, jurisdiction issues, maritime liens and other relevant Florida statutes.

The information provided here is quite technical and can be somewhat confusing to the average consumer. As always, I invite you contact me with any specific questions you may have with regards to the maritime industry and its components as they apply to you.

Salvage Awards 
Computation of salvage awards has traditionally followed the longstanding guidance of the Supreme Court in The Blackwall, 77 U.S. (10 Wall.) 1 (1869). Six factors are considered in determining the amount of a salvage award:
1. Degree of danger from which the ship was rescued;

2. Post-casualty value of the property saved;

3. Risk incurred in saving the property from impending peril;

4. Promptitude, skill, and energy displayed in rendering the service and salving the property;

5. Value of the property employed by the salvors and the danger to which it was exposed; and

6. Costs in terms of labor and materials expended by the salvors in rendering the salvage service.

The “salved value” of a vessel “is the post-casualty value of the property, in her damaged state, at the time of the salvage or after the vessel is brought into safe harbor.” An acceptable measure of the vessel’s value is made by deducting the actual cost of repairs from the value of the vessel after repairs. The actual selling price of the salved vessel, if the sale is conducted in a commercially reasonable manner, is the best evidence of the vessel’s fair market value.

The amount of the salvage award is not based on work and labor performed on an hourly or fixed-rate basis but is given as a reward to ensure safety of property and life at sea. There is a strong public policy in favor of encouraging salvors to save and restore property to its owners and to encourage others to venture out and save distressed property. Thus salvage awards should be in the form of a “reward” rather than quantum meruit (as much as he deserved).

Resources: 
Ocean Services Towing and Salvage, Inc. v. Brown, 810 F.Supp. 1258 (S.D. Fla. 1993) 
The Oxford, 66 F. 590 (5th Cir. 1895) 
Ocean Services Towing & Salvage, Inc. 
B.V. Bureau Wijsmuller v. United States, 487 F.Supp. 156 (D.C. N.Y. 1974)

Jurisdiction Issues
In Metropolitan Dade County v. One (1) Bronze Cannon, 537 F.Supp. 923 (S.D. Fla. 1982), the court explained that the “saving to suitors” clause gives exclusive jurisdiction to federal courts in any civil case of admiralty or maritime jurisdiction. However, it affords litigants a choice of remedies, not forums; because there is no pure salvage remedy in state courts, plaintiffs have the option of proceeding on civil remedies (including salvage contracts) in state court or a pure salvage remedy in federal court in admiralty. Therefore, if the salvage was completed in accordance to a salvage contract, a plaintiff may bring suit in state court. However, if the salvage was a “pure” salvage, meaning not by contract, a plaintiff should bring suit in federal court in admiralty.

In Florida, some courts have dismissed salvage actions in state court as being exclusively within federal court jurisdiction and other courts permitting salvage actions in state court as long as the remedy requested is in personam and not in rem. In O’Neill v. Schoenbrod, 355 So.2d 440 (Fla. 3d DCA 1978), a salvage action was dismissed by the state court. In upholding the dismissal, the appellate court stated that salvage was “a matter peculiarly within the jurisdiction of the admiralty courts because, inter alia, of the peculiar system awarding the compensation.” The same plaintiff was later prevented from bringing the same claim as a state court action for unjust enrichment in state court, as a “disguised salvage claim.”

A contrary Florida case decided that a salvor may bring its action in personam in state court under concurrent jurisdiction. A federal district court remanded the marine salvage claim to state court because the remedy requested was in personam and not in rem.

Resources:
O’Neill v. Schoenbrod, 374 So.2d 70 (Fla. 3d DCA 1979). 
Sebastian Tow Boat & Salvage, Inc. v. Slavens, 16 FLW Fed. D187 (M.D. Fla. 2002).

Maritime Liens
A maritime lien is a secured right peculiar to maritime law. A lien is a charge on property for the payment of a debt, and a maritime lien is a special property right in a vessel given to a creditor by law as security for a debt or claim arising from some service rendered to the ship to facilitate her use in navigation or from an injury caused by the vessel in navigable waters.

The maritime claim of salvage gives rise to a maritime lien. A maritime claim may be enforced by an action in personam in a federal district court or in a state court under the “saving to suitors” clause. Such an action presupposes that the court has subject-matter jurisdiction and that the defendant is properly before the court. A judgment in an in personam action may be enforced by the seizure and sale of the entire property of the judgment. Likewise, an action in rem is available for the enforcement of a maritime lien. All maritime liens may be executed, that is, foreclosed, by an action in rem. A person entitled to a maritime lien may proceed both in rem and in personam if the prerequisites for each action are met.

Preferred Maritime Lien
According to 46 U.S.C. § 31301(5) (F), a preferred maritime lien is a maritime lien on a vessel for salvage, including contract salvage.

Priorities of Liens
There is no authoritative scheme of priorities among maritime liens. No statute has created it and, although a number of judicial decisions give an order of ranking, in each case it is incomplete. Consequently, the issue of ranking-competing maritime liens and claims has been left to legal scholars and to the federal courts. However, the ranking of maritime lien claims by the district and circuit courts in conjunction with the priority rules codified in 46 U.S.C. §§ 31301(5)-(6), 31326(b)(1)-(2) has resulted in allowing the following rules of ranking to be generally observed:

1. Expenses of justice during custodia legis (see 46 U.S.C. § 31326(b)(1));

2. The following preferred maritime liens (see 46 U.S.C. § 31301(5)(A)-(F));

a. Wages of the crew; maintenance and cure; as to masters’ wages, see 46 U.S.C. § 11112; wages of stevedore (dock laborer) when directly employed by the ship owner or his agent (see 46 U.S.C. § 31341);

b. Salvage, including contract salvage, and general average;

c. Maritime torts, including personal injury, property damage and cargo tort liens;

3. All maritime contract liens which arise before the filing of a preferred ship mortgage (U.S. flag vessel) (see 46 U.S.C. § 31301(5)(A)). These include liens for “necessaries”, such as repairs, supplies, towage, and the use of a dry dock or marine railway (see 46 U.S.C. § 31301(4)), as well as cargo contract damage liens and contract charterer’s liens;

4. Preferred ship mortgages (U.S. flag vessels);

5. Other maritime contract liens which accrue after the filing of a preferred ship mortgage (U.S. flag vessels) and prior to a foreign preferred ship mortgage. However, all necessaries provided in the United States have priority over foreign preferred ship mortgages irrespective of the time they arose. (See 46 U.S.C. § 31326(b)(2));

6. Foreign preferred ship mortgages;

7. Maritime contract liens, excluding those for necessaries provided in the U.S., accruing after foreign preferred ship mortgages such as contract cargo damage liens and contract charterer’s liens;

8. State-created liens of a maritime nature;

9. Maritime liens for penalties and forfeitures for violation of federal statutes;
10. Perfected non-maritime claims, including tax liens;

11. Attaching liens in causes of action within the admiralty and maritime jurisdiction (foreign attachment);

12. Maritime liens in bankruptcy;

13. All other general creditors/claimants.

According to the above ranking scheme, competing liens are initially ranked as to superiority by class. The top priority liens will of course be paid first. However, ifthe funds in the registry of the admiralty court are insufficient to fully pay all of the claims within a particular class, the issue of priority of claims within the class itself must be resolved.

There are various rules of ranking claims within the same class which are generally agreed upon. “The basic general rule is the inverse order rule that claims of the same class are given priority amongst themselves according to the inverse order of their accrual. In other words ‘the last lien given will supersede the preceding’.” Though the inverse order rule is the basic general rule for the ranking of claims within a class, for practical reasons the rule has been “subjected to a series of special rules which in effect have largely displaced it.” For example in Fredelos v. Merritt-Chapman & Scott (The Padre Island), 447 F.2d 435 (5th Cir. 1971), the court held that a claim for maintenance and cure has the same priority as a wage claim and ranks higher than a claim for salvage.

In The William Leishear, 21 F.2d 862, 863 (D. Md. 1927), the court described the “inverse order” rule in the following way:

Generally speaking, the law of maritime liens may be said to be made up of exceptions to the above doctrine, which gives priority to the lien latest in point of time, so that to-day it is possible to deduce, from the decisions, the following order of priority, existing irrespective of time, which represents the weight of authority: (1) Seaman’s wages; (2) salvage; (3) tort and collision liens; (4) repairs, supplies, towage, wharfage, pilotage, and other necessaries; (5) bottomry bonds in inverse order of application; (6) non-maritime claims. This, however, is no more than a very general statement, since any summary is subject to further exceptions of more or less narrow application.

With respect to salvage claims, it is rare that more than one set of salvage liens is in issue. If two or more salvage operations had been performed on distinct occasions, the more recent liens would have priority as a matter of course.

Relevant Florida Statutes
Florida law defines lost and abandoned property and contains procedures for transferring title of lost or abandoned property to finders. Derelict vessels are treated separately under F.S. 376.15(1) and 823.11. These statutes make it unlawful to “leave any vessel in a wrecked, junked, or substantially dismantled condition or abandoned upon or in any public water or at any port in this state without the consent of the agency having jurisdiction thereof, or docked at any private property without the consent of the owner of such property.”

Persons who find lost or abandoned property must report the location and a description of the property to law enforcement. The law enforcement agency may elect to retain any or all of the abandoned property for its own use or use by the state or unit of local government, trade the property to another unit of local government or state agency, donate the property to a charitable organization, sell the property, or notify the appropriate refuse removal service. Notice that the property will be retained, sold, or otherwise disposed of is required. Owners of abandoned property who do not remove such property as required by law are liable to the law enforcement agency for the costs of removal, storage, and destruction of the property, less any salvage value obtained by disposal of the property. Obstructing a law enforcement officer in the discharge of the law enforcement officer’s duties is a second degree misdemeanor.

Resources:
The John G. Stevens, 170 U.S. 113, 119 (1898). 
G. Gilmore & C. Black, The Law of Admiralty § 9-62 at 744
Florida Statutes Referenced: 
F.S. 705.101(2)-(3)
F.S. 705.102-705.104
F.S. 705.102 
F.S. 705.103(2)
F.S. 705.103(4)
F.S. 705.103(5)

 

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