Page 55: of Maritime Reporter Magazine (December 1996)

a preferred mortgage covering a

U.S. documented vessel, Pub.L. 104-324 opens the opportunity to seek financing worldwide without need for approval by the Secretary.

As a consequence, both the provi- sion providing for establishment of 'Westhampton Trusts' to obtain sim- ilar financing and all references thereto or to mortgages generally under section 9(c) of the 1916 Act (transfers requiring Secretary approval) have been repealed or eliminated as no longer required.

Extrajudicial Remedies Upon

Default of Preferred Mortgages

In an effort to resolve conflicting case law and uncertainties regard- ing the use of extra-judicial reme- dies, Congress expressly permitted their use in addition to judicial remedies of an in rem action against the vessel or a civil action in personam against the mortgagor.

This change corrects the situation that has existed since 1985 as a result of the decision in Bank of

America National Trust and

Savings Assoc. v Fogle, 637 F.Supp. 305 (N.D. Cal. 1985)(holding that the in rem remedy provided by statute indicated a Congressional intent to preclude such "self help"), where a mortgagee was forced to seek judicial relief even though repossession and sale could have been accomplished without court involvement (particularly where a recreational vessel was involved).

The new provision does, however, raise some additional questions, particularly regarding the ability of a second or third mortgagee to fore- close on vessel assets without knowledge of the first preferred mortgagee.

Vessel Financing Practices Of

Other Countries

Section 1113(f) of Pub.L. 104-324 further tasks the Secretary of

Transportation with studying and reporting on the methods for leas- ing, demise chartering, and financ- ing of vessels operating in the coastal trades of other countries and whether the laws of those other countries provide reciprocity for

U.S. banks, leasing companies, and other financial institutions with respect to the rights granted foreign institutions in the preceding changes. This report is required to be submitted to Congress by

October 1997, so the changes dis- cussed above may only be the first wave of change to U.S. laws in these areas.

For more information on these laws

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December, 1996 57