First Nat. Bank v. Beckwith MacHinery Co.

650 So. 2d 1148, 26 U.C.C. Rep. Serv. 2d (West) 519, 1995 La. LEXIS 592, 1995 WL 66298
CourtSupreme Court of Louisiana
DecidedFebruary 20, 1995
Docket94-CQ-2065
StatusPublished
Cited by51 cases

This text of 650 So. 2d 1148 (First Nat. Bank v. Beckwith MacHinery Co.) is published on Counsel Stack Legal Research, covering Supreme Court of Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
First Nat. Bank v. Beckwith MacHinery Co., 650 So. 2d 1148, 26 U.C.C. Rep. Serv. 2d (West) 519, 1995 La. LEXIS 592, 1995 WL 66298 (La. 1995).

Opinion

650 So.2d 1148 (1995)

The FIRST NATIONAL BANK OF BOSTON
v.
BECKWITH MACHINERY COMPANY
v.
VIKING MARITEC, INC.

No. 94-CQ-2065.

Supreme Court of Louisiana.

February 20, 1995.

*1149 David S. Willenzik, Michael H. Rubin, for plaintiff.

Peter J. Butler, Aubrey B. Hirsch, Jr., Eric A. Schaffer, for defendant.

Mary E. Arceneaux, for Louisiana Bankers Ass'n, amicus curiae.

David S. Willenzik, Michael H. Rubin, for First Nat. Bank of Boston.

*1150 MARCUS, Justice[*].

Pursuant to La.R.S. 13:72.1 and Rule XII of the Supreme Court of Louisiana, the United States Court of Appeals for the Fifth Circuit has certified the following question of law to this court:

Which interest should have priority under Louisiana law: (1) a civil law "privilege" for suppliers of ship-building materials, thus giving Beckwith creditor priority rights, or (2) an earlier perfected UCC security interest, thus giving FNBB creditor priority rights.[1]

As Rule XII, § 3 requires, the certificate includes a statement of facts showing the nature of the cause and the circumstances out of which the question of law arises:

This case revolves around the construction and financing of a towboat. In 1992, Viking Maritec, Inc. ("Viking") and Avondale Industries, Inc. ("Avondale") entered into a contract for Avondale to build a towboat for Viking in exchange for a purchase price of $2.8 million. Viking entered into a credit agreement with First National Bank of Boston ("FNBB") to finance the purchase price due Avondale and to pay for other equipment for the vessel. FNBB agreed to lend Viking up to $4.8 million, and Viking executed a construction note in favor of FNBB. Viking also executed a "Louisiana Ship Mortgage and Security Agreement," granting the bank under the provisions of La.Rev.Stat.Ann. 10:9-101— 10:9-604 (West 1993) a security interest in the towboat and its materials and components. FNBB perfected the security interest by filing a UCC-1 financing statement in the proper office on August 6, 1992. The documents stated that the Ship Mortgage Law and the Louisiana UCC would govern the security agreement. In early 1993, Viking purchased from Beckwith Machinery Company ("Beckwith") engines and related machinery, which were incorporated into the tugboat.
Viking did not pay either Beckwith or FNBB. After its demand for payment was not answered, FNBB filed an action in federal district court to have the unfinished and undocumented towboat seized and sold. Beckwith intervened, seeking priority through the Louisiana Civil Code which gives privileges to certain classes of creditors, including suppliers of ship-building materials and equipment. La.Civ.Code Ann. art. 3237 (West 1952). FNBB filed a motion asking the court to give priority instead to its perfected UCC security interest.
On July 26, 1993, the district court rendered a decision formally ranking FNBB's security interest in the vessel ahead of Beckwith's materialman's privilege. Judgment was entered on September 3, 1993, giving priority to the bank's security interest. Beckwith appeals from that judgment. In its memorandum and order, the district court expressed considerable doubt as to whether the Louisiana legislature intended such a result.

The question certified to this court raises two issues: (1) whether the priority rules contained in Chapter 9 of the Louisiana Commercial Laws[2] (Chapter 9) govern a ranking dispute between a materialman's privilege created pursuant to La.Civ.Code art. 3237(8) and a prior perfected security interest in the same goods created pursuant to Chapter 9; and (2) which of the foregoing interests has priority over the other.

Beckwith obtained a materialman's privilege on the engines and machinery sold to Viking and incorporated into the tugboat by operation of La.Civ.Code art. 3237, which provides in pertinent part:

The following debts are privileged on the price of ships and other vessels, in the order in which they are placed:
. . . .
8. Sums due to sellers, to those who have furnished materials and to workmen employed in the construction, if the vessel has never made a voyage; ....

It is undisputed that this privilege is nonpossessory; that is, its existence does not depend on Beckwith's possession of the goods, *1151 nor does Beckwith have possession of the goods. Additionally, the facts as stated in the certificate indicate that FNBB perfected its security interest prior to the time Beckwith's privilege arose. The first issue we must decide is whether the ranking dispute between Beckwith's nonpossessory materialman's privilege and FNBB's prior perfected security interest is governed by the provisions of Chapter 9. This is a case of first impression in this state.

Louisiana enacted Article 9 of the Uniform Commercial Code (UCC) as Chapter 9 of the Louisiana Commercial Laws[3] effective January 1, 1990, and was the last of all the states to do so.[4] Section 10:9-102 indicates the subject matter of Chapter 9 and provides in pertinent part:

(1) Except as otherwise provided in R.S. 10:9-104 on excluded transactions, this Chapter applies
(a) to any transaction (regardless of its form) which is intended to create a security interest in personal property or fixtures including goods, documents, instruments, general intangibles, chattel paper or accounts;
. . . .
(2) This Chapter applies to security interests created by contract, including pledge, assignment, chattel mortgage, other lien or title retention contract, and lease or consignment intended as security. This Chapter does not apply to statutory liens and privileges except as expressly provided herein....
(4) As used in this Chapter the following terms have the following meanings when they refer to property that is located in this state and is subject to its law:
. . . .
(b) "Lien" or "statutory lien" means a privilege created by the Louisiana Civil Code, Louisiana Revised Statutes of 1950, or other statutory authority, other than a vendor's privilege on immovable property. (Emphasis added.)[5]

The term "security interest" is defined in La.R.S. 10:1-201(37), which provides in pertinent part:

"Security interest" means an interest in personal property or fixtures, created by contract, which secures payment or performance of an obligation.... A lien or privilege created by the Louisiana Civil Code, the Louisiana Revised Statutes, or other statutory authority is not a security interest.... (Emphasis added.)

Section 10:9-104(c) on excluded transactions states, in pertinent part: "The provisions of this Chapter do not apply ... to a lien given by statute or other rule of law for services or materials except as provided in R.S. 10:9-201 and 10:9-310 on priority of such liens

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Bluebook (online)
650 So. 2d 1148, 26 U.C.C. Rep. Serv. 2d (West) 519, 1995 La. LEXIS 592, 1995 WL 66298, Counsel Stack Legal Research, https://law.counselstack.com/opinion/first-nat-bank-v-beckwith-machinery-co-la-1995.