Glazer Steel Corp. v. Sandoz (In re Gulf Overseas Service Corp.)

8 B.R. 1010
CourtDistrict Court, W.D. Louisiana
DecidedFebruary 28, 1981
DocketBankruptcy No. B76-1528-L
StatusPublished

This text of 8 B.R. 1010 (Glazer Steel Corp. v. Sandoz (In re Gulf Overseas Service Corp.)) is published on Counsel Stack Legal Research, covering District Court, W.D. Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Glazer Steel Corp. v. Sandoz (In re Gulf Overseas Service Corp.), 8 B.R. 1010 (W.D. La. 1981).

Opinion

OPINION

RODNEY BERNARD, Jr., Bankruptcy Judge.

This matter comes before the court upon the complaints of Glazer Steel Corporation and Steel, Inc., claiming privileges for materials, and upon intervener’s complaint filed by James P. Cross, Jr., claiming a labor and materialman’s privilege. First City National Bank, by way of an “Answer” has intervened to protect its rights as an alleged mortgagee of certain vessels. All matters having been consolidated, trial was held at Opelousas, Louisiana on June 13, 1978.

This is a contest between a mortgage creditor, First City National Bank, on the one hand and Glazer Steel Corporation and Steel, Inc., material suppliers, and James P. Cross, a labor and materialman claimant on the other, seeking the proceeds of the sale of two vessels.

The debtor, Gulf Overseas Service Corporation, hereinafter referred to as G.O.S.C., was engaged in the operation of a shipyard at the Port of New Iberia. In early 1976 it sought funds from FCNB (First City National Bank) for the construction of two oceangoing barges, hereafter referred to as GM 290 and GM 291. As a result of this application two “collateral chattel and ship mortgage assignments and pledges” were confected in order to secure future advances to cover costs of construction of the barges. The mortgage which described that which was to become GM 290 was dated April 5, 1976 and filed for record in Iberia Parish on April 26, 1976. The mortgage dated July 13, 1976 and recorded in Iberia Parish on July 30, 1976 described that which was to become GM 291.

As a result of these mortgages FCNB advanced the sums of $1,250,000.00 for the construction of GM 290, and $750,000.00 for the construction of GM 291. Following completion of the barges they were sold by the Chapter XI Receiver and portions of the purchase prices were paid over to FCNB leaving balances due on the above mortgages in the sums of $358,168.49 and $338,-304.52 respectively.

During the months of April and May, 1976 Glazer (Glazer Steel Corp.) sold and delivered steel to G.O.S.C. and billed the debtor $138,977.13 therefor. This steel was for the construction of the barge, GM 290. During July of 1976 Glazer sold, delivered to, and billed G.O.S.C. for steel in the amount of $9,991.01. This steel was for the construction of GM 291. These sales and deliveries of steel are the basis for Glazer’s alleged privilege.

During April and May, 1976 Steel, Inc. sold and delivered steel to G.O.S.C. for the construction of GM 290, billing G.O.S.C. $54,496.15 therefor. This is the basis for Steel, Inc.’s claim of privilege.

The claim of James Cross, Jr. is based upon charges for use of a crane with operator for the months of April through Sep[1012]*1012tember, 1976 for which Cross billed G.O.S.C. the sum of $27,021.59. Cross alleges that he has a labor and materialmans privilege against GM 290 and GM 291 since the crane was used in their construction.

THE MORTGAGES

When FCNB agreed to make the loans for construction of GM 290 and GM 291 it sought to secure these loans by means of two security devices captioned “Collateral Chattel and Ship Mortgage, Pledge and Assignment”.

Prior to the passage of the Louisiana Chattel Mortgage Law of 1912, “ships and other vessels” were susceptible to mortgage by virtue of Article 3289 of the Louisiana Civil Code. Since, prior to that time, the chattel mortgage was unknown in Louisiana, the conventional real mortgage was used for securing loans on ships. After the chattel mortgage law was passed this form of security device was used for the mortgage of ships, no contention being made that ships and other vessels were anything but movable property.

In 1975 the Louisiana Legislature saw fit to provide a means of financing the construction of ships by passing the Ship Mortgage Law which defines “Ship” under R.S. 9:5522(b) as “a tug, pushboat, pullboat, barge, dredge, or other vessel or watercraft of more than fifty tons gross weight to be constructed within the state of Louisiana.” The wording of the statute does not preclude the use of any other type of security device for the aforementioned purpose. It does, however, by its definition of “ship” preclude its use in the construction of a vessel or watercraft of less than fifty tons gross weight. Further it specifies by its definition of “ship” that such a mortgage is to be used only in the construction of a ship. The foregoing leads to the conclusion that the Louisiana chattel mortgage may still be utilized in mortgaging completed ships, regardless of size, as well as for financing the construction of ships of less than fifty tons gross weight. The unanswered question, at this point, is whether or not the Louisiana Chattel mortgage may be used for financing the construction of ships of more than fifty tons gross weight.

In confecting its mortgages FCNB utilized a hybrid security device melding the Louisiana chattel mortgage with the ship mortgage. The validity of this device requires statutory interpretation since the rights of competing lien creditors differ, dependant upon a finding of which statute, or whether both statutes, apply.

THE PRIVILEGES

The Louisiana Civil Code Article 3237 confers a privilege on the price of ships and other vessels in favor of certain creditors. That Article reads, in part, as follows:

“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;”

No claims of privilege for debts due in the nature of those enumerated under 1 thru 7 have been made therefor no other privilege exists which would prime the materialmen and labor claimants.

Glazer and Steel, Inc. claim privileges for steel delivered to G.O.S.C. for the construction of GM 290 and 291. James P. Cross, Jr., a contractor, claims a privilege for labor performed in the construction of both vessels. Such privileges are clearly granted by the Code. Whether or not they exist in this case depends upon the proven facts. If they do exist, whether or not they prime the bank’s mortgage depends upon the validity and type of mortgage held by the bank.

CONCLUSION

FCNB has sought the best of both worlds by naming its mortgages, “Collateral Chattel and Ship mortgage.” Can they be both? To answer this question we must look to the actual provisions of the mortgages for there is a principle of law, requiring no citation, which provides that a [1013]*1013contract will be construed, not with reference to what the parties call it but with reference to its actual provisions. Both of the mortgages under consideration contain identical provisions which give insight as to the law under which the contract is to be construed. In the descriptions of the mortgaged property there appears this language, “.... together with all work, materials, components and fabrications (as defined in the Ship Mortgage Law of the State of Louisiana [Louisiana Statute 9:5521 et seq hereinafter referred to simply as the “Ship Mortgage Law”]) ...

Again, paragraph 11 of both mortgages contains this language,

“11.

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Bluebook (online)
8 B.R. 1010, Counsel Stack Legal Research, https://law.counselstack.com/opinion/glazer-steel-corp-v-sandoz-in-re-gulf-overseas-service-corp-lawd-1981.