SUBCHAPTER II—COMMERCIAL INSTRUMENTS
§31321. Filing, recording, and discharge
(a)(1) A bill of sale, conveyance, mortgage, assignment, or related instrument, whenever made, that includes any part of a documented vessel or a vessel for which an application for documentation is filed, must be filed with the Secretary to be valid, to the extent the vessel is involved, against any person except—
(A) the grantor, mortgagor, or assignor;
(B) the heir or devisee of the grantor, mortgagor, or assignor; and
(C) a person having actual notice of the sale, conveyance, mortgage, assignment, or related instrument.
(2) Each bill of sale, conveyance, mortgage, assignment, or related instrument that is filed in substantial compliance with this section is valid against any person from the time it is filed with the Secretary.
(3) The parties to an instrument or an application for documentation shall use diligence to ensure that the parts of the instrument or application for which they are responsible are in substantial compliance with the filing and documentation requirements.
(4) A bill of sale, conveyance, mortgage, assignment, or related instrument may be filed electronically under regulations prescribed by the Secretary.
(b) To be filed, a bill of sale, conveyance, mortgage, assignment, or related instrument must—
(1) identify the vessel;
(2) state the name and address of each party to the instrument;
(3) state, if a mortgage, the amount of the direct or contingent obligations (in one or more units of account as agreed to by the parties) that is or may become secured by the mortgage, excluding interest, expenses, and fees;
(4) state the interest of the grantor, mortgagor, or assignor in the vessel;
(5) state the interest sold, conveyed, mortgaged, or assigned; and
(6) be signed and acknowledged.
(c) If a bill of sale, conveyance, mortgage, assignment, or related document is filed that involves a vessel for which an application for documentation is filed, and the Secretary decides that the vessel cannot be documented by an applicant—
(1) the Secretary shall send notice of the Secretary's decision, including reasons for the decision, to each interested party to the instrument filed for recording; and
(2) 90 days after sending the notice as provided under clause (1) of this subsection, the Secretary—
(A) may terminate the filing; and
(B) may return the instrument filed without recording it under subsection (e) of this section.
(d) A person may withdraw an application for documentation of a vessel for which a mortgage has been filed under this section only if the mortgagee consents.
(e) The Secretary shall—
(1) record the bills of sale, conveyances, mortgages, assignments, and related instruments of a documented vessel complying with subsection (b) of this section in the order they are filed; and
(2) maintain appropriate indexes, for use by the public, of instruments filed or recorded, or both.
(f) On full and final discharge of the indebtedness under a mortgage recorded under subsection (e)(1) of this section, a mortgagee, on request of the Secretary or mortgagor, shall provide the Secretary with an acknowledged certificate of discharge of the indebtedness in a form prescribed by the Secretary. The Secretary shall record the certificate.
(g) The mortgage or related instrument of a vessel covered by a preferred mortgage under
(h) On full and final discharge of the indebtedness under a mortgage deemed to be a preferred mortgage under
(
| Revised section | Source section (U.S. Code) |
|---|---|
| 31321(a)(1) | 46:921(a) |
| 31321(a)(2) | 46:1012 |
| 31321(a)(3) | New |
| 31321(b) | 46:926(a), (b) |
| 31321(c), (d) | New |
| 31321(e) | 46:921(b) |
| 31321(f) | 46:925(b) |
| 31321(g) | New |
| 31321(h) | 46:925(b) |
Section 31321(a)(1) provides for the filing of a bill of sale, conveyance, mortgage, assignment, or related instrument of a vessel. This subsection makes substantive changes to law. The bill would allow a bill of sale, conveyance, mortgage, assignment, or related instrument to be filed at the same time an application for documentation under
Paragraph (2) provides that each bill of sale, conveyance, mortgage, assignment, or related instrument that is filed in substantial compliance with the requirements of this section is valid against any person from the time it is filed with the Secretary.
Paragraph (3) provides that it is the responsibility of the parties to an instrument to use diligence to ensure that the particulars of a filed instrument for which they are responsible are in substantial compliance. It is not the responsibility of the Secretary to validate the information in the instrument. If an instrument is later found to be invalid because it is not in substantial compliance, and the parties lose the benefits of a preferred mortgage, it is their fault, not the Secretary's.
Section 31321(b) sets out the requirements that an instrument must meet to be properly filed. To be filed the instruments must: (1) identify the vessel; (2) state the name and address of each party to the instrument; (3) state, if a mortgage, the amount of the direct or contingent obligations (in one or more units of account as agreed to by the parties) that is or may become secured by the mortgage, excluding interest, expenses, and fees; (4) state the interest of the grantor, mortgagor, or assignor; (5) state the interest sold, conveyed, mortgaged, or assigned; and (6) be signed and acknowledged. While most of these items are required under current law to be included in the index, and therefore required to be submitted to the Secretary to be recorded, this subsection makes a number of substantive changes to law. First, while vessel names are currently required to be submitted, this requirement has been broadened so that hull identification numbers and official numbers can be used to more specifically identify a vessel (since many vessels have the same name). Second, it requires the mortgage to state the maximum amount of the obligation, including principal, interest, fees, etc., that are secured by the mortgage. It also clarifies that the mortgage obligation may be payable in more than one unit of account, such as yen, franc, or special drawing right. Third, it recognizes that under some modern financing practices an instrument may not have a date of maturity. The requirement for supplying the date of maturity has been eliminated.
Section 31321(c) provides that if an instrument filed involves a vessel that has not yet been documented, and the Secretary decides that the vessel cannot be documented by the applicant, then the Secretary shall send notice of that denial to the parties, including the reasons for the Secretary's decision. If the parties have not corrected the deficiencies within 90 days, the Secretary may terminate the filing and return the instruments. This invalidates the instruments.
Section 31321(d) prohibits a person from withdrawing an application for documentation of a vessel for which a mortgage has been filed unless the mortgagee consents. Since the withdrawal will invalidate the mortgage, the mortgagee should be allowed to prohibit the withdrawal.
Section 31321(e) makes a substantive change to law. It requires the Secretary to record instruments in the order they are received for filing, not in the order in which they were received for recording. It also makes a substantive change by eliminating the specific indexes required under the law and substituting a general requirement for the Secretary to maintain indexes of instruments filed or recorded, or both, for use by the public. These indexes, prescribed by regulations, must be in keeping with U.S. obligations under treaties to which the United States is a party. Since section 104 [105] of this Act makes the existing rules and regulations applicable under this subsection, the current indexing system will be maintained that includes the names of the vessels; names of the parties to the instruments; time and date each instrument was received; the interest in the vessel that was sold, conveyed, mortgaged, or assigned; and the date of the maturity of the mortgage, if any. However, it allows the Secretary by regulation to automate the system with computers, as long as the new system provides the public with an adequate method of finding and examining these public records.
Section 31321(f) makes a substantive change to law by eliminating the requirement that a partial discharge of indebtedness be filed with the Secretary. The bill requires that on the full and final discharge of indebtedness the mortgagee, on request of the Secretary or mortgagor, shall provide the Secretary with a written, acknowledged certificate of discharge of the indebtedness. This subsection also makes a substantive change by requiring that the mortgagee, not the mortgagor, provide the certificate of discharge. The Secretary shall then record the certificate. However, this does not prohibit a person from submitting a certificate of discharge under subsection (a) since it is a related instrument. This subsection also makes a substantive change to law by eliminating the requirement that the discharge be endorsed on the vessel's certificate of documentation, and that the Customs Service only may clear a vessel after an endorsement has been made. This change is made because of the elimination of endorsements under section 31322.
house floor statement
Section 31321 has been changed to clarify that a mortgage, whenever made, must be filed to be valid against third parties. This clarification allows mortgage closings to occur previous to filing of an instrument, and to eliminate the need for a fictional simultaneous closing and filing.
Subsection (g) clarifies that if an application for documentation is filed for a vessel covered by a preferred mortgage under section 31322(d) (as enacted by this Act), the preferred mortgage must be filed with the Secretary at the same time the application for documentation is filed to be valid against third parties. If the preferred mortgage is filed with the Secretary at the time the documentation application is filed, it is valid from the time it became a preferred mortgage under section 31322(d).
When a State preferred mortgage under section 31322(d) is finally discharged, subsection (h) of this section requires the mortgagee to provide upon request to the Secretary or a State, whichever is more appropriate, an acknowledged certificate of discharge of indebtedness. This is necessary when a vessel in the system moves from a participating titling State and is not retitled in another participating State. In this case, there is no way to update the status of the indebtedness through the original titling State. The Secretary is required to accept this information to be maintained in the vessel identification system under
Editorial Notes
Amendments
2010—Subsec. (a)(1).
2002—Subsec. (a)(4)
1996—Subsec. (a).
1989—Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date
Section effective Jan. 1, 1989, not to affect any civil action filed before that date, and, insofar as applicable to vessels for which an application for documentation has been filed, effective Jan. 1, 1990, with further provision for an instrument filed before Jan. 1, 1989, but not recorded before that date, and with other qualifications, see section 107 of
§31322. Preferred mortgages
(a) A preferred mortgage is a mortgage, whenever made, that—
(1) includes the whole of the vessel;
(2) is filed in substantial compliance with
(3)(A) covers a documented vessel; or
(B) covers a vessel for which an application for documentation is filed that is in substantial compliance with the requirements of
(4) with respect to a vessel with a fishery endorsement that is 100 feet or greater in registered length, has as the mortgagee—
(A) a person eligible to own a vessel with a fishery endorsement under
(B) a State or federally chartered financial institution that is insured by the Federal Deposit Insurance Corporation;
(C) a farm credit lender established under title 12,
(D) a commercial fishing and agriculture bank established pursuant to State law;
(E) a commercial lender organized under the laws of the United States or of a State and eligible to own a vessel for purposes of documentation under
(F) a mortgage trustee under subsection (f) of this section.
(b) Any indebtedness secured by a preferred mortgage that is filed or recorded under this chapter, or that is subject to a mortgage, security agreement, or instruments granting a security interest that is deemed to be a preferred mortgage under subsection (d) of this section, may have any rate of interest to which the parties agree.
(c)(1) If a preferred mortgage includes more than one vessel or property that is not a vessel, the mortgage may provide for the separate discharge of each vessel and all property not a vessel by the payment of a part of the mortgage indebtedness.
(2) If a vessel covered by a preferred mortgage that includes more than one vessel or property that is not a vessel is to be sold on the order of a district court in a civil action in rem, and the mortgage does not provide for separate discharge as provided under paragraph (1) of this subsection—
(A) the mortgage constitutes a lien on that vessel in the full amount of the outstanding mortgage indebtedness; and
(B) an allocation of mortgage indebtedness for purposes of separate discharge may not be made among the vessel and other property covered by the mortgage.
(d)(1) A mortgage, security agreement, or instrument granting a security interest perfected under State law covering the whole of a vessel titled in a State is deemed to be a preferred mortgage if—
(A) the Secretary certifies that the State titling system complies with the Secretary's guidelines for a titling system under
(B) information on the vessel covered by the mortgage, security agreement, or instrument is made available to the Secretary under
(2) This subsection applies to mortgages, security agreements, or instruments covering vessels titled in a State after—
(A) the Secretary's certification under paragraph (1)(A) of this subsection; and
(B) the State begins making information available to the Secretary under
(3) A preferred mortgage under this subsection continues to be a preferred mortgage even if the vessel is no longer titled in the State where the mortgage, security agreement, or instrument granting a security interest became a preferred mortgage under this subsection.
(e) If a vessel is already covered by a preferred mortgage when an application for titling or documentation is filed—
(1) the status of the preferred mortgage covering the vessel to be titled in the State is determined by the law of the jurisdiction where the vessel is currently titled or documented; and
(2) the status of the preferred mortgage covering the vessel to be documented under
(f)(1) A mortgage trustee may hold in trust, for an individual or entity, an instrument or evidence of indebtedness, secured by a mortgage of the vessel to the mortgage trustee, provided that the mortgage trustee—
(A) is eligible to be a preferred mortgagee under subsection (a)(4), subparagraphs (A)–(E) of this section;
(B) is organized as a corporation, and is doing business, under the laws of the United States or of a State;
(C) is authorized under those laws to exercise corporate trust powers;
(D) is subject to supervision or examination by an official of the United States Government or a State;
(E) has a combined capital and surplus (as stated in its most recent published report of condition) of at least $3,000,000; and
(F) meets any other requirements prescribed by the Secretary.
(2) If the beneficiary under the trust arrangement is not a commercial lender, a lender syndicate or eligible to be a preferred mortgagee under subsection (a)(4), subparagraphs (A)–(E) of this section, the Secretary must determine that the issuance, assignment, transfer, or trust arrangement does not result in an impermissible transfer of control of the vessel to a person not eligible to own a vessel with a fishery endorsement under
(3) A vessel with a fishery endorsement may be operated by a mortgage trustee only with the approval of the Secretary.
(4) A right under a mortgage of a vessel with a fishery endorsement may be issued, assigned, or transferred to a person not eligible to be a mortgagee of that vessel under this section only with the approval of the Secretary.
(5) The issuance, assignment, or transfer of an instrument or evidence of indebtedness contrary to this subsection is voidable by the Secretary.
(g) For purposes of this section a "commercial lender" means an entity primarily engaged in the business of lending and other financing transactions with a loan portfolio in excess of $100,000,000, of which not more than 50 per centum in dollar amount consists of loans to borrowers in the commercial fishing industry, as certified to the Secretary by such lender.
(h) For purposes of this section a "lender syndicate" means an arrangement established for the combined extension of credit of not less than $20,000,000 made up of four or more entities that each have a beneficial interest, held through an agent, under a trust arrangement established pursuant to subsection (f), no one of which may exercise powers thereunder without the concurrence of at least one other unaffiliated beneficiary.
(
| Revised section | Source section (U.S. Code) |
|---|---|
| 31322(a)(1) | 46:922(a), (b) |
| 31322(a)(2) | New |
| 31322(b) | 46:926(d) |
| 31322(c)(1) | 46:922(e) |
| 31322(c)(2) | 46:922(f) |
| 31322(d), (e) | New |
Section 31322 sets out the conditions that must be met for a mortgage to be considered a preferred mortgage, and the types of endorsements that the Secretary must make on any certificate of documentation of a vessel that is to be covered by a preferred mortgage.
Subsection (a)(1) makes many substantive changes to law. While a preferred mortgage must still include the whole of a vessel, this subsection eliminates the exception of certain vessels under 25 gross tons. It allows a vessel for which an application for documentation has been filed to have a preferred mortgage. It allows a mortgage to be a preferred mortgage from the time all four conditions are met, rather than from when the vessel is finally documented. Therefore, a mortgage will usually attain its preferred status when the application for documentation and the instrument have been filed. This subsection changes the requirement that all documented vessels have as a mortgagee a person that is a citizen of the United States, as defined in section 2 of the Shipping Act, 1916, and allows a State, the United States Government, a federally insured depository institution, or any other person approved by the Secretary to be a mortgagee.
Subsection (a)(2) makes a substantive change to law exempting fishing, fish processing, and fish tender vessels, and vessels operated only for pleasure from the mortgagee restrictions, since these vessels do not have significant national defense use.
Subsection (b) permits a preferred mortgage to have any rate of interest that is agreeable to the parties to the mortgage. This subsection makes no substantive change to law.
Subsection (c)(1) applies to a mortgage that covers more than one vessel or additional property that is not a vessel. This subsection allows a preferred mortgage to include a separate discharge of the additional vessels and property.
Subsection (c)(2) applies when a preferred mortgage covers more than one vessel, does not provide for the separate discharge of a vessel, and is to be sold by court order. The amount of the mortgage indebtedness attributable to a vessel is that part of the indebtedness, increased by 20 percent, that the court determines approximates the value that the particular vessel bears to the value of all the vessels and property covered by the mortgage. In other words, the amount to be set by the court is the estimated value of the one vessel plus 20 percent of that value to assure sufficiency of collateral.
This section also makes a substantive change by eliminating the requirement that a vessel's certificate of documentation be endorsed with information from the mortgage. This change is made since most of the information is out of date when examined, and since a mortgage must be carried on self-propelled vessels under section 31324(b). This section also eliminates the requirement for the inclusion of an affidavit of good faith. However, both criminal and civil penalties have been added [in section 31330] to help ensure that there is not fraud. This section also eliminates the requirement that a preferred mortgage include a separate discharge for additional property that is not a vessel, the requirement that the mortgage does not stipulate that the mortgagee waives the mortgage's preferred status; and the requirement for clearing vessels with endorsed documents through Customs.
house floor statement
Under section 31322(a)(2) a "vessel operated only for pleasure" is exempt from any restrictions on who can be a mortgagee. This standard is the same as used for the documentation of a recreational vessel under
Under subsection (c)(2), if a vessel covered by a preferred mortgage that includes more than one vessel or property that is not a vessel is to be sold on the order of a district court in rem, and there is not a separate discharge, then the mortgage constitutes a lien on that vessel in the full amount of the outstanding mortgage indebtedness, and an allocation of mortgage indebtedness for purposes of a separate discharge may not be made. This change is made to eliminate the formula that did not work and to allow the vessel to be sold free and clear, regardless of the amount of the sale.
Under subsection (d) of section 31322, a mortgage or other instrument representing financing of a vessel under State law that is made under applicable State law and covers the whole of a vessel titled in a State is deemed to be a preferred mortgage if two conditions are fulfilled. The first condition is that the Secretary must certify that the State in which the vessel is titled has a titling system that complies with the Secretary's vessel titling guidelines established under
Paragraph (2) of subsection (d) clarifies that mortgages or other financing instruments may obtain preferred status under subsection (d) if they cover vessels titled in a State after the Secretary certifies the compliance of the State's titling system, and the State begins making vessel identification information available to the Secretary. Preferred mortgage status can only be attained when these two conditions are in effect. Mortgages or financing instruments made prior to that are not preferred and, if these two conditions cease to exist, new mortgages or forecasting instruments made after that time cannot attain preferred status.
The law of the titling State controls the making of the preferred mortgage or financing instrument under this subsection. No additional Federal recording requirements may be imposed for the mortgage or instrument to obtain preferred status under this subsection.
Paragraph (3) of this subsection ensures that a preferred mortgage under this subsection retains that status if the vessel covered by the mortgage later relinquishes its title. If the vessel is subsequently documented, the continuing validity of the mortgage is determined by section 31321(g) (as enacted by this Act).
Subsection (e) of section 31322 clarifies the validity of preferred mortgages made under subsection (d). In the case of a State titled vessel covered by a preferred mortgage for which a new titling application is filed, the validity of the mortgage is governed by the law of the titling State in which the mortgage became preferred. In the case of a documented vessel covered by a preferred mortgage for which an application for a State title is filed, or a State titled vessel covered by a preferred mortgage for which an application for documentation is filed, the validity of the preferred mortgage is governed by
Information on vessels with preferred mortgages made under State law will be available to creditors from the vessel identification system under
Editorial Notes
Amendments
2018—Subsec. (a)(4)(B).
2006—Subsec. (a)(4)(A).
Subsec. (a)(4)(E).
Subsec. (d)(1)(A).
Subsec. (f)(2).
2001—Subsec. (a)(4)(B) to (F).
"(B) a state or federally chartered financial institution that satisfies the controlling interest criteria of section 2(b) of the Shipping Act, 1916 (
"(C) a person that complies with the provisions of
Subsecs. (f) to (h).
1999—Subsec. (a)(4).
1998—Subsec. (a)(4).
Subsec. (b).
Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (d)(3).
1996—Subsec. (a).
1989—Subsec. (a)(2).
Subsec. (d)(1).
Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 2001 Amendment
Effective Date of 1998 Amendment
Effective Date
Section effective Jan. 1, 1989, not to affect any civil action filed before that date, and, insofar as applicable to vessels for which an application for documentation has been filed, effective Jan. 1, 1990, with other exceptions and qualifications, see section 107 of
§31323. Disclosing and incurring obligations before executing preferred mortgages
(a) On request of the mortgagee and before executing a preferred mortgage, the mortgagor shall disclose in writing to the mortgagee the existence of any obligation known to the mortgagor on the vessel to be mortgaged.
(b) After executing a preferred mortgage and before the mortgagee has had a reasonable time to file the mortgage, the mortgagor may not incur, without the consent of the mortgagee, any contractual obligation establishing a lien on the vessel except a lien for—
(1) wages of a stevedore when employed directly by a person listed in
(2) wages for the crew of the vessel;
(3) general average; or
(4) salvage, including contract salvage.
(c) On conviction of a mortgagor under section 31330(a)(1)(A) or (B) of this title for violating this section, the mortgage indebtedness, at the option of the mortgagee, is payable immediately.
(
| Revised section | Source section (U.S. Code) |
|---|---|
| 31323(a) | 46:924(1) |
| 31323(b) | 46:924(2) |
| 31323(c) | 46:941(b) (last sentence) |
Section 31323(a) requires the mortgagor to disclose any obligations on the vessel before executing a preferred mortgage. This subsection makes no substantive change to law.
Section 31323(b) provides that, after executing a preferred mortgage, the mortgagor may not incur, without consent of the mortgagee, any contractual obligations establishing a lien on the vessel—except a lien for stevedore wages, crew wages, general average, and salvage. The only substantive change to law made by this subsection is that the reasonable time to record a mortgage is changed to a reasonable time to file the mortgage, and the elimination of the reference to endorsements. These changes are in keeping with the changes made in section 31322.
Section 31323(c) provides that if a mortgagor is convicted of a violation of this section, then the mortgage indebtedness, at the option of the mortgagee, is payable immediately. This subsection makes no substantive change to law.
Statutory Notes and Related Subsidiaries
Effective Date
Section effective Jan. 1, 1989, with certain exceptions and qualifications, see section 107 of
§31324. Retention and examination of mortgages of vessels covered by preferred mortgages
(a) On request, the owner, master, or individual in charge of a vessel covered by a preferred mortgage shall permit a person to examine the mortgage if the person has business with the vessel that may give rise to a maritime lien or the sale, conveyance, mortgage, or assignment of a mortgage of the vessel.
(b) A mortgagor of a preferred mortgage covering a self-propelled vessel shall use diligence in keeping a certified copy of the mortgage on the vessel.
(
| Revised section | Source section (U.S. Code) |
|---|---|
| 31324 | 46:923 |
Section 31324(a) provides for examination of mortgages of a vessel that is covered by a preferred mortgage by persons that have business with the vessel that may give rise to a maritime lien or the sale, conveyance, mortgage, or assignment of the mortgage. This subsection makes no substantive change to law.
Section 31324(b) requires that a certified copy of the mortgage must be on board a self-propelled vessel. This subsection makes no substantive change to law.
Statutory Notes and Related Subsidiaries
Effective Date
Section effective Jan. 1, 1989, with certain exceptions and qualifications, see section 107 of
§31325. Preferred mortgage liens and enforcement
(a) A preferred mortgage is a lien on the mortgaged vessel in the amount of the outstanding mortgage indebtedness secured by the vessel.
(b) On default of any term of the preferred mortgage, the mortgagee may—
(1) enforce the preferred mortgage lien in a civil action in rem for a documented vessel, a vessel to be documented under
(2) enforce a claim for the outstanding indebtedness secured by the mortgaged vessel in—
(A) a civil action in personam in admiralty against the mortgagor, maker, comaker, or guarantor for the amount of the outstanding indebtedness or any deficiency in full payment of that indebtedness; and
(B) a civil action against the mortgagor, maker, comaker, or guarantor for the amount of the outstanding indebtedness or any deficiency in full payment of that indebtedness; and
(3) enforce the preferred mortgage lien or a claim for the outstanding indebtedness secured by the mortgaged vessel, or both, by exercising any other remedy (including an extrajudicial remedy) against a documented vessel, a vessel for which an application for documentation is filed under
(A) the remedy is allowed under applicable law; and
(B) the exercise of the remedy will not result in a violation of
(c) The district courts have original jurisdiction of a civil action brought under subsection (b)(1) or (2) of this section. However, for a documented vessel, a vessel to be documented under
(d)(1) Actual notice of a civil action brought under subsection (b)(1) of this section, or to enforce a maritime lien, must be given in the manner directed by the court to—
(A) the master or individual in charge of the vessel;
(B) any person that recorded under section 31343(a) or (d) of this title an unexpired notice of a claim of an undischarged lien on the vessel; and
(C) a mortgagee of a mortgage filed or recorded under
(2) Notice under paragraph (1) of this subsection is not required if, after search satisfactory to the court, the person entitled to the notice has not been found in the United States.
(3) Failure to give notice required by this subsection does not affect the jurisdiction of the court in which the civil action is brought. However, unless notice is not required under paragraph (2) of this subsection, the party required to give notice is liable to the person not notified for damages in the amount of that person's interest in the vessel terminated by the action brought under subsection (b)(1) of this section. A civil action may be brought to recover the amount of the terminated interest. The district courts have original jurisdiction of the action, regardless of the amount in controversy or the citizenship of the parties. If the plaintiff prevails, the court may award costs and attorney fees to the plaintiff.
(e) In a civil action brought under subsection (b)(1) of this section—
(1) the court may appoint a receiver and authorize the receiver to operate the mortgaged vessel and shall retain in rem jurisdiction over the vessel even if the receiver operates the vessel outside the district in which the court is located; and
(2) when directed by the court, a United States marshal may take possession of a mortgaged vessel even if the vessel is in the possession or under the control of a person claiming a possessory common law lien.
(f)(1) Before title to the documented vessel or vessel for which an application for documentation is filed under
(2) Failure to give notice as required by this subsection shall not affect the transfer of title to a vessel. However, the rights of any holder of a maritime lien or a preferred mortgage on the vessel shall not be affected by a transfer of title by an extrajudicial remedy exercised under this section, regardless of whether notice is required by this subsection or given.
(3) The Secretary shall prescribe regulations establishing the time and manner for providing notice under this subsection.
(
| Revised section | Source section (U.S. Code) |
|---|---|
| 31325(a) | 46:951 (1st sentence) |
| 31325(b)(1) | 46:951 (2d sentence) |
| 31325(b)(2) | 46:954(a) |
| 31325(b)(3) | New |
| 31325(c) | 46:951 (3d sentence) |
| 31325(d) | 46:951 (4th to 6th sentences) |
| 31325(e) | 46:952 (1st, 2d sentences) |
Section 31325 provides for the enforcement of a preferred mortgage lien.
Section 31325(a) makes a "preferred mortgage" a lien on the vessel in the amount of the mortgage indebtedness secured by the vessel outstanding at foreclosure. This subsection makes no substantive change to law.
Section 31325(b) provides that, on default of any term, the mortgagee may enforce the preferred mortgage lien in a civil action in rem, or in personam in admiralty against the mortgagor, comaker, or guarantor for the amount of the outstanding indebtedness secured by the vessel or any deficiency in paying off that indebtedness. This subsection makes a substantive change to law by allowing a nonadmiralty civil action to be brought against the mortgagor, comaker, or guarantor for the amount of the outstanding indebtedness secured by the vessel or any deficiency in paying off that indebtedness. This change allows an action to be brought even when the vessel is outside U.S. jurisdiction. This section will also allow the action to be brought against the comaker or guarantor of the mortgage.
Section 31325(c) provides for original and exclusive jurisdiction by a district court, to the exclusion of the courts of a State for civil actions brought in rem. It also provides for original jurisdiction for civil actions brought in personam in admiralty and civil actions brought under subsection (b)(3). This subsection makes a substantive change to law by broadening the jurisdiction to courts in the territories, as defined in section 31301, as well as giving original jurisdiction to the district courts in nonadmiralty civil actions brought to enforce the preferred mortgage lien.
Subsection (d) provides that actual notice of a civil action in rem to enforce a maritime lien must be given in a manner directed by the court to the master, individual in charge of the vessel, to any person that recorded a notice of a claim of an undischarged lien, and, for the first time, to the mortgagee of a mortgage filed with the Secretary. This notice is not required if, after a search is made that is satisfactory to the court, the person entitled to notice is not found in the United States. Failure to give notice does not affect the court's jurisdiction. However, the mortgagor is still liable to the person not notified for damages in the amount of that person's interest in the vessel that was terminated by the civil action in rem, and a civil action may still be brought to recover the amount of the terminated interest. The district courts have original jurisdiction of the action, regardless of the amount in controversy or the citizenship of the parties. If plaintiff prevails, the court shall award costs and attorneys fees to the plaintiff.
Subsection (e) provides that, in a civil action in rem, the court may appoint a receiver and authorize operation of the vessel. When directed by the court, a United States marshal may take possession—even if the vessel is in the possession of or under the control of a person claiming a possessory common law lien. This subsection makes a substantive change to law by allowing the court to retain in rem jurisdiction over the vessel even if the receiver operates the vessel outside the district in which the court is located.
house floor statement
Subsection (c) of this section clarifies that the district courts have original jurisdiction for a civil action under subsection (b) of this section, and exclusive jurisdiction in the case of vessels documented or to be documented under
Editorial Notes
Amendments
2008—Subsec. (b)(3)(B).
2006—Subsec. (b)(3)(B).
2002—Subsec. (d)(1)(B).
Subsec. (f)(1).
1998—Subsecs. (b)(1), (3), (c).
1996—Subsec. (b).
Subsec. (b)(1).
Subsec. (b)(3).
Subsec. (f).
1989—Subsecs. (b), (c).
"(b) On default of any term of the preferred mortgage, the mortgagee may enforce the preferred mortgage lien in—
"(1) a civil action in rem for a documented vessel or a vessel to be documented under
"(2) a civil action in personam in admiralty against the mortgagor, comaker, or guarantor for the amount of the outstanding indebtedness secured by the mortgaged vessel or any deficiency in full payment of that indebtedness; and
"(3) a civil action against the mortgagor, comaker, or guarantor for the amount of the outstanding indebtedness secured by the mortgaged vessel or any deficiency in full payment of that indebtedness.
"(c) The district courts have original jurisdiction of a civil action brought under subsection (b) of this section. However, for documented vessels or vessels to be documented under
Statutory Notes and Related Subsidiaries
Effective Date of 2008 Amendment
Amendment by
Effective Date of 2002 Amendment
Effective Date
Section effective Jan. 1, 1989, with certain exceptions and qualifications, see section 107 of
Construction of 1996 Amendment
§31326. Court sales to enforce preferred mortgage liens and maritime liens and priority of claims
(a) When a vessel is sold by order of a district court in a civil action in rem brought to enforce a preferred mortgage lien or a maritime lien, any claim in the vessel existing on the date of sale is terminated, including a possessory common law lien of which a person is deprived under
(b) Each of the claims terminated under subsection (a) of this section attaches, in the same amount and in accordance with their priorities to the proceeds of the sale, except that—
(1) the preferred mortgage lien, including a preferred mortgage lien on a foreign vessel whose mortgage has been guaranteed under
(2) for a foreign vessel whose mortgage has not been guaranteed under
(
| Revised section | Source section (U.S. Code) |
|---|---|
| 31326(a) | 46:953(b), 961(c) |
| 31326(b)(1) | 46:953(b) |
| 31326(b)(2) | 46:951 (2d par. proviso) |
Section 31326(a) provides for a court-ordered sale to enforce a preferred mortgage lien or a maritime lien and the priority of claims. When a mortgaged vessel is sold by court order in a civil action in rem, any prior claim in the vessel is terminated—including any possessory common law lien. This subsection makes a substantive change to law by making the process the same for maritime liens as was provided for preferred mortgage liens. This eliminates the requirement for making a new mortgagee for a court sale to enforce a maritime lien. This section also broadens the jurisdiction to courts in the territories, as defined in section 31301.
Section 31326(b)(1) provides that each of these terminated claims attaches, in the same amount and priority, to the proceeds of sale—except that the preferred mortgage lien always has priority over these other claims. However, the preferred mortgage lien is still subordinated to expenses and fees allowed by the court, costs imposed by the court, and any preferred maritime liens. This may include statutory fees such as the fee of the United States Marshal under
Section 31326(b)(2) provides in the case of a foreign vessel, the preferred mortgage lien is also subordinated to a maritime lien for necessaries performed or supplied for the vessel in the United States. "Provided" has been substituted for "provided or supplied" for consistency in usage. Except for broadening its coverage under subsection (a), this paragraph makes no substantive change to law.
Editorial Notes
Amendments
2006—Subsec. (b)(1).
Subsec. (b)(2).
1993—Subsec. (b)(1).
Subsec. (b)(2).
Statutory Notes and Related Subsidiaries
Effective Date
Section effective Jan. 1, 1989, with certain exceptions and qualifications, see section 107 of
§31327. Forfeiture of mortgagee interest
The interest of a mortgagee in a documented vessel or a vessel covered by a preferred mortgage under
(
| Revised section | Source section (U.S. Code) |
|---|---|
| 31327 | 46:961(b) |
Section 31327 provides for forfeiture of the mortgagee's interest if the mortgagee authorized, consented, or conspired to do the act, failure, or omission that is the basis of the violation that caused forfeiture of the vessel. This section makes no substantive change to law.
Statutory Notes and Related Subsidiaries
Effective Date
Section effective Jan. 1, 1989, with certain exceptions and qualifications, see section 107 of
[§31328. Repealed. Pub. L. 104–324, title XI, §1113(b)(1), Oct. 19, 1996, 110 Stat. 3970 ]
Section,
§31329. Court sales of documented vessels
(a) A documented vessel may be sold by order of a district court only to—
(1) a person eligible to own a documented vessel under
(2) a mortgagee of that vessel.
(b) When a vessel is sold to a mortgagee not eligible to own a documented vessel—
(1) the vessel must be held by the mortgagee for resale;
(2) the vessel held by the mortgagee is subject to
(3) the sale of the vessel to the mortgagee is not a sale to a person not a citizen of the United States under
(c) Unless waived by the Secretary of Transportation, a person purchasing a vessel by court order under subsection (a)(1) of this section or from a mortgagee under subsection (a)(2) of this section must document the vessel under
(d) The vessel may be operated by the mortgagee not eligible to own a documented vessel only with the approval of the Secretary of Transportation.
(e) A sale of a vessel contrary to this section is void.
(f) This section does not apply to a documented vessel that has been operated only for pleasure.
(
| Revised section | Source section (U.S. Code) |
|---|---|
| 31329 | 46:961(f) |
Section 31329 sets out certain restrictions on the court sale of a documented vessel.
Section 31329(a) restricts the sale only to a person eligible to own a documented vessel under
Section 31329(b) sets out conditions on the sale to a trustee acting as a holder of a preferred mortgage on a documented vessel for the benefit of a person not eligible to be the holder of a preferred mortgage on that vessel. First, the vessel must be held by the trustee for resale. Second, while being held for resale, the vessel is subject to requisition or purchase during a national emergency under section 902 of the Merchant Marine Act, 1936 (46 App. U.S.C. 1242). And third, the sale of the vessel to the trustee is not a sale foreign within the terms of the First Proviso of section 27 of the Merchant Marine Act, 1920 (46 App. U.S.C. 883).
Section 31329(c) requires a person that is eligible to document the vessel that purchases a vessel from the court to document the vessel. This subsection also requires the person purchasing the vessel from the trustee to document it, thereby restricting to whom the trustee can sell the vessel. Many documented vessels have no national defense utility, such as recreational vessels and fishing vessels. Therefore, both of these restrictions can be waived by the Secretary. As previously discussed, these waivers can be on a case-by-case basis or with a blanket waiver.
Section 31329(d) prohibits a trustee from operating the vessel without the approval of the Secretary.
Section 31329(e) voids any sale that is done contrary to this section.
house floor statement
Under section 31329(d) a vessel may be operated by the trustee only with the approval of the Secretary. Under current law a vessel may be documented by a trust if all of the members of the trust are citizens of the United States. If the trust buying the vessel at the court sale includes foreign investors, the vessel cannot be documented. The Committee intends in this section that the vessel will only be "operated" in a maintenance manner, but not in a commercial service.
Editorial Notes
Amendments
2010—Subsec. (d).
2006—Subsec. (a)(1).
Subsec. (b)(2).
Subsec. (b)(3).
1996—Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date
Section effective Jan. 1, 1989, with certain exceptions and qualifications, see section 107 of
§31330. Penalties
(a)(1) A mortgagor shall be fined under title 18, imprisoned for not more than 2 years, or both, if the mortgagor—
(A) with intent to defraud, does not disclose an obligation on a vessel as required by
(B) with intent to defraud, incurs a contractual obligation in violation of
(C) with intent to hinder or defraud an existing or future creditor of the mortgagor or a lienor of the vessel, files a mortgage with the Secretary.
(2) A mortgagor is liable to the United States Government for a civil penalty of not more than $10,000 if the mortgagor—
(A) does not disclose an obligation on a vessel as required by
(B) incurs a contractual obligation in violation of
(C) files with the Secretary a mortgage made not in good faith.
(b)(1) A person that knowingly violates
(2) A person violating
(3) A vessel involved in a violation under
(c) If a person not an individual violates this section, the president or chief executive of the person also is subject to any penalty provided under this section.
(
| Revised section | Source section (U.S. Code) |
|---|---|
| 31330(a) | 46:941(b) (1st sentence) |
| 31330(b) | New |
| 31330(c) | 46:941(b) (1st sentence) |
Section 31330(a) provides for criminal penalties for not disclosing obligations, incurring contractual obligations in violation of section 31323(b), and filing a mortgage made not in good faith. This subsection makes a substantive change to law by adding civil penalties and by making it a crime to record with the Secretary of Transportation a mortgage made not in good faith with the intent to hinder an existing or future creditor of the mortgagor or a lienor of the vessel. This is done since the affidavit of good faith has been eliminated from the elements of a preferred mortgage.
Section 31330(b) adds criminal and civil penalties for violating the sale and trust requirements under sections 31328 and 31329. It also makes a vessel and its equipment involved in those violations subject to seizure by the Government.
Section 31330(c) makes the president or chief executive officer of a corporation or association liable as a mortgagor for the penalties under this section.
house floor statement
Subsection (a) of this section adds criminal and civil penalties for a preferred mortgagor's failure to carry out certain requirements under
Editorial Notes
Amendments
2010—Subsec. (a)(1)(B).
Subsec. (a)(1)(C).
Subsec. (a)(1)(D).
Subsec. (a)(2)(B) to (D).
1996—Subsec. (b).
Statutory Notes and Related Subsidiaries
Effective Date
Section effective Jan. 1, 1989, with certain exceptions and qualifications, see section 107 of