The law of the sea

by George L. Canfield; J. Y. Brinton; George W. Dalzell

9. Priorities.—

Important priorities exist among maritime liens and these are adjusted when the ship is sold in admiralty to satisfy her debts. The purchaser at an admiralty sale, as elsewhere stated, takes the ship free of all existing liens; the proceeds of the sale are distributed among the lienors according to their priorities, after deducting costs and expenses.

Liens for torts take precedence over all prior liens, and the later lien for tort will be preferred to an earlier if there has been an absence of diligence in enforcing it. The John G. Stevens, 170 U. S. 113, is the leading case on the priority of liens against the offending vessel for torts committed by her. Mr. Justice Gray held:

But the question we have to deal with is whether the lien for damages by the collision is to be preferred to the lien for supplies furnished before the collision.

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The collision, as soon as it takes place, creates, as security for the damages, a maritime lien or privilege, jus in re, a proprietary interest in the offending ship, and which, when enforced by admiralty process in rem, relates back to the time of the collision. The offending ship is considered as herself the wrongdoer, and is herself bound to make compensation for the wrong done. The owner of the injured vessel is entitled to proceed in rem against the offender, without regard to the question who may be her owners, or to the division, the nature, or the extent of their interests in her. With the relations of the owners of those interests, as among themselves, the owner of the injured vessel has no concern. All the interests existing at the time of the collision in the offending vessel, whether by way of part ownership, of mortgage, of bottomry bond, or of other maritime liens for repairs or supplies, arising out of contract with the owners or agents of the vessel, are parts of the vessel herself, and as such are bound by and responsible for her wrongful acts. Any one who had furnished necessary supplies to the vessel before the collision, and had thereby acquired, under our law, a maritime lien or privilege in the vessel herself, was, as was said in The Bold Buccleugh [7 Moore P. C. 267] before cited, of the holder of an earlier bottomry bond, under the law of England, "so to speak, a part owner in interest at the date of the collision and the ship in which he and others were interested was liable to its value at that date for the injury done without reference to his claim [7 Moore P. C. 285]."

Liens arising out of matters of contract will be paid in substantially the following order:—

Salvage.

Sailors' wages and wages of a stevedore when employed by master or owner.

"Preferred mortgages" (see below).

Pilotage and Towage.

Supplies and Repairs.

Advances of Money.

Insurance premiums (where a lien).

Mortgages not preferred.

It may be regarded as the grand rule of priority among maritime liens, that they are to be paid in the inverse order of the dates at which they accrued. Liens arising on a later voyage have priority over liens of an earlier voyage, and the later in point of time which have been for the preservation or improvement of the vessel, are to be paid in the inverse order of the dates at which they accrued, the later debt being paid in full before anything is allowed to the lien of an inferior grade. The reason for this is because the loan, or service, or whatever created the later lien has tended to preserve or improve the first lien-holder in security for his lien. He is to be preferred who contributed most immediately to the preservation of the thing.

An important qualification of the rule heretofore governing the priority of maritime liens on American vessels, is made by the Ship Mortgage Act of 1920 (Merchant Marine Act, see Appendix). By this act certain mortgages which conform to its provisions are called "preferred mortgages" and are made maritime liens enforceable in admiralty. In the order of priority, a preferred mortgage lien comes next after liens arising out of tort, for wages of a stevedore when employed directly by the owner, operator, master, ship's husband, or agent of the vessel, for wages of the crew, for general average and for salvage. Liens for repairs, pilotage, towage, freight and charter hire come in subsequent to "preferred mortgages."

The subjects of liens for salvage, wages, pilotage and towage, advances, mortgages, freight and charter hire are discussed under the appropriate titles in this book.