Opinion ID: 293073
Heading Depth: 1
Heading Rank: 1

Heading: Background — Corporate Craft

Text: 2 We are called upon by mortgagee 1 to extricate it from the intricate labyrinth of corporate legerdemain into which it unwittingly wandered, through the tacit encouragement and direction of a corporate triad — Winsen, Ltd., Winson, Inc., and Caribbean Tanker Service, Inc., 2 — determined to have its barge and own it too, all at the expense of the mortgagee in the amount of a L 15,000 ($36,000.00 American) mortgage debt. 3 Omnipresent in the background and forefront of these three entities is the ubiquitous Joe Brown, organizer, officer, acting business representative, and principal or substantial stockholder. 3 4 In October 1964 the steel barge Star 800, then owned by Winsen, was brought to Miami and berthed at Winson's dock. With the barge still at Winson's dock Winsen, the barge owner, acting through its President Brown executed on May 10, 1965 a foreign ship mortgage on the barge with mortgagee. 4 According to Brown's testimony sometime thereafter in May 1965 he disassociated himself from Winsen. 5 But if this occurred, the mortgagee was unaware of it. 5 Though the warranty in the mortgage was sufficient guaranty for mortgagee that mortgagor would in effect be responsible for any subsequent obligations incurred against the barge which would impair the mortgage security value, the record contains no evidence which did, or should have, placed the mortgagee on constructive or actual notice of the existence of any claim for wharfage or a superior maritime lien. Brown on the other hand, as a result of the interaction between Winsen and Winson, both of which he was president and acting business agent at the time the mortgage was created, was patently aware that Winsen had never paid any of its wharfage obligation to Winson. What Brown knew so knew Winsen and Winson. 6 On February 28, 1968 Brown, acting in his capacity as president of Winson, prepared invoices for the wharfage and repairs that had been accruing against Winsen's barge over the previous 46 months. The claim then totaled about $9,500.00. 6 This was the first demonstrable evidence showing that Winsen actually owed for wharfage. It was, moreover, the first claim for wharfage even on Brown's testimony. He testified that Winsen had made no payment to Winson during the 46 months that the barge had been berthed at its dock. On the other hand, Winson had never made a demand for payment, either written or oral. On the same date that Brown had prepared the invoices, Winson (through Brown) assigned them to Caribbean of which Brown was then the acting business agent, an officer, and substantial or majority stockholder. 7 There is no evidence of the amount of consideration that passed in the assignment, but the invoices had written on them THIS IS ASSIGNED FOR VALUE RECEIVED. The District Court found as a fact that an assignment had been consummated between Winson and Caribbean, but made no finding on consideration. 7 Since a valid and unqualified assignment operates to transfer to the assignee no greater right or interest than was possessed by the assignor, 6 C.J.S. Assignments § 82, the most Caribbean can claim is that it stands in the shoes of Winson which at best, were ill-fitting if not worn out from the Winsen-Winson dealings at and subsequent to the creation of the ship mortgage, plus even worse, Caribbean was not an arms-length-dealing stranger. 8 This assignment, as was the supposed lien, was a secret one evidenced only by the invoices, which were immediately filed in the offices of Winson and Caribbean, where they remained since the date of the assignment until they were exhumed for the trial. 8 In March, 1968 Winsen transferred title of the barge to Winson. The consideration was $10.00, good will, and the obligation to clear the mortgage with Barclay's Bank. Thus Winson, a short period after it had assigned away its maritime lien for no visible consideration, purchased the barge for a consideration of $10.00, with full knowledge that the purchase was subject to the existing foreign ship mortgage of $36,000 and a possible maritime lien in the amount of $9,475. The fine hand of Brown runs throughout this and more so it was the fine hand of Brown that successfully concealed from the Court — an admiralty Court exercising its vast equitable powers, Hadjipateras v. Pacifica, S.A., 5 Cir., 1961, 290 F.2d 697, 1961 A.M.C. 1417 — the real facts as to the official title record of the barge as bearing on the persons executing the bill of sale for Winsen to Winson and the circumstances surrounding it. 9 9 Brown's next furtive step was in March 1968 when, acting for Winson, he executed a bill of sale on the barge to John Wolf in consideration of $8,900.00 cash. Even this could not be clean cut. For some unexplained reason the date on the bill of sale was July 1968. In the bill of sale Brown represented the Star 800 to be free and clear of all liens. The barge was never delivered to Wolf because it was subsequently libeled by the mortgagee for the purpose of foreclosing on the foreign ship mortgage. Consequently Wolf instituted criminal charges 10 against Brown that since have been dropped in accordance with Brown's agreement to reimburse Wolf. 11 10 Meanwhile back with the mortgagees, on August 20, 1968 a libel was instituted against Winsen in personam and against the barge in rem to foreclose on the mortgage. Caribbean then initiated its libel in rem against Winson on September 27, 1968 in order to enforce its assigned maritime lien for dockage and repairs but failed to file a notice of pending litigation as is required by Rule 6, subd. D of the Local Rules for the Southern District of Florida. 12 11 No claim or answer having been filed the mortgagee obtained a default decree in its libel against Winsen and the barge, and the marshal, who had custody of the barge, was ordered to sell it at public sale. The mortgagee was high bidder and purchased the barge. Caribbean thereupon, in the person of Brown, objected to confirmation of the sale and moved for a consolidation of the two actions. The District Court set aside the sale and consolidated the libels for the purpose of determining priority as between the lien claimants. The Judge found, as a fact, that Winson had acquired a valid maritime lien and, that it had assigned the lien to Caribbean, and held the maritime lien to be first and best, thereby superior to the ship mortgage. Caribbean was allowed to bid up to the amount of its lien ($10,516.02) without cash deposit, and was high bidder. Thus it now owns the Star 800 for which it paid no cash or other cognizable consideration, and in one fell swoop extinguished the claimed debt that was originally due from Winsen to Winson, now due from Winson to Caribbean, and completely expunged the foreign ship mortgage in the amount of L 15,000 ($36,000.00) to the total loss of the mortgagee.