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MARYLAND NATL. BANK v. DAROVEC

April 27, 1993

MARYLAND NATIONAL BANK, Plaintiff,
v.
JOSEPH M. DAROVEC and VICTORIA A. LOGUIDICE DAROVEC, Defendants.



The opinion of the court was delivered by: WAYNE R. ANDERSEN

 This case is before the court on the parties' cross-motions for summary judgment. Defendants have also filed a motion to strike the affidavits of Thomas Sweeney and Michele Meredith which were filed in support of plaintiff's motion for summary judgment. For the following reasons, we grant the defendants' motion for summary judgment and deny plaintiff's motion for summary judgment. We grant in part and deny in part defendants' motion to strike the affidavits.

 BACKGROUND

 The material facts of this case are not in dispute. On or about July 13, 1988 defendants Joseph Darovec and Victoria Loguidice Darovec executed and delivered to plaintiff Maryland National Bank ("MNB") a certain Marine Promissory Note in consideration of a loan in the amount of $ 94,000 made by MNB to defendants. Defendants then executed and delivered a Marine Security Agreement to MNB on July 13, 1988, granting MNB a first lien upon a certain vessel duly documented and licensed as a vessel of the United States of America named Grape Vine, Official No. 938931.

 On December 5, 1988 Irmgard McNally, attorney in fact for the defendants, executed a first preferred mortgage on the vessel on behalf of defendants and in favor of MNB. Said preferred mortgage was duly filed with the United States Coast Guard, Office of Vessel Documentation Cleveland Ohio and was recorded and indexed on December 8, 1988 at 8:45 a.m. in Book PM-58, Instrument 35.

 Defendants defaulted in making payment to MNB under the terms of the aforesaid marine promissory note. MNB claims that the balance due, after all credits and set offs, from defendants to MNB is $ 68,736.19 which balance is in default. On May 11, 1990, payments on the marine promissory note being in default, a notice of intention to repossess the vessel was sent to the debtors. The May 11, 1990 letter informed defendants of the steps necessary to cure their default and recover the boat. MNB repossessed the vessel by self help without the use of force or breach of the peace on or about May 30, 1990.

 A notice of repossession and resale of the vessel dated June 28, 1990 was mailed to defendants on June 29, 1990. On or about September 26, 1991, MNB caused the vessel to be sold by private sale to Brian Stover and Kathryn Stover. MNB claims that its repossession, sale, and application of proceeds of resale of the aforesaid vessel was in compliance with Maryland Commercial Code § 12-1021.

 On March 5, 1992, MNB forwarded to defendants a letter advising them of the sale and demanding the deficiency amount due under the Marine Promissory Note of $ 68,736.19. Said deficiency has not been paid to date by defendants. On March 24, 1992, MNB brought this action seeking to recover the alleged $ 68,736.19 deficiency.

 DISCUSSION

 Summary judgment is appropriate when the movant demonstrates "the absence of a genuine issue as to any material fact, and for these purposes the material . . . lodged must be viewed in the light most favorable to the opposing party." Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970). The nonmoving party may not merely rest on its pleadings, but must demonstrate, through specific evidence, that there remains a genuine issue of triable fact. Lister v. Stark, 942 F.2d 1183, 1187 (7th Cir. 1991) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 324, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)); Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir. 1991). "One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims . . . ." Celotex, 477 U.S. at 323-24.

 A. The Ship Mortgage Act

 The Ship Mortgage Act, 46 U.S.C. §§ 31301-31343 (1989) (the "Act"), was originally enacted in 1920 to bring ship mortgages within the jurisdiction of the admiralty courts. The object of the Act is to make the mortgagee secure, and the Act grants properly recorded ship mortgages preferred status over most maritime liens. The Thomas Barlum, 293 U.S. 21, 39, 79 L. Ed. 176, 55 S. Ct. 31 (1934); see generally Gilbert L. Fontenot, Plugging the Leaks in the Ship Mortgage Act: Nate Leasing Co. v. Wiggins, 16 Tul. Mar. L. J. 213 (1991). A creditor obtains a preferred mortgage under § 31322 of the Act if the mortgage: 1) includes the whole of the vessel; 2) covers a documented vessel; 3) has as the mortgagee a federally insured depository institution; and 4) is filed in substantial compliance with § 31321. In this case, there is no dispute that MNB's preferred mortgage meets the requirements of § 31322 of the Act and has been appropriately filed. The parties instead dispute the effect of § 31325 which provides for enforcement of the preferred mortgage lien in the event of a default. Section 31325 provides in part that:

 
(b) On default of any term of the preferred mortgage, the mortgage (sic) may--
 
(1) enforce the preferred mortgage lien in a civil action in rem for a documented vessel, a vessel to be documented under chapter 121 of this title, or a foreign vessel; and
 
(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 ...

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