Section 24 Creation and Scope of Security Interests and Preferred Ship Mortgages

• Library: Secured Transactions 2005

Security interests in vessels are covered by Article 9 of the UCC to the extent that federal law does not control. Section 400.9-109(c)(1), RSMo Supp. 2004; Dietrich v. Key Bank, N.A., 72 F.3d 1509 (11^th Cir. 1996); Morgan Guar. Trust Co. of N.Y. v. M/V Grigorios C. IV, 615 F. Supp. 1444 (E.D. La. 1985); Brown v. Baker, 688 P.2d 943 (Alaska 1984).

Federal law provides for a specific type of security instrument, the “preferred ship mortgage,” that offers advantages for lenders over an ordinary security interest under Article 9. Ship Mortgage Act, 46 U.S.C. §§ 31321–330. Congress first created the preferred ship mortgage in 1920 to establish a lending institution’s priority over several types of maritime liens and thus facilitate the financing of the shipping industry. 1 Barkley Clark & Barbara Clark, The Law of Secured Transactions Under The Uniform Commercial Code ¶...