mortgages were subject to a myriad of different standards depending on the state in which the execution of the mortgage took place.
As stated, the SMA requires that an acknowledgement or notarization be made "before a notary public or other official authorized by the law of the United States or a State to take acknowledgements of deeds". 46 U.S.C. § 31301(1). Thus, contrary to defendant's assertion, on its face, the statute addresses the individual before whom an acknowledgement can be made, e.g., a notary public -- it does not speak to who may make the acknowledgement on behalf of a corporation or other entity.
Defendant correctly points out that the legislative history of the SMA indicates that Congress intended to make a change from the Act in the substantive law regarding acknowledgements. However, the change, which allows notarizations under state law and under federal law, was meant "to make the execution of instruments easier". H. Rep. No. 100-918, reprinted in, 1988 U.S. Code Cong. & Admin. News, 100th Cong., 2d Sess. at 6133 (emphasis added). In the Court's view, this addition was not intended to undercut the emphasis on uniformity, but instead to offer an alternative to it that would continue to encourage investment in shipping.
This legislative history, combined with the fact that the statute is silent with respect to who may make an acknowledgement on behalf of a corporation, as distinct from the person before whom the acknowledgement can be made, suggests to the Court that the SMA now provides for an acknowledgement to be made before someone authorized to do so under state law, but that state law does not limit who may make an acknowledgement on behalf of a corporation. Under this analysis, the acknowledgement at issue was proper. However, the Court need not reach this question to decide the instant motion because, as explained below, the Court finds that irrespective of the propriety of the acknowledgement, plaintiff has substantially complied with the SMA.
In addressing the substantial compliance requirement of the Act, which the Court looks to for guidance in its analysis of the SMA's substantial compliance requirement, courts have held that mere technicalities in execution should not be overemphasized, and in fact should often be ignored. For example, in Collier Advertising Service v. Hudson River Day Line, 14 F. Supp. 335 (S.D.N.Y. 1936), the opposing lienors attacked the priority of the mortgage at issue on the ground that the oath of ownership required by the statute was made by the company vice president and not the president or secretary. According to the court, "it is pressing technicality too far to say that because of the trifling irregularity in the oath the vessels lost their status as vessels of the United States and the bondholders lost their priority." Id. at 337.
In The Nan B, 78 F. Supp. 748 (D. Alaska 1948), the court was faced with affidavits that were not in strict compliance with the Act, and held that in the absence of fraud, the Act should be "liberally construed to effectuate the object of the statute to make investments in shipping and ship mortgages more attractive and secure." Id. at 749-50. Finally, in Prudential Insur. Co. v. S.S. American Lancer, 870 F.2d 867 (2d Cir. 1989) the Second Circuit upheld the preferential status of a mortgage which contained a $ 92 million clerical error because "the . . . case law . . . requires only that the mortgagee make a good faith effort" to comply with the relevant statutes, "as long as no other party is misled to its detriment". Id. at 873.
There has been no argument in this case that the acknowledgement was unauthentic or not signed with authority. Thus, it is difficult for the Court to find that any alleged defect in the acknowledgement operated to defendant's detriment. Moreover, in conducting this analysis, the Court is mindful both of the need to construe the provisions of SMA liberally in order to encourage investments in shipping, as well as the traditional reluctance of courts to terminate the preferred status of a mortgage on the basis of a technicality. Thus, even assuming, arguendo, that New York law dictates who may make an acknowledgement, the Court finds that the mortgage at issue in this case was in substantial compliance with section 31321(b)(6) and is thus a "preferred" mortgage under the SMA. In the Court's view, to hold plaintiff to the requirements of state law in this case would be to thwart Congressional intent.
For the foregoing reasons, the Court holds that plaintiff is entitled to the remaining proceeds of the sale of the defendant yacht, amounting to the $ 36,000 currently contained in the Court's registry.
Dated: Brooklyn, New York
March 3, 1993
DENIS R. HURLEY, U.S.D.J.