## Facts

- Tractug Associates financed construction and operation of several vessels through loans backed by the Federal Maritime Administration (MARAD) and secured by preferred ship mortgages on the vessels.
- Tractug defaulted, MARAD began foreclosure, and Tractug entered bankruptcy.
- During bankruptcy, the bankruptcy court approved a wage-deferral agreement allowing continued vessel operations, with some crew wages deferred.
- The United States filed an in rem admiralty action in federal district court to foreclose the preferred ship mortgages and sell the vessels.
- Crew members intervened, asserting maritime liens for (a) unpaid pre-bankruptcy wages and (b) post-bankruptcy wages, including deferred wages under the court-approved agreement.
- The district court held that the Bankruptcy Code’s automatic stay (11 U.S.C. § 362(a)(4)) barred enforcement of maritime liens for post-bankruptcy wages and granted summary judgment against all wage claims, entering judgment under Rule 54(b).

## Issues

1. Whether 11 U.S.C. § 362(a)(4) barred an admiralty court from adjudicating and enforcing seamen’s maritime wage liens in an in rem mortgage foreclosure against vessels owned by a bankruptcy debtor.
2. Whether the Bankruptcy Code and bankruptcy-court jurisdiction impliedly restrict a district court’s original admiralty jurisdiction under 28 U.S.C. § 1333 over maritime wage liens.
3. Whether seamen’s wage liens, including those arising post-petition from continued service under a court-approved wage-deferral arrangement, retain priority over preferred ship mortgages.

## Decision

- The Ninth Circuit reversed the summary judgment for the United States and remanded.
- The court held that the Bankruptcy Code did not strip the district court of admiralty jurisdiction to adjudicate and enforce seamen’s maritime wage liens in rem.
- The court rejected the view that § 362(a)(4) extinguished or made unenforceable seamen’s wage liens arising from post-petition maritime service.
- The crew’s wage liens could be asserted against the vessels in the foreclosure proceeding and were entitled to priority over the government’s preferred ship mortgages.

## Legal Principles

- Seamen’s wage claims give rise to highly favored maritime liens that traditionally take priority over most competing claims, including preferred ship mortgages.
- Congressional grants of bankruptcy jurisdiction and the Bankruptcy Code’s automatic stay do not impliedly curtail the district courts’ original admiralty jurisdiction under 28 U.S.C. § 1333 to adjudicate in rem maritime lien claims.
- The automatic stay provision in 11 U.S.C. § 362(a)(4) does not nullify maritime wage liens or prevent an admiralty court from determining lien validity and priority against the vessel res in a foreclosure sale context.
- General commercial-law schemes should not be read to displace established maritime lien rules absent clear statutory direction.

## Conclusion

The Ninth Circuit held that bankruptcy stay provisions and bankruptcy-court jurisdiction do not bar admiralty enforcement of seamen’s maritime wage liens, and that those wage liens—including post-petition wages tied to continued maritime service under a court-approved arrangement—remain enforceable in rem with priority over preferred ship mortgages.


United States v. The ZP Chandon, 889 F.2d 233 (9th Cir. 1989)