FSMC, TITLE 19.  ADMIRALTY & MARITIME
 
 
Chapter 3:  Registration of
Vessels, Mortgages and Liens

301.    Obligation of Register.
302.    Qualifications of vessel registration.
303.    Declaration of Qualified Person.
304.    Status of Ownership if not a qualified person.
305.    Voluntary registration of other vessels wholly owned by qualified person (s).
306.    Continuation of registration.
307.    Liability of owners.
308.    Ports of Registry.
309.    Registrar and Register.
310.    Recording of particulars in Register.
311.    Application of Registration.
312.    Tonnage Certificate.
313.    Marking.
314.    Improper description of vessel in required documentation or marking.
315.    Entries in the Register.
316.    Change of ownership.
317.    Recording of bills of sale.
318.    Certificate of Registry.
319.    Provisional Certificate of Registry.
320.    Alteration.
321.    Duty to provide information to Registrar.
322.    Notification of vessel loss or destruction.
323.    Liabilities of unregistered vessels.
324.    Recording of mortgages.
325.    Recording of notices of claim of lien.
326.    Priority of maritime liens and mortgages.
327.    Mortgages in default.
328.    Notice of action to enforce mortgages.
329.    Operation of vessel pending disposition.
330.    Continuation of mortgagee's interest.
331.    Transfer of mortgage.
332.    Discharge of mortgage.
333.    Status of mortgage on foreign vessel.
334.    Disclosure of liens and priority.
335.    Necessaries.
336.    Waiver of maritime lien for necessaries.
337.    Arrest of vessels.
338.    Forced sale of vessels.
339.    Designation of owner; communications and service of progress.
340.    Regulations governing maritime liens and mortgages.

      301.  Obligation to register.

     (1)       All vessels 12 meters and over which are wholly owned by Qualified Persons, if not registered under the laws of another nation, shall be registered in the Federated States of Micronesia.

     (2)       All vessels 12 meters and over entering or operating within the waters of the Federated States of Micronesia shall be duly registered either in accordance with the laws of the Federated States of Micronesia or another nation.

     (3)       An owner or master of any vessel who knowingly allows the vessel to enter the waters of the Federated States of Micronesia or operate within such waters, unless the vessel is duly registered in accordance with the laws of the Federated States of Micronesia or another nation, commits a civil offense and shall be liable to a fine not exceeding $50,000.  The burden of proof shall lie on the owner or master of the vessel to demonstrate that the vessel is duly registered.

     (4)       A vessel may be detained until the master of the vessel produces its Certificate of Registry.

     (5)       In addition to any other penalties, continued violation of this section shall be grounds for the vessel to be forfeited to the National Government.

Source:  PL 10-76 15.

Cross-reference:  FSM Const., art. IX, 2(h).

Editor's note:  PL 10-76 took effect April 1, 1998.

The former provisions of chapters 1 to 12 of this title were repealed in their entirety by PL 10-76 1 and replaced by the provisions of PL 10-76, the "National Maritime Act, 1997" codified at chapters 1 to 13 of this title.

      302.  Qualifications for vessel registration.

     (1)     For the purposes of this title, a Qualified Person is:

     (a)  a person who is a citizen of the Federated States of Micronesia, or a corporation which is established in accordance with the laws of the Federated States of Micronesia or any of its States, wholly owned by citizens, whose principal place of business is in the Federated States of Micronesia;

     (b)  a person holding a current and valid foreign investment permit duly issued by the National Government to operate a vessel in interstate or international commerce who or which has its principal place of business in the Federated States of Micronesia; or

     (c)  the National and State Governments of the Federated States of Micronesia and their instrumentalities.

     (2)     Every vessel which is owned by a Qualified Person as defined under subsection (1)(b) of this section shall only be registered in the Federated States of Micronesia if it operates from, and the majority of its voyages begin or end, in the Federated States of Micronesia.

     (3)     The Registrar shall require the production of satisfactory documentary evidence demonstrating that the owner is a Qualified Person and the vessel meets the requirements for registration.

     (4)     Ownership of any share of a vessel by a person who is not a Qualified Person shall constitute cause for removal of the vessel from the Register and forfeiture to the National Government.

     (5)     A vessel which has ceased to meet the requirements for registration under this chapter shall be struck off the Register.

     (6)     Any person who is not a Qualified Person who purports to be a Qualified Person for the purpose of registering a vessel under this title commits a national offense punishable by a fine not exceeding $100,000 or imprisonment of not more than one year, or both.

Source:  PL 10-76 16; PL 10-137 1.

      303.  Declaration of Qualified Person.
     A person shall not be registered as owner of a vessel unless the person has filed a Declaration of Qualified Person with the Registrar, declaring:

     (1)  that the person is a Qualified Person;

     (2)  that no person other than a Qualified Person has any interest in the vessel; and

     (3)  in the case of a vessel to be purchased, that the person to be named as the transferee in the bill of sale is a Qualified Person.

Source:  PL 10-76 17.

      304.  Status of ownership if not a Qualified Person.

     (1)      If a person who is not a Qualified Person:

     (a)  acquires any ownership interest in a Registered Vessel other than by purchase and does not transfer that interest to a Qualified Person or become a Qualified Person within 90 days, that interest shall be struck off the Register;

     (b)  purchases any ownership interest in a Registered Vessel and within 90 days does not remove the vessel from the Register or become a Qualified Person, that interest shall be null and void and shall not be registered under this title.

     (2)       Where equity demands, the Secretary shall have discretion to extend any time period set forth in this section.

Source:  PL 10-76 18; PL 10-137 2.

      305.  Voluntary registration of other vessels wholly owned by Qualified Person(s).  
    Vessels which are not required by this title to be registered in the Federated States of Micronesia, but are wholly owned by Qualified Persons and not registered in any other nation, may be registered in accordance with this title.

Source:  PL 10-76 19.

      306.  Continuation of registration.
    Vessels which were duly registered in the Federated States of Micronesia before the date on which this Act became law shall be deemed to be registered under this title.

Source:  PL 10-76 20.

Editor's note:  PL 10-76 took effect April 1, 1998.

      307.  Liability of owners.

     (1)  Where a person has an undisclosed and unregistered ownership interest in a Registered Vessel and another person is registered as owner, both shall be subject to all pecuniary penalties imposed on the owners of vessels, and proceedings may be taken against either or both of them, with or without joining the other of them.

     (2)  This section does not apply to holders of maritime liens or to a mortgagee, except a mortgagee in possession or control of a vessel.

     Source:  PL 10-76 21.

      308.  Ports of Registry.
     The Secretary may designate Ports of Registry by regulation.

     Source:  PL 10-76 22.

      309.  Registrar and Register.

     (1)  The Registrar shall be appointed by the Secretary, and shall keep the Register and any instruments required to be deposited with the Registrar.

     (2)  The Register shall be open to public inspection during normal business hours.

     (3)  Extracts from the Register and copies of the instruments shall be obtainable from the Registrar upon payment of the fee prescribed in regulations.

     Source:  PL 10-76 23.

      310.  Recording of particulars in Register.

     (1)     A bill of sale, conveyance, mortgage, assignment of mortgage, or the transfer of any interest in any Registered Vessel shall not be valid with respect to such vessel against any person other than the grantor or mortgagor, his or her heirs or devisees and persons having actual notice thereof, until the instrument evidencing such transaction is recorded in the Register.

     (2)     The Registrar shall record in the Register the particulars contained in the instruments as soon as they are received.

     (3)     The Registrar shall also record in the Register:

     (a)  the name of the vessel;

     (b)  the names and addresses of the parties;

     (c)  the time and date of receipt of the instrument;

     (d)  the interest in the vessel transferred or affected;

     (e)  the amount and date of maturity of any mortgage; and

     (f)  any other information prescribed by regulation.

     (4)     After the Registrar has recorded the particulars of the instruments deposited in the Register, the Registrar shall file the original documents in a separate file for each vessel.

     Source:  PL 10-76 24; PL 10-137 3.

      311.  Application for Registration.
     An Application for Registration under this title shall be made by the owner in accordance with the regulations.

Source:  PL 10-76 25.

      312.  Tonnage Certificate.

     (1)  Before registration under this title, a vessel must be inspected by a qualified Surveyor appointed by the Secretary, who shall be authorized to ascertain the tonnage of the vessel and issue a tonnage survey report.

     (2)  On receipt of a tonnage survey report the Principal Surveyor shall, on payment of the prescribed fee, issue a Tonnage Certificate.

Source:  PL 10-76 26.

      313.  Marking.

     (1)  A vessel shall not be registered under this title unless it is marked permanently and in accordance with the regulations.

     (2)  Any person who conceals, removes, alters, defaces or obliterates any mark on any vessel commits a civil offense, and shall be liable to a fine not exceeding $10,000.

Source:  PL 10-76 27.

      314.  Improper description of vessel in required documentation or marking.
     An owner or master of a Registered Vessel who permits the vessel to be described by a name other than its registered name in required documentation or marking, commits a civil offense, and shall be liable to a fine not exceeding $50,000.

Source:  PL 10-76 28.

      315.  Entries in the Register.

     (1)  Entries in the Register shall be made in accordance with the regulations.

     (2)  No vessel may be registered under this title by the same name as a vessel already registered.

Source: PL 10-76 29.

      316.  Change of ownership.

     (1)  Where a Registered Vessel is sold, conveyed or otherwise transferred to a Qualified Person, the vessel shall be transferred by a bill of sale in the prescribed form and executed by the transferor and the transferee and, in the case of a corporation, by affixing the corporate seal.

     (2)  Where an interest in a Registered Vessel changes ownership, the owner shall, within ten days after such change, register the vessel in accordance with the Vessel Registration Regulations, and a new Certificate of Registry shall be issued, provided the vessel still qualifies for registration.
 
Source:  PL 10-76 30.

      317.  Recording of bills of sale.

     (1)  A bill of sale or related document transferring an interest in a Registered Vessel or any other instrument related thereto shall not be recorded in the Register unless it states the interest of the grantor in the vessel and the interest sold or conveyed.

     (2)  Upon payment of the prescribed fee, the Registrar shall record the documents in subsection (1) of this section in the order of their receipt and sign each document stating the time and date that each was received.

Source:  PL 10-76 31.

      318.  Certificate of Registry.

     (1)       When all the prescribed requirements for registration have been met with respect to a vessel, the Registrar shall issue a Certificate of Registry.

     (2)       The Certificate of Registry shall contain an accurate description of the vessel and list any and all ownership interests in the vessel.

     (3)      The Certificate of Registry shall be kept on board the vessel.

     (4)       The Certificate of Registry is not a document which transfers title in a vessel and shall not be subject to detention except as is provided in subsection (6) of this section.

     (5)       Any owner or master who knowingly uses or allows the use of a Certificate of Registry for any purpose which would mislead or deceive or have the tendency to mislead or deceive any other person, commits a civil offense and shall be liable to a fine not exceeding $50,000.

     (6)       Surrender of certificate.

     (a)     Any person who holds a Certificate of Registry shall surrender it on demand to the person entitled to its custody for the lawful navigation of the vessel, to the Registrar, or to any other person entitled by law to require its delivery.

     (b)     Any person who fails to comply with this subsection commits a civil offense and shall be liable to a fine not exceeding $50,000.

Source:  PL 10-76 32.

      319.  Provisional Certificate of Registry.

     (1)  Where a vessel is acquired outside the Federated States of Micronesia by a Qualified Person, the Registrar may issue a Provisional Certificate of Registry.

     (2)  The owner or master of a provisionally Registered Vessel shall, within 10 days after the arrival of the vessel in the Federated States of Micronesia, deliver the Provisional Certificate of Registry to the Registrar.

     (3)  The Registrar may only issue a Certificate of Registry after the vessel has fully complied with all the requirements of the Vessel Registration Regulations.

Source:  PL 10-76 33.

      320.  Alterations.
     Where a Registered Vessel is so altered that the Tonnage Certificate or the description of the vessel contained in the Register is no longer accurate, the owner shall register the alteration within seven days after completion of the alteration.

Source:  PL 10-76 34.

      321.  Duty to provide information to Registrar.  
     The owner of any Registered Vessel who is directed in writing by the Registrar to provide information concerning the vessel or its owners shall comply within 10 days.

Source:  PL 10-76 35.

      322.  Notification of vessel loss or destruction.  
     The owner of a Registered Vessel shall immediately notify the Registrar in writing if the vessel is lost or destroyed, or any owner ceases to be a Qualified Person.

Source:  PL 10-76 36.

      323.  Liabilities of unregistered vessels.
     Where a vessel is required to be registered but is not, the vessel, its owners and master shall:

     (1)  not be entitled to any benefits, privileges, advantages or protections enjoyed by Registered Vessels;

     (2)  not be relieved of obligations under this title and regulations by reason of the fact that the vessel is not registered;

     (3)  remain liable for the payment of all dues, fees, fines or other charges, for forfeiture, and for punishment for offenses in the same manner as if the vessel were registered.

Source:  PL 10-76 37.

      324.  Recording of mortgages.

     (1)  A Registered Vessel may be made security for a loan or other financial obligation by way of a mortgage in the prescribed form.

     (2)  A mortgage shall not be recorded in the Register unless it states the interest of the mortgagor in the vessel and the term and conditions of the mortgage on the vessel.

     (3)  Upon payment of the prescribed fee, the Registrar shall record mortgages in the order of their receipt and sign each mortgage stating the time and date that each was received.

     (4)  The Registrar shall endorse on the Certificate of Registry of the vessel covered by the mortgage:

     (a)  the names of the mortgagor and mortgagee;

     (b)  the amount and date of maturity of the mortgage; and

     (c)  the time and date the mortgage was recorded.

Source:  PL 10-76 38; PL 10-137 4.

Case annotations:  United States statutes regarding ships' mortgages will not be adopted as the common law of the Federated States of Micronesia, because their purposes are not applicable to the FSM and because their changing nature and complexity are not conducive to forming the basis of the common law of this nation. Federal Business Dev. Bank v. S.S. Thorfinn, 4 FSM Intrm. 57, 59-60 (Truk 1989).

The enforcement of ships' mortgages does not come within the admiralty jurisdiction of the FSM Supreme Court.  Federal Business Dev. Bank v. S.S. Thorfinn, 4 FSM Intrm. 57, 60 (Truk 1989) (Reversed in Appellate Division at 4 FSM Intrm. 367, 376) (App. 1990).

The question of the enforceability of ship mortgages is a matter that falls within the maritime jurisdiction of the FSM Supreme Court under art. XI, 6(a) of the Constitution.  Federal Business Dev. Bank v. S.S. Thorfinn, 4 FSM Intrm. 367, 376 (App. 1990).

      325.  Recording of notices of claim of lien.

     (1)  The Registrar shall upon the request of any person record in the Register notice of such person's claim to a lien on a Registered Vessel, supported by credible documentary evidence, together with the nature, date of creation, and amount of the lien and the name and address of the person.

     (2)  Any person who has caused notice of a claim of lien to be so recorded shall, upon discharge of the indebtedness, forthwith file a certificate of such discharge with the Registrar, who shall record the discharge of the indebtedness giving rise to the lien.

Source:  PL 10-76 39.

Cross-reference:  FSM Const., art. IX, 2(h).

      326.  Priority of maritime liens and mortgages.

     (1)  All claims secured by maritime liens on any Registered Vessel shall take priority over all registered mortgages and charges which have been duly recorded by the Registrar in the Register, and no other claim shall take priority over such maritime liens or over such mortgages or charges.

     (2)   Each of the following claims against the owner, demise charterer, manager or operator of a Registered Vessel shall be secured by a maritime lien on the vessel:

     (a)  claims for wages and other sums due to the master, officers and other members of the crew in respect of their employment on the vessel, including costs of repatriation and social insurance contributions payable on their behalf;

     (b)  claims in respect of loss of life or personal injury occurring, whether on land or on water, in direct connection with the operation of the vessel;
 
     (c)   claims for reward for the salvage of the vessel;

     (d)   claims for port, canal, and other waterway dues and pilotage dues;

     (e)   claims based on tort arising out of physical loss or damage caused by the operation of the vessel other than loss of or damage to cargo, containers and passengers' effects carried on the vessel.

(3)  (a)  The maritime liens set out in subsection (2) of this section shall rank in the order listed, PROVIDED HOWEVER, that maritime liens securing claims for reward for the salvage of a vessel shall take priority over all other maritime liens which have attached to the vessel prior to the time when the salvage operations giving rise to the salvage claims were performed;

     (b)   Where a claim for reward for the salvage of a vessel is recorded in the Register, the maritime liens set out in each of subsections (a), (b), (d) and (e) of subsection (2) of this section shall rank pari passu as among themselves.

     (4)   The maritime liens securing claims for reward for the salvage of a vessel shall rank in the inverse order of the time when the claims secured thereby accrued.  Such claims shall be deemed to have accrued on the date on which each salvage operation was terminated.

(5)   (a)     The assignment of or subrogation to a claim secured by a maritime lien entails the simultaneous assignment of or subrogation to such a maritime lien;

     (b)  Claimants holding maritime liens may not be subrogated to the compensation payable to the owner of the vessel under an insurance contract.

     (6)   A maritime lien shall be extinguished after a period of one year, unless extended by an order of the Supreme Court.

     (7)   Where there is more than one mortgage recorded in the Register in respect of the same vessel, the mortgagees shall, notwithstanding any expressed, implied, or constructive notice, be entitled in priority one over the other according to the time and date on which each mortgage was recorded in the Register and not according to the date of each mortgage itself.

     (8)   A registered mortgage shall not be affected by any act of bankruptcy or insolvency committed by the mortgagor after the date of recording of the mortgage, notwithstanding that the bankrupt or insolvent mortgagor had, at the time of the insolvency, the vessel in his possession, order or disposition.

     (9)   Any such registered mortgage shall have priority over any right, claim, or interest in the vessel of the other creditors of the bankrupt or any trustee or assignee on their behalf.

Source:  PL 10-76 40.

Cross-reference: The statutory provisions on the FSM Supreme Court and the Judiciary are found in title 4 of this code.

      327.  Mortgages in default.

     (1)  A mortgagee of a Registered Vessel shall not by reason of the mortgage be deemed to be the owner of the vessel, nor shall the mortgagor be deemed to have ceased to be the owner of the vessel.

     (2)  On default of any term of a mortgage, a mortgagee may enforce a claim for outstanding indebtedness secured by the mortgaged vessel in a civil action in personam in the Supreme Court against the mortgagor, maker, co-maker, or guarantor for the amount of the outstanding indebtedness or any deficiency in full payment of that indebtedness.

     (3)  In the event of default of the mortgage, the registered mortgagee shall be entitled to recover the amount due under the mortgage by applying to the Supreme Court for an order, directing that the mortgaged vessel, or any share therein, be sold by tender or at a public auction, and that the proceeds of the sale be used to satisfy:
 
     (a)  the expenses of conducting the sale;

     (b)  the amount outstanding to the mortgagee under the mortgage; and

     (c)  the amount outstanding to subsequent mortgagees, with the balance being distributed to the mortgagor.

     (4)  Upon receiving an application from the mortgagee for the order mentioned in subsection (3) of this section, the Supreme Court may set a date for a hearing concerning the default of mortgage.

     (5)  The mortgagee shall cause notice to be personally served on the mortgagor and any subsequent mortgagees, but if such required notice cannot be personally served, then an application may be made to the Supreme Court providing for the date of the hearing to be publicized on at least one radio station at the location of mortgagor and subsequent mortgagees and by any other means having wider circulation, and such shall be considered to be service of adequate notice on the parties.

     (6)   Where the Supreme Court has found the mortgage to be in default, it may order the forced sale of the vessel, or any share therein, and for this purpose the Supreme Court shall appoint a person as an Officer of the Court to conduct the sale and distribute the proceeds in accordance with the order.

     (7)   An Officer of the Court shall not be liable for any act or omission in conducting the sale or distributing the proceeds if acting in good faith.

     (8)   Where more than one person is registered as mortgagee of the same vessel, a subsequent mortgagee shall not make an application to sell the vessel without the concurrence of every prior mortgagee, except under an order of the Supreme Court.

     (9)   Where a vessel has been sold in accordance with subsection (6) of this section, the Supreme Court shall, by order, vest ownership of the vessel in the purchaser, which order shall be recorded in the Register by the Registrar.

Source:  PL 10-76 41.

Case annotations:  Case annotations found throughout this title may refer to the earlier provisions of the National Maritime Act of 1993 that was repealed by PL 10-76, the National Maritime Act, 1997.  These annotations are retained for reference purposes as some of the language of the National Maritime Act, 1997 is similar to the language of the former National Maritime Act of 1993.

United States statutes regarding ships' mortgages will not be adopted as the common law of the Federated States of Micronesia, because their purposes are not applicable to the FSM and because their changing nature and complexity are not conducive to forming the basis of the common law of this nation.  Federal Business Dev. Bank v. S.S. Thorfinn, 4 FSM Intrm. 57, 59-60 (Truk 1989).

The enforcement of ships' mortgages does not come within the admiralty jurisdiction of the FSM Supreme Court.  Federal Business Dev. Bank v. S.S. Thorfinn, 4 FSM Intrm. 57, 60 (Truk 1989) (Reversed in Appellate Division at 4 FSM Intrm. 367, 376) (App. 1990).

The question of the enforceability of ship mortgages is a matter that falls within the maritime jurisdiction of the FSM Supreme Court under art. XI, 6(a) of the Constitution.  Federal Business Dev. Bank v. S.S. Thorfinn, 4 FSM Intrm. 367, 376 (App. 1990).

      328.  Notice of action to enforce mortgage.

     (1)  Actual notice of a civil action brought in the Supreme Court to enforce a mortgage shall be personally served on:

     (a)  the owner, master or individual in charge of the vessel or his agent for service of process;

     (b)  a subsequent mortgagee of an undischarged mortgage recorded under this chapter; and

     (c)  any person who has recorded a maritime lien on the vessel.

     (2)  Personal service of notice is not required if, after search satisfactory to the Supreme Court, persons entitled to such notice have not been found in the Federated States of Micronesia.

Source:  PL 10-76 42.

Cross-reference: The statutory provisions on the FSM Supreme Court and the Judiciary are found in title 4 of this code.  The statutory provisions on Judicial Procedure are found in title 6 of this code.

      329.  Operation of vessel pending disposition.
     When a civil action has been commenced in the Supreme Court:

     (1)  the Court may appoint and authorize a person to manage and operate the mortgaged vessel but shall retain in rem jurisdiction over the vessel even if the vessel operates outside the Federated States of Micronesia; and

     (2)  the Court may request the Attorney General to direct the national police or other authorized officer to take possession of a mortgaged vessel even if the vessel is in the possession of or under the control of a person claiming a possessory lien.

Source: PL 10-76 43.

Cross-reference: The statutory provisions on the FSM Supreme Court and the Judiciary are found in title 4 of this code.  The statutory provisions on Judicial Procedure are found in title 6 of this code.


      330.  Continuation of mortgagee's interest.

     (1)  The interest of a mortgagee in a Registered Vessel shall not be terminated by a forfeiture of the vessel for a violation of any of the laws of the Federated States of Micronesia, unless the mortgagee authorized, consented or conspired to effect the illegal act, failure, or omission which constituted such violation.

     (2)  In the event of forfeiture resulting in a forced sale of the vessel by tender or public auction, the proceeds of the sale shall be used to satisfy:

     (a)  the expenses of conducting the sale;

     (b)  the amount outstanding to the mortgagee under the mortgage; and

     (c)  the amount outstanding to subsequent mortgagees.

     (3)  Any remaining balance from the proceeds of the sale shall not be paid to the mortgagor, but shall be paid into the General Fund of the Federated States of Micronesia.

Source:  PL 10-76 44.

      331.  Transfer of mortgage.

     (1)  A registered mortgage of a vessel may be transferred to any person by registration of an instrument of transfer of that mortgage in the prescribed form.

     (2)  On the production to the Registrar of an instrument of transfer of a registered mortgage and of the mortgage to which the instrument relates, the Registrar shall register the transfer by making an entry of the transfer in the Register, and endorse and sign the mortgage and the instrument of transfer to the effect that the entry has been made and stating the date and time of making the entry.

Source:  PL 10-76 45.

      332.  Discharge of mortgage.
     The mortgagee, upon a complete discharge of the mortgage indebtedness, shall forthwith file a Certificate of Discharge of Mortgage duly executed by the mortgagee, his successors or assigns, with the Registrar, who shall forthwith record the discharge of the mortgage.

Source:  PL 10-76 46.

      333.  Status of mortgage on foreign vessel.
     In addition to a mortgage made under this chapter, any mortgage or similar charge created as security on any foreign vessel duly and validly executed and registered in accordance with the laws of the nation where the vessel is registered, may be enforced in the Supreme Court if the vessel is in the waters of the Federated States of Micronesia.

Source:  PL 10-76 47.

Cross-reference:  The statutory provisions on the FSM Supreme Court and the Judiciary are found in title 4 of this code.  The statutory provisions on Judicial Procedure are found in title 6 of this code.

      334.  Disclosure of liens and priority.

     (1)  Where the owner of a Registered Vessel has received a service or the vessel has caused loss of life or personal injury giving rise to a claim which creates a maritime lien against the vessel, the lien holder may require the Registrar to record the lien against the vessel in the Register.

     (2)  Irrespective of whether the maritime lien is registered in accordance with subsection (1) of this section, the person who provided the service or who has suffered injury, or the next of kin or executor of the estate of the person who has lost his or her life as a result of the action of the vessel or any other lien holder having a claim against a vessel can exercise that lien against the vessel while it is owned by the original debtor.

     (3)  A maritime lien against a Registered Vessel shall not be enforceable against the vessel subsequently purchased by a bona fide purchaser for value without notice unless it has been recorded in the Register.

     (4)  The failure of a lien holder to register a maritime lien against a Registered Vessel shall not prejudice the claim against the vessel owner who received services or whose vessel caused damage giving rise to the lien in the first instance.

     (5)  A mortgagor, before executing a mortgage in respect of a Registered Vessel, shall disclose to the mortgagee in writing the existence of any maritime lien, prior mortgage, or other obligation or liability upon the vessel to be mortgaged, which is known to the mortgagor.

     (6)  After the execution of such mortgage and before the mortgagee has had a reasonable time to record it and have proper endorsements made upon the Certificate of Registry of the vessel, the mortgagor, without the consent of the mortgagee, shall not incur any contractual obligation creating a lien upon the vessel, having priority over a mortgage other than liens for wages of the crew of the vessel or for salvage.

     (7)  A mortgagor, including an officer, director, agent or employee of a company which owns a vessel, the financing of which is secured by a mortgage, commits a civil offense, and shall be liable to a fine not exceeding $200,000, where such mortgagor:

     (a)  with intent to defraud, fails to disclose the existence of any prior mortgage, maritime lien, or other obligation or liability upon the vessel; or

     (b)  with intent to defraud, incurs any contractual obligation giving rise to a lien before the mortgagee has had a reasonable time to record the mortgage.

     (8)  Upon commission of any civil offense set forth in subsection (7) of this section the mortgage indebtedness shall become immediately due and payable at the election of the mortgagee.

Source:  PL 10-76 48; PL 10-137 5.

      335.  Necessaries.

     (1)  Any person who furnishes stores, provisions, fuel, towage, repairs, use of dry dock or marine railway, or other necessaries, to any foreign or domestic vessel upon the order of the owner or person authorized by the owner, shall have a maritime lien on the vessel which shall:

     (a)  subject to sections 334 and 338 of this chapter, follow the vessel notwithstanding any change of ownership, registration or flag;

     (b)  in case of assignment or subrogation of the claim secured by a maritime lien on the vessel, entail the simultaneous assignment of or subrogation to such a maritime lien;

     (c)  be extinguished at the expiration of the lesser period of either:

     (i)  six months from the time when the claims secured thereby arose unless, prior to the expiration of such period, the vessel has been arrested or seized, such arrest or seizure leading to a forced sale; or

     (ii)  sixty days following a sale to a bona fide purchaser of the vessel, such period to commence on the date on which the sale is made in accordance with this chapter;

     (d)  rank after the maritime liens set out in section 326 of this chapter and also after registered mortgages or charges recorded in accordance with this chapter.

     (2)  The owner, owner's agent, master or any person to whom the management of the vessel is entrusted, shall be presumed to have authority from the owner to procure such necessaries.

     (3)  This section shall not confer a lien when persons providing the services referred to in subsection (1) of this section know, or by exercise of reasonable diligence should have ascertained, that because of the terms of a charter party, agreement of sale of the vessel, or for any other reason, the person ordering necessaries was without authority to bind the vessel.

Source:  PL 10-76 49.

Cross-reference:  FSM Const., art. IX, 2(h).  The statutory provisions on Territory, Economic Zones and Ports of Entry are found in title 18 of this code.

Case annotations:  Supplies and service that are necessaries when provided to a vessel give rise to maritime liens.  Maruwa Shokai (Guam), Inc. v. Pyung Hwa 31, 6 FSM Intrm. 1, 3 (Pon. 1993).

A general agent is not barred from obtaining a maritime lien.  Obtaining the lien depends on whether the supplies and services furnished the vessel are necessaries, not on the contractual relation.  Maruwa Shokai (Guam), Inc. v. Pyung Hwa 31, 6 FSM Intrm. 1, 3 (Pon. 1993).

Necessaries are defined as those things reasonably needed in the business of the vessel.  Maruwa Shokai (Guam), Inc. v. Pyung Hwa 31, 6 FSM Intrm. 1, 3 (Pon. 1993).

To be entitled to a maritime lien a provider of necessaries must rely on the credit of the vessel.  General maritime law presumes that a provider of necessaries relies on the credit of the vessel. Maruwa Shokai (Guam), Inc. v. Pyung Hwa 31, 6 FSM Intrm. 1, 3 (Pon. 1993).

A contract provision for a line of credit that was never filled in as to  amount and never funded cannot overcome presumption that a supplier of necessaries relied on credit of vessel.  Maruwa Shokai (Guam), Inc. v. Pyung Hwa 31, 6 FSM Intrm. 1, 4 (Pon. 1993).

      336.  Waiver of maritime lien for necessaries.
     This chapter shall not prevent a person who holds a maritime lien for necessaries for stores, provisions, fuel, towage, repairs, use of dry dock or marine railway, or other necessaries, from waiving the right to a lien against the vessel at any time, by agreement or otherwise.

Source:  PL 10-76 50.

      337.  Arrest of vessels.

     (1)  A Registered Vessel may be arrested in respect of default in payment on claims secured by maritime liens or mortgages against the vessel recorded in the Register.

     (2)  Where sufficient evidence is provided to the Supreme Court to warrant the arrest of a Registered Vessel, the Court may issue an order for the arrest of the vessel.

     (3)  A vessel which has been arrested may only be released by an order of the Court if sufficient security has been provided in the amount and form satisfactory to the claimant; or, if the sufficiency and form is disputed, the Supreme Court may order that security be provided in an amount which shall not exceed the value of the vessel.

     (4)  Upon application of the owner the Court may, in its discretion, as a condition for the arrest of the vessel, impose upon the claimant the obligation to provide security of a kind and for an amount on such terms as the Court deems appropriate and for any loss which may be incurred by the owner or defendant as a result of the arrest.

     (5)  Where sufficient security cannot be obtained by the owner as guarantee for the payment of the maritime lien or mortgage, the lien holder or mortgagee shall file an application with the Supreme Court for an order for the forced sale of the vessel.

Source:  PL 10-76 51.

Cross-reference: The statutory provisions on the FSM Supreme Court and the Judiciary are found in title 4 of this code.  The statutory provisions on Judicial Procedure are found in title 6 of this code.

      338.  Forced sale of vessels.

     (1)  In the event of a forced sale of a Registered Vessel or a foreign vessel, the claimant shall, prior to the forced sale of the vessel, ensure that notice is provided to:

     (a)  the Registrar or the registrar in the nation of the vessel's registration;

     (b)  all holders of registered mortgages or charges;

     (c)  all holders of maritime liens; and

     (d)  the registered owner of the vessel.

     (2)  Such notice shall be provided at least 30 days prior to the forced sale, and shall contain the particulars concerning the forced sale as well as the proceeding leading to the forced sale.

     (3)  All registered mortgages or charges, except those assumed by the purchaser with the consent of the holders, and all maritime liens and other encumbrances of whatsoever nature attached to the vessel at the time of the forced sale shall cease to be attached to the vessel provided that:

     (a)  at the time of the sale, the vessel is within the jurisdiction of the Supreme Court; and

     (b)  the sale has been effected in accordance with this chapter.
 
     (4)  The costs and expenses arising out of the arrest or seizure and subsequent sale of the vessel shall be paid first out of the proceeds of the sale.  Such costs and expenses include the costs for the upkeep of the vessel, the master and crew as well as wages, repatriation, social insurance contributions payable on behalf of the master and crew, and other sums and costs referred to in section 326 of this chapter incurred from the time of arrest or seizure.  The balance of the proceeds shall be distributed in accordance with this chapter to the extent necessary to satisfy the respective claims.  Upon satisfaction of all claimants, any residue of the proceeds shall be paid to the owner and shall be freely transferable.

     (5)  If at the time of the forced sale the vessel is in the possession of a builder or of a repairer who, under the laws of the Federated States of Micronesia enjoys a right of retention, such builder or repairer shall surrender possession of the vessel to the purchaser, but shall be entitled to obtain satisfaction of his claim out of the proceeds of the sale after the satisfaction of the claims of holders of maritime liens.

     (6)  When a vessel has been the object of a forced sale, the Registrar shall, in accordance with the order of the Supreme Court and at the request of the purchaser, issue a certificate to the effect that the vessel is sold free of all registered mortgages or charges, except those assumed by the purchaser, and of all liens and other encumbrances, provided that the requirements set out in subsections (3)(a) and (b) of this section have been complied with.

     (7)  Where the vessel is a Registered Vessel, the Registrar shall delete all registered mortgages or charges except those assumed by the purchaser, issue a Certificate of Deletion for the purpose of new registration, and shall, if the purchaser is a Qualified Person and wishes to register the vessel in the Federated States of Micronesia, proceed in accordance with the requirements of the Vessel Registration Regulations to have the vessel registered in the Register under the name of the purchaser as the new owner.

     (8)  The order of the Supreme Court shall provide that any proceeds of the forced sale are actually available and freely transferable.

Source:  PL 10-76 52.

Cross-reference: The statutory provisions on the FSM Supreme Court and the Judiciary are found in title 4 of this code.  The statutory provisions on Judicial Procedure are found in title 6 of this code.

      339.  Designation of owner; communications and service of process.

     (1)  Where a Registered Vessel is owned by more than one person, one owner shall be designated owner.

     (2)  Communications from the Government may be sent to and service of legal process may be made on the owner at the address on file with the Registrar.  Any communication to the owner shall be deemed to be a communication to all owners.

Source:  PL 10-76 53.

      340.  Regulations governing maritime liens and mortgages.
     The Secretary may promulgate regulations relating to maritime liens and mortgages, taking into account the provisions of the MLM Convention.

Source:  PL 10-76 54.

Cross-reference:  FSM Const., art. IX, 2(h).

Cross-reference:  The statutory provisions on Administrative Procedures are found in title 17 of this code.
                                                                                                                                                                                                                                                                                                           
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