United States Fourth Circuit Court of Appeals held that the party which had been granted exclusive salvor status of the R.M.S. Titanic and which had retrieved numerous artifacts from the wreck, had not yet obtained a salvage award. Thus, that party held recovered artifacts only as salvor in possession and did not have title in them. In consequence, the Court affirmed the District Courtís (court of first instance) order prohibiting sale of the artifacts.
Case Note contributed by Thomas H. Belknap, Jr., attorney with the firm Healy and Baillie LLP, New York, International Contributors to the website.
DMC Category Rating: Confirmed
Following settlement of a claim by the vesselís insurers, a federal district court for the Eastern District of Virginia (a court of first instance) issued an order dated June 7, 1994 declaring RMST salvor in possession. That order provided, in part, that "[t]he Court finds and orders that [RMST] is the salvor in possession of the wreck . . . and that [RMST] is the true, sole and exclusive owner of any items salvaged from the wreck of the defendant vessel in the past and, so long as [RMST] remains salvor in possession, items salvaged in the future, and is entitled to all salvage rights . . . ." At the time of entry of this order, and on numerous occasions thereafter, RMST expressly represented to the Court that it considered itself to be a salvor and did not intend to sell the artifacts but, instead, intended to exhibit them as a collection.
In July 2001, RMST advised the Court of the formation of The Titanic Foundation, Inc. and reported that the foundation was interested in purchasing the artifacts from RMST. A hearing was held in September 2001, at which the district court concluded that it was not prepared to approve a sale without the submission of a detailed plan. Following the hearing, evidently concerned that a sale might take place, the district court issued an order on September 26, 2001 finding that its earlier orders prohibiting the sale of individual artifacts recovered from the wreck were proper and necessary. RMST appealed that order, following which the district court entered another order on October 19, 2001, essentially explaining its earlier orders. RMST appealed this second order as well.
Was the district court correct in restraining RMSTís right to sell the recovered artifacts?
The Fourth Circuit Court of Appeals rejected RMSTís arguments and held that the district court had acted properly in restricting the disposition of the salvaged property. Finding that RMSTís position was premised on "a fundamental misunderstanding of its role as salvor-in-possession," the court conducted a detailed review of "the relevant fundamental principles of salvage law."
The Court noted first that, "by saving property at sea, salvors do not become the propertyís owner; rather they save it for the owners and become entitled to a reward from the owner or from his property." A salvor may enforce his right to a reward through an in rem action against the recovered property. In such a case, "if the owner appears and pays the salvage reward determined by the court, the lien is discharged and the owner takes the property clear of the salvage lien. On the other hand, if the owner does not appear, then the case continues as an in rem action, and the court determines the award, sells the property, and, from the proceeds, pays the salvor. Any remainder from the sale is remitted to the owner." Where, as here, the salvage is on-going, the salvor is entitled to seek separate salvage awards on a periodic basis.
A salvor is not ordinarily entitled to keep the recovered property unless the proceeds of a salvage sale would be clearly inadequate fully to compensate the salvor, in which case "the court might, as a matter of discretion, award the salvor title to the property in lieu of the proceeds of sale, thus saving the costs of sale. The salvor does not have a direct right, however, to title in the property.
Turning to the specific issues raised by RMST, the Court focused primarily on RMSTís argument that the district courtís June 1994 order granted it ownership and title to the artifacts salvaged from the wreck. The court concluded that the language of that order was ambiguous in that it referred both to salvage rights and to ownership rights. But RMST, the court noted, had always held itself out to the court to be a salvor of property and had never laid claim to ownership of the artifacts under the law of finds (which, in any event, would require a showing that the Titanic had been abandoned by her owners, which showing had never been made). Given that the district court could in no event have granted title to the property to RMST until it first had obtained a salvage award, the court concluded that the June 1994 order must be construed as only having granted RMST "exclusive possession of the artifacts pending further necessary proceedings." In any event, the court concluded any ambiguity in the June 1994 order was clarified over the course of the proceedings, through which the district court had issued several additional orders making clear that RMST was not entitled to sell the artifacts.
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