author: BERTELSMAN, District Judge.

text:
    Chaddie J. SALISBURY, Plaintiff, v. HOUSING AUTHORITY OF the CITY OF NEWPORT, Marguerite Robinson, Irene Deaton, Ann Frederick, Bill G. Wilder, Betty K. Gillespie, and Day Johnston, Defendants.
    Civ. A. No. 83-30.
    United States District Court, E.D. Kentucky, Covington Division.
    Aug. 20, 1985.

      Richard A. Getty, John S. Rees, and Janet P. Jakubowicz, Greenebaum, Doll & McDonald, Louisville, Ky., for Chaddie Salisbury plaintiff.
    Richard G. Meyer, Deters, Benzinger & Lavelle, Covington, Ky., for Housing Authority of the City of Newport defendant and Marguerite Robinson defendant.

      Robert W. Carran, Covington, Ky., for Irene Deaton defendant and Ann Frederick defendant.
    Robert G. Breetz, Stites & Harbison, Louisville, Ky., for Bill G. Wilder defendant.
    Charles M. Perkins, Georgetown, Ky., for Betty K. Gillespie defendant.
    Willie Mathis, Jr., Florence, Ky., for Day Johnston defendant.
   OPINION AND ORDER

BERTELSMAN, District Judge.

This is a 42 U.S.C. § 1983 civil rights action in which plaintiff charges that she was deprived of her rights to substantive and procedural' due process secured by the Fourteenth Amendment to the Constitution of the United States. She also asserts deprivation of her right to free speech as guaranteed by the First Amendment as well as state law claims of breach of contract, defamation, and interference with contractual relations.

Facts

On April 29, 1982, plaintiff entered into a three year employment contract with the Newport Housing Authority (NHA) to serve as its executive director. Paragraph 8 of that contract requires notification ninety days prior to termination by either party and provides that she may be terminated only for “just cause and said cause must be factual, valid and documented.” On May 20, 1983, Salisbury was terminated by the NHA.

Salisbury contends that her termination was not for just cause, but was motivated by fear on the part of some members of the NHA that she would “blow the whistle” on improper activities in which they were involved, and because of her public criticism of the NHA and its members. This is the basis of her First Amendment claim.

Salisbury’s termination followed several months of intense, well publicized volleys of charges and countercharges between her and members of the NHA, as well as disagreements among the Authority members sufficient to induce two of them and counsel for the NHA to resign. The attorney was replaced by the defendant Wilder, personal attorney for Irene Deaton, Mayor of Newport and plaintiff’s principal antagonist.

At one point in the ongoing dispute the Board informed Salisbury that it was about to fire her without further ado. She then filed this civil rights action in this court and sought a temporary restraining order (T.R. O.), which motion came on for hearing a few hours before the meeting at which Salisbury was to be terminated. At the conclusion of that hearing, this court declined to enter the T.R.O. on the ground that it was premature, since the Authority had not yet acted. However, the court from the bench formally advised those defendants that were present that Salisbury did have a contractual property right and that they could be personally liable in damages if they terminated her in violation of her due process and other constitutional rights.

The Authority did not terminate her immediately but suspended her with pay, brought the formal charges, and held the hearing with which we are now concerned. The hearing was held over Salisbury’s frequent protests that the members of the Authority were not impartial. There are no statutory procedures for hearing charges against an employee of the Authority, so the Authority heard the charges itself. At the conclusion of the hearing, which lasted several weeks, Salisbury was discharged.

Further detailed facts are set forth in the margin.

In its present posture, the case presents the court primarily with an issue on which there are relatively few judicial opinions— what are the characteristics of an impartial fact-finding tribunal, and when is one required, when the other elements of due process are present?

Plaintiffs Right to Due Process

It is uncontested that plaintiff had a property right, created by state law by reason of her contract, which right was protected by the due process clause. Roth v. Board of Regents, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972); Kendall v. Board of Education of Memphis City, 627 F.2d 1 (6th Cir.1980) (teacher terminated during one year contract).

As a public employee with “tenure” for a limited term, there is no doubt that due process entitled her to a pretermination hearing on whether “just cause” existed for her dismissal. Cleveland Board of Education v. Loudermill, — U.S. —, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985) (extensive discussion).

The Board chose to give Salisbury a full-blown pretermination hearing rather than an abbreviated pretermination hearing and a trial-type post-termination hearing, as it might have done. The extensive hearing granted to plaintiff was the only hearing she received. Since she was suspended with pay at the time it was held it was a pretermination hearing. Nevertheless, because it was the only hearing, due process required that it be the “trial-type” hearing usually held as a post-termination hearing.

The hearing contained all of the outward indicia of due process. Plaintiff was permitted to be represented by counsel, who cross-examined witnesses and called witnesses on plaintiffs behalf. The hearing was formal in nature and both a stenographic and videotape record were made. Except for one or two additional charges of which she claims she did not have sufficient advance notice, plaintiff had proper written notice of the charges brought against her.

Plaintiff was Denied her Right to an Impartial Decisionmaker

Plaintiff contends, however, that these due process indicia were illusory because she was deprived of the impartial decisionmaker she had demanded. The abstract proposition that a public employee facing a due process hearing on charges is entitled to an impartial decisionmaker has been stated many times in the decisions. See, e.g., Hortonville Joint School District No. 1 v. Hortonville Education Assn., 426 U.S. 482, 96 S.Ct. 2308, 49 L.Ed.2d 1 (1976); Kendall v. Board of Education of Memphis City, 627 F.2d 1, 5 (6th Cir.1980) and other cases hereinafter discussed. However, it has proved difficult to define precisely this right in practice in cases involving the varied disputes that arise in the hurly-burly of local government.

When an employee of local government is discharged for cause, it is quite common for the initiator of the charges to participate in the ultimate decision whether the charges are justified. The smaller the unit of local government, the more likely this is to be true. This has been recognized by the courts, and it is well established that mere familiarity with the facts of a case gained as initiator of charges does not per se disqualify a decisionmaker. Withrow v. Larkin, 421 U.S. 35, 47, 95 S.Ct. 1456, 1464, 43 L.Ed.2d 712 (1975); Hortonville Joint School District No. 1 v. Hortonville Education Assn., 426 U.S. 482, 96 S.Ct. 2308, 49 L.Ed.2d 1 (1976).

Remarkably, although a due process right to an impartial decisionmaker is well-established, there are relatively few cases in which it has been held that due process was denied because the decisionmaker was biased. That this is such a case, however, is apparent.

The leading decision on the subject is Hortonville, supra, which involved a school board which initiated charges of participating in an unlawful strike against the teachers under its jurisdiction. The Board granted a hearing but acted as the decision-maker. Even though the Board had participated in the negotiations preceding the strike, the Supreme Court held that the Board was not disqualified to make the final termination decision. The Court observed that the Board members did not have “the kind of personal or financial stake in the decision that might create a conflict of interest” and that there was “nothing in the record to support charges of personal animosity.” 426 U.S. at 491-92, 96 S.Ct. at 2313-2314. The Court held that the teachers had “failed to demonstrate that the decision to terminate their employment was infected by the sort of bias that we have held to disqualify other decisionmakers as a matter of due process.” 426 U.S. at 496, 96 S.Ct. at 2315-2316. Also entering into the Court’s decision was the consideration that, inasmuch as the teachers admitted they were on strike, “there was no possibility of an erroneous factual determination on this critical threshold issue.” 426 U.S. at 494, 96 S.Ct. at 2314-2315.

Other decisions also make it apparent that mere involvement, or even an instrumental role, in bringing charges against a public employee does not disqualify an official or governing board from acting as the final decisionmaker.

For example, in Brasslett v. Cota, 761 F.2d 827 (1st Cir.1985), a town manager brought charges against the fire chief for allegedly making false charges concerning the insufficiency of fire protection. The town’s due process structure for its employees provided for a hearing tribunal to render an advisory opinion to the manager who was the ultimate decisionmaker. Even though the manager had made the initial decision to terminate the chief, the appellate court affirmed the trial court in holding that due process had not been violated for lack of an impartial decisionmaker. The Court summarized its rationale as follows:

“The court below was quite correct in observing that Brasslett failed to demonstrate that Cota harbored actual bias against him. In addition, he made no showing that circumstances existed which might ordinarily give rise to an inordinate risk of bias; Cota had no pecuniary interest in the outcome of the plaintiffs appeal nor did he have any animosity toward Brasslett as a result of personal criticism or attacks. To the contrary, even after the interview, Cota described his working relationship with Brasslett as a good one____ Accordingly, any argument that the Town of Orono neglected to provide Brasslett with an impartial decisionmaker must fail.” (Citations omitted)

Id. at 837.

Another very pertinent decision is Morris v. City of Danville, 744 F.2d 1041 (4th Cir.1984). In Morris, a complaint was made to a city manager concerning the plaintiff police chief. The manager caused an investigation to be made by the Commonwealth’s attorney, who made an extensive report stating that the chief had been guilty of several violations of local procedures and state law. After the chief had apparently declined a pretermination hearing, he was suspended without pay and relieved of his duties, subject to a right under local procedures to demand a hearing before the manager.

The manager held a six-day hearing and made the final decision to dismiss the chief. In his subsequent action in the federal disr trict court the primary complaint of the chief was that he had been denied an impartial decisionmaker. The district court agreed, holding that the participation of the city manager disqualified him from acting as an impartial decisionmaker, thus denying the chief due process. In a carefully reasoned decision, discussing many authorities, the Circuit Court of Appeals reversed on appeal. The appellate court held that the participation of the manager in bringing the charges did not disqualify him under the rule of Withrow and Hortonville, supra, but that if, upon further inquiry, which it ordered the district court to pursue on remand, the manager was ultimately shown “to have had a disqualifying personal bias that did stem from a source other than his prior participation in the administrative process,” he must then be disqualified. 744 F.2d at 1046 (emphasis added).

In holding that the role of the manager in bringing the charges did not disqualify him as the ultimate decisionmaker, the court stated:

“In this case, ... the decision by Church to terminate Morris was largely a procedural step, designed to inform Morris of the charges against him and of his opportunity to respond to them at a subsequent hearing. Similarly, Church’s conditional decision was based on the ex parte submission of Fuller, which was embodied in the investigative report. Cf. FTC v. Cement Institute, 333 U.S. 683, 701, 68 S.Ct. 793, 803, 92 L.Ed. 1010 (1948) (“the fact that the Commission had entertained such views as the result of its prior ex parte investigations did not necessarily mean that the minds of its members were irrevocably closed on the subject.”) Contrary to the district court’s view, Church’s initial decision to discharge Morris operated merely to inform Morris of the charges against him and simply reflected the fact that, in Church’s view, the allegations made in Fuller’s report were sufficient cause to terminate Morris’s employment if he did not refute them at the hearing.”

Id. at 1045. In reversing the district court’s decision that due process had been lacking, the appellate court put great weight on its view that the manager’s “initial decision to terminate [the chief] was tantamount to a ‘show cause’ order, which notified [the chief] both of the extensive factual issues to be resolved at the hearing and of their seriousness.” 744 F.2d at 1046, n. 7.

On the other side of the line is Staton v. Mayes, 552 F.2d 908 (10th Cir. 1972), where, in circumstances quite similar to those existing here, a school board was held to be disqualified by bias in deciding charges of incompetence against a superintendent, where several of the board members had made public statements impugning the competence of the superintendent. This court concludes that in Salisbury’s case such disqualification was required and that plaintiff was deprived of her right under due process of law to an impartial decisionmaker.

A synthesis of the above decisions reveals that whether or not the decision-making board or individual possesses a disqualifying personal bias depends on the following considerations:

1. Whether the decisionmaker’s role in initiating the charges was largely a procedural step, or implies that the decision-maker’s mind is closed on the issue of guilt.
2. Whether there are important issues of fact such that the decisionmaker’s possible lack of impartiality gives rise to serious risk of an erroneous decision based on tainted findings of fact.
3. Whether the decisionmaker has a personal interest, either pecuniary or relating to personal prestige, in seeing that the termination is upheld.
4. Whether personal animosity exists between the employee and the decision-maker.

Here, the Authority members’ involvement was much greater than merely procedural.

And unlike the proceedings before the school board in Hortonville, there existed a great possibility of erroneous factual determination on the critical issues, because of the personal involvement of the NHA in the dispute with Salisbury. If Salisbury were found not guilty of the charges, then almost inevitably certain members of the NHA would be guilty of misconduct on their own part.

Here, a federal suit was already pending, such that the Authority members might be found liable for violating Salisbury’s First Amendment rights, if she had been wrongfully suspended. Also, they might be found liable in a defamation action for the public allegations of misconduct they had made against her. Their prestige was also in jeopardy if Salisbury was vindicated. They obviously possessed the most intense pecuniary and personal bias.

It must also be recalled that the NHA had previously expressed an intention to terminate Salisbury, and the formal charges and hearing were only implemented because of the proceedings in this court, during which the court warned the defendants personally that they could be liable for violating Salisbury’s constitutional rights if due process was not observed. Particularly pertinent is the fact that intense personal animosity existed between Salisbury and Mayor Deaton, who sat on the NHA and appointed all of the other members thereof under applicable state law. Also, Mayor Deaton’s personal attorney was employed to act as special counsel for the Authority in Salisbury’s hearing.

Thus, this court holds that, unlike the situations in Hortonville, Brasslett, and Morris, supra, the plaintiff here did demonstrate that each of the four disqualifying factors listed above existed. First, the Authority’s role in initiating the charges was more than procedural. Second, the factual issues were crucial and there was a great risk of erroneous factual findings by reason of the Authority members’ bias against Salisbury. Third, the Authority members had both a pecuniary and personal interest in seeing the termination upheld because of pending and possible future litigation. Fourth, a bitter personal dispute had been raging for months between Salisbury and the Authority members, displaying considerable animosity on the part of all concerned.

Therefore, plaintiff was deprived of her due process right to an impartial decision-maker under the facts existing in this case.

The Effect of Existing State Judicial Remedies

Defendants argue that the existence of state judicial review of the Authority’s action in terminating Salisbury serves to provide her with due process, even if it was lacking in the hearing before the Authority. They also contend that her right to sue on a state claim for breach of contract serves the same purpose.

Defendants do not deny that there is no requirement that Salisbury exhaust either state administrative or judicial remedies. It is now well established that there is no requirement that she do either. Patsy v. Board of Regents, 457 U.S. 496, 102 S.Ct. 2557, 73 L.Ed.2d 172 (1982); Loudermill v. Cleveland Bd. of Ed., 721 F.2d 550 (6th Cir.1983), aff’d. — U.S. —, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985).

Rather, defendants assert that, inasmuch as Loudermill, supra, held that only an “abbreviated” pretermination hearing was required if there are adequate post-termination remedies, plaintiff was not entitled to an unbiased tribunal in the pretermination hearing held here, because state judicial review provided an adequate post-termination hearing. Defendants also rely heavily on Lee v. Western Reserve Psychiatric Habilitation Center, 747 F.2d 1062 (6th Cir.1984), in attempting to establish this proposition.

There are several fallacies to defendants’ arguments. First of all, neither Louder-mill nor Lee, supra, addressed the issue of an unbiased decisionmaker. In both cases, the employees did not complain of bias, but claimed that they had been deprived of due process for lack of sufficient pretermination procedures. It was unnecessary for the Supreme Court in Loudermill or the Court of Appeals in Lee to pass on the extent to which the “abbreviated” pretermination hearing was required to be held by al. impartial decisionmaker.

Nor need this court comment on whether the “abbreviation” of a Loudermill- type pretermination hearing implies some relaxation of the impartiality requirement. Here, the hearing was in effect both the pretermination and post-termination hearing. Plaintiff’s complaint is not that the procedures were insufficient in quantity, but that although the procedures were facially adequate, they were so tainted by the bias of the tribunal as to be illusory.

The complaint is justified, as has been explained above, and the deficiency in the crucial quality of impartiality is not compensated for by the state judicial review afforded. For, in Kentucky, a public employee who can be discharged only for cause is entitled to a limited de novo review. The Kentucky courts have held that a right of review to this extent is implied in the state constitution. The nature of this review is that the employee may appeal to the circuit court and file the transcript of the administrative hearing there. Although both sides may introduce evidence, the employee has the burden of proof and the court may reverse the agency’s decision only for arbitrariness. Thus, if the deck was stacked against the employee by the bias of the administrative tribunal, judicial review does not sufficiently reshuffle the cards. An adverse determination on a credibility or other factual issue by a biased administrative tribunal may well taint the judicial review.

Qualified, Immunity

The individual defendants argue that they are entitled to qualified immunity. This contention is clearly without merit.

A governmental entity is not entitled to any claim of qualified immunity but its “officials” may raise this defense. Thus, innocent officials are protected while the redress for violation of constitutional rights is guaranteed. Owen v. City of Independence, 445 U.S. 622, 100 S.Ct. 1398, 63 L.Ed.2d 673 (1980).

The Supreme Court has relatively recently decided that the Constitution is best served by using an objective test for qualified immunity of public officials. Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982); Davis v. Scherer, — U.S. —, 104 S.Ct. 3012, 82 L.Ed.2d 139 (1984); Mitchell v. Forsyth, — U.S. —, 105 S.Ct. 2806, 86 L.Ed.2d 411 (1985). To overcome the defense of qualified immunity it must appear that the defendant officials violated clearly established constitutional rights of which a reasonable person would have known. Harlow v. Fitzgerald, 457 U.S. at 818-19, 102 S.Ct. at 2738; Davis v. Scherer, 104 S.Ct. at 3018. Mitchell v. Forsyth, supra. The due process cases cited above show that the right to an impartial decisionmaker as an element of due process was established long before the events here in issue occurred in late 1982 and early 1983. This fact was emphatically pointed out to the defendants by plaintiffs counsel throughout the proceedings. Although some cases might present a close question whether a particular official was so involved in making the initial decision to bring charges against a public employee as to be disqualified as the ultimate decisionmaker, the court does not believe this is one of them. The disqualifying personal bias of the Authority member was by any objective standard readily apparent. Therefore, the defendants are not entitled to qualified immunity.

State Action as to Certain Defendants

Johnston, Gillespie and Wilder contend that as non-members of the NHA they acted as private individuals and not under the color of state law. Plaintiff has alleged a conspiracy of all defendants, however, to deprive her of her constitutional rights. If these contentions are proved, these defendants would be acting under color of state law for purposes of this § 1983 action. Dennis v. Sparks, 449 U.S. 24, 101 S.Ct. 183, 66 L.Ed.2d 185 (1980); Tower v. Glover, — U.S. —, 104 S.Ct. 2820, 81 L.Ed.2d 758 (1984); Macko v. Bryon, 641 F.2d 447 (6th Cir.1981).

Rule of Necessity

Defendants argue that this rule permits even a biased tribunal to decide a case if no appeal procedure or alternative exists. Cf. Staton v. Mayes, 552 F.2d 908 (10th Cir.1977).

The rule of necessity is an ancient rule originally developed to permit judges to hear a case in which they had an interest when there was no provision for appointment of another judge. United States v. Will, 449 U.S. 200, 213, 101 S.Ct. 471, 479-480, 66 L.Ed.2d 392 (1980). In Kentucky, the rule has been applied to school board members where they have the sole statutory authority to hire and fire teachers. Carter v. Craig, 574 S.W.2d 352 (Ky.App. 1978).

In this case plaintiff is a contractual employee of the NHA. Although KRS 80.090 reposes sole authority in the “appointing officer” to remove an authority member, no such provision exists regarding employees. KRS 80.070 grants a housing authority the power to hire any employees it deems necessary. It does not vest sole termination power in the authority.

As a result, KRS § 80.070 would permit the NHA to appoint an independent hearing examiner to hear a case and would not require the application of the rule of necessity. Considering that an impartial fact-finder is an essential element of due process and the overwhelming bias of the Authority in this instance, this court holds that the Authority should have appointed an impartial hearing examiner, attempted to submit the matter to arbitration, or otherwise avoided acting in a quasi-judicial capacity under the circumstances.

Remedy

For the reasons stated above, defendants’ motion for summary judgment must be denied, and plaintiff’s motion for partial summary judgment to the extent based on the denial of due process must be granted.

But this does not mean that we proceed immediately to affix damages. Judge Jones in his opinion for the Sixth Circuit in Kendall v. Board of Education of Memphis City, 627 F.2d 1, 6 n. 6 (6th Cir.1980) has spelled out for us the procedure that must now be followed.

“Once the plaintiff has established a deprivation of constitutional rights, the burden of proof shifts to the defendant to demonstrate that the deprivation of constitutional rights did not cause the plaintiff’s injury. Mt. Healthy Bd. of Education v. Doyle, 429 U.S. 274, 287, 97 S.Ct. 568, 576, 50 L.Ed.2d 471 (1977). Thus, after Kendall proved a violation of procedural due process, the Board bore the burden of demonstrating that her dismissal was not caused by its failure to afford her a proper hearing before the dismissal. To meet its burden, the Board must show that it had just cause for the dismissal, that is, that its charges against Kendall are true. See Codd v. Velger, 429 U.S. 624, 630, 635, 97 S.Ct. 882, 885, 888, 51 L.Ed.2d 92 (1977) (per curiam) (Brennan, J., and Stevens, J., dissenting).”

We have an unusual situation here in that neither party has demanded a jury, and we have a full transcript and videotape of the lengthy hearing before the Housing Authority. The plaintiff admits she was permitted to present all or nearly all of the evidence she desired at this hearing, although she has established that the evaluation of this evidence was tainted by bias. Therefore, the court believes that the matter is best referred to a United States Magistrate to act as Special Master, pursuant to F.R.Civ.P. 53, in determining whether the plaintiff is entitled to recover damages, and to file a report and recommendation on all remaining issues, including damages. The Magistrate will review the transcript and videotape, but may take additional evidence in his discretion. His principal inquiry will be whether the charges against the plaintiff were justified, such that she would have been terminated if the hearing had been held before an impartial decisionmaker. He will also make findings on the issue whether the termination was caused by plaintiff’s exercise of her First Amendment rights. See Mt. Healthy Bd. of Education v. Doyle, 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977).

      . The function of the Housing Authority is to establish and operate low cost housing projects within the City of Newport. Kentucky Revised Statute 80.020. It is managed by a board consisting of the mayor of the city ex officio and four other members the mayor appoints. KRS 80.030. Defendants argue that its actions are not actions of a public agency and, therefore, the requisite "state action" element for a claim under § 1983 is lacking. A cursory review of KRS Chapter 80 indicates, however, that the NHA is a state agency whose actions are state actions. Tedder v. Housing Authority of Paducah, 574 F.Supp. 240 (W.D.Ky.1983). Therefore, the type of analysis used by this court in Watkins v. Reed, 557 F.Supp. 278 (E.D.Ky.1983), aff’d 734 F.2d 17 (6th Cir.1984) ("close nexus” analysis between private entity and government) is not required.

      . The defendants in this action are:
      Defendant, Newport Housing Authority (NHA), a corporate housing authority subsidized by the federal government and created pursuant to Kentucky Housing Authority law, KRS Chapter 80.
      Defendant, Irene Deaton, the Mayor of Newport at all times relevant to this action and a member of the NHA Commission.
      Defendant, Ann Fredericks, NHA Commission member.
      Defendant, Marguerite Robinson, NHA Commission member.
      Chaddie Salisbury is suing Deaton, Fredericks, and Robinson, both individually and in their official capacities as NHA Commission members.
      Defendant, Bill Wilder, Deaton’s personal attorney and as of February, 1983, special counsel for the NHA, hired to handle all further legal matters involving Salisbury.
      Defendant, Betty Gillespie, Executive Director of the Housing Authority of the City of Georgetown, interim executive director of the NHA prior to Salisbury’s employment, as well as March through May, 1983.
      Defendant, Day Johnston, architect for the NHA; hired in 1980 by Gillespie as the modernization contract architect for the NHA.
      A chronological listing of the events leading up to the plaintiffs termination will help the reader obtain a feel for the acerbity of the controversy between Salisbury and the defendants:

        December, 1982—According to Salisbury, she commenced an investigation of certain work done by the general contractor on an NHA modernization project and on the design work done by defendant Johnston, the NHA architect. She allegedly did so based on information she had received of design defects. Purportedly, an independent engineering firm notified Salisbury at her request for investigation, that the work failed to meet building code requirements and that the architectural design was inadequate and improper.

        January 14, 1983—Salisbury claims to have met with Leroy Hoffman, then chairman of the NHA Commission, in order to discuss Johnston’s role regarding design defects in the modernization project and his attempted coverup thereof. This was prompted by a letter received by the plaintiff from Johnston, dated January 13, 1983. In the letter, Johnston admitted having improperly designed part of a heating duct system for the modernization project and trying to cover this up. Defendants contend that Salisbury learned of design defects and the cover-up earlier than December, 1982, and failed to disclose it to them at that time.

        January 19, 1983—Irene Deaton claims that she was first notified by Ms. Salisbury of irregularities in the performance of a contract which NHA had entered into with the Kamex Construction Company. Deaton claims that she began a background inquiry into Ms. Salisbury's direction of the NHA, during which time she found additional evidence of mismanagement. This improper conduct allegedly involved the unauthorized issue of substantial change orders and the unauthorized hiring of a consultant who, because of his concurrent employment with Kamex, had a conflict of interest.

        January 21, 1983—An executive session of the NHA was held. Salisbury claims that it was convened at her request to discuss matters relating to the improper work done on the modernization project. Defendants claim it was to discuss the charges developed by Ms. Deaton in her investigation of Salisbury. It is undisputed that Mayor Deaton moved for termination of Ms. Salisbury at that meeting, but the full board concluded that further investigation was appropriate prior to her termination.

        January 27, 1983—The NHA met in an open meeting. Plaintiff claims that Deaton again moved to terminate her, but the move was defeated allegedly because Chairman Hoffman refused to vote. Plaintiff claims that Hoffman's refusal was based on his statement that the board did not have enough information to move against Salisbury at that time. She also claims that the motion by Deaton was made despite the NHA’s attorney’s advice that she should be afforded her due process rights prior to dismissal. Plaintiff claims that she asked for an opportunity to be heard on the charges against her both at the January 21st and January 27th meetings, but was refused.

        February 23, 1983—Plaintiff filed this action initially to prevent the NHA from firing her without due process of law.

        February 24, 1983—A hearing was held on plaintiff’s motion for a restraining order. The motion was denied, but this court admonished the members of the NHA that failure to provide plaintiff with due process could subject them to liability.

        February 24, 1983—Plaintiff received a letter signed by Deaton, Fredericks and Robinson listing 22 charges against her and stating that "you may be assured that the board will take action to either suspend or terminate your contract based upon the above charges at a future date." The letter also stated that her contract with the board was invalid, charging that she drew it up and presented it to the board, but it was never approved by the HUD office.

        March 1, 1983 —Plaintiff mailed a letter to the NHA requesting an impartial hearing examiner to hear the charges against her. She claims that the Authority refused to grant the requested hearing and that she was told that the proper body to hear her case was the NHA itself. She claims that the NHA at that time consisted of Deaton and Fredericks, due to the resignation of
        three other members of the Authority. She claims that Deaton and Fredericks both had either brought or seconded all of the charges against her.

        March 2, 1983—The NHA suspended Ms. Salisbury, according to them with full pay, and scheduled a hearing for April 9, 1983. Plaintiff claims that just prior to the scheduled hearing which was continued until April 16, 1983, the NHA asserted four additional charges against her which were to be heard at the same time as the original charges, despite her repeated objections to the lack of adequate notice of the additional charges.

        April 16, 1983—A hearing was held before the NHA. According to defendants, Ms. Salisbury appeared with counsel who called and examined witnesses on her behalf and cross-examined witnesses against her. After several weeks of hearings, the NHA issued a decision on May 20, 1983, which found that there was just cause to terminate plaintiff, effective August 18, 1983.
      Plaintiff is now suing on the following grounds:
      (1) That all the defendants individually and collectively conspired to deprive her of her (a) employment contract, and (b) liberty (interest in her good name and reputation) interests without due process of law. She claims procedural irregularities at the hearing itself including lack of impartial decision-makers, bias, prejudgment and multiple roles of the hearing examiners.
      (2) She claims that Deaton and Wilder violated her liberty interests by providing the media with information regarding her that they knew or should have known was false and misleading.
      (3) Plaintiff claims that defendants conspired unlawfully to deprive her of her property and liberty interests as punishment and in retribution for exercising her First Amendment right of free speech.
      (4) She claims breach of contract by the NHA.
      (5) She claims that Wilder, Gillespie and Johnston induced the NHA to breach its contract with her intentionally and maliciously, and thereby interfere with her contractual relations.
      (6) Plaintiff charges that Wilder and Deaton are liable for defamation in that they published false and defamatory statements in the paper against her.
      All of this was attended by widespread publicity, and the charges and countercharges between plaintiff and the board, especially Mayor Deaton, became a local cause celebre. These events were characterized by bitter animosity between the two sides of the dispute.

      . Loudermill held that a “tenured” public employee is entitled under due process to a pretermination hearing, before he or she can be discharged. However, this hearing may be "abbreviated," that is, consist only of notice of charges and an opportunity to respond, if followed by an adequate post-termination hearing. Because of the public charges made against her, plaintiff was also entitled to the hearing to attempt to clear her name. Burkhart v. Randles, 764 F.2d 1196 (6th Cir.1985) and cases therein cited.

      . One such case is Staton v. Mayes, 552 F.2d 908 (10th Cir.1977) (school board).

      . The term used by the Fourth Circuit in Morris, supra, seems apt.

      . The court is not holding that all of the factors must be demonstrated in every case. Rather a balancing of the factors is required.

      . Where the pretermination is "abbreviated” the post-termination hearing must be trial-type. Carter v. Western Reserve Psychiatric Habilitation Center, 767 F.2d 270 (6th Cir.1985), or, if only a pretermination hearing is held it must be trial-type.

      . City of Henderson Civil Service Commission v. Zubi, 631 S.W.2d 632 (Ky.1982); Brady v. Pettit, 586 S.W.2d 29 (Ky.1979).

      . Defendants also argue that the existence of adequate state remedies in a breach of contract action or administrative appeal provides sufficient due process under the doctrine of Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981) and Vicory v. Walton, 721 F.2d 1062 (6th Cir.1983). This argument is without merit. The NHA did have opportunity to anticipate and control the proceedings. Therefore, this is not a case of a random, unauthorized act where "a pre-deprivation hearing is ‘impracticable’ or ‘impossible.’ ’’ Stachura v. Truszkowski, 763 F.2d 211, 215 (6th Cir.1985). Cf. Logan v. Zimmerman Brush Co., 455 U.S. 422, 433-5, 102 S.Ct. 1148, 1156-57, 71 L.Ed.2d 265 (1982); Wilson v. Beebe, 770 F.2d 578 (6th Cir. en banc, 1985).

      . These facts provide the "exceptional circumstance” required by F.R.Civ.P. 53(b).


source: Caselaw Access Project

author: SEAR, District Judge.

license: Public Domain

text:
    MORGAN GUARANTY TRUST COMPANY OF NEW YORK, et al., Plaintiffs, v. The M/V GRIGORIOS C. IV, et al., Defendants.
    No. 83-6268.
    United States District Court, E.D. Louisiana.
    Aug. 20, 1985.

      Henry Read, Daniel Lund and Stanley McDermott, III, Montgomery, Barnett, Brown & Read, New Orleans, La., J. Bond Smith and John Loflin, Lord, Day & Lord, New York City, for plaintiffs.
    Walter Carroll, Jr., Terriberry, Carroll & Yancey, New Orleans, La., Alfred E. Yudes, Jr., Burlingham, Underwood & Lord, New York City, for defendants.
   MEMORANDUM AND ORDER

SEAR, District Judge.

Plaintiffs, Morgan Guaranty Trust Company (“Morgan”), Continental Illinois National Bank and Trust Company of Chicago (“Continental”), National Westminister Bank USA, Inc. (“Nat West”), and Banque De La Societe Financiere Europeenne (“BSFE”) (collectively, “the Plaintiffs’) brought this action in rem on December 30, 1983 to foreclose on a First Preferred Greek Ship Mortgage which they held on the M/V Grigorios. The Grigorios is of Greek registry and the mortgage was given as partial security for an $80 million revolving credit and term loan facility (“the Loan Agreement”) funded by the Plaintiffs in favor of the ship’s owner, Hellenic Lines, Ltd. (“Hellenic”), a Greek stock corporation.

The vessel was arrested in the Port of New Orleans on January 4, 1984 and, on unopposed motion of the Plaintiffs, was sold on February 29, 1984 for $1,270,000 pursuant to Supplemental Admiralty Rule E(9)(b). Under the terms of the order for the sale of the vessel, the time for filing liens ran until 30 days after the sale, or through March 30, 1984. Accordingly, on April 5, 1984, the Plaintiffs’ motion to default all lienholders who had not timely intervened was granted.

Numerous parties intervened before and after the sale to recover monies allegedly owed them for supplies or services rendered to the vessel.

One of the intervenors, Mobil Sales and Supply Corporation (“Mobil”), contends that the mortgage which the Plaintiffs claim on the Grigorios is not a valid preferred ship mortgage under the Ship Mortgage Act, 46 U.S.C. § 911 et seq., and that even if it is, its lien for supplies piovided to the vessel is superior to the Plaintiffs’ mortgage lien under 46 U.S.C. § 951. Trial was conducted on these issues and after consideration of the evidence, the arguments of counsel, the pre- and post-trial memoranda of the parties, and the law applicable to the case, I now make the following findings of fact and conclusions of law.

I. Background

Hellenic was founded by Pericles Callimanopoulos. When he died on September 20, 1979, he left the bulk of his shares in the corporation to his son, Grigorios (59.375%), and the remainder to his wife and daughters. The wife and daughters thereafter brought an action in the Court of First Instance of Pireaus, Greece contesting the validity of his will. Although the validity of the will was initially upheld, the Greek court later ruled that the wife and daughters may be entitled to a larger share of Callimanopoulos’ estate. As a “conservatory measure” pending an accounting of the succession, the court appointed an administrator to control the shares of Hellenic which formed part of the succession. On April 7, 1982, an Extraordinary General Meeting of Hellenic’s shareholders was convened in accordance with the instructions of the court for the purpose of electing a new Board of Directors. At that meeting, the court-appointed administrator voted the shares of the succession. The new Board of Directors then scheduled another Extraordinary General Meeting of Hellenic’s shareholders for June 1, 1982. When dissident shareholders sought to prevent that meeting on the ground that it would jeopardize their interests, the court reaffirmed the authority of its administrator and refused to enjoin the June 1, 1982 meeting. Prior to the meeting, however, on May 31, 1982, Callimanopoulas’ heirs entered into an agreement providing for the distribution of voting rights to the shares of the succession. At the meeting of June 1, 1982, a new Board of Directors was elected in accordance with the May 31, 1982 shareholders agreement.

At the end of 1982, Hellenic had several loans outstanding with Continental and Morgan totalling approximately $69.9 million. These loans were secured in part by mortgages on seven ships owned by Hellenic and in part by a pledge of marketable securities. At that time, there was a worldwide recession which severely depressed the shipping market and made it difficult for Hellenic to fulfill its obligation to repay these loans. Hellenic therefore sought to refinance its debt in a manner that would permit it to defer temporarily payments on the principal of the loans and to increase its liquidity. Morgan and Continental both declined to refinance the debt until Hellenic obtained additional working capital.

Hellenic obtained the additional capital by arranging for two other banks, BFSE and Nat West, to participate in refinancing its debt. Management and documentation of the refinancing were initially handled by Continental, but were later overseen by Morgan after it became apparent that Morgan would fund the majority of the refinancing. On April 28, 1983, Hellenic and the Plaintiffs executed the Loan Agreement which provided that Hellenic would receive $80 million of revolving credit that would convert to a six year term loan after December 31, 1984. The Loan Agreement also provided that Continental and Morgan would release the securities pledged to them by Hellenic. Thus, under the Loan Agreement, Hellenic obtained about $10.1 million of new credit, deferral of the roughly $32 million in principal payments that would have been due during 1983 and 1984 under the earlier loans by Continental and Morgan to Hellenic, and the release of approximately $7 million of securities pledged by Hellenic to Continental and Morgan.

In exchange, the Plaintiffs were given mortgages on the seven Hellenic vessels that were previously mortgaged to Continental and Morgan, as well as mortgages on four additional ships, including the Grigorios. The ship mortgages, however, were not fully executed at the time that the Loan Agreement was signed. Initially, the parties contemplated execution of the ship mortgages in Greece and execution of the Loan Agreement and other documents in New York. Two or three days prior to closing, Morgan notified the Plaintiffs’ New York counsel, R. Theodore Ammon, that it would not execute a power of attorney to permit the Plaintiffs’ Greek counsel, Theo V. Sioufas, to execute the mortgages in Greece. Consequently, the signing of the mortgages was rescheduled to New York.

Although Hellenic’s Board of Directors had authorized on April 19, 1983 its New York representatives to execute all documents relevant to the Loan Agreement, when Sioufas was informed that the mortgages would be signed in New York rather than Greece, he recommended that Hellenic’s Board of Directors execute a notarial power of attorney in favor of Anatasios Pitenis, Hellenic’s representative who would sign the mortgages in New York. Sioufas believed at that time that under New York law, the mortgages would be executed in notarial form and that a notarial power of attorney was necessary to enable Pitenis, a non-director of Hellenic, to execute the mortgages. A meeting of Hellenic’s Board of Directors could not be scheduled until after April 28, 1983, when the documents were to be signed in New York. Consequently, at the closing on April 28, 1983, two copies of each of the ship mortgages were reserved for signing by Pitenis after the power of attorney had been executed by Hellenic’s Board. Therefore, at the April 28, 1983 closing, he executed only eight copies of each of the ship mortgages; he executed all ten copies of all of the other documents. The Plaintiffs, however, executed all copies of each of the documents, including the two reserved copies of the ship mortgages.

Hellenic’s Board of Directors met on May 2, 1983 and issued a resolution authorizing two members of the Board to execute a notarial power of attorney in favor of Pitenis. Immediately after the power of attorney was executed, Pitenis executed in New York the two reserved copies of each of the mortgages. The mortgages were subsequently taken to the county clerk’s office for certification of the notaries’ signatures, and then to the Greek consulate for certification of the county clerk’s signature. Thereafter, the mortgages were taken to Greece by Pitenis and delivered to Sioufas who registered them on May 3, 1983 in Piraeus, Greece, the port in which the Grigorios and the other vessels were registered. Simultaneously with the recordation of the ship mortgages in Greece, the Plaintiffs released the $80 million of credit to Hellenic. That day, Hellenic drew $73 million against its credit and repaid its prior obligations of about $69.9 million to Continental and Morgan.

Hellenic paid on August 3, 1983 the first installment of interest that it owed under the Loan Agreement, but failed to pay the second installment which was due on November 3, 1983. The Plaintiffs formally declared Hellenic to be in default on November 23, 1983 and notified Hellenic that they were exercising their right under the Loan Agreement to accelerate repayment of the entire outstanding amount of credit extended to Hellenic. They began filing foreclosure actions in rem and arresting Hellenic’s vessels on November 25, 1983.

Hellenic filed for reorganization under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101 et seq. on December 12, 1983 in the Southern District of New York. On January 20, 1984, Bankruptcy Judge Bur-ton R. Lifland ordered that the automatic stay provided by § 362 of the Bankruptcy Code be lifted so that any party could proceed with actions in rem against the mortgaged vessels.

II. Validity of the Mortgage

Although Mobil initially advanced several arguments as to why the mortgage claimed by the Plaintiffs is not a valid preferred ship mortgage under the Ship Mortgage Act, the pre- and post-trial briefs, as well as the proposed findings of fact and conclusions of law which it submitted, indicate that Mobil abandoned all but three challenges to the preferred status of the mortgage. First, Mobil claims that the mortgage fails to meet the prerequisites for creation of a preferred ship mortgage under the Ship Mortgage Act. Second, Mobil contends that Hellenic’s board of directors lacked authority to mortgage the vessel. Third, Mobil asserts that Hellenic was insolvent at the time the mortgage document was executed and therefore the mortgage was a nullity.

The Ship Mortgage Act provides that a preferred mortgage constitutes “a lien upon the mortgaged vessel in the amount of the outstanding mortgage indebtedness secured by such vessel.” 46 U.S.C. § 951. Both domestic and foreign ship mortgages can qualify as preferred mortgages under the Ship Mortgage Act. Section 951 of Title 46 provides that:

the term ‘preferred mortgage’ shall include, in addition to a preferred mortgage made pursuant to the provisions of this chapter [i.e., a domestic preferred mortgage created under 46 U.S.C. § 922], any mortgage, hypothecation or similar charge created as security upon any documented foreign vessel ... if such mortgage, hypothecation, or similar charge had been duly and validly executed in accordance with the laws of the foreign nation under the laws which the vessel is documented and has been duly registered in accordance with such laws in a public register ...; and the term ‘preferred mortgage lien’ shall also include the lien of such mortgage, hypothecation, or similar charge____

Mobil does not dispute that the mortgage creates a security interest in the vessel in favor of the Plaintiffs. Thus, because the Grigorios is a vessel documented under the laws of Greece, the mortgage constitutes a preferred ship mortgage under § 951 if it was executed in accordance with Greek law and recorded in the proper Greek public register.

At trial, four experts in Greek law, Sioufas, Paul C. Aurameas, Professor A.N. Yiannopoulas, and Aristides P. Kalamiotis, testified regarding the Greek law governing ship mortgages. The first three testified for the Plaintiffs, and the fourth for Mobil. Much of the testimony of the witnesses was substantially similar. That testimony indicated that there are two requirements to establish any mortgage in Greece. There must be a title of mortgage, and that title must be registered in the appropriate public records. With respect to ships, a title of mortgage may be created only by the will of the parties expressed in a formal or informal instrument.

Greek law provides for two types of ship mortgages, simple and preferred. Both convey to the creditor the right to proceed in rem against the ship to satisfy the debt after default by the debtor. A Greek simple ship mortgage is like a preferred ship mortgage in the United States created under 46 U.S.C. § 922 in that it provides for foreclosure and judicial sale of the vessel upon default on the debt. In addition, a Greek preferred ship mortgage allows the creditor another- means to satisfy the debt after default of the debtor. The creditor holding a Greek preferred ship mortgage may take over the proceeds from the vessel’s operation. The mortgagor in a preferred ship mortgage may also give the creditor the right to sell the ship in a private sale and apply the proceeds to the debt.

Under the Greek Code of Private Maritime Law, a simple ship mortgage may be created either by an informal instrument (i.e., an unilateral declaration of the debtor executed before a notary), or by a formal instrument (i.e., a contract executed by both parties before a notary). Legislative Decree No. 3899 of 1958, which governs preferred ship mortgages, provides in Article 2 that a preferred ship mortgage can be created within Greece only through a formal instrument. Where a preferred ship mortgage is executed outside of Greece, however, Article 2 permits the instrument to be in the “form required by the law of the country in which the agreement is executed.” Legislative Decree No. 2687 of 1953, permits the instrument to be a unilateral declaration of the debtor executed under private signature.

There is. also Greek law specifically applicable to the mortgage at issue in this case. Ministerial Decision and Approval No. F53521 of 1969 was issued pursuant to the authority of Legislative Decree No. 2867 of 1953 and constitutes irrevocable law specifically applicable to the Grigorios. Article 19 of the Ministerial Decision authorizes the vessel owner, in this case, Hellenic, to encumber the Grigorios by preferred mortgages:

either by contract or by any other act signed before Greek notary public in accordance with the form provided for by Greek law in case the signing takes place in Greece, or, if the signing takes place abroad, in accordance with the form required or permitted by the law of the place of signing.

Thus, under Article 2 of Legislative Decree No. 3899 of 1958 and the Ministerial Decision, the experts agree that the law of the place of the signing—in this case, New York—governs the form of any instrument purporting to create a mortgage upon the Grigorios.

The experts disagree, however, about what form under New York law the mortgage must take. The Plaintiffs’ experts uniformly testified that for an instrument to be a valid preferred Greek ship mortgage, it need only be in a form sufficient to create a security interest under New York law. Mobil’s expert, Kalamiotis, stood alone in testifying that Greek law looks only to the form of instruments which create the same rights under New York law as would be created under Greek law. I find the testimony of the Plaintiff’s experts more persuasive than Kalamiotis’ testimony for several reasons. First, and most important, Kalamiotis’ opinion is not supported by any of the Greek authorities he cited. Second, the Plaintiff’s experts’ interpretation of Greek law is consistent with the operation of its counterpart in the law of the United States, 46 U.S.C. § 951. That statute considers only whether a security interest has been established in the foreign vessel, and not whether the security interest constitutes a maritime lien. See State of Israel v. M/V Nili, 435 F.2d 242, 252 (5th Cir.1970), cert. denied, 401 U.S. 994, 91 S.Ct. 1232, 28 L.Ed.2d 532 (1971). Third, the testimony of the Plaintiff’s experts provided a clearer explanation of Greek law. For example, Kalamiotis’ testimony was ambiguous as to the precise form the instrument must take under New York law to create a valid preferred mortgage under Greek law. Furthermore, Kalamiotis did not include this point in his expert report. Indeed, he expressed it for the first time at trial. If Greek law were as he testified, one would have expected him to have included it in his report. I therefore credit the testimony of the Plaintiff’s experts and find that a mortgage of any form sufficient to create, as between the parties, a security interest under New York is a proper form of title under Greek law.

New York law specifically provides for the enforcement of a security interest as between the parties where: (1) the debtor has signed a security agreement which contains a description of the collateral; (2) value has been given; and (3) the debtor has rights in the collateral. N.Y.U.C.C. § 9-203. The mortgage in this case meets these requirements and is therefore in proper form under Greek law.

Although Mobil conceded at trial that the mortgage created a security interest in the vessel in favor of the Plaintiffs, Mobil nevertheless argues that New York law is inapplicable. Mobil claims that Article 9 of the N.Y.U.C.C. does not apply:

to a security interest subject to any statute of the United States, to the extent that such statute governs the rights of parties to and third parties affected by transactions in particular types of properties.

N.Y.U.C.C. § 9-104(a). That argument, however, is incorrect. The plain language of § 9-104 suggests that Article 9 is inapplicable only to the extent that the federal statute applies. The commentary to § 9-104 confirms this interpretation:

[wjhere a federal statute regulates the incidents of security interests in particular types of property, those security interests are of course governed by the federal statute and excluded from this Article.' The Ship Mortgage Act, 1920, is an example of such a federal act____ Even such a statute as the Ship Mortgage Act is far from a comprehensive regulation of all aspects of ship mortgage financing. That Act contains provisions on formal requisites, on recordation and on foreclosure but not much more. If problems arise under a ship mortgage which are not covered by the Act, the federal admiralty court must decide whether to improvise an answer under ‘federal law’ or to follow the law of some state with which the mortgage transaction has appropriate contacts. The exclusionary language in paragraph (a) is that this Article does not apply to such security interest ‘to the extent’ that the federal statute governs the rights of the parties. Thus if the federal statute contained no relevant provision, this Article could be looked to for an answer.

(Emphasis added). In this case, the provisions of the Ship Mortgage Act governing foreign ship mortgages do not specify the formal requisites of a foreign ship mortgage. Hence, under Greek law, Article 9 of the N.Y.U.C.C. controls the form of the mortgage and the mortgage is of proper form.

Mobil also argues vigorously that the mortgage is invalid under Greek law because of alleged informalities in the dating of the notarial jurats on the acknowledgments and on Hellenic’s affidavit of good faith. Neither acknowledgments nor an affidavit of good faith, however, are required under New York law to establish a security interest in property. Thus, any informality in the dating of the notarial jurats is irrelevant under Greek law.

In addition to meeting the requirements of New York law as to form, a valid title of a Greek preferred ship mortgage must meet the requirements of Greek law regarding substance. Article 3(a) of Legislative Decree No. 3899 of 1958 provides that the mortgage must identify the creditor, the debtor, the debt which the mortgage secures, the maturity date, and the ship. The Plaintiffs’ experts all testified the mortgage contains all of the information necessary under Greek law to be a valid title of preferred ship mortgage. Notwithstanding the opinion of Kalamiotis to the contrary, I agree.

Greek law also requires that the grantor of the mortgage be the owner of the vessel or a person acting under authority of the owner. See Code of Private Maritime Law, Art. 204; Greek Civil Code Art. 1265(2); Legislative Decree No. 3899 of 1958, Art. 22. Thus, this provision of Greek law was satisfied if Pitenis was properly authorized to act on behalf of Hellenic. Whether Pitenis was properly authorized turns on whether Hellenic’s Board of Directors had the authority to appoint Pitenis, and on whether the appointment was in the form required by Greek law.

Article 217 of the Greek Civil Code provides that a power of attorney “in the absence of other indication, is subject to the same form that is required for the execution of the juridical act for which the power of attorney is given.” In this case, New York law did not require that the mortgage be executed in notarial form; therefore, the power of attorney in favor of Pitenis granted by the April 19, 1983 resolution of Hellenic’s Board of Directors was in a form acceptable under Greek law. Nevertheless, by resolution on May 2, 1983 before Pitenis execute the two copies of the mortgage which were registered in Greece, Hellenic’s Board also granted Pitenis a power of attorney in notarial form. Consequently, the form of Pitenis’ appointment would have been appropriate under Greek law even if New York law had required that the mortgages be executed in notarial form.

Although Mobil does not challenge the form of Pitenis’ appointment, it vigorously contends that Hellenic’s Board of Directors lacked authority to appoint him. Mobil first asserts that the Board lacked authority because Hellenic ceased to exist in March, 1955. Hellenic was formally constituted on March 19, 1935 through the publication of its Articles of Association in the Bulletin of Joint Stock and Limited Liability Companies of the Government Gazette, an official publication of the government of Greece. Article 4 of those Articles of Association established the term of the company at twenty years, or until March 18, 1955. However, included with the exhibits admitted into evidence, though not otherwise identified as an exhibit, is a certified and consularized copy of the Government Gazette of February 26, 1955 in which an amendment to Article 4 is published. That amendment fixes the duration of the Hellenic company at 40 years from the date of incorporation in 1935, or until March 18,1975. Article 4 was once again amended in 1970 to extend the duration of Hellenic until March 18, 1995. Accordingly, I find that Hellenic was continually in existence under Articles of Association from the time they were first promulgated in 1935 through the time that this action was brought.

Mobil next claims that Hellenic’s Articles of Association require that any documents be signed by Hellenic’s managing director or by two members of the Board of Directors, and that the Articles provide no authority for the appointment of a nondirector to execute a mortgage on behalf of the Board. Mobil, however, cites no provision of Hellenic’s Articles of Association in support of the first proposition and I have found none. With respect to the second, Article 21 provides, in addition to an extensive list of the duties of the Board, that: “[i]n other words, the Board of Directors decides on all matters requiring attention for the execution of the aims of the Company and all matters in the Company’s administration and protection of its interests.” This language is certainly broad enough to permit the Board to authorize a non-director to execute a mortgage.

Mobil’s final contention regarding the lack of authority of Hellenic’s Board of Directors to appoint Pitenis is that certain decisions of the Greek courts have deprived the Board of authority to bind the corporation. Specifically, Mobil points to several actions brought by the wife and daughters of Pericles Callimanopoulas in which they have sought to have various meetings of Hellenic’s shareholders declared invalid. None of the actions cited by Mobil, however, challenge the meeting of Hellenic’s shareholders on June 1, 1982 at which the Board of Directors that authorized Pitenis to execute the mortgage was elected.

Moreover, the June 1, 1982 shareholders’ meeting was convened by the Board of Directors elected at the April 7, 1982 meeting of Hellenic’s shareholders which in turn was held in accordance with judgments of the Court of First Instance of Piraeus. Although those judgments were interlocutory, they were issued as conservatory measures in the succession proceedings. .Under Greek law, decisions of a Board of Directors elected in compliance with conservatory measures stand despite subsequent modification of the interlocutory judgment. Thus, even if Callimanopoulos’ dissatisfied heirs prevail in their challenge to the succession, decisions of the Board which was elected June 1, 1982 will not be affected. I therefore find that Pitenis was properly authorized to execute the mortgage on behalf of Hellenic.

Mobil’s final challenge to the validity of the title of mortgage is its claim that Hellenic was insolvent at the time the mortgage was created and that the mortgage therefore constitutes a voidable preference under Greek bankruptcy law. Mobil, however, adduced no evidence that Hellenic was insolvent at the time the mortgage was created. Indeed, the testimony of Judith J. Plows, who is employed by Morgan as a Vice President in its shipping department and was responsible for Hellenic’s business with Morgan, suggests the contrary. Moreover, when the Court of First Instance of Piraeus, Greece found Hellenic to be insolvent, it established March 31, 1984 as the date of insolvency. Relying on Kalamiotis’ report, Mobil nevertheless contends that the Greek court may later redetermine the date of Hellenic’s insolvency. Even if Kalamiotis’ analysis of Greek law were credible, whether the Greek court will at some time in the future redetermine the date of Hellenic’s insolvency is purely speculative. Consequently, I find that Hellenic was not insolvent when the mortgage was created and that the title of mortgage is-valid.

The final requirement for establishing a valid Greek preferred ship mortgage is that the title of mortgage be registered. Until this is accomplished, the mortgage establishes no rights under Greek law, whether as between the parties, or as to third parties. In this case, the mortgage was registered by Sioufas in Piraeus, the port in which the ship was registered. Under Articles 1271 and 1329 of the Greek Civil Code, the registration of a mortgage in Greece is presumed valid unless: (1) the mortgagor is not the owner of the mortgaged property on the date of registration of the mortgage; (2) the mortgage fails to identify the mortgagor, the mortgagee, the mortgaged property or the amount the indebtedness secured; (3) the registration is not dated; or (4) the title of mortgage is void. Although all of the Plaintiffs’ experts testified that the mortgage was properly registered, Kalamiotis alone testified that the registration was defective and therefore invalid.

The defect described by Kalamiotis was that the discrepancy between the date of registration and the date stated on the mortgage, and the changed dates on the notarial jurats on the acknowledgments and on Hellenic's affidavit of good faith rendered the date of registration uncertain. The date stated on the face of the mortgage, however, is identical to the date declared on the certificate of registration, May 3, 1983. Moreover, Article 197 of the Greek Code of Private Maritime Law provides that “[t]he mortgage begins to exist from the time of the appropriate registration in the records of the place in which the vessel is registered. Consequently, under Greek law, a mortgage does not exist until it is registered and the date on which it is executed or which is stated on its face is therefore irrelevant to the determination of the date of registration. Similarly, even if the acknowledgments and Hellenic’s affidavit of good faith were not surplusage under New York and therefore Greek law, the date stated in the notarial jurats is irrelevant to the date of registration. I therefore find no defect in the registration of the mortgage and that the registration is valid.

Accordingly, I conclude that the mortgage is a Greek preferred ship mortgage which was duly and validly executed and recorded in a public register in accordance with the laws of Greece. Thus, the mortgage is a preferred mortgage within the meaning of 46 U.S.C. § 951 and is therefore entitled to treatment as a preferred mortgage lien.

III. The Priority of Mobil’s Lien

Mobil argues that even if the Plaintiffs hold a valid preferred ship mortgage under the Ship Mortgage Act, it is subordinate to Mobil’s lien for supplies provided to the Grigorios. The lien asserted by Mobil is in the amount of $177,735.20 for marine fuel oil and marine gas oil supplied to the Grigorios in Durban, South Africa on November 18, 1983. The evidence presented at trial reflects that: In early November, 1983, a representative of Hellenic called one of Mobil’s sales managers in New York inquiring as to Mobil’s price for fuel oil in South Africa. Mobil, however, declined to accept Hellenic’s order. Thereafter, Pitenis of Hellenic called Curt Townsend, a Vice President of Mobil with responsibility for overseeing certain sales of marine bunkers. Townsend agreed to accept Hellenic’s order. Because Mobil had no fuel depot in South Africa, Mobil arranged for Mobil Oil Southern Africa (PTY), Ltd. (“Mobil South Africa”), to supply the Grigorios. Mobil South Africa “assigned and transferred” its claim against the Grigorios to Mobil. Hellenic was then billed by Mobil for the value of the oil, but never paid.

The provision of the Ship Mortgage Act upon which Mobil relies in asserting that its lien is entitled to priority is the last clause of 46 U.S.C. § 951, which provides:

Provided, however, That such ‘preferred mortgage lien’ in the case of a foreign vessel shall also be subordinate to maritime liens for repairs, supplies, towage, use of drydock or marine railway, or other necessaries, performed or supplied in the United States.

Even assuming that Mobil is entitled to a maritime lien for the oil supplied to the Grigorios by Mobil South Africa, that oil was clearly not supplied in the United States. Mobil nevertheless contends that the Plaintiffs’ mortgage lien should be subordinated under § 951 because Hellenic arranged to purchase the oil in the United States. In making this argument, Mobil ingeniously characterizes its claim as one arising under a contract that was “performed” in the United States.

Section 951, however, makes no reference to contracts. Its plain language is concerned exclusively with the location at which the repairs were performed, or the supplies supplied. Although the brief legislative history of this provision indicates that it was intended to protect American suppliers of goods and services to foreign vessels, there is no clear expression of congressional intent to protect American suppliers supplying vessels outside of the United States. See, H.R.Rep. No. 1662, 83d Cong., 2d Sess., 1954 Code Cong. & Ad. News 2451-53. Mobil’s interpretation of § 951 would unduly extend the reach of the law of the United States. Cf. Gulf Trading and Transportation Co. v. M/V Hoegh Shield, 658 F.2d 363, 366-368 (5th Cir.1981) cert. denied, 475 U.S. 1119, 102 S.Ct. 2932, 73 L.Ed.2d 1332 (1982) (holding that U.S. law governed creation vol non of maritime lien for fuel supplied in Canal Zone even though fuel was ordered in London and delivered under contract negotiated there); Brandon v. S.S. Denton, 302 F.2d 404, 411 (5th Cir.1962); (“ ‘[t]he law of the place where the contract is made is, generally speaking, the law of the contract; i.e., it is the law by which the contract is expounded. But the right of priority forms no part of the contract itself’ ”). Moreover, under the Federal Maritime Lien Act, 46 U.S.C. §. 971 et seq., it must be presumed that those who furnish repairs, supplies and other necessaries look to the credit of the vessel and not that of the owner. Sasportes v. M/V Sol De Copacabana, 581 F.2d 1204, 1209 (5th Cir.1978). Where a supplier looks to the credit of the vessel to secure his lien, it would be anomalous to consider that the lien attaches in a place other than where the supplies were provided to the vessel. Consequently, because Mobil’s claim is not for supplies furnished to the Grigorios in the United States within the meaning of § 951, its claim is not superior to the Plaintiffs’ mortgage lien. See Sasportes v. M/V Sol De Copacabana, supra, 581 F.2d at 1211 (holding that of those monies advanced to vessel for necessaries, only those advances made in the United States entitled to priority).

      . Several of the intervenors later voluntarily dismissed their interventions. The Plaintiffs have stipulated to the validity and priority of the liens asserted by four of the intervenors which total $79,572.77. One party, Jerome Brown, failed to intervene before the deadline established by the order for sale. Because Brown’s claim did not arise until after the deadline and because the claims of the other intervenors had not yet been adjudicated, he was nevertheless permitted to intervene on January 2, 1985. Brown’s claim arises from personal injuries he allegedly sustained while working aboard the vessel in 1979. That claim is presently set for trial on December 16, 1985.

      . Judgment No. 2285 of 1981, Court of First Instance of Piraeus, Greece.

      . Judgment No. 352 of 1982, clarified by Judgment No. 871 of 1982, Court of First Instance of Piraeus, Greece.

      . Although the Loan Agreement was executed on April 28, 1983, it was “dated as of March 31, 1983."

      . The amounts funded by each of the Plaintiffs were: Morgan, $40 million; Continental, $30 million; BSFE, $1 million; and Nat West, $5 million.

      . The other vessels mortgaged were: Hellenic Valor, Hellenic Innovator, Hellenic Explorer,' Hellenic Sun, Hellenic Wave, Hellenic Pride, Hellenic Star, Hellenic Champion, Hellenic Ideal, and Hellenic Friendship. The Hellenic Friendship, however, was not owned by Hellenic, but by Universal Cargo Carriers, Inc., a related corporation. This vessel was mortgaged under the Loan Agreement pursuant to Universal’s guarantee of Hellenic’s debt.

      . The closing of the Loan Agreement and execution of the documents took place in the New York offices of the Plaintiffs' counsel. Because all of the documents had been prepared in anticipation of execution on April 28, 1983, the date line of the notarial jurat on the acknowledgments and the affidavits of good faith that were attached to the mortgages had been typed as “April_, 1983.” Pitenis was not to execute the two reserved copies of the ship mortgages until after Hellenic's Board met on May 2, 1983; therefore, Ammon instructed an associate of his law firm to change the date line of the notarial jurats on the acknowledgments and affidavits of good faith of Hellenic which were attached to the two reserved copies to "May_, 1983." The associate, however, failed to follow Ammon's instructions and changed the date line of the jurats on the acknowledgments of the Plaintiffs as well.
      Two notaries were present at the signing of the documents on April 28, 1983. They were introduced to the persons who would be signing the documents on behalf of Hellenic and the Plaintiffs. Those persons were told that the notaries would sign the acknowledgments . and, with respect to Hellenic, the affidavits of good faith. After the documents had been executed by the parties, the notaries signed and sealed the acknowledgments and the affidavits of good faith on all of the mortgages except for the two reserved copies. On those copies, the notaries signed and sealed only the acknowledgments with respect to the Plaintiffs. The date lines of the notarial jurats were incorrectly completed by Ammon’s associate with the date of closing, May 3, 1983, rather than with the date on which the notaries had in fact signed the jurats.
      The same notaries were also present at the signing of the two reserved copies of the ship mortgages by Pitenis on May 2, 1983. After signing of the mortgages by Pitenis, the notaries signed and sealed the jurats on the acknowledgments and affidavits of good faith. Ammon's associate also incorrectly dated the notarial jurats on these documents as of May 3, 1983. In preparing the documents for shipment to Greece, Ammon noticed that his associate had incorrectly dated the jurats on the acknowledgments by Hellenic, and instructed his associate to change the date to May 2, 1983 to reflect the date on which the jurat had actually been signed. Aamon did not notice that the jurat on the acknowledgment by the Plaintiffs were also incorrectly dated May 3, 1983.

      . Indeed, Mobil's counsel expressly conceded this point at trial.

      . Legislative Decree No. 2687 was authentically interpreted by legislative Decree No. 2928 of 1954. In accordance with the practice of Greek lawyers, reference to Legislative Decree No. 2687 herein shall also indicate reference to Legislative Decree No. 2928 of 1954.

      . The Ministerial Decision, dated January 8, 1970, was issued jointly by the Greek Ministers of Coordination, Mercantile Marine and Finance, and published in the January 23, 1970 edition of the official Government Gazette.

      . Before the Grigorios was completed, it was registered as Hull No. 1076 in accordance with Article 4 of the Greek Code of Private Maritime Law which permits registration of a vessel at any time after construction has begun.

      . At trial, however, Kalamiotis offered this as only one possible interpretation. He also suggested that the laws of Greece may govern the form of the instrument. He theorized that because New York law provides that a mortgage on a ship of a foreign flag is governed by the laws of the flag state, Greek law governed the mortgage in this case in all respects. Although he claimed to have authority for this opinion, his testimony revealed none. Moreover, his opinion is directly contradicted by Article 32 of the Greek Civil Code which expressly declares:
      When foreign law is to be applied, the rules of conflict of law of the foreign state are not part of the applicable law.
      Furthermore, counsel for Mobil conceded at trial that New York law governed the form of the mortgage.

      . The language of Article 4 subsequent to the 1955 amendment is identical to the text of Article 4 contained in the 1960 recodification of the Articles of Association which was admitted into evidence.

      . The language of Article 1268 of the Greek Civil Code, which governs mortgages generally, is substantially similar.