Court Opinion

ID: 8834031
Source: CourtListenerOpinion
Date Created: 2022-11-26 16:13:01.253475+00
Date Added: 2024-06-11T17:05:00.365441
License: Public Domain

BREWSTER, District Judge.
This is a proceeding in retn, brought by the mortgagees named in a mortgage covering the steamship Lincoln Land, formerly known as the steamship Cartona, which will be hereinafter referred to as the Lincoln Land. Libelants invoke the jurisdiction conferred by subsection K of the Ship Mortgage Act of 1920 (Act June 5, 1920, § 30 [Comp. St. Ann. Supp. 1923, § 8146¼n]) upon this court to enforce a mortgage lien by suit in rem in admiralty.
By order of court the steamship has been sold,-and there is now in court about $7,000. Intervening petitions have been filed, presenting claims aggregating about $4,300 for supplies furnished subsequent to the date of the mortgage, and one petition presented for lighterage service furnished prior to said date, amounting to about $1,500. The libel-ants claim that they, as holders of a preferred mortgage under the Ship Mortgage Act, are entitled to the proceeds of sale now in the hands of the court. The intervening claimants deny that the mortgage is preferred, and assert that the mortgagees5 rights are subordinate to those of such claimants. It becomes necessary, therefore, to determine who is entitled to the funds now in court, and this determination requires a consideration oí the status of the mortgage held by libelants. The essential facts are not in disputé.
The Lincoln Land is a steamship built in the United States, with a gross tonnage of 2,916 tons. By bill of sale, dated February 2, 1922, and recorded with the collector'of customs of the port of New York February 18, 1922, the Atlantic Gulf Steamship Company, Inc., transferred to Bertha Hilk Daly, a citizen residing in New York, the Lin-*360coin Land. On March 3, 1922, a consolidated certificate of enrollment and license (Act April 24, 1906 [Comp. St. §§ 8066, 8073, 8067]) was issued to Bertha H. Daly as sole owner, by which the steamship was licensed to carry on the coasting trade for one year from date of license.
The libelants had loaned money to the Atlantic Gulf Steamship Company, Inc., the payment of which the said Bertha H. Daly had guaranteed. Pursuant to an agreement between the parties, a bill of sale was given to the libelants by Bertha Hilk Daly, dated March 6, 1922. The libelants are both citizens of the United States. They then resided in New York, and carried on business in New York under the firm name of Levison & Co. They caused the bill of sale of the Lincoln Land to be recorded in the port of New York on June 21, 1922, but it does not appear that any new certificate of enrollment or license was ever issued to them as new owners. They never operated the steamship. On June 21, 1922, the same day the bill of sale to them was recorded, they executed a bill of sale of the steamship to the Indian Navigation & Transportation Company, Inc., a corporation organized under the laws of Delaware. A purchase-money mortgage for $43,500, covering the steamship and her appurtenances, was given back by the Indian Navigation & Transportation Company, Inc., to the libelants. Both the bill of sale to the corporation and the mortgage made by it were on June 22, 1922, recorded with the collector of the port of New York. So far as is disclosed by the evidence, neither were recorded elsewhere. The mortgage was duly indorsed on the ship’s documents July 14, 1922. The mortgagors defaulted, and the mortgagees declared the full principal sum due and payable. If their mortgage has a preferred status, it is clear that their lien takes priority over those for supplies and repairs furnished subsequent to July 14, 1922.
It is urged on behalf of the intervening petitioners that the mortgage in question does not have the preferred status given by subsection M of the Ship Mortgage Act, being Comp. St. Ann. Supp. 1923, § 8146¼nnn, (a) because the Congress has no constitutional authority to give to a mortgage on a vessel preferred status as a maritime lien; (b) because the mortgage was not recorded at port of documentation, as required by the act; and (c) because the act only gives preferred status to mortgages on vessels of the United States, and that the Lincoln Land was not a vessel of the United States when the mortgage was made,
First, as to the constitutionality of the so-called Ship Mortgage Act: Proctors for libelants have filed with me a brief devoted largely to a very learned presentation of the law and the reasons for upholding the constitutionality of the act. After a careful consideration of the cases cited and arguments advanced, I am satisfied that Congress, under its power to regulate commerce, may legislate respecting mortgages on ships, and may give to such mortgages preferred status. It is not so clear that it could give to. this court, as a court of admiralty, jurisdiction to enforce or recognize such mortgages as preferred maritime liens. However, I am inclined to the opinion that this extension of jurisdiction is a proper one. The J. E. Rumbell, 148 *361U. S. 1, 13 Sup. Ct. 498, 37 L. Ed. 345; The Lottawanna, 21 Wall 558, 22 L. Ed. 654. In the early case of The John Jay, 17 How. 399, 15 L. Ed. 95, it was intimated that Congress had power to alter the rule that mortgages on ships were nonmaritime contracts and unenforceable in admiralty. Until a higher court has announced a contrary doctrine, I am quite prepared to follow the learned District Judge in the Eastern district of Virginia, who has said in the case of The Oconee, 280 Fed. 927, 933, that, “Congress having now acted, the omission existing in the law as it formerly stood is supplied, and the act must be held within the power of Congress, and therefore constitutional.” I cannot, therefore, relegate the rights of the mortgagees to an inferior position on the ground that the act under "which the rights are asserted is beyond the authority of Congress to enact.
But the other objections raised to the priority of libelants’ lien are not easily disposed of. Under the Ship Mortgage Act of 1920 a mortgage, to have the preferred status, must be a valid mortgage, which at the time it is made includes the whole of any vessel of the United States of 200 gross tons or upwards, must be recorded “as provided in subsection C” of the act, and must be indorsed upon the ship’s documents (subsection D of section 30 of Act of June 5, 1920 [Comp. St. Ann. Supp. 1923, §§ 81461¼kk, 81461¼kkk). The mortgage was endorsed upon the ship’s documents, but it is denied that it was recorded as provided in subsection C, and that it included a vessel of the United States.
Subsection C is as-follows:
“(a) No sale, conveyance, or mortgage which, at the time such sale, conveyance, or mortgage is made, includes a vessel of the United States, or any portion thereof, as a whole or any part of the property sold, conveyed, or mortgaged shall be valid, in respect to such vessel, against any person other than the grantor or mortgagor, his heir or devisee, and a person having actual notice thereof, until such bill of sale, conveyance, or mortgage is recorded in the office of the collector of customs of the port of documentation of such vessel. * * * ”
The act in subsection B defines the term “port of documentation” as the port at which the vessel is documented,' and further defines the word “documented” to mean “registered or enrolled or licensed under the laws of the United States, whether permanently or temporarily.” These definitions control in any interpretation of the act. The Lincoln Land, under her former name, Cartona, had been permanently enrolled and licensed under the laws of the United States by her former owner, Bertha Hilk Daly, at the port of New York. Obviously the port of New York was the port of documentation when Bertha H. Daly gave her bill of sale to libelants. As the libelants were residents of New York, it is equally true that New York was the. only port which could be deemed to be the port of documentation. Clearly/ recording in any other port would not satisfy the requirement of subsection C. It is true that the libelants did not surrender the certificate of enrollment and license, or take out "a new one. They had no occasion to do so, as they did not operate the steamship, and apparently did not acquire her with any intention of so doing. The bill of sale to them was properly recorded in the port of New York. This was the situation when libel-ants sold the vessel to the Indian Navigation & Transportation Com*362pany, Inc., and took bade the mortgage in question, both of which were promptly recorded in the office of the collector of customs of the port of New York. It is urged that, inasmuch as the Indian Navigation & Transportation Company, Inc., was a Delaware corporation, and consequently resided in that state, the Lincoln Land no longer belonged to the port of New York, and the record in that port did not satisfy the statute. Fairbanks Steam Shovel Co. v. Wills, 240 U. S. 642, 36 Sup. Ct. 466, 60 L. Ed. 841.
It seems settled on the authorities that, upon the sale of the Lincoln Land to a Delaware corporation, the port of New York ceased to be the home port of the vessel. Yost v. Lake Erie Transportation Co., 112 Fed. 746, 50 C. C. A. 511; The Havana, 64 Fed. 496, 12 C. C. A. 361; The New Brunswick (D. C.) 125 Fed. 567. But I am not prepared to agree that the Ship Mortgage Act of 1920 was not satisfied by the record in the port of New York.
At the time of the sale the port of New York was the home port of the grantors and was the port where the vessel had been in fact documented. It was therefore the port, and the only port, which answered the definition of the statute, and the bill of sale to the Indian Navigation & Transportation Company, Inc., was, in my opinion, properly recorded there. The mortgage, being given contemporaneously to secure the purchase price, was also properly recorded in New York. The duty of enrolling or registering the vessel after the sale did not rest upon the libelants, nor can it be said that the preferred status of their mortgage depended upon the performance of that duty by the corporation. We are dealing only with the place where constructive notice qf the lien shall be given by recording. The statute provides that it shall be recorded at that port which is the port of documentation at the time of the mortgage, not where the vessel may later be documented by the-mortgagee. The fact that no document was ever issued to libel-ants is not necessarily fatal, especially in view of the provision of subsection B, defining the term “vessel of the United States” as “any vessel documented under the laws of the United States and .such vessel shall be held to continue to be so documented until its documents are surrendered with the approval of the board” (United States Shipping Board). I am ,of the, opinion, therefore, that the mortgage should not be denied a preferred status on the ground that it was not recorded as required by law. I am aware that the conclusion is apparently in conflict with opinions handed down in White’s Bank v. Smith, 7 Wall. 646, 19 L. Ed 211, and in Johnson v. Merrill, 122 Mass. 153; but it may be proper to observe that the court in these cases was dealing with R. S. § 4192, a statute expressly repealed by subsection X of the Ship Mortgage Act of 1920 (Comp. St. Ann. Supp. 1923, § 8146¼rr), and did not have before it the definitions of the later act, in the light of which that act must be construed. See Moore v. Lincoln Park & Steamboat Consolidated Co., 196 Pa. 519, 46 Atl. 857.
Furthermore, in view of the statutory definition of the term “vessel of the United States,” the Lincoln Land must be held to be such a vessel. It appears that she had been permanently enrolled under the laws of the United States, and therefore “documented,” and, as no evi*363dence is offered tending to show that her documents had been surrendered, she must be held to continue to be so documented, and at the time of sale to be a vessel of the United States, within the provision of the Ship Mortgage Act. Subject, therefore, to any liens which take precedence over a preferred mortgage, as provided in subsection M of the act, the libelants are entitled, as holders of a preferred mortgage, to the proceeds now in court.