The Oconee

• Citation: 280 F. 927
• Parties: THE OCONEE.
• Decision Date: 01 January 1922
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

280 F. 927

THE OCONEE.

United States District Court, E.D. Virginia.

January 1, 1922

Hunt Hill & Betts, George Whitefield Betts, Jr., Morris Douw Ferris, and Joseph A. Barrett, all of New York City, Hughes Vandeventer & Eggleston and Braden Vandeventer, all of Norfolk, Va., for Wm. H. Muller & Co., Limited.

Kirlin Woolsey, Campbell, Hickox & Keating, James H. Herbert, and John M. Woolsey, all of New York City, and Baird, White &amp Lanning, of Norfolk, Va. (Edward R. Baird, Jr., and George M. Lanning, both of Norfolk, Va., of counsel), for Dartmouth Coaling Co., Limited.

Burlingham, Veeder, Masten & Fearey, of New York City, and Hughes, Vandeventer & Eggleston, of Norfolk, Va., for Henry Kaelin & Son, Inc.

Silas B. Axtell, of New York City, and Roper, Bowden, Cochran & Sands, of Norfolk, Va., for B. A. Barack.

Baird, White & Lanning, of Norfolk, Va., for Swift & Co., Limited, and Anderson Clayton & Co.

Paul W. Kear, U.S. Atty., and H. H. Rumble, Sp. Asst. in Admiralty to U.S. Atty., both of Norfolk, Va., for the United States.

GRONER District Judge.

Libelant, on May 3, 1921, filed its libel in this court against the steamship Oconee for necessaries furnished the ship at Bremen, Germany, in February, 1921. The vessel was attached by the marshal, and, by decree subsequently entered, sold at public auction for $25,500. Numerous petitions have been filed in the cause, among them the petition of the United States, claiming, as the holder of a preferred mortgage, priority of payment out of the fund in the registry of the court. The debt thus claimed to be secured is largely in excess of the amount of the fund, and, if allowed, will leave nothing for distribution to the libelant or the other interveners.

The Oconee was originally owned by the United States. On April 26, 1920, she was sold to E. H. Green & Co. who, on July 21, 1920, with the consent of the Shipping Board, sold her to the Oconee Steamship Company. The last-named, to secure the unpaid purchase price, executed 15 negotiable promissory notes, for $21,814.80 each, payable every 6 months, beginning October 26, 1920, and as security for these notes executed and delivered to the Shipping Board, for the account of the United States, a preferred mortgage on the whole of the vessel, which was duly recorded. Default was made in the payment of the second note, and the United States has intervened, by libel and petition in this cause, to the end that its preferred mortgage may be foreclosed, and that the indebtedness to it, evidenced by the promissory notes above mentioned, may be ascertained and paid. Exceptions, on behalf of other claimants, have been filed, in which two major questions are presented for decision:

First. 'Was the enactment of the statute known as the Ship Mortgage Act of 1920, in so far as it purports to give a ship mortgage a preferred status, a valid exercise of congressional power?'

Second. 'If the statute is constitutional, does the compliance therewith, which gives to a mortgage a preferred status, amount to constructive notice of the existence of the lien?'

The Ship Mortgage Act is a part of the Merchant Marine Act of June 5, 1920, 41 Stat. 1000. In order to provide an American merchant marine 'sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in the time of war,' and in order to encourage investment in ships and the financing of maritime ventures, Congress, in subsection C (a) of the act mentioned, provided a method whereby a mortgage on a vessel of the United States should have a preferred status. Certain prerequisites are provided in the act to be done by the mortgagor or the mortgagee, or both, in order that the benefits of the provision may accrue-- for instance: The vessel must be a vessel of the United States of 200 gross tons or upward; the mortgage must include the whole of the vessel; the mortgage must be indorsed upon the vessel's documents; it must be recorded as required, together with the time and date when the mortgage is so indorsed; an affidavit of good faith must be filed with the record; there must be no waiver therein of the preferred status, and the mortgagee must not be an alien. In the case now under consideration it is conceded that all of the requirements just named were duly complied with.

In addition to the above, certain duties are imposed by the act upon the mortgagor and master, and penalties are provided for their neglect. Thus, in section E, the mortgagor is required to retain a certified copy of the mortgage on board, 'to be exhibited by the master to any person having business with the vessel which may give rise to a maritime lien,' etc., and the master of the vessel is required, 'upon the request of any such person,' to exhibit, with the documents of the vessel, a copy of the mortgage to such person.

On behalf of the exceptants, it is now insisted that, even if the constitutionality of the act be decided affirmatively, the burden is on the United States, as claimant under the preferred mortgage, to show that the master complied with the provisions of subsection E just quoted. This proposition will be dealt with in the concluding part of the opinion.

From all of the foregoing it will be seen that the question first presented for decision here is: Did Congress exceed the powers vested in it by the Constitution in passing the so-called Ship Mortgage Act (Act June 5, 1920, subsec. C; 41 Stat. p. 1000). Article 3 (section 2) of the Constitution of the United States reads as follows:

'The judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority;-- to all Cases affecting Ambassadors, other public Ministers and Consuls;-- to all Cases of Admiralty and Maritime Jurisdiction,' etc.

And section 8, clause 18, of article 1, empowers Congress to make all laws necessary and proper for carrying into execution the powers vested in the government of the United States, or in any department or officer thereof. The original Judiciary Act (Act Sept. 24, 1789, Sec. 9, 1 Stat. 76) conferred upon the federal District Courts exclusive original cognizance of all civil causes of admiralty and maritime jurisdiction, including all seizures under the laws of the impost, navigation-- or trade of the United States-- saving to suitors, in all cases, the right of a common-law remedy, where the common law is competent to give it.

Admittedly, Congress has no other power to legislate on the subjectmatter than is thus conferred, and where the power is questioned the duty of the court is to see whether the grant is broad enough to embrace the specific act. Very early in the history of the country the jurisdiction of the District Court, in admiralty, to enforce payment of a mortgage upon a boat, was challenged, and by frequent adjudications by the Supreme Court that question was settled in the negative. In The John Jay, 17 How. 399, 15 L.Ed. 95, Judge Wayne, on behalf of the court, said:

'It has been repeatedly decided in the admiralty and common-law courts in England, that the former have no jurisdiction in questions of property between a mortgagee and the owner. No such jurisdiction has ever been exercised in the United States.'

And further on in the same opinion he says:

It (a mortgage) 'is a contract without any of the characteristics or attendants of a maritime loan,' and, 'has nothing in it analogous to those contracts which are the subjects of admiralty jurisdiction.'

Likewise, in the case of The J. E. Rumbell, 148 U.S. 1, 13 Sup.Ct. 498, 37 L.Ed. 345, which was a contest between persons furnishing repairs and supplies in the home port of the vessel, on the one hand, and the holders of a mortgage, on the other, the decision gave precedence to the supply claims by virtue of a statute of the state wherein the supplies were furnished, and in the course of the opinion Mr. Justice Gray, speaking for the court, said:

'An ordinary mortgage of a vessel, whether made to secure the purchase money upon the sale thereof, or to raise money for general purposes, is not a maritime contract. A court of admiralty, therefore, has no jurisdiction of a libel to foreclose it, or to assert either title or right of possession under it.'

See, also, in the same connection, The Eclipse, 135 U.S. 599, 608, 10 Sup.Ct. 873, 34 L.Ed. 269; People's Ferry Co. v. Beers, 20 How. (61 U.S.) 396, 400, 15 L.Ed. 961; The Rupert City (D.C.) 213 F. 263, 273.

In the light of the decisions in these cases it cannot be doubted that, unless there exists in Congress power to change the recognized and established law on the subject, the act of 1920 must be declared unconstitutional.

On behalf of the exceptants, it is insisted that Congress possesses no such power; that, when the grant of admiralty and maritime jurisdiction was surrendered by the states to the federal Government, neither more nor less was then surrendered than was understood at the time to be embraced within those terms, or, as was said by Mr. Justice Bradley, speaking for the court, in The Lottawanna, 21 Wall. 558, 574, 22 L.Ed. 654:

'The general system of maritime law which was familiar to the lawyers and statesmen of the country when the Constitution was adopted was most certainly intended and referred to when it was declared in that instrument that the judicial power of the United States shall extend 'to all cases of admiralty and maritime jurisdiction.''

Or, as was said by Mr. Justice Catron, speaking for the court in People's Ferry Co. v. Beers, supra:

'Its terms (admiralty jurisdiction) are indefinite, and its

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