Port Welcome Cruises, Inc. v. SS Bay Belle
| Decision Date | 26 February 1963 |
| Docket Number | 4364.,No. 4351,4361,4357,4351 |
| Citation | 215 F. Supp. 72 |
| Parties | PORT WELCOME CRUISES, INC. v. S. S. BAY BELLE. WILSON LINES, INC. (formerly Wilson Excursion Lines, Inc.) and ABC Vending Corporation v. S. S. BAY BELLE. James McCONNELL, trading as McConnell Fuel Oil Co. v. S. S. JOHN A. MESECK. WILSON LINES, INC. (formerly Wilson Excursion Lines, Inc.) and ABC Vending Corporation v. S. S. JOHN A. MESECK. |
| Court | U.S. District Court — District of Maryland |
COPYRIGHT MATERIAL OMITTED
L. Vernon Miller, Baltimore, Md., David H. Rosenbluth, Philadelphia, Pa., and Piper & Marbury, Baltimore, Md., for Wilson Lines, Inc.
L. Vernon Miller, Baltimore, Md., Gilbert W. Oswald, Philadelphia, Pa., and Piper & Marbury, Baltimore, Md., for ABC Vending Corporation.
Joseph I. Huesman and Lerch & Huesman, Baltimore, Md., for Port Welcome Cruises, Inc.
John J. O'Connor, Jr., and Peter J. Ladzinski, Baltimore, Md., for Jackson and Warner.
Francis B. Burch, City Sol., George W. Baker, Jr., Deputy City Sol., and James B. Murphy, Asst. City Sol., for Mayor and City Council of Baltimore.
Solomon B. Levin, Baltimore, Md., for Humble Oil & Refining Co.
Harry Singerman, Baltimore, Md., for Meadowgold Ice Cream Co.
Sanford A. Harris, and Sagner, Stevan & Harris, Baltimore, Md., for Sealtest Foods Division of National Dairy Products Corporation.
Marvin C. Wahl, Baltimore, Md., for James McConnell, trading as McConnell Fuel Oil Co.
Marvin C. Wahl, Baltimore, Md., for Carmen Santonello, trading as Santel Linen Service.
Nos. 4361 and 4364 are libels to foreclose ship mortgages on the S. S. "BAY BELLE" and S. S. "JOHN A. MESECK," respectively. The mortgages are alleged to be "preferred mortgages" pursuant to the provisions of the Ship Mortgage Act of 1920, 46 U.S.C.A. § 911 et seq. Nos. 4351 and 4357 are libels in rem against the S. S. "BAY BELLE" and S. S. "JOHN A. MESECK," respectively, by alleged maritime lienors to foreclose their respective items. The libels against the S. S. "BAY BELLE" were consolidated, and additional claims alleging maritime liens were filed against the vessel. The libels against the S. S. "JOHN A. MESECK" were consolidated, and additional claims alleging maritime liens were filed against the vessel. The two consolidated actions were further consolidated, for purposes of the hearing, and will be decided together in this opinion.
The cases involve principally a contest between the mortgagees and other alleged maritime lienors, who became so subsequent to the execution, etc., of the mortgage, as required by the Act, as to whether the mortgages are preferred ship mortgages, and entitled to priority of payment, except to the extent that the other claimed liens are preferred because based on wages or torts.1 Other than the mortgages, the claims against the ships, together with a general description of their nature, are as follows:
S. S. "BAY BELLE"
1. Port Welcome Cruises, Inc
For wharfage, gas, electricity, water and fuel oil
for period May 15, 1961, to December 3, 1961 $ 1,599.22
2. Frank Jackson and Harry B. Warner
For wages for period February 1, 1962, through
March 15, 1962 ($430.00 each) 860.00
3. Mayor and City Council of Baltimore
For wharfage during period January 1, 1962, to
April 1, 1962 6,000.00
4. Humble Oil & Refining Company
For fuel oil during the period August 1, 1961
through September 25, 1961 5,386.95
__________
Total claims against "BAY BELLE" $13,846.17
S. S. "JOHN A. MESECK"
James McConnell, trading as McConnell Fuel Oil Co
for fuel supplied said vessel during period May 18
1961, to September 6, 1961 $ 7,905.24
Santel Linen Service, for linens and uniforms 1,169.47
__________
Total claims against "MESECK" $ 9,074.71
Thirty days after the cases were argued and submitted, an additional intervening libel was filed on behalf of Sealtest Foods Division of National Dairy Products Corporation, against the S. S. "BAY BELLE" for milk products sold and delivered to the vessel during the months of August and September, 1961, in the gross amount of $347.14.
FACTS:
By an agreement, dated March 30, 1961, Wilson Excursion Lines, Inc. (subsequently known as Wilson Lines, Inc., and hereafter called "Wilson"), agreed to sell to Wilson Steamship Corporation (hereafter called "Steamship"), four vessels, including the S. S. "BAY BELLE" and the S. S. "JOHN A. MESECK," certain real estate in Kent County, known as Tolchester Park, certain real estate in Pennsville, New Jersey, known as Riverview Beach Park, and all other assets, franchises, leases, furniture, etc., which Wilson owned in Baltimore, Boston, New York and Philadelphia in connection with its excursion boat operations there. The total consideration fixed was $1,400,000.00, and the agreement assigned certain portions of the consideration to each of the items sold. So far as pertinent, the consideration for the S. S. "BAY BELLE" was designated to be $50,000.00, for the S. S. "JOHN A. MESECK" $230,000.00 for Tolchester Park $100,000.00, and for Riverview Park $200,000.00.
The agreement recited that a deposit of $140,000.00 was made, and that at the closing—fixed for April 14, 1961—cash in the amount of $760,000.00 would be paid, and that Steamship would give Wilson a note in the principal amount of $500,000.00, maturing in ten years and bearing interest at the rate of 5% per annum, payable quarterly. The note was to be secured by first preferred ship mortgages covering each vessel, purchase money mortgages on each of the amusement parks and a pledge of all of the assets of Steamship.
Notwithstanding that the agreement recited that Wilson would sell Riverview to Steamship, the agreement recited that Wilson did not have title to Riverview, but that it had a right to receive title. It was agreed that if at the time of closing Wilson had not yet received title to this amusement park its obligation to transfer title would be postponed until such time as it received title, but that, thereafter, it would immediately transfer such title.
The agreement contained other elaborate provisions generally required in a transaction of this magnitude, including a summary of certain other provisions to be included in the ship mortgages to secure the note for $500,000.00.
As originally drafted, the agreement contemplated that all of the issued and outstanding capital stock of Steamship would be pledged to secure the debt to Wilson, but, at or about the time of execution, the agreement was amended, by initialed interlineations, to convert this covenant into one to pledge all of the other assets of Steamship conveyed by Wilson besides the four vessels and the two amusement parks.
The closing did not take place on April 14, as specified in the agreement. On that date there was a dry run in New York City, but, because some of the documents required amendment, the actual closing took place on April 17, 1961, the following Monday, in Wilmington, Delaware. At the closing there was brought into the transaction ABC Vending Corporation (hereafter called ABC), from which Steamship had arranged to borrow the sum of $1,000,000.00, $900,000.00 of which was used to meet the total cash payment required, and the balance to be retained by Steamship for use as working capital. The $1,000,000.00 loan from ABC was evidenced by a note almost identical to the form of note given to Wilson to secure the $500,000.00 unpaid balance of the purchase price, and the ABC note as originally contemplated, was secured by the mortgages aforementioned on the several vessels, including the S. S. "BAY BELLE" and the S. S. "JOHN A. MESECK," in which Wilson and ABC were named as mortgagees pari passu.
At the time of closing, Wilson had not yet acquired title to Riverview, and it was agreed that the transfer of title would take place at a future date, when Wilson acquired title. Also at the time of closing, there was a modification of the March 30, 1961 agreement. Because the stock of Steamship was then owned by Mr. and Mrs. Joseph Goldstein, Mr. Goldstein, who attended the closing, with the advice of his attorney, concluded that it would be preferable to pledge the stock of Steamship, as contemplated in the original draft of March 30, 1961 agreement, rather than to mortgage or pledge its assets. The substitution was agreeable to the other parties, and an appropriate pledge agreement was prepared and signed by Mr. Goldstein. Mrs. Goldstein was not present at the closing and it was understood that she would sign the pledge agreement at a later date. However, Mrs. Goldstein has never signed the pledge agreement.
Mr. and Mrs. Goldstein personally guaranteed the note to ABC and, as additional security, there was assigned to ABC life insurance policies on Mr. Goldstein's life, having a value upon his death in the amount of $500,000.00 (the cash surrender value of which was not proved), and his 2/15ths interest in the intestate estate of his deceased father, Goodman Goldstein.
Subsequent to the closing, Wilson, through one of its wholly-owned subsidiaries, obtained title to Riverview by mortgage foreclosure. However, Wilson never conveyed title to the amusement park to Steamship.
After the payment of $66,213.21 of the principal amount, applied to the ABC note, the mortgages became in default for nonpayment of interest and scheduled partial payment of principal, and, on or about March 16, 1962, the mortgagees, in accordance with the terms of the mortgages, took possession of the S. S. "BAY BELLE" and the S. S. "JOHN A. MESECK" and retained...
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