State of Israel v. Motor Vessel Nili
| Decision Date | 18 October 1968 |
| Docket Number | No. 66-1329-Civ-CA.,66-1329-Civ-CA. |
| Citation | 318 F. Supp. 1196 |
| Parties | STATE OF ISRAEL, a sovereign nation, Plaintiff, v. The MOTOR VESSEL NILI, of Israeli Registry No. MS-169, her engines, machinery, tackle, apparel, masts, boats, furniture, and all other necessaries thereunto appertaining and belonging, and Nili Somerfin Car Ferries, Limited, an Israeli corporation, Defendants. |
| Court | U.S. District Court — Southern District of Florida |
Richard F. Ralph, Miami, Fla., for State of Israel.
Irving M. Wolff, Miami, Fla., for Nili-Somerfin Car Ferries Limited.
Heiman & Heiman, Miami, Fla., for T. Arison Co.
ORDER ON MOTIONS FOR SUMMARY JUDGMENT
This order grants in part and denies in part the motions for summary judgment filed by the State of Israel and the Intervenor Dade Trading Corp.
On December 17, 1963, the Nili-Somerfin Car Ferries Limited1 (hereinafter Owner-Mortgagor) contracted2 with the Fairfield Shipbuilding & Engineering Company Limited of Govan, Glasgow, Scotland (hereinafter Builder) for construction of the vessel involved here (hereinafter Nili). The agreement provided for 20 per cent payment of the vessel's purchase price during construction and 80 per cent payment of the purchase price on delivery.
On October 14, 1964 the Owner-Mortgagor signed a financing agreement with the Bank of Scotland (hereinafter the Bank). Under this financing agreement the Bank was to loan 2,078,400 pounds sterling to the Owner-Mortgagor. This amount covered the 80 per cent payment of the purchase price due on the vessel's delivery. The financing agreement provided that within fifteen days the Owner-Mortgagor would obtain a letter from the State of Israel (hereinafter Israel) promising Israel's execution of a guarantee for the due repayment of the 2,078,400 pounds sterling. Within fifteen days Israel agreed to execute the requested guarantee; the guarantee to be executed upon the Owner-Mortgagor's receipt of the vessel. The Bank in turn was committed to advance the funds only after: (1) delivery of the Nili, (2) its registry at a port in Israel in the name of the Owner-Mortgagor, and (3) the issuance of the guarantee by Israel.
On May 25, 1965 Israel and the Owner-Mortgagor executed a contract of Guarantee.3 This Contract required the Owner-Mortgagor to do two things upon delivery of the Nili: (1) register the vessel in the Israeli Register of Vessels and (2) register a first mortgage on the vessel in favor of Israel. To assure the performance of these duties the Owner-Mortgagor delivered to Israel a power of attorney.4
On June 8, 1965 Israel issued its Guarantee to the Bank5. This Guarantee, which was contingent upon delivery of the Nili, assured the repayment of a series of 60 notes that were to be executed by the Owner-Mortgagor to the Bank upon delivery of the Nili. The notes guaranteed represented the 80 per cent payment of the purchase price and interest on this amount.
On June 12, 1965 the Nili was delivered to the Owner-Mortgagor; the vessel was registered in Israel; the first mortgage was executed and registered in Israel; and the promissory notes were executed and delivered.
On December 12, 1965, promissory note number 31 came due and was paid by the Owner-Mortgagor. Two more promissory notes came due on June 12, 1966. On June 14, 1966 Israel was notified by the Bank that the notes were not paid. On June 21 the Bank demanded that Israel pay the notes as required under the Guarantee. Israel complied with that demand. On June 30, Israel demanded repayment from the Owner-Mortgagor for the amount Israel had paid under the Guarantee. On November 8, 1966 Israel again demanded repayment of the amounts paid under the Guarantee and in addition elected under clause 13A of the mortgage deed to accelerate the debt.6
On November 17, 1966 Israel filed this action to foreclose its mortgage. This Court ordered the vessel sold on December 29, 1966 and on January 30, 1967 the United States Marshal sold the vessel to the State of Israel for $4,200,000.00.
In addition to the claim of Israel, $885,500.21 in other claims have been filed against the vessel. Of these claims $76,349.21 worth were either settled or dismissed leaving $809,151 in claims against the vessel not including the $8,014,644.00 claim of Israel under its mortgage. At this point in the litigation the validity and amount of these claims have not been determined. But to put the case in a proper context, a very rough classification of this $809,151 in claims is helpful.7 There are approximately $82,000 in claims for personal injury and maintenance and cure. Another $275,000 of the claims fall within the proviso clause of 46 U.S.C. § 951 — that is, are claims for necessaries and supplies furnished to the vessel in the United States. The remaining $451,000 in claims represent a great variety of claims which can only be described in the negative as claims probably not falling within the proviso language of 46 U.S.C. § 951.
The motions for summary judgment raise two legal questions. First, is the mortgage valid and enforceable in this court? Second, is the mortgage's lien preclusionary clause valid and effective?
The State of Israel seeks to foreclose its mortgage under 46 U.S.C. § 951 which gives this Court jurisdiction to foreclose certain foreign ship mortgages that are "preferred mortgages" within the meaning of the statute.
Throughout this lengthy litigation numerous objections have been made to the validity of the mortgage and this Court's jurisdiction to foreclose that mortgage. A hearing on May 29, 1968 materially clarified and limited these objections. At that hearing the lienors conceded the proper registration and recordation of Israel's mortgage.8 The lienors did urge four other objections to the validity of the mortgage.
The lienors argue that there never was an acceleration of the secured debt and at most Israel can only recover amounts actually paid under the Guarantee to the Bank. Exhibit 10 attached to Israel's motion for summary judgment clearly answers this objection. Exhibit 10 is a letter from the Accountant General of Israel to the Owner-Mortgagor dated November 8, 1966. In this letter Israel notified the Owner-Mortgagor of Israel's election under clause 13A of the mortgage9 (the acceleration clause) to demand the full sum of the remaining indebtedness. This was certainly sufficient to accelerate the indebtedness. In addition, in the complaint, Israel again demands and declares the whole of the guaranteed amounts as due.10
The record clearly shows the acceleration of the secured debt.
The lienors also argue there is no showing of Israel's authority to guarantee the debt of a private corporation. Thus, both the guarantee and the mortgage arising out of it are ultra vires and of no effect.
The record contains evidence of Israel's authority to guarantee this private debt. The Guarantee attached to the Complaint as Exhibit II and executed by the Minister of Finance of Israel recites his power and authority to execute the guarantee and refers to explicit enabling legislation.11 The Complaint alleges that the Guarantee was duly executed and delivered and that the mortgage was "duly and validly executed in accordance with the laws of the State of Israel."12 The Complaint is sworn to by the Accountant General of Israel (Dov-Ben Dror) in a separate affidavit.13 In addition, the Legal Advisor to the Ministry of Finance of the State of Israel, Elhanon Landau, recites in an affidavit that "the Ship's Mortgage Deed and the documents attached thereto * * * were duly and validly executed and duly registered in accordance with the applicable law of the State of Israel."14 A careful study of the voluminous documents submitted in support of Israel's motion for summary judgment proves the authority of Israel to execute this guarantee. The whole history—documentary and factually—of this case shows that a major foundation of these transactions was the power of Israel to execute the guarantee here in question. In light of this factual and documentary background the affidavits and the complaint take on an added evidentiary significance.
In the face of this evidence supporting Israel's authority to guarantee the Owner-Mortgagor's private debt, the lienors boldly raise the general and unsupported objection that there is no such authority. This objection fails for two reasons. First, the objection is insufficient under Federal Rule 56(e). Israel has supplied affidavits and comprehensive, detailed documents tending to show its authority to execute the guarantee. The lienors have supplied nothing. Rule 56(e) places a burden on the lienors; they have not met it.
The second reason the objection fails is the presumption of regularity of a public officer's official acts.15 This presumption of regularity supports the official acts of public officers, and, in the absence of clear evidence to the contrary, courts presume that they have properly discharged their official duties.16 This presumption applies to the acts of foreign officials as well as American.17 No evidence was offered by the lienors to overcome this legal presumption in favor of Israel's official acts and thus the presumption stands unrebutted.
For the above reasons, I find that the State of Israel had authority to guarantee the Owner-Mortgagor's private debt.
The lienor's third objection is based on the fact that the debt secured here was a shipbuilding loan. The lienors argue that the guarantee and mortgage grew out of the shipbuilding loan and can be in no better position than the loan. Since a shipbuilding contract under American admiralty law does not create a maritime lien, the lienors argue that the lien of Israel's mortgage is not a maritime...
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