THE FORT ORANGE

• Decision Date: 20 December 1933
• Citation: 5 F. Supp. 833
• Parties: THE FORT ORANGE. THE BERKSHIRE. THE TROJAN. THE RENSSELAER. CITY BANK FARMERS' TRUST CO. v. HUDSON RIVER NAVIGATION CORPORATION.
• Court: U.S. District Court — Southern District of New York

5 F. Supp. 833

THE FORT ORANGE THE BERKSHIRE THE TROJAN THE RENSSELAER CITY BANK FARMERS' TRUST CO. v. HUDSON RIVER NAVIGATION CORPORATION.

District Court, S. D. New York.

December 20, 1933.

COPYRIGHT MATERIAL OMITTED

Mitchell, Taylor, Capron & Marsh, and Burlingham, Veeder, Fearey, Clark & Hupper, all of New York City (Mansfield Ferry, Henry L. Glenn, and Ray Rood Allen, all of New York City, of counsel), for City Bank Farmers' Trust Co.

Rogers & Whitaker, Crowell & Rouse and Kirlin, Campbell, Hickox, Keating & McGrann, all of New York City (Spier Whitaker, E. Curtis Rouse, Delbert M. Tibbetts, and Harold B. Finn, all of New York City, of counsel), for Maritime Lienors Standard Oil Co. and others.

Kenneth K. Mackenzie, of New York City (John J. McManus, of New York City, and Randolph W. Childs, of Philadelphia, Pa., of counsel), for bondholders' committee.

Herman L. Weisman, of New York City, for trustee in bankruptcy of Hudson River Navigation Corporation.

KNOX, District Judge.

On December 1, 1925, this court, which had for several years administered the affairs of Hudson Navigation Company in an equity and mortgage foreclosure suit, made a decree for the sale of the assets of the corporation. At the auction held on February 4, 1926, the properties were sold to Assets Purchasing Corporation. Nineteen days later this sale was confirmed. Some time thereafter, the bids of the purchasers were assigned to Hudson River Navigation Corporation, and that company, under suitable conveyances, acquired all the property, real and personal, that had belonged to Hudson Navigation Company. It included four steamers, known, respectively, as the Fort Orange, Berkshire, Trojan, and Rensselaer. The transfer of the vessels was accomplished by means of individual bills of sale, one for each vessel.

Prior to the date upon which title was to pass under the bids made at the sale above mentioned, Assets Purchasing Corporation had arranged to borrow such funds as were necessary to complete the purchase, and had contracted to execute a mortgage upon all such tangible property as it should acquire thereunder. This mortgage was to secure a bond issue of the par value of $3,000,000. When Hudson River Navigation Corporation took over the bids of Assets Purchasing Corporation, it assumed the latter's obligation with respect to the proposed mortgage transaction.

These preliminaries being out of the way, title to the properties of Hudson Navigation Company passed to Hudson River Navigation Corporation upon May 5, 1926. The mortgage securing the bond issue was executed and delivered to the Farmers' Loan & Trust Company (now known as City Bank Farmers' Trust Company), as trustee, within a few minutes of the moment at which the mortgagor acquired title to the properties. At 3:15 p. m., an hour or so following the completion of the title closing, just described, the new owner of the properties caused each of the bills of sale covering the vessels which had comprised the passenger fleet of the Hudson Navigation Company to be recorded in the proper office of the customs house, at the port of New York. After a lapse of five minutes, the mortgage was similarly recorded. A quarter of an hour later, the four vessels were documented in the office of the collector of customs at New York as vessels of the United States. A counterpart of the mortgage was recorded in the office of the register of New York county at 3:50 p. m. of the same day, and was transcribed in Liber 367 of Mortgages at page 418.

On January 18, 1932, the City Bank Farmers' Trust Company, as mortgage trustee, filed the present bill in equity, alleging defaults in the terms of the aforesaid mortgage. Among other things, the court was asked to decree the mortgage to be a valid lien upon all the mortgaged property and a preferred lien upon the vessels named in the indenture, under the provisions of the Ship Mortgage Act of June 5, 1920 (46 USCA § 911 et seq.). Foreclosure and sale of the mortgaged property was likewise sought. Hudson River Navigation Corporation appeared and consented to the appointment of a receiver of the mortgaged property. Upon May 19, 1932, the mortgage trustee also filed a libel in admiralty against the steamships Fort Orange, Berkshire, Trojan, and Rensselaer. In this latter suit, prayer was made that the mortgage be declared a valid lien upon the vessels, superior to all other claims and liens, except preferred maritime liens, and for a decree of foreclosure upon each of the vessels.

Upon July 13, 1932, the mortgagor corporation was adjudicated a bankrupt under an involuntary petition in bankruptcy filed in this district on January 30, 1932. In due course a trustee was elected. On August 17, 1932, the court entered an interim decree in the equity cause. By orders dated December 12, 1932, the trustee in bankruptcy was permitted to intervene in both the equity and admiralty suits. On February 4, 1933, he filed answers, and on April 28, 1933, amended answers, in both causes.

At this point, attention should be called to the fact that prior to the institution of suit by City Bank Farmers' Trust Company in either the equity or admiralty causes Standard Oil Company of New Jersey, United Dry Dock Company, Inc., and Tietjen & Lang Dry Dock Company, each claiming maritime liens upon the steamers, Berkshire, Trojan, and Rensselaer, had libeled the vessels in both the Southern and Northern districts of New York, and they had been taken into custody by the United States marshals for such judicial districts. The libels so filed proceeded to decrees; the liens against the vessels being liquidated as follows: Steamship Berkshire, $26,577.29 plus interest; steamship Trojan, $18,491.59 plus interest; steamship Rensselaer, $17,061.96 plus interest.

The corporations holding these liens appeared specially in the suit of City Bank Farmers' Trust Company, as mortgage trustee, upon the equity side of the court, and generally in the admiralty cause. In the latter litigation, the lienors assert their liens to be of superior rank to any that may exist under the terms of the mortgage held by mortgage trustee. The issue thus raised is of vital importance to these litigants and it, together with others hereinafter specifically mentioned, must here be determined.

With this outline of the status of the parties before the court, I may proceed to sketch the chronology of events having a bearing upon the adjudication to be made.

The interim decree of August 17, 1932, in the equity suit, had upheld the validity and priority of the lien of the mortgage with respect to the following property:

(1) A fund amounting to $1,707,551.28, being part of the money received by the mortgage trustee as a result of condemnation proceedings instituted by the city of New York against Pier New No. 32 owned by the mortgagor.

(2) The sum of $45.99 then held by the mortgage trustee in a sinking fund account, which had been set up pursuant to a provision contained in the mortgage.

(3) A lease dated January 1, 1915, relating to certain dock and river front property in Albany, N. Y., and designated in the mortgage as parcel No. 3. In this instrument, the city of Albany was the lessor and the Albany River-Front Company, Inc. was lessee.

(4) A lease dated July 1, 1916, relating to the same property, in which the Albany River-Front Company was lessor and the Hudson River Navigation Company was lessee.

(5) All the right, title, and interest of the mortgagor in and to all the machinery, sheds, dock equipment, and other property then situated upon or used in connection with the above-mentioned Albany property, which was owned by the mortgagor at the time of the execution of the mortgage.

(6) All the right, title, and interest of the mortgagor in and to all the office furniture, supplies, and equipment, safes, tools, and trucks situated upon the above-mentioned property, upon Pier New No. 32 (referred to as parcel No. 1 in the mortgage), and upon the property located at Kingston, N. Y. (referred to in the mortgage as parcel No. 2) at the time of the execution and delivery of the mortgage.

(7) The rents, incomes, earnings, issues, and profits from the properties referred to in the four preceding paragraphs, numbered 3, 4, 5, and 6, accruing on or after January 18, 1932, and from the sum of $1,707,551.28 of the remainder of said sum, accruing on or after March 21, 1932.

The interim decree, as amended by an order of September 2, 1932, expressly reserved the following questions for further determination:

(1) Whether the mortgage is a valid and subsisting lien upon the vessels Fort Orange, Berkshire, Rensselaer, and Trojan, and, if so, whether such lien is prior to any other lien which may have attached to any or all of the said vessels; and whether the mortgage constitutes a valid lien upon the earnings, rents, and profits from the said vessels, and, if so, whether such lien is prior to any other lien which may have attached to such earnings, rents, and profits.

(2) Whether the mortgage constitutes a lien upon the moveable property (machinery, equipment, etc.) enumerated in connection with the Albany leases (referred to as parcel No. 3 in the mortgage), which was acquired by the mortgagor after the date of the execution and delivery of the mortgage.

(3) Whether the mortgage constitutes a lien upon the office furniture, safes, tools, etc., situated upon or used in connection with the Albany property (parcel No. 3), Pier New No. 32 (parcel No. 1), and the property located at Kingston, N. Y. (parcel No. 2), that was acquired after the date of the execution and delivery of the mortgage.

(4) All questions with respect to the validity and ownership of bonds of the face value of $78,000 referred to in article X of the interim decree.

(5) All questions not expressly determined by the interim decree.

The matters so reserved in the equity suit, as well as questions relating to the validity and priority of...