1. Claim of the mortgagee of vessels requisitioned by the
Government, for amounts expended to repair them after their return,
held without basis in view (1) of an agreement, joined in
by the Government, the owners, and the mortgagee, by which the
expense to the Government of transporting to destination the
cargoes aboard when the use was taken should be charged against the
amount of just compensation, and any balance in the Government's
favor be payable upon return of the ships and be secured by prior
liens upon them, and (2) in view of the fact that the amount found
to be due the Government upon the final accounting exceeded the
amount found to have been expended for the repairs. P.
288 U. S.
247.
2. The claim against the United States, by the holder of
mortgage on ships that were requisitioned by the Government, for
the expense of repairs to put them in condition after their return,
gains no
Page 288 U. S. 244
support in this case from the fact that the claimant also hold
by assignment construction liens that attached before the
requisition, the status of which is not revealed by the findings.
P.
288 U. S.
248.
74 Ct.Cls. 82 reversed.
Certiorari, 287 U.S. 588, to review a judgment allowing a claim
for "just compensation" presented by the holder of mortgage liens
on vessels that were requisitioned for use by the Government and
afterwards repaired at the expense of the mortgagee.
MR. JUSTICE STONE delivered the opinion of the Court.
This case is here on certiorari, granted on petition of the
government, to review a judgment of the Court of Claims in favor of
the intervener, the Liberty Trust Company, respondent here. 74
Ct.Cls. 82. The suit was brought by Acme Operating Corporation, as
plaintiff, to recover just compensation alleged to be due to it as
the charterer of two steamships, the
James S. Whitney and
the
H. M. Whitney, the use of which was requisitioned in
behalf of the government by the Shipping Board, under the Act of
June 15, 1917, c. 29, 40 Stat. 182. The Court of Claims dismissed
the petition of the plaintiff, but gave judgment for the
intervener, which claimed as the assignee and successor in interest
of the Fidelity Trust Company, mortgagee of the two vessels. The
sole question presented by the petition is whether the Court was
right in giving judgment for the intervener.
The vessels were each subject to a mortgage of the Fidelity
Trust Company, later assigned to the intervener.
Page 288 U. S. 245
The owners chartered them to the Acme Corporation, plaintiff
below, and at about the same time, they were placed in repair yards
for alteration and repairs, the cost of which for each ship was
paid only in part. On April 27, 1918, shortly before the maturity
of the mortgages, the use of the vessels was requisitioned by the
Shipping Board. Having been arrested under libels in admiralty by
the construction companies for the balance due for the repairs,
they were released to the government by court orders.
August 12, 1918, the United States, through the Shipping Board,
entered into a contract with the owners of the ships and the
mortgagee, predecessor in interest of the intervener, by which it
was provided that the government should retain from the amounts
which would otherwise be due as just compensation for the use of
the vessels its expenditures in behalf of the owners, for
transporting to their destinations the cargoes which were in the
ships at the time of requisition. If just compensation due "for the
requisitioning" of the vessels exceeded the debt to the government,
the government was authorized to apply the excess to the payment of
the mortgages and liens on the vessels. It was also provided that,
if the ships should be released from the requisition or returned to
the owners before the government should be fully reimbursed for
carrying the cargoes forward to destination, the government should
have liens upon them for the amount of the unpaid balance, which
the owners and the mortgagee agreed should be superior to the
mortgage liens.
In December, 1918, requisition charter parties between the
government and the owners of the ships were executed as of the date
of the requisitions. The charter parties are not set forth in the
findings, but they provided that "the owner accepts this
requisition charter in full satisfaction of . . . all claims . . .
against the United States arising out of the requisition," and
accepts
Page 288 U. S. 246
the compensation provided by the charter parties "as the just
compensation required by law."
The ships were subsequently released by the government and
returned by the Board to the owners, the
H. M. Whitney on
July 8, 1919, and the
James S. Whitney on July 10, 1919.
They were placed in dock for repairs and reconditioning, upon
completion of which they were removed by the agent of the owners
and Fidelity Trust Company, the mortgagee. The court below found
that the Fidelity "advanced and paid," for the account of the
owners of the two vessels, a total of $129,299.76 "for sundry
services and materials in connection with" the repairs, and gave
judgment for the intervener for that amount.
A final accounting was had between the owners and the government
which the court below found to be correct. The account, after
crediting to the owners $87,706.84, the estimated cost of
reconditioning the ships as fixed by a survey, showed a balance of
$77,068.54 still owing to the government for delivering the cargoes
which were in the ships at the time of requisition. The total
amount due the government at the time the vessels were returned
thus exceeded the claim of the intervener. In September, 1920, the
Fidelity Trust Company became financially embarrassed, was taken
over by the Massachusetts Commissioner of Banks, and, in April,
1921, its assets were transferred to the intervener which, for
purposes of the present litigation, may be regarded as standing in
its stead.
The court below held that the requisition of the use of the
ships when they were in the custody of the admiralty court and when
the mortgagee was neither in possession nor entitled to possession
did not entitle the mortgagee to compensation; but it nevertheless
held that the intervener was entitled to recover the $129,297.66,
which it
Page 288 U. S. 247
expended to repair the vessels after their return by the
government, on the ground that "the injury to the vessels
themselves was an injury to the
res" on which the
intervener held a mortgage. In this, we think it was in error.
The intervener endeavors to support the judgment below on the
grounds that the injury or depreciation of the vessels while in use
by the government under the requisition charters was, in effect, a
destruction of them
pro tanto, which, in itself, operated
as a requisition of the mortgagee's interest, for which just
compensation must be paid (
see United States v. Welch,
217 U. S. 333,
217 U. S. 339;
A. W. Duckett & Co. v. United States, 266 U.
S. 149,
266 U. S.
151), and that, in any case, the mortgagee's security
was impaired to the full extent of the damage done, and it is
entitled to recover the cost to it of rehabilitating its security
by reconditioning the vessels.
It is unnecessary to consider in detail numerous objections
raised by the government to the soundness of these contentions and
to the sufficiency of the findings to support them, if sound. It is
enough that the agreement of August 12, 1918, between the United
States, the owners of the vessels, and the mortgagee, which is
binding on the intervener, contemplated that the government should
be reimbursed in full for its transportation charges from "the
compensation due for requisitioning" the vessels, before any
payments of compensation should be made to the mortgagee. To this
end, the agreement provided that, in the event that the steamers
were returned before the government was fully paid for carrying the
cargoes, the government should have
"and there are hereby created liens upon said steamers and both
of them, for the amount of the unpaid balance . . . which amount
shall be forthwith due and payable on the release of said steamers
or either of them, and which liens the parties . . . agree shall be
superior to the mortgage liens."
We think the effect of
Page 288 U. S. 248
this agreement was to confer upon the claim of the government
priority over that of the mortgagee. The superiority of the
government's claim to that of the mortgagee is certainly not
affected by the fact that the vessels have been returned, and the
mortgagee seeks not the full amount of its mortgages, but the
amount in which it contends its interest has been destroyed or its
security impaired.
When the vessels were returned, $164,775.38 was due the
government for unpaid transportation charges. The government has
credited upon its claim the cost of repairs found reasonable by the
survey, $87,706.84. But, even if the full amount of $129,297.66,
claimed by the intervener to represent the damage to the vessels
while in the service, be regarded as due to the owners and
mortgagee as their interests may appear, the most that the
mortgagee can ask is that the government's prior claim be reduced
by that amount. Even if that is done, the government's claim is not
satisfied, or its lien discharged. Hence, there is no foundation
upon any theory for the recovery of a money judgment against the
government by the intervener, as mortgagee.
The intervener seeks also to sustain its recovery upon the
ground that it owns the construction liens for repairs and
alterations of the vessels before they were requisitioned. The
findings show that the claims of the construction companies were
acquired by the Fidelity Trust Company, and, in 1921, transferred
to the intervener along with the other assets of that company. But
no claim founded upon these construction liens was asserted by the
intervener's petition or considered by the court below. The case
was decided, as it was evidently tried, on the basis of
intervener's claim upon its mortgages. The status of the liens at
the time of the trial is neither revealed by the findings nor
mentioned in the opinion; the findings do not admit of a
determination of their validity.
Page 288 U. S. 249
The vessels were placed in full repair by the mortgagee; to the
extent that they were repaired before the liens were assigned, the
lienors could have had no rights against the government for the
impairment of their security, and they transferred none by the
assignments. There is no finding which shows to what extent the
repairs had been made at the time of the assignments, although it
appears that some of them, at least, were then completed. The
intervener does not say, and cannot, on these findings that it made
the repairs to protect the security of the liens, rather than that
of its own mortgages, which are subordinate to the claims of the
government. Accordingly, there is no basis in the findings for
contending that the intervener stands in any better position as the
holder of the construction liens than it does as mortgagee.
Reversed.