1. A court of admiralty has no jurisdiction of a suit to
foreclose a mortgage on a ship in the absence of an Act of Congress
conferring such jurisdiction. P.
293 U. S.
32.
2. "Preferred mortgages" of ships under the Ship Mortgage Act of
1920 include deeds of trust securing bonds sold to the public, and,
under that statute, are foreclosable exclusively in admiralty, with
priority of lien as therein prescribed, if indorsement upon ship's
documents, recording, and other conditions expressed in the statute
have been fulfilled. P.
293 U. S.
32.
Page 293 U. S. 22
3. The status of "preferred mortgages" does not depend upon
application of the borrowed money to maritime use. This condition
is not expressed in the Act, and cannot be implied. P.
293 U. S.
37.
So
held in view of the minute and explicit provisions
of the Act; its legislative history, showing that the objective was
to foster our merchant marine by making ship mortgages, including
deeds of trust securing bonds, safe and attractive to investors,
and the importance to this purpose of having the jurisdiction to
foreclose in admiralty exclusively or in state courts exclusively
determinable by precise statutory conditions, rather than by
extrinsic criteria raising a host of questions as to the
application of the proceeds of loans.
4. Congress, under Art. III, § 2, and Art. I, § 8, par. 18 of
the Constitution, has paramount power to determine the maritime law
which shall prevail throughout the country, but, in so doing, it is
necessarily restricted to the sphere of the admiralty and maritime
jurisdiction, the boundaries of which are determined by the
exercise of the judicial power. P.
293 U. S.
42.
5. In order to promote investment in shipping securities and
thus to advance the maritime interests of the United States,
Congress has power, by amendment of the maritime law, to regulate
the priorities of mortgage and other liens on ships and to provide
jurisdiction in admiralty for the enforcement of such mortgages.
Bogart v. The John
Jay, 17 How. 399, considered. P.
293 U. S.
48.
6. There is no ground for denying this power when the proceeds
of the mortgage are used for other purposes than the direct benefit
of the vessel. P.
293 U. S.
50.
68 F.2d 946 reversed.
Certiorari, 292 U.S. 619, to review the reversal, for want of
jurisdiction, of two decrees entered by the District Court, 56 F.2d
455, 2 F. Supp. 733, for the foreclosure of mortgages on two
ships.
Page 293 U. S. 30
MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.
These are suits in admiralty to foreclose two mortgages given by
the Barlum Steamship Company upon the vessels
Thomas
Barlum and
John J. Barlum, respectively. The
mortgages purported to be preferred mortgages under the Ship
Mortgage Act 1920. 41 Stat. 1000-1006, 46 U.S.C. c. 25, §§ 911-984.
The mortgagor, appearing as claimant, contended that the admiralty
was without jurisdiction. The District Court overruled that
contention, and, finding that all the requirements of that Act had
been met, entered decrees of foreclosure and sale. 56 F.2d 455; 2
F. Supp. 733. In the case of the
John J. Barlum, the
decree provided for the recovery by certain seamen, intervening
libelants, of amounts due for wages, as preferred maritime liens.
The Circuit Court of Appeals reversed the decrees, holding that the
suits should have been dismissed for the want of jurisdiction. 68
F.2d 946. This Court granted certiorari. 292 U.S. 619.
The mortgagor, at the time the mortgages were executed, was a
close corporation, about four-fifths of its shares being owned by
John J. Barlum, who was also interested in several nonmaritime
enterprises. The mortgage in No. 13 on the
Thomas Barlum
was executed in March, 1929, to petitioner, as trustee, to secure
$200,000 of bonds which were purchased by petitioner with a
definite understanding as to the application of the proceeds.
Approximately $50,000 were to meet obligations secured by a prior
mortgage upon the same vessel; about $100,000 were to take up loans
of John J. Barlum and Thomas Barlum & Sons, a concern which was
engaged in a nonmaritime enterprise, and the remainder, about
$42,000, were to provide for repairs and for refitting the vessels
Thomas Barlum and
John J. Barlum. The
mortgage
Page 293 U. S. 31
was executed while the
Thomas Barlum was laid up.
The mortgage, in No. 14, on the
John J. Barlum was
executed in December, 1927, to petitioner, as trustee, to secure an
issue of $200,000 of bonds purchased by petitioner with the
understanding that, of the proceeds, petitioner was to retain about
$82,000 to cover principal and interest on bonds of John J. Barlum
secured by a mortgage on real estate, and about $10,000 to be
applied on one of his notes. Most of the remaining proceeds, which
were paid over to the mortgagor, was used to take up loans in
connection with nonmaritime enterprises, only a small part being
devoted to payments relating to the operation of the vessels.
In both instances, the bonds secured by the mortgages were
negotiable bonds, and were purchased by petitioner for sale to the
general public, and were largely so sold.
There is no question as to the validity of the mortgages or of
the bonds which they secure or as to the default in payment. The
question is solely one of jurisdiction in admiralty of the
foreclosure suits. Respondent contends that the mortgages "were so
devoid of connection with maritime purposes" that the provision of
the Ship Mortgage Act conferring jurisdiction in admiralty "either
does not, or cannot constitutionally, apply."
The Circuit Court of Appeals was divided in opinion. The
majority of the judges, without passing on the extent of
congressional authority, thought that it was sufficient to point
out that the mortgagor and mortgagee knew, before the mortgages
were made, that the moneys advanced "were intended for and actually
were used for nonmaritime purposes," and they concluded that the
provisions of the Ship Mortgage Act did not extend to such a case.
The minority view, supporting the decision of the District Court,
was that the Congress intended to encourage the investment of
capital in ships; that it
Page 293 U. S. 32
might well be that this object could best be promoted by
allowing vessels "to be hypothecated as readily and with the same
effect as other personal property;" that a mortgage on a ship would
be "a most undesirable security" if purchasers of bonds so secured
must, at their peril, ascertain how moneys advanced upon the
mortgage are to be spent, and that Congress had constitutional
authority to give to a valid mortgage a preferred status, and to
provide for the enforcement of the lien in admiralty, by virtue of
its control over ships as essentially marine instrumentalities, a
control which includes the promotion of their development and the
regulation of their use.
Prior to the enactment of the Ship Mortgage Act 1920, the
admiralty had no jurisdiction of a suit to foreclose a mortgage on
a ship.
Bogart v. The Steamboat John
Jay, 17 How. 399,
58 U. S. 402;
Schuchardt v. Ship
Angelique, 19 How. 239,
60 U. S. 241;
People's Ferry Co. v.
Beers, 20 How. 393,
61 U. S. 400;
The
Lottawanna, 21 Wall. 558,
88 U. S. 583;
The Eclipse, 135 U. S. 599,
135 U. S. 608;
The J. E. Rumbell, 148 U. S. 1,
148 U. S. 15.
[
Footnote 1] If jurisdiction in
the admiralty of the present suits is to be maintained, it must be
by reason of the application and validity of the provisions of the
Ship Mortgage Act.
1.
The application of the statute. The grant of
jurisdiction is found in subsection K (46 U.S.C. § 951), which
provides:
"A preferred mortgage shall constitute a lien upon the mortgaged
vessel in the amount of the outstanding mortgage indebtedness
secured by such vessel. Upon the default of any term or condition
of the mortgage, such lien may be enforced by the mortgagee by suit
in rem in admiralty.
Page 293 U. S. 33
Original jurisdiction of all such suits is granted to the
district courts of the United States exclusively."
The grant is thus one of exclusive jurisdiction to enforce the
lien of a "preferred mortgage." If the mortgage is a preferred
mortgage within the definition of the Act, jurisdiction is granted;
otherwise not. "Preferred mortgages" are carefully defined in the
detailed provisions of subsection D. [
Footnote 2] 46 U.S.C. § 922. The application
Page 293 U. S. 34
of this term in the subsequent provisions of the Act, including
the provision as to admiralty jurisdiction, is not left to
inference, but is explicitly stated in subdivision (b) of
subsection D as follows:
"Any mortgage which complies in respect to any vessel with the
conditions enumerated in this subsection is hereafter in this
chapter called a 'preferred mortgage' as to such vessel."
Subdivision (a) of subsection D provides that a "valid
mortgage," which "includes the whole of any vessel of the United
States of 200 gross tons and upward," shall have, in addition,
"in respect to such vessel and as of the date of the compliance
with all the provisions of this
Page 293 U. S. 35
subdivision, the preferred status given by the provisions of
subsection M, [
Footnote 3]"
46 U.S.C. § 953. The term "vessel of the United States" means
any vessel documented under the laws of the United States, and, in
the case of a mortgage "involving a trust deed and a bond issue
thereunder," the term "mortgagee" means the trustee. Subsection B,
46 U.S.C. § 911. The "preferred status" given by subsection M is
that, on foreclosure and sale in admiralty, all preexisting claims
in the vessel are to be held terminated, and thereafter are to
attach to the proceeds of the sale, and the "preferred mortgage
lien" is to have priority over all claims against the vessel,
except "preferred maritime liens" and expenses, fees, and costs
allowed by the Court. "Preferred maritime liens" are those arising
prior to the recording and indorsement of the mortgage as required,
or
"a lien for damages arising out of tort, for wages of a
stevedore when employed directly by the owner, operator, master,
ship's husband, or
Page 293 U. S. 36
agent of the vessel, for wages of the crew of the vessel, for
general average, and for salvage, including contract salvage."
The requirements of subdivision (a) of subsection D which must
be met in order to obtain this preferred status are that the
mortgage shall be indorsed upon the vessel's documents and shall be
recorded; that an affidavit shall be filed with the record
"to the effect that the mortgage is made in good faith and
without any design to hinder, delay, or defraud any existing or
future creditor of the mortgagor or any lienor of the mortgaged
vessel,"
that the mortgage does not stipulate for a waiver of the
preferred status, and that the mortgagee is a citizen of the United
States. Subdivisions (c) and (d) of subsection D set forth the
nature and manner of the required indorsement upon the documents of
the vessel, and subsection C (46 U.S.C. § 921), to which subsection
D refers, contains detailed provisions as to recording.
Subdivision (e) of subsection D provides that a mortgage which
includes property other than a vessel "shall not be held a
preferred mortgage" unless there is provision for the separate
discharge of such property by the payment of a specified portion of
the mortgage indebtedness; subdivision (f) of subsection D makes
provision for the case of a mortgage covering more than one vessel.
And where a mortgage covers property in addition to vessels, the
Act is not to be construed as authorizing a proceeding
in
rem in admiralty to enforce the rights of the mortgagee in
respect to such property. Subsection N, [
Footnote 4] 46 U.S.C. § 954.
Page 293 U. S. 37
Subsection E (46 U.S.C. § 923) imposes the duty upon the
mortgagor to keep on board the mortgaged vessel a certified copy of
the mortgage and to cause it and the vessel's documents to be
exhibited by the master to any person having business with the
vessel which may give rise to a maritime lien or to a transfer or
mortgage of the vessel. Subsection F (46 U.S.C. § 924) requires the
mortgagor to disclose to the mortgagee, upon his request, the
existence of any maritime lien, prior mortgage, or other obligation
or liability of the vessel that is known to the mortgagor, and
prohibits the mortgagor, after the mortgage is executed and before
the mortgagee has had reasonable time to record it and to have the
necessary indorsements made upon the vessel's documents, from
incurring "any contractual obligation creating a lien upon the
vessel" other than those liens which are made "preferred maritime
liens" as above stated. Provision is also made for the record of
notices of claims of lien on the mortgaged vessel, for certificates
of discharge of liens, and for the inspection of records and
obtaining copies. Subsections G and I (46 U.S.C. §§ 925, 927).
Penalties are provided for failure to exhibit documents and for
violation of the Act in other respects, and provision is also made
for recovery, by suits in the district courts of the United States,
against collectors of customs and mortgagors, or masters of
vessels, of damages caused by failure to perform the duties imposed
upon them. Subsection J (46 U.S.C. § 941).
An examination of the provisions of the Act leaves no room for
doubt that the subject of mortgages of vessels, and, in particular,
the priority which should be assigned to them in relation to other
liens, was under the close scrutiny of the Congress in determining
its policy. But, among all the minute requirements of the Act, we
find none as to the application of the proceeds of loans which such
mortgages secure. No condition is imposed
Page 293 U. S. 38
as to the purposes for which the moneys are lent. While the
Congress took care to make distinct provision for cases where a
mortgage covers property other than a vessel, no distinction is
made as to the status of mortgages of vessels by reason of an
intention to devote the borrowed moneys to uses other than
maritime. We are not at liberty to imply a condition which is
opposed to the explicit terms of the statute. It is enough, so the
statute says expressly, that the mortgage is upon a vessel of the
United States, that it is a valid mortgage, that it is made in good
faith, that it is disclosed by proper indorsements on the vessel's
documents and is duly recorded, and that the other conditions,
specified in detail, are met. Such a mortgage upon a vessel
documented under the laws of the United States the Congress has
undertaken to regulate with respect to priority of lien. If the
conditions so laid down are fulfilled, the mortgage is to be a
"preferred mortgage," with all the incidents which the Act attaches
to it, including the right to bring foreclosure in admiralty. To
hold that a mortgage is not within the Act which the Act itself
states is within it is not to construe the Act, but to amend it.
The question of policy -- whether different terms should have been
imposed -- is not for us. We may not add to the conditions set up
by Congress any more than we can subtract from them. They stand, as
defined, precise and complete.
We see nothing in the general purpose of the act which can be
deemed to restrict the natural meaning and effect of its language.
Rather, the general purpose emphasizes that meaning and effect. The
Ship Mortgage Act is a part of the Merchant Marine Act 1920 (41
Stat. 988). Its declared purpose is "to provide for the promotion
and maintenance of the American merchant marine." The Congress, in
its wisdom, decided upon the means to achieve that object and set
forth its conclusions in the terms of the statute. The
legislative
Page 293 U. S. 39
history of the statute shows the controlling considerations. The
report of the Senate Committee on Commerce pointed out that
"mortgage security on ships" was "practically worthless;" that it
was proposed to "make it good except as to certain demands that
should be superior to everything else, such as wages;" and that it
was desired to have "our people and capital interested in shipping
and shipping securities." Sen.Rep. No. 573, 66th Cong., 2d Sess.,
p. 9. The bill, with this purpose, was developed in conference. The
managers on the part of the House of Representatives, in their
statement accompanying the report of the Committee of Conference,
observed that, by the enlarged provisions of the bill,
"the mortgagee under a mortgage upon a vessel of the United
States is made more secure in his interest in the vessel than he is
under existing admiralty law,"
and, referring to the plan of "creating a preferred mortgage,"
added that "the preferred status arises upon the recording of the
mortgage as a preferred mortgage and its indorsement upon vessel's
documents." There is no suggestion of any requirement as to the
use, intended or actual, of the moneys borrowed upon the faith of
the mortgage security. H.R. No. 1102, 66th Cong., 2d Sess., p. 34;
H.R. No. 1107, 66th Cong., 2d Sess., p. 31. [
Footnote 5] The measure was enacted in the terms
thus proposed.
Page 293 U. S. 40
In placing ship mortgages upon a stronger basis as securities,
the Congress had in mind, and expressly included, trust deeds
securing issues of bonds to the public. Subsection B (46 U.S.C. §
911). It is plain that the fundamental purpose to promote public
confidence in such securities, and their extended use as
investments, would have been frustrated if purchasers of bonds had
to discover at their peril the application of the proceeds of the
secured loans, or if their rights depended upon such knowledge as
their trustee might have, rather than upon the satisfaction of the
statutory conditions and the disclosures, as required, by
indorsement on the vessel's documents and recording. But, while
contemplating such bond issues, with their obvious practical
incidents, the Congress did not set up a special rule for them, or
for purchasers of bonds without notice as to the application of
proceeds. The Congress made simple, clear, and definite
conditions
Page 293 U. S. 41
as to all ship mortgages otherwise valid, and, when these were
performed, the mortgages were to have the status prescribed.
Given the standing of such mortgages in admiralty, which the
Congress desired to establish, an omission of a provision as to the
use of the moneys borrowed cannot be regarded as anomalous. An
analogous principle has been recognized in relation to bottomry and
respondentia bonds. Thus, in the case of bottomry bonds,
if the conditions of the bottomry attach, such bonds, when given by
the owner of the vessel, have been held to be within the admiralty
jurisdiction even if they are given to secure nonmaritime outlays.
That view was emphatically stated by Justice Story in
The
Draco, 2 Sumn. 157. There, jurisdiction of the District Court,
sitting in admiralty, was challenged upon the ground that the bond
in question was not a "fit foundation for a proceeding
in
rem."
Id., p. 174. After a careful review of the
historical conception of bottomry bonds, Justice Story concluded
(
id., p. 186):
"In my opinion, there is not the slightest ground to uphold the
doctrine that, in order to constitute a bottomry bond as such, in
the sense of the maritime law, it is necessary that the money
should be advanced for the necessities of the ship, or for the
cargo, or for the voyage. Where it is given by the master,
virtute officii, it must, in order to have validity, be
for the ship's necessities, for the implied authority of the master
extends no farther. But where it is given by the owner as
dominus navis, he may employ the money as he pleases. It
is sufficient if the money be lent upon the bottom of the ship at
the risk of the lender, for the voyage."
So, in the case of a
respondentia loan, it is not
necessary that it should be made before the departure of the ship
on the voyage, or that the money lent should be employed in the
outfit of the vessel or invested in the goods on which the risk is
run. It matters not, this Court
Page 293 U. S. 42
has said, at what time the loan is made, or upon what goods the
risk is taken. "If the risk of the voyage be substantially and
really taken," and the transaction be otherwise valid,
"it is no objection to it that it was made after the voyage was
commenced, nor that the money was appropriated to purposes wholly
unconnected with the voyage."
The lender is not presumed to lend "upon the faith of any
particular appropriation of the money."
Conard v.
Atlantic Insurance Co., 1 Pet. 386,
26 U. S. 437.
See Conard v.
Nicoll, 4 Pet. 291,
29 U. S. 310; 3
Kent's Com. 361, note (e);
The Draco, supra, pp.
188-189.
It is also to be noted that the jurisdiction granted to the
admiralty by the Ship Mortgage Act is exclusive. If a mortgage is
within the Act, there can be no suit to foreclose it in a state
court; [
Footnote 6] if the
mortgage is not within the Act, there can be no suit for
foreclosure in the admiralty. It cannot be doubted that the
Congress recognized the importance of basing the jurisdiction, as
thus sought to be conferred, upon precise statutory conditions. We
find no warrant for leaving it to be tested by extrinsic criteria,
raising a host of questions as to the application of the proceeds
of loans, in the solution of which the statute affords no aid.
We conclude that the Court had jurisdiction of the suits
provided the Congress had authority to grant it.
2.
The validity of the grant of jurisdiction. The
Congress rested its authority upon the constitutional provisions
extending the judicial power "to all cases of admiralty and
maritime jurisdiction" and conferring upon the Congress the power
to make all laws which shall be "necessary and proper" for carrying
into execution all powers "vested by this Constitution in the
Government of the United States, or in any Department or Officer
thereof." Article III, § 2; article 1, § 8, par. 18. [
Footnote 7] This authority
Page 293 U. S. 43
was not confined to the cases of admiralty and maritime
jurisdiction in England when the Constitution was adopted.
Waring v.
Clarke, 5 How. 441,
46 U. S.
457-458. The limitations which had been imposed upon the
high court of admiralty in the course of its controversy with the
courts of common law were not read into the grant. But the grant
presupposed a "general system of maritime law" which was familiar
to the lawyers and statesmen of the country, and contemplated a
body of law with uniform operation.
The
Lottawanna, 21 Wall. 558,
88 U. S.
574-575. The Constitution did not undertake to define
the precise limits of that body of law, or to lay down a criterion
for drawing the boundary between maritime law and local law.
Id. Boundaries were to be determined in the exercise of
the judicial power in recognition of the purpose of the grant. "No
State law can enlarge it, not can an act of Congress or rule of
court make it broader than the judicial power may determine to be
its true limits."
The
St.Lawrence, 1 Black 522,
66 U. S. 527.
The framers of the Constitution did not contemplate that the
maritime law should remain unalterable. The purpose was to place
the entire subject, including its substantive, as well as its
procedural, features, under national control. From the beginning,
the grant was regarded as implicitly investing legislative power
for that purpose in the United States. When the Constitution was
adopted, the existing maritime law became the law of the United
States "subject to power in Congress to alter, qualify or
supplement it as experience or changing conditions might require."
Panama Railroad Co. v. Johnson, 264 U.
S. 375,
264 U. S. 385-
387. The Congress thus has paramount power to determine the
maritime law which shall prevail throughout the country.
The
Lottawanna, supra, p.
88 U. S. 577;
Butler v. Boston Steamship Co.,
130 U. S. 527,
130 U. S. 557;
Ex parte Garnett, 141 U. S. 1,
141 U. S. 13;
Southern Pacific Co. v. Jensen, 244 U.
S. 205,
Page 293 U. S. 44
244 U. S. 215;
Crowell v. Benson, 285 U. S. 22,
285 U. S. 39;
United States v. Flores, 289 U. S. 137,
289 U. S.
148-149. But, in amending and revising the maritime law,
the Congress necessarily acts within a sphere restricted by the
concept of the admiralty and maritime jurisdiction.
The Belfast, 7
Wall. 624,
74 U. S. 641;
Panama Railroad Co. v. Johnson, supra; Crowell v. Benson,
supra, p.
285 U. S.
55.
The Congress began the exertion of this authority at an early
date. In the Judiciary Act of 1789, the Congress conferred upon the
district courts of the United States exclusive jurisdiction of all
seizures under the laws of impost, navigation, or trade of the
United States where the seizures were made on navigable waters
within the respective districts. § 9, 1 Stat. 76, 77;
Waring v.
Clarke, supra, p.
46 U. S. 458;
The Margaret,
9 Wheat. 421,
22 U. S. 427.
By the Act of June 19, 1813, 3 Stat. 2, the Congress declared that
a vessel employed in a fishing voyage should be answerable for the
fishermen's share of the fish caught, upon a contract made on land,
in the same form and to the same effect as any other vessel is
liable to be proceeded against for the wages of seamen.
Waring
v. Clarke, supra. Important illustrations of the exercise of
congressional power are found in the Limitation of Liability Act of
1851, 9 Stat. 635, enacted for the purpose of encouraging
investment in shipbuilding by limiting the venture of shipowners to
the loss of the ship itself, or her freight then pending, in cases
of damage occasioned without the owner's privity or knowledge
(
Norwich Co. v.
Wright, 13 Wall. 104;
Hartford Accident &
Indemnity Co. v. Southern Pacific Co., 273 U.
S. 207,
273 U. S.
214); the extension, by the Act of June 26, 1884, § 18,
23 Stat. 57, 58, of the admiralty jurisdiction to proceedings for
the limitation of liability, so as to include damages by a vessel
to a land structure (
The Plymouth, 3
Wall. 20;
Cleveland Terminal R. Co. v. Steamship Co.,
208 U. S. 316;
Richardson v. Harmon, 222 U. S. 96,
222 U. S. 101,
222 U. S. 106);
the Act June 23, 1910, 36 Stat. 604,
Page 293 U. S. 45
providing for a maritime lien for repairs or supplies furnished
to a vessel in her home port, to be enforced by a proceeding
in
rem (
The General
Smith, 4 Wheat. 438,
17 U. S. 443;
The St. Jago de
Cuba, 9 Wheat. 409,
22 U. S. 420;
The J. E. Rumbell, 148 U. S. 1,
148 U. S. 12;
Piedmont Coal Co. v. Seaboard Fisheries Co., 254 U. S.
1,
254 U. S. 11);
the Act of March 30, 1920, 41 Stat. 537, providing for jurisdiction
in admiralty of suits for damages from death caused by wrongful act
and occurring on the high seas (
The Hamilton, 207 U.
S. 398;
Western Fuel Co. v. Garcia,
257 U. S. 233,
257 U. S. 243;
Lindgren v. United States, 281 U. S.
38,
281 U. S. 48);
the Seamen's Act of 1915, § 20, 38 Stat. 1185 (
Chelentis v.
Luckenbach Steamship Co., 247 U. S. 372,
247 U. S.
384); the Merchant Marine Act of 1920, § 33, 41 Stat
1007, amending § 20 of the act of 1915, thus bringing, in relation
to seamen, into the maritime law rules drawn from the Federal
Employers' Liability Act (
Panama Railroad Co. v. Johnson,
supra; Engel v. Davenport, 271 U. S. 33,
271 U. S. 35;
Panama Railroad Co. v. Vasquez, 271 U.
S. 557,
271 U. S. 559;
Northern Coal Co. v. Strand, 278 U.
S. 142,
278 U. S.
147), and the Longshoremen's and Harbor Workers'
Compensation Act 1927, 44 Stat. 1424 (
Nogueira v. N.Y. N.H.
& H.R. Co., 281 U. S. 128;
Crowell v. Benson, supra).
Of special significance in relation to the present question are
the Acts of 1884 and 1910,
supra. By the former, the
admiralty jurisdiction in limitation proceedings was enlarged so as
to embrace the liability for a nonmaritime tort. Although the
damaged structure was on land, the injury was due to the operation
of the vessel, and it could not be said that the Congress had
stepped beyond the limits of its authority to amend the law in
furthering its policy to encourage investments in ships.
Richardson v. Harmon, supra. Compare The
Blackheath, 195 U. S. 361,
195 U. S.
367-368. The Act of 1910 created a lien to be enforced
in rem for repairs or supplies to vessels in their home
ports. The state of the law as it existed before
Page 293 U. S. 46
that enactment was fully described in
The J. E. Rumbell,
supra. For repairs or supplies furnished to a vessel in a
foreign port, a lien was given by the general maritime law, and
could be enforced in admiralty, but, for repairs or supplies in the
home port, no lien existed, or could be enforced in admiralty under
the general law, independently of local statute. When the statute
of a State gave a lien to be enforced by process
in rem
against the vessel for repairs or supplies in her home port, that
lien, being similar to the lien arising in a foreign port under the
general law, was deemed to be in the nature of a maritime lien, and
therefore could be enforced in admiralty, and, in such case, the
enforcement of the lien was within the exclusive jurisdiction of
the courts of the United States sitting in admiralty. The result
was that, where necessaries were furnished to a vessel in her home
port, the vessel could not be sued in the federal courts under the
general maritime law, for that law was not deemed to confer a lien,
and could not be sued in a state court, for that court could not
enforce the lien created by the state law, but the lien so given
might be enforced in admiralty. [
Footnote 8] The Act of 1910 abolished the artificial
distinction between repairs and supplies in a home port and those
in a foreign port. While it created a lien where, in the absence of
local provision therefor, none had theretofore existed, the change
was not deemed to be inconsistent with the general principles of
the maritime law, and it effected a substitution of a single
federal statute for the conflicting state statutes.
Piedmont
Coal Co. v. Seaboard Fisheries Co., supra. The Act of 1910
also provided that it should not be necessary "to allege or prove"
that credit was given to the vessel; previously, supplies furnished
to the vessel at the home port, or on the owner's order, were
presumed to be furnished upon his personal credit, and created no
lien.
Id.
Page 293 U. S. 47
Respondent, in attacking the grant of jurisdiction by the Ship
Mortgage Act, relies strongly upon the reasoning of the Court in
Bogart v. The Steamboat John Jay, supra, which denied,
under the former law, jurisdiction in admiralty to enforce payment
of a mortgage upon a vessel. The Court there said that neither in
England [
Footnote 9] nor in the
United States had the admiralty courts exercised jurisdiction in
questions of property between a mortgagee and the owner; that the
foundation of the rule was "that the mere mortgage of a ship, other
than that of an hypothecated bottomry," was a contract "without any
of the characteristics or attendants of a maritime loan," and was
made "without reference to navigation or perils of the sea;" that
it was a security "to make the performance of the mortgagor's
undertaking more certain;" that, while the mortgagor continued in
possession of the ship, the mortgagee was disconnected "from all
agency and interest in the employment and navigation of her, and
from all responsibility for contracts made on her account;" that
there was nothing maritime in the contract, and that from the
organization of courts of admiralty and their modes of proceeding,
they cannot secure to the parties to the mortgage "the remedies and
protection which they have in a court of chancery."
But it did not follow, because this view was taken of the
existing law, that the Congress was without power to amend the law
so as to enable the admiralty courts to take cognizance of
mortgages on ships, and to regulate priorities of liens, in order
to promote investment in shipping securities and thus to advance
the maritime interests of the United States. Indeed, in the
Bogart case, the Court seemed to recognize the existence
of that constitutional authority. For the Court, in concluding its
opinion, observed that the policy of commerce and its exigencies in
England had given to its admiralty courts
Page 293 U. S. 48
a more ample jurisdiction in respect to mortgages of ships than
they had under the former rule. And the Court pointed out that this
"enlarged cognizance of mortgages" had been given by statute 3 and
4 Victoria, chap. 65, and said that,
"until this shall be done in the United States by Congress, the
rule in this particular must continue in the admiralty courts of
the United States as it has been."
The significance of this suggestion cannot be overlooked. The
fact that mortgages on ships had not been considered to be maritime
contracts was not conclusive as to the constitutional authority of
the Congress to alter or supplement the maritime law in this
respect, and thus to extend the admiralty jurisdiction "as
experience or changing conditions might require," while keeping
within a proper conception of maritime concerns. The ship,
documented under the laws of the United States, is the
instrumentality of our maritime enterprise, the prime object of our
maritime policy. The ship, "from the moment her keel touches the
water," becomes "a subject of admiralty jurisdiction;" she acquires
personality; she becomes competent to contract, is individually
liable for her obligations, and is responsible for her torts.
Tucker v. Alexandroff, 183 U. S. 426,
183 U. S. 438.
The existence of the ship, the investments which make that
existence possible, is the necessary postulate of maritime liens.
We cannot fail to regard the encouragement of investments "in
shipping and shipping securities" -- the objective of the Ship
Mortgage Act -- as an essential prerogative of the Congress in the
exercise of its wide discretion as to the appropriate development
of the maritime law of the country. The regulation of the
priorities of ship mortgages in relation to other liens, and the
conferring of jurisdiction in admiralty in order to enforce this
regulation, are appropriate means to that legitimate end.
Page 293 U. S. 49
The enlargement of the cognizance of mortgages of ships, in the
admiralty courts in England, nearly one hundred years ago, to which
the Court referred in the
Bogart case, was to remedy an
evil which had been found to exist. The purpose was "to enable the
Court to exercise its ordinary jurisdiction to the full extent."
[
Footnote 10] That Act
applied whenever the ship was "under arrest by process issuing from
the high court of admiralty" or the proceeds of a ship so arrested
had been brought into the registry of the court, and the court was
invested with
"full jurisdiction to take cognizance of all claims and causes
of action of any person in respect to any mortgage of such ship or
vessel, and to decide any suit instituted by any such person in
respect of any such claims or causes of action respectively."
3 & 4 Vict., c. 65, §§ 3, 4. These provisions were expanded
by later legislation. The admiralty court in England has
jurisdiction in respect of any mortgage duly registered according
to the provisions of the Merchant Marine Act 1894,
"whether or not the ship or proceeds are under the arrest of the
Court, and such jurisdiction may be exercised by an action
in
rem or
in personam."
Roscoe's Admiralty Practice (5th Ed.) p. 51.
This response "to the exigencies of commerce" has had its
counterpart in the legislation of other European States. It may be
said that the "general maritime law" takes cognizance of mortgages
of ships, provides for their registration, and establishes rules
with respect to priorities. [
Footnote 11]
Page 293 U. S. 50
Prior to the Ship Mortgage Act, the right of the mortgagee to
intervene as a claimant of proceeds of a vessel sold by process in
the admiralty was recognized, and was frequently exercised.
Schuchardt v. Ship Angelique, supra; The Lottawanna, supra; The
J. E. Rumbell, supra. The distinction between such an
intervention and an original proceeding by the mortgagee was no
doubt controlling as a matter of jurisdiction and procedure under
the law as it then existed, but it cannot be considered as
establishing a criterion of the constitutional power of the
Congress in defining jurisdiction and procedure. The Congress
undoubtedly could determine the priorities that should be
recognized by the admiralty court and, having that authority, the
Congress could fix the conditions upon which mortgages of ships
documented under the laws of the United States should have the
priority specified. The grant of jurisdiction in admiralty to
entertain a suit by the mortgagee, where the mortgage complies with
the prescribed conditions, in order to enforce the permitted lien
against the vessel, is, after all, but a provision of suitable
machinery to give effect to the rights which the Congress has
created.
If it be concluded, and we think it must be, that the Congress
has this power in the case of the mortgage of a vessel to provide
for its acquisition, or for the discharge of preexisting liens, or
for its necessities -- that is, to authorize the enforcement by
suits in admiralty of mortgages given to secure loans for the
direct benefit of the vessel -- we perceive no ground to deny to
the Congress constitutional power to make similar provision as to
mortgages
Page 293 U. S. 51
of ships which comply with its rules, although the proceeds of
the loans thereby secured are used for other purposes. The analogy
of the decision by Justice Story in
The Draco case,
supra, as to bottomry bonds, and of the decisions of this
Court in the
Conard cases,
supra, as to
respondentia bonds, is apparent. If the maritime law does
not require, as Justice Story held, that a bottomry bond, as such,
must be given for the necessities of the ship or for the cargo or
for the voyage, but that it is sufficient, when given by the owner,
that the money be lent upon the bottom of the ship at the risk of
the lender, for the voyage, and that, in such case, the owner is
free to employ the money as he pleases; if, as this Court decided,
in the case of a
respondentia loan, it is no objection
that it is made after the departure of the ship, or that the money
lent was not employed in the outfit of the vessel or invested in
the goods on which the risk was run, or that the money was
appropriated for purposes wholly unconnected with the voyage, we
cannot see that an analogous provision with respect to ship
mortgages is so far inconsistent with the fundamental principles of
maritime law as to place such mortgages beyond the authority of the
Congress in determining the admiralty jurisdiction. The contention
to the contrary loses sight of the dominant purpose of the Act, a
purpose which the Congress was competent to achieve. That purpose,
we repeat, was to establish the worth of "shipping securities" in
the interest of the merchant marine. In order to create public
confidence in such securities, in obligations issued on the faith
of ship mortgages, the Congress deemed it necessary not to hamper
their issue or enforcement by compelling inquiries as to the
application of loans, but to give a definite and assured character
to such mortgages provided they met certain simple conditions. The
Congress, in the exercise of its discretion, was entitled to
consider the methods by which securities are issued to the public
and
Page 293 U. S. 52
dealt in, and the well known usages of business in this regard
amply support its judgment.
The authority of the Congress to enact legislation of this
nature was not limited by previous decisions as to the extent of
the admiralty jurisdiction. We have had abundant reason to realize
that our experience and new conditions give rise to new conceptions
of maritime concerns. These may require that former criteria of
jurisdiction be abandoned -- as, for example, they were abandoned
in discarding the doctrine that the admiralty jurisdiction was
limited to tidewaters.
The Genesee
Chief, 12 How. 443,
overruling 23 U.
S. 10 Wheat. 428.
The constitutional validity of the grant of jurisdiction by the
Ship Mortgage Act has been sustained in
The Oconee, 280 F.
927, in
The Nanking, 292 F. 642, and in
The Lincoln
Land, 295 F. 358. [
Footnote
12] We find no reason for reaching a contrary conclusion in the
instant cases.
The decrees of the Circuit Court of Appeals are reversed, and
the causes are remanded for further proceedings in conformity with
this opinion.
Reversed.
* Together with No. 14,
Detroit Trust Co., Trustee v. The
John J. Barlum et al., certiorari to the Circuit Court of
Appeals for the Second Circuit.
[
Footnote 1]
See also The William D. Rice, 3 Ware, 134, 136;
The
Martha Washington,3 Ware, 245, 251;
The Sailor
Prince, 1 Ben. 461, 466;
Morgan v. Tapscott, 5 Ben.
252;
Britton v. The Venture, 21 F. 928;
The Gordon
Campbell, 131 F. 963, 965;
The Clifton, 143 F. 460,
463;
The Conveyor, 147 F. 586, 589;
The Rupert
City, 213 F. 263, 266.
[
Footnote 2]
Subsection D is as follows:
"
Preferred mortgages. (a) A valid mortgage which at the
time it is made includes the whole of any vessel of the United
States of 200 gross tons and upward, shall in addition have, in
respect to such vessel and as of the date of the compliance with
all the provisions of this subdivision, the preferred status given
by the provisions of subsection M, § 953, if --"
"(1) The mortgage is indorsed upon the vessel's documents in
accordance with the provisions of this chapter;"
"(2) The mortgage is recorded as provided in subsection C,
section 921, together with the time and date when the mortgage is
so indorsed;"
"(3) An affidavit is filed with the record of such mortgage to
the effect that the mortgage is made in good faith and without any
design to hinder, delay, or defraud any existing or future creditor
of the mortgagor or any lienor of the mortgaged vessel;"
"(4) The mortgage does not stipulate that the mortgagee waives
the preferred status thereof; and"
"(5) The mortgagee is a citizen of the United States."
"(b) Any mortgage which complies in respect to any vessel with
the conditions enumerated in this subsection is hereafter in this
chapter called a 'preferred mortgage' as to such vessel."
"(c) There shall be indorsed upon the documents of a vessel
covered by a preferred mortgage --"
"(1) The names of the mortgagor and mortgagee;"
"(2) The time and date the indorsement is made;"
"(3) The amount and date of maturity of the mortgage; and"
"(4) Any amount required to be indorsed by the provisions of
subdivision (e) or (f) of this subsection."
"(d) Such indorsement shall be made (1) by the collector of
customs of the port of documentation of the mortgaged vessel, or
(2) by the collector of customs of any port in which the vessel is
found, if such collector is directed to make the indorsement by the
collector of customs of the port of documentation, and no clearance
shall be issued to the vessel until such indorsement is made. The
collector of customs of the port of documentation shall give such
direction by wire or letter at the request of the mortgagee and
upon the tender of the cost of communication of such direction.
Whenever any new document is issued for the vessel, such
indorsement shall be transferred to and indorsed upon the new
document by the collector of customs."
"(e) A mortgage which includes property other than a vessel
shall not be held a preferred mortgage unless the mortgage provides
for the separate discharge of such property by the payment of a
specified portion of the mortgage indebtedness. If a preferred
mortgage so provides for the separate discharge, the amount of the
portion of such payment shall be indorsed upon the documents of the
vessel."
"(f) If a preferred mortgage includes more than one vessel and
provides for the separate discharge of each vessel by the payment
of a portion of the mortgage indebtedness, the amount of such
portion of such payment shall be indorsed upon the documents of the
vessel. In case such mortgage does not provide for the separate
discharge of a vessel and the vessel is to be sold upon the order
of a district court of the United States in a suit
in rem
in admiralty, the court shall determine the portion of the mortgage
indebtedness increased by 20 percentum (1) which, in the opinion of
the court, the approximate value of the vessel bears to the
approximate value of all the vessels covered by the mortgage, and
(2) upon the payment of which the vessel shall be discharged from
the mortgage."
[
Footnote 3]
Subsection M is as follows:
"
Preferred maritime lien; priorities; other liens. (a)
When used hereinafter in this chapter, the term 'preferred maritime
lien' means (1) a lien arising prior in time to the recording and
indorsement of a preferred mortgage in accordance with the
provisions of this chapter, or (2) a lien for damages arising out
of tort, for wages of a stevedore when employed directly by the
owner, operator, master, ship's husband, or agent of the vessel,
for wages of the crew of the vessel, for general average, and for
salvage, including contract salvage."
"(b) Upon the sale of any mortgaged vessel by order of a
district court of the United States in any suit
in rem in
admiralty for the enforcement of a preferred mortgage lien thereon,
all preexisting claims in the vessel, including any possessory
common law lien of which a lienor is deprived under the provisions
of subsection L, § 952, shall be held terminated, and shall
thereafter attach, in like amount and in accordance with their
respective priorities, to the proceeds of the sale, except that the
preferred mortgage lien shall have priority over all claims against
the vessel, except (1) preferred maritime liens, and (2) expenses
and fees allowed and costs taxed, by the court."
[
Footnote 4]
Subdivision (b) of subsection N is as follows:
"(b) This chapter shall not be construed, in the case of a
mortgage covering, in addition to vessels, realty or personalty
other than vessels, or both, to authorize the enforcement by suit
in rem in admiralty of the rights of the mortgagee in
respect to such realty or personalty other than vessels."
[
Footnote 5]
In this statement, the House managers said:
"This Senate amendment is an extensive provision by which the
mortgagee under a mortgage upon a vessel of the United States is
made more secure in his interest in the vessel than he is under
existing admiralty law. The amendment supplements the existing
mortgage recording provisions by creating a preferred mortgage
which in foreclosure proceedings will have priority in the
distribution of the proceeds from the sale of the mortgaged vessel
over all maritime liens against the vessel except liens for damages
arising out of tort, stevedores' and crew's wages, general average,
and salvage. The preferred status arises upon the recording of the
mortgage as a preferred mortgage and its indorsement upon vessel's
documents. Under the Senate amendment, the foreclosure proceedings
are brought in the Federal courts in equity with simulated
admiralty procedure under which the court in equity gives a title
good against the world and terminates all preexisting claims
against the vessel."
"
* * * *"
"The House recedes with an amendment which places the
constitutional basis of Congress' power to legislate in respect to
vessel mortgages upon the grant of admiralty jurisdiction and the
'necessary and proper clause' of the Constitution, instead of the
power to regulate interstate and foreign commerce. The amendment as
agreed to further places exclusive jurisdiction in the federal
courts to foreclose vessel mortgages upon the grant of admiralty
jurisdiction, instead of the provisions of the Constitution
relating to diversity of citizenship and cases arising under the
laws of the United States. The amendment as agreed to also makes
the title granted under the order of a court of admiralty in the
case of the libel of a vessel covered by a preferred mortgage good
against the world, as under the existing admiralty law and
international admiralty practice; clarifies the provisions as to
fleet mortgages; provides for the reenactment and incorporation in
the amendment of the existing vessel mortgage recording provisions,
and prevents the repeal of § 4 of the maritime lien act of 1910 in
respect to the doctrines of advances and laches."
[
Footnote 6]
See Note 5
[
Footnote 7]
See Note 5
[
Footnote 8]
See Benedict's Admiralty, 5th ed., §§ 87, 88.
[
Footnote 9]
See The Neptune, 3 Hagg. 129, 132.
[
Footnote 10]
See statement of Dr. Lushington in
The
Fortitude, 2 Wm. Rob. 217, 222.
[
Footnote 11]
See, e.g., The Netherlands, Maritime Law, Code of
Commerce, 1838; France, Act of July 10, 1885, and Decree of June
18, 1886; Belgium, Laws of August 21, 1879, June 12, 1902, February
10, 1908, and September 4, 1908; Denmark, Maritime Law of April 1,
1892, Act 103 of April 29, 1913, also Act 57 of April 1, 1892;
Italy, Maritime Law, Code of Commerce of 1883, and Mercantile
Marine Code. 1866, as amended; Norway, Maritime Law of July 20,
1893, as amended by Acts of May 4, 1901, July 13, 1917, and July 9,
1920.
See Constant, "The Law Relating to the Mortgage of
Ships," Appendix A; "The Progress of Continental Law in the 19th
Century," Georges Ripert, Maritime Law, Continental Legal History
Series, p. 399.
[
Footnote 12]
The validity of the Act was not questioned in
Morse Dry Dock
& Repair Co. v. Northern Star, 271 U.
S. 552,
271 U. S.
555-556, and its validity has been assumed in several
decisions in the lower federal courts.
See The Egeria, 294
F. 791;
The Northern No. 41, 297 F. 343;
The Red
Lion, 22 F.2d 329;
National Bank v. Enterprise Marine Dock
Co., 43 F.2d 547;
Consumers Co. v. Goodrich Transit
Co., 53 F.2d 972.