Brief in Opposition to Petition for Writ of Certiorari — Teamsters v. United States

Supreme Court brief1934

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SUBJECT INDEX.

Reference to Decision Below ..................... 1

Reasons for Opposition to Certiorari............ 2- 4

Additional Statement of Facts ................. 4- 9

ee ee Tere Te Tee ee ry rere te 10-27

Prior to the Ship Mortgage Act it was settled

law that a ship mortgage securing a personal

loan to the shipowner was not, ez proprio

vigore, foreclosable in admiralty—not because

the Congress had not conferred such jurisdic-

tion but because, under the Constitution as in-

terpreted by this court, neither the loan, the

primary contract, nor the mortgage, the inci-

dent thereof, was a maritime contract. The

Congress has no power to extend admiralty

jurisdiction to a nonmaritime contract....... 10-16

Maritime liens encumber commerce and are

ee ere ee error 16

In any event the fact that the contratta | in-

volved were not wholly maritime would pre-

clude original admiralty jurisdiction ......... 16-17

Admiralty Courts are not courts of equity.. 17

The claim of ufconstitutionality herein is

deep rooted. The power of the Congress in

connection with admiralty cannot transcend

the jurisdiction delegated by the states to the

Federal Government under the Constitution.

The objection herein presents the serious ques-

tion whether the legislative branch of the Fed-

eral Government has not encroached upon the

reserved sovereign powers of the states.

The attempted grant of admiralty jurisdiction

herein would deprive the states of reserved

jurisdiction over nonmaritime contracts because

federal admiralty jurisdiction is exclusive.

No state statute creating a maritime lien, jus-

ticiable in admiralty and thereby waiving re-

served state rights, is involved. Subsection K,

if applicable, is unconstitutional ............. 18-22

The Congress cannot enlarge the grant of

I II nv edcccescicesseaseces 19

Federal admiralty jurisdiction to enforce a

ire Sella saa awe eka ones 19-20

A fair construction of the Ship Mortgage

Act justified the holding that it does not apply

to the particular mortgages involved. The

act should be so construed ................. 23-26

Eee Cnet ia ieee «a» eaueew se 27

Table of Cases Cited.

Ada, The (C. C. A. 2), 250 Fed. 194............... 17

American Steamboat Co. v. Chace, 16 Wall. (83

ee ee SS Serer er eee eee 20

Belfast, The, 7 Wall. (74 U. S.) 624, 19 L. Ed. 266 19

Bogart v. The Steamboat John Jay, 17 How. (58

oe ee SS Fy Se rrr TT ere 11-13

Carpenter v. Longan, 16 Wall. (83 U. S.) 271, 21

ee evened y Vil k wad h a sea ka wisneas 16

Crowell v. Benson, 285 U. S. 22, 55, 52 S. Ct. 285,

ae Ee SR ere rere Tre ree 19, 21, 23

Dahnke-Walker Milling Company v. Bondurant, 257

U. S. 282, 42 S. Ct. 106, 66 L. Ed. 239........ 23

Freights of the Kate, The, 63 Fed. 707, 720...... 15

General Smith, The, 4 Wheat. 438, 4 L. Ed. 609.... 20

‘

’

—

lil

Genesee Chief, The, 12 How. (53 U. S.) 443, 13

i TN sda kha ha uaw ake eek eRe eee Van anaes 11,18

Grant v. Poillon, 20 How. (61 U.S.) 162, 15 L. Ed.

MIG cca ec Chae aces tae eee 16

Kalfarli, The (C. C. A. 2), 277 Fed. 301........... 16

Kellum v. Emerson, Fed. Cas. No. 7669........... 17

Krauss Bros. Lumber Co. v. Dimon §S. 8S. Corp., °

ee eee rer er 16

Lincoln Land, The (D. C. Mass.), 295 Fed. 358..... 26

Lottawanna, The, 21 Wall. (88 U. S.) 558, 22 L.

Ne Rh ss i ins bee b A cakes bed eRe R eS haw hO 14-15, 19

Meyer et al. v. Tupper, 66 U. S. (1 Black) 522,

Oe S| ame er re ee ere 19, 21

Nanking, The (D. C. Cal.), 292 Fed. 642.......... 26

New Jersey, Steam Navigation Co., The, v. The

Merchants’ Bank of Boston, 6 How. 344, 12

i os Shak eek aed e aes be Keabawen nes 11

Oconee, The (D. C. Va.), 280 Fed. 927............ 26

Panama R. Co. v. Johnson, 264 U. S. 375, 44 S. Ct.

ek EE Nc 6s ace k aA eek ku teas 22, 23

People’s Ferry Co., The, v. Beers, 20 How. (61

U. a) eee, 2e: Ee Oe OG1 Sk ks 13-14, 16, 18, 24

Perry v. Haines, 191 U. S. 17, 24 S. Ct. 8, 48 L.

a sR SAP ere ao ere Petey She etme 20

Pillsbury Flour Mills Co. v. Interlake SS. Co.

epee Se SG 8 ge eer ree 17

Providence & N. Y. S. S. Co. v. Hill Mfg. Co., 109

U. S. 578, 3 S. Ct. 379, 27 L. Ed. 1038........ 21

Rea v. The Steamer Eclipse, 135 U. S. 599, 10 S.

ee ee Oe es I or no we an ha kh le ks 16

Richard Winslow, The (C. C. A. 7), 71 Fed. 426.. 17

Roanoke, The, 189 U. S. 186, 23 S. Ct. 491, 47 L.

Eerie reniats tpn spl Rana g ale eon east eA ae Ante 20

Roberts v. Atlantic Oil Producing Co. (C. C. A.

ae ee We erate kcec cleus acana 25

Rumbell, The J. E., 148 U. S. 1, 13 S. Ct. 498, 37

ie I Mee a5 x a koe ees RO ba RRS 15, 20

seisacabsia

Sd eet Te ee ee ”

Schuchardt v. Ship Angelique, 19 How. (60 U. S.)

ee eG ke SUN SAL ode oth abu ade sas

Taylor, The Moses, v. Hammons, 4 Wall. (71 U. S.)

a a ten Se ee ee

Winnebago, The (C. C. A. 6), 141 Fed. 945........

Authorities.

Article III, Sections 1 and 2 U. S. Constitution..

Judiciary Act of 1789, 28 U.S. C. A. § 41 (8).....

Ship Mortgage Act, The (Sec. 30 of the Merchant

Marine Act 1920), 46 U.S. C. A. § 861........

Merchant Marine Act of 1920, Sec. 1, 46 U.S. C. A.

SPA een ey eee ee ee eee eee

Merchant Marine Act of 1920, See. 36, 46 U. S.

ae eS peat Saree rer erie eens ene

In The

Supreme Court of the United States

October Term, 1933.

Nos. 909-910.

DETROIT TRUST COMPANY, TRUSTEE,

Petitioner,

Steamer THOMAS BARLUM, Her Engines, etc.,

BARLUM STEAMSHIP COMPANY,

Respondent.

DETROIT TRUST COMPANY, TRUSTEE,

Petitioner,

Steamer JOHN J. BARLUM, Her Engines, etc.,

BARLUM STEAMSHIP COMPANY,

Respondent.

, a

BRIEF FOR RESPONDENT IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI.

(All Italics Supplied.)

The opinions delivered in the court below are now re-

ported as The Thomas Barlum, The John J. Barlum, 68

F. (2d) 946.

This brief will be directed to the propositions that

certiorari is not merited because :

The factual situations involved are so unusual as

to be sut generis.

The decision below was clearly warranted.

Realizing that the facts presented were very excep-

tional and not typical of ship mortgage transactions, writ-

ten argument in respondent’s behalf in the court below

was prefaced by the following statement:

i a ane or

‘‘It is not urged that the Ship Mortgage Act is

unconstitutional in its entirety nor that Congress,

having power to legislate concerning “true maritime

liens, could not subordinate certain of such liens to

other, even common law, liens. It is not urged that

a purchase money mortgage or a mortgage placed

on a ship to raise funds for maritime purposes

would be invalid or necessarily without the jurisdic-

tion of the admiralty court. Such contentions are

not necessary or pertinent herein. What is urged

is that these particular mortgages, by intendment of

the parties and under the circumstances established

by the record, were so devoid of connection with

maritime purposes that the provisions of Subsection

K of the Ship Mortgage Act, 46 U. S. C. Av;§ 951,

conferring original foreclosure jurisdiction on the

district court in admiralty, either does not, cr can-

not constitutionally, apply.’’

This restriction of the issues was clearly recognized

by the Circuit Court of Appeals in the prevailing opinion

[68 F. (2d) 948-949] as follows:

Ot. tee iwee Va rhs,

‘Appellant argues that these mortgages, as the

record establishes, were so devoid of connection with

maritime purposes and subjects, that the statute

should not be construed to confer and cannot confer tl

original jurisdiction of foreclosure in admiralty. c

” . o

a —_

‘Tf it were established that these mortgages were

given to support an issue of bonds ‘to develop and

encourage the maintenance of such a merchant marine’

and therefore in accord with the objects of the Ship

Mortgage Act, the admiralty jurisdiction to foreclose

would be unquestionable. We reed not decide

whether or not a loan made for maritime purposes

secured by a mortgage on a ship will become non-

maritime if the borrower, contrary to the agreement

of the mortgage, diverts the money to nonmaritime

purposes, nor need we consider what effect any es-

toppel in such a case would have. We are not called

upon to say whether or not Congress could in any

event extend the admiralty jurisdiction to a matter

so closely related to transportation by navigable

waters as to provide for the exclusive enforcement

in admiralty of a mortgage on a ship actually en-

gaged in such transportation. It is sufficient to point

out here that the mortgagor and mortgagee both

knew in advance of making these mortgages that the

moneys advanced were not to be used for such pur-

poses, but were intended for and actually were used

for nonmaritime purposes. This was fully disclosed

ot the ta. * * *

6+* * *

Nowhere in the Merchant Marine Act

or the Ship Mortgage Act is it anywhere shown that

Congress intended that ship mortgages given by

owners to support outside operations such as real

estate ventures or to pay past debts not arising in

maritime transactions were in contemplation. Mort-

gage loans of this character are foreign to the idea

of maritime operations. The mortgages in question

having been shown to be nonmaritime in intent and

character, the admiralty court did not have jurisdic-

tion, and the application to dismiss the suit should

have been granted.’’

The minority opinion erroneously assumes and states

that respondent contended that the Congress could not

confer the status of a preferred mortgage upon any other

than a true maritime mortgage. Respondent made no

ry MS Rit Md rt tice als

such contention. Respondent did contend that there was

a distinction between a preferred mortgage lien and a

maritime lien and between the congressional power to

confer preference right upon a nonmaritime mortgage

by subordination of maritime liens thereto and the power

by fiat to convert a nonmaritime lien into a maritime lien

and make it, per se, the subject of original admiralty jur-

isdiction.

The minority opinion also assumes that unless original

foreclosure jurisdiction under Subsection K of the Ship

Mortgage Act is upheld herein the power of the Con-

gress to give a mortgage preference in distributions is

necessarily destroved. Thut problem is not involved in

this record. ¢

The unusual facts referred to require additjonal state-

ment.

ADDITIONAL STATEMENT OF FACTS.

Respondent, Barlum Steamship Company, claimant be-

low, is a West Virginia corporation with principal office

at Detroit, Michigan. At the times involved it was, and

still is, owner of two steel steamers plying the Great

Lakes known as the ‘‘Thomas Barlum’’ and ‘‘John J.

Barlum’’ (R. 9, 29, 63, 82). John J. Barlum was presi-

dent and Thomas Barlum was secretary of the company

(R. 51, 99). In 1927 and 1928 its 3200 shares were held

by 14 stockholders, John J. Barlum holding 9561 shares.

In 1929 it had 11 stockholders, John J. Barlum holding

2651 shares (R. 197-199, 250). As a matter of con-

venience the company maintained separate bank accounts

for the steamers and in separate banks (R. 171, 191).

)

John J. Barlum was connected with several enterprises.

Detroit Trust Co. for years had done business with Mr.

Barlum and certain of these enterprises (R. 133). ‘‘Bar-

lum Land Co.’’ was an assumed name used by Mr. Barlum

in connection with certain of his individual fee and lease-

hold real estate holdings, including those known as Law-

yers Building, Dixie Land and Lewis Hotels. In 1925

Mr. Barlum and wife executed a $1,250,000 bond issue

mortgage to Detroit Trust Co. as Trustee covering these

properties and thereafter conveyed them to ‘‘Barlum

Land & Improvement Co.,”’ a Michigan corporation, in

exchange for its entire capital stock (R. 157, 170, 201-202,

210). ‘‘Barlum Realty Co.’ is a ‘Michigan corporation

owning a forty-story Detroit office building, in which

corporation John J., Thomas J. and Louis Barlum, pro-

portions not shown, owned the entire capital stock (R.

171, 210). ‘‘Cadillac Square & Improvement Co.” is a

limited partnership association which built, owns and op-

erates a twenty-story hotel known as Barlum Hotel, De-

troit (R. 186). The stock in the association is owned

by the three Barlum brothers, William B. Thompson and

his two sons, and three sisters of the Barlums—neither

the Thompsons nor the sisters having any interest in the

steamship company (R. 210). ‘‘Thomas Barlum & Sons

Co.” was a Michigan corporation engaged in the meat

packing business in Detroit. Its stock was owned by

John J., Thomas J. and Louis P. Barlum. John was

manager and head (R. 200, 206-207). It had made ex-

tensive loans from Detroit Trust Co. (R. 200). The steam-

ship company had no interest in the stock or assets of

Barlum Land Co. (R. 202), Barlum Land & Improvement

Co. (R. 184-203), Barlum Realty Co. (R. 203), Cadillac

Square & Improvement Co. (R. 187, 203), or Thomas Bar-

lum & Sons Co. (R. 210), nor did any of these have any

interest in the steamship company (R. 202-203).

a aa

Prior to the making of either mortgage under fore-

closure herein respondent had executed to petitioner a

$100,000 mortgage on the ‘‘Thomas Barlum’’ dated De-

cember 1, 1924 (R. 133, 135, 144), paid down to $50,000

and refunded by a similar mortgage for $75,000, dated

February 15, 1927 (R. 141, 171, 223-225). The mortgage

of December 1, 1924, was intended to, and did, secure

a loan by petitioner to respondent to pay a tax claim

which the Government was asserting against respondent

(R. 136, 169-170, 199, 201, 221-222).

$200,000 “Thomas Barlum” mortgage, March 1, 1929:

This is the mortgage foreclosed by the decree of the dis-

trict court herein in suit No. 1794. By February, 1929,

the $75,000 mortgage had been reduced to $50,000. Ne-

gotiations were had with the trust company for an in-

creased loan (R. 146). On February 21, 1929, the trust

company, per Mr. Butler, vice-president, wrote =?

ent (Exhibit 7; R. 227-230, 146-147) offering to purchasé,

at 97%, $200,000 of bonds secured by mortgage on the

‘‘Thomas’’ guaranteed by John J. Barlum, documents

to be prepared by the trust company’s attorneys, and

(R. 228) stating:

“Tt is understood that as a condition of the above

the proceeds of the purchase of said bonds by us are

to be used as follows:

To pay the note issue now outstanding se-

cured by mortgage on the same steamer $50,000.00

Interest on the same from February 15th

to which it is now paid up to March

EES ee 125.00

Annual fee due the trustee.............. 25.00

Closing fee due the trustee .............. 25.00

Attorneys’ charges estimated ............ 750.00

Trustee’s fee for certifying new bonds.... 200.00

Cost of printing new bonds estimated..... 100.00

To take up principal debt of John J. Bar-

lum and Thomas Barlum & Sons now

held by us to the amount of.......... 100,000.00

—

Balance to Steamship Company for repairs

and refitting the steamers ‘‘Thomas

Barlum’’ and ‘‘John J. Barlum’’ for

the season of 1929 .................. 42,775.00”’

The $100,000 debt of Mr. Barlum and Thomas Barlum

& Sons was for collateral loans long previously made

to them respectively by the trust company and had no

relation to respondent. Mr. Butler was fully informed

as to the details of such debt (R. 147, 151-153, 162-164)

and it was contemplated that the debt should be paid as

indicated (R. 204).

The mortgage, prepared by the trust company’s at-

torneys (R. 213), dated as of March 1, 1929, was exe-

cuted and delivered about March 22, 1929, while the boat

was laid up. Exhibit A attached to libel (R. 17-60) is a

copy of the mortgage.

The application to the Securities Commission (pre-

pared by the trust company) relating to this $200,000

mortgage, stated the purpose of the issue was to ‘‘re-

finance’? (R. 150; Exhibit 9, R. 234). As shown by the

trust company’s statement (Exhibit 8; R. 231-232), it

withheld from the proceeds of the issue $50,358.33 to

take up the balance of the previous mortgage, $1545.23

for trustee and attorney fees, printing, recording, etc.,

and:

‘‘Amount required to take up Thomas

Barlum & Sons note, being principal

Mme interest oo... ccccscsnce, \ ee ak $45,510.00

Amount necessary to take up John J.

Barlum note, being principal and

“ ccnocaipny SET PPEC TT Te Eon 33,566.50

of principal of John J.

Barlum note ............ $20,745.50

Accrued int. to March 25th.. 178.00 20,923.50

Balance to Barlum Steamship Company 42,896.44”

int ah lat al cenit,

» :

PLA the tee Aaa Sabet A bbe ie AEA Dini hos bf teiti chate ~

abel

Respondent deposited the $42,896.44 in bank account

‘‘Steamer John J. Barlum’’ at National Bank of Com-

merce and paid therewith about $22,000 of accounts re-

lating to the ‘‘John J.’’ and transferred $20,000 of the

balance to the bank account ‘‘Steamer Thomas Bar-

lum’’ at the American State Bank and out of which

were paid running accounts allocated to the ‘‘Thomas’’

on account of its previous season’s operations (R. 178-

183; Exhibit 19, R. 246-249). |

$200,000 “John J. Barlum” mortgage, December 15,

1927: This is the murtgage foreclosed by the decree of

the district court herein in suit No. 1795. Exhibit 13

(R. 235-236, 155) is the accepted written offer by the trust

company to respondent dated December 23, 1927, to pur-

chase an issue of $200,000 of respondent’s bonds on the

‘‘John J.’’ at 98, to be ‘guaranteed by John J. Barlum,

documents to be satisfactory to trust company’s attor-

neys. The mortgage, dated as of December 15, 1927

(Exhibit A to libel, R. 71-114), prepared by the trust

company’s attorneys (R. 213) was executed about Janu-

ary 5, 1928, while the boat was laid up. The understand-

ing was that $82,281.25 was to be withheld by the trust

company to pay $50,000 principal and $32,281.25 interest

on the $1,250,000 bond issue mortgage executed by

John J. Barlum and wife to the trust company on the

individual real estate and leaseholds of Mr. and Mrs.

Barlum as aforesaid and also that $10,000 was to be

retained by the trust company and applied on an indi-

vidual note executed by Mr. Barlum to the trust company

dated August 11, 1927, evidencing a personal loan made

to Mr. Barlum by the trust company (Exhibit 15, R. 238,

239; Exhibit 15-A, R. 240, 156-158, 205). Respondent had

no connection with such items for which said sums were

to be withheld. Such items, together with certain trustee

and attorney fees and expenses, were withheld according

to the understanding. The remainder of the proceeds

of the loan was deposited in the bank account of the

‘‘Thomas’’ and used as follows: Paid to engineer of the

‘‘Thomas’’ for past season services $500; loan to Thomas

Barlum & Sons Co. $4000; loan to Cadillac Square Im-

provement Co. $52,500; loan to Barlum Realty Co. $18,-

600; loan to John J. Barlum personally $5500 (used by

him in paying an individual note held by the Romeo Sav-

ings Bank); loan to Lewis Hotel $19,000 (being one of

the properties covered by the $1,250,000 mortgage given

by John J. Barlum and wife to the trust company); paid

to the captain of the ‘‘John J.’ $500 for services in con-

nection with that steamer and $2000 was transferred to

the ‘Steamer John J. Barlum’’ account (R. 183-189).

Out of the entire proceeds of the issue only the $500 paid

to the master of the ‘‘John J.’’ and the $2000 transferred

to its account had any connection with the ‘‘John J.”’

(R. 188).

Remedy provided in mortgages: The sole remedy for

foreclosure stipulated in the mortgages is by seizure and

sale “‘WITHOUT’”’ process of any kind (R. 36-38, 89-91).

Cases so atypical as these do not merit the coveted re-

view nor justify the broad assertions made by petitioner

as to the harmful effect of the decision below. No simi-

lar case appears to have been presented to the courts

in the fourteen years the Ship Mortgage Act has been

in effect. It is respectfully submitted that the review

sought should await a record in which the questions

raised by petitioner were squarely involved or decided.

2 abies,

ei See Ute

a TEE Rte NAT casi HANA gia 8 pon

ARGUMENT—MERITS.

MORTGAGE NONMARITIME.

Prior to the Ship Mortgage Act it was settled law that

a ship mortgage securing a personal loan to the ship-

owner was not, ex proprio vigore, foreclosable in ad-

miralty—not because the Congress had not conferred such

jurisdiction but because, under the Constitution as inter-

preted by this court, neither the loan, the primary con-

tract, nor the mortgage, the incident thereof, was a mari-

time contract. The Congress has no power to extend

admiralty jurisdiction to a nonmaritime contract.

Article III of the Constitution provides:

‘‘Section 1. The judicial Power of the United

States, shall be vested in one supreme Court, and

in such inferior Courts as the Congress may from

time to time ordain and establish * * *.”

‘“‘Section 2. The judicial Power shall extend * * *

to all Cases of admiralty and maritime jurisdic-

ae.

Perforce Section 1, supra, the Congress, by the Judi-

ciary Act of 1789, conferred upon the district courts

original jurisdiction:

‘‘Of all civil causes of admiralty and maritime

jurisdiction, saving to suitors in all cases the right

of a common law remedy where the common law is

competent to give it * * *.’ 28 U. S.C. A. §

41 (3). Vide, Part 2 Constitution, U. S. C. A. n.

152.

This court early dispelled the idea that the admiralty

jurisdiction thus conferred upon the federal courts was

the circumscribed power of the English admiral at the

time of the adoption of the Constitution.

The New Jersey Steam Navigation Company v.

The Merchants’ Bank of Boston (1848), 6 How.

344,12 L. Ed. 465.

That this court was fully conscious of the desirability of

making federal admiralty jurisdiction as comprehensive

as the needs of navigation, is attested by the above case

as well and by the decision of The Genesee Chief (1851),

12 How. (53 U. 8.) 443, 13 L. Ed. 1058, holding that the

admiralty jurisdiction was not limited to tide waters.

Certainly this court accorded the constitutional provi-

sions a broad, rather than a restricted, interpretation

and in view of such a tendency this court’s refusal to

uphold jurisdiction over ship mortgages is of great

significance.

Bogart v. The Steamboat John Jay (1854), 17 How.

(58 U. 8.) 399, 15 L. Ed. 95: Libelants had sold the

steamer to McMurray, taking a purchase money mort-

gage for part of the sale price. Upon default in pay-

ment of the mortgage note libelants filed libel against

the steamer.

‘*To this libel George Logan, by way of answer,

put in a claim of ownership of The John Jay, by a

bona fide purchase from McMurray; and he further

denies the jurisdiction of the court, upon ground

that the contract between the libelants and McMurray

was not maritime, or a case of admiralty and mari-

time jurisdiction * * *

‘‘Upon the hearing of the cause in the district

court, the libel was dismissed * * *. We think

that the affirmance of the judgment of the district

court was right, and will hére briefly give our rea-

sons for that opinion.

;

Sate 6

Orit setccssrcnriaissicnten Da ie RE Oe er

‘“‘It has been repeatedly decided in the admiralty

and common law courts in England, that the former

have no jurisdiction in questions of property between

a mortgagee and the owner. No such jurisdiction

has ever been exercised in the United States. No

case can be found in either country where it has been

done. In the case of The Neptune, 3 Hagg., Adm.

Rep. 132, Sir Jolin Nicholl, in giving his judgment,

observes: ‘Now, upon questions of mortgage, the

Court of Admiralty has no jurisdiction, whether

a mortgage is foreclosed, whether a mortgagee has

a right to take possession of a chattel personal,

whether he is the legal or only the equitable owner,

and whether a right of redemption means that a

mortgagee is restrained from selling in repayment of

his debt till after the time specified for the redemp-

tion is passed, the decision of these questions belongs

to other courts; they are not within the jurisdiction

or province of the courts of admiralty, which never

decide on questions of property between the mort-

gagee and owner.’

“This is not so, because such a jurisdiction had

been denied by the jealousy of the courts of the com-

mon law. Its foundation is, that the mere mortgage

of a ship, other than that of an hypothecated bot-

tomry, is a contract. without any of the characteris-

tics or attendants of a maritime loan, and is entered

into by the parties to it, without reference to navt-

gation or perils of the sea. It ts a security to make

the performance of the mortgagor’s undertaking

more certain; and whilst-he continues in possession

of the ship, disconnecting the mertgagee from all

agency and interest in the employment and naviga-

tion of her, and from all responsibility for contracts

made on her aecount. Such a mortgage has nothing

in it analogous to those contracts which are the sub-

jects of admiralty jurisdiction. In such a case, the

ship is the object for the accomplishment of the con-

tract, without any reference to the use of her for

such a purpose. There cannot be, then, anything

maritime in it. A failure to perform such a con-

tract cannot make it maritime.’’

| 13

There was no dissent from this opinion and seven of

the justices who participated in the decision of The

Genesee Chief in 1851 were still members of this court.

Schuchardt v. Ship Angelique (1856), 19 How. (60

U.S.) 239,15 L. Ed. 625.

Mortgagees filed /ibel in the district court against the

proceeds of a ship sold under decrees entered upon other

libels based on maritime liens. The court dismissed the

mortgagee’s libel, saying:

“The libel filed in this case is a libel simply to

foreclose a mortgage, or to enforce the payment of

a mortgage, and the proceeding cannot therefore be

upheld within the case of Bogart v. The John Jay,

heretofore decided by this court (17 How.) 58 U. 8.

399.

““The proper course for the mortgagees was to

have appeared as claimants to the libels filed against

the vessel, in which the questions presented in the

case might have been raised and considered * * *,

The People’s Ferry Co. v. Beers (1858), 20 How.

(61 U. S.) 393, 15 L. Ed. 961.

Libel against a new ferry boat for balance due the

builders for its construction under a contract reserving

a lien to secure payment. The district court upheld

admiralty jurisdiction. In reversal, this court said:

‘“‘The lien reserved by the contract, is not set up

in the libel, nor can it avail, as it amounted to noth-

ing more than a mortgage on the vessel for a debt

* * *

“The question presented involves a contest be-

tween the State and Federal Governments. The

latter has_no power or jurisdiction beyond what

the Constitution confers; * * * The extént of

power withdrawn from the States, and vested in the

Aibiiidteh pe aiibinaitinwvesie:

De PN

PEST LETS ELLE SSA ht san LIB te F

General Government, depends on a proper construc-

tion of the constitutional provision above cited. Its

terms are indefinite, and its true limits can only be

ascertained by reference to what cases were cog-

nizable in the maritime courts when the Constitution

was formed—for what was meant by it then, it must

mean now; what was reserved to the States, to be

regulated by their own institutions, cannot be right-

fully infringed by the General Government, either

through its Legislative or Judiciary Department.

The contest here is not so much between rival tri-

bunals, as between district sovereignties, claiming to

exercise power over contracts, property, and personal

franchises * * *

‘‘The admiralty jurisdiction, in cases of contract,

depends primarily upon the nature of the contract,

and is limited to contracts, claims, and services,

purely maritime, and touching rights and duties ap-

pertaining to commerce and navigation * * *,

‘““In considering the foregoing description, it must

be borne in mind that liens on vessels encumber com-

merce, and are discouraged; so that where the owner

is present, no lien is acquired by the materialman;

nor is any, where the vessel is supplied or repaired

in the home port * * *. So far from the con-

tract being purely maritime, and touching rights

and duties appertaining to navigation (on the ocean

or elsewhere), it was a contract made on land, to

be performed on land. The wages of the shipwrights

had no reference to a voyage to be performed; they

had no interest or concern whatever in the vessel

—

had no interest or concern whatever in the vessel

after she was delivered to the party for whom she

was built; they were bound to rely on their con-

es so

The Lottawanna (1874), 21 Wall. (88 U. S.), 558, 22 L.

Ed. 654:

‘“In this case the appellants themselves have no

maritime lien, but merely a mortgage to secure an ordi-

nary debt not founded on a maritime contract. They,

atl at aA ta EE in oS elite ee Mi tn a henselias

15 o

therefore, have no standing in court, except under the

43rd Admiralty Rule, and in the manner above indi-

cated.’”’

The J. E. Rumbell (1892), 148 U. S. 1, 13 S. Ct. 498,

37 L. Ed. 345:

‘“‘An ordinary mortgage of a vessel, whether made

to secure the purchase money upon the sale thereof,

or to raise money for general purposes, is not a

maritime contract. A court of admiralty, therefore,

has no jurisdiction of a libel to foreclose it or to

assert either title or right of possession under it

*“ * *. But it has jurisdiction, after a vessel has

been sold by its order and the proceeds have been

paid into the registry, to pass upon the claim of the

mortgagee, as of any other person, to the fund, and

to determine the priority of the various claims, upon

petitions such as were filed by the mortgagees and

the materialmen in this case * * *,

“The mortgage, on the other hand, is not a mari-

time contract, and constitutes no maritime lien,

* * * 99

The Freights of the Kate (D. C. N. Y.), 63 Fed. 707,

720, in which Mr. Justice Brown said:

‘A letter of credit, like a loan of money, is in it-

self indifferent in character; it may be maritime, or

nonmaritime, according to the objects of the loan,

the intent of the parties, and the circumstances at-

tending it. Maritime contracts are contracts that

pertain to maritime commerce and navigation. A

letter of credit issued for the purpose of directly

aiding the prosecution of current voyages, and upon

the faith of the freights to be earned, as a part

of the contract, is as purely maritime as a bottomry

bond; and no commercial transactions are more char-

acteristically maritime than these.’’

an = eee

A note is the primary obligation to which a mortgage

securing it is merely an incident.

Carpenter v. Longan, 16 Wall. (83 U. 8.) 271, 21

L. Ed. 313.

The foregoing decisions clearly state the factors which

render a loan and ship mortgage nonmaritime in char-

acter. The loans herein were merely personal contracts

in no way involving navigation or the perils of the sea.

The mortgages were merely security for performance of

the personal contract and in no way involved the use of

the steamers in navigation.

MARITIME LIENS ENCUMBER COMMERCE AND

ARE STRICTI JURIS.

Krauss Bros. Lumber Co. v. Dimon 8. 8S. Corp.,

Vol. 78 Adv. Op. page 91;

The Kalfarli (C. C. A. 2), 277 Fed. 391;

The People’s Ferry Co. v. Beers, fra, page 13.

IN ANY EVENT THE FACT THAT THE CON-

TRACTS INVOLVED WERE NOT WHOLLY MARI-

TIME WOULD PRECLUDE ORIGINAL ADMIRALTY

JURISDICTION.

Grant v. Poillon, 20 How. (61 U. 8S.) 162, 15 L. Ed.

871:

‘*The jurisdiction of courts of admiralty is limited,

in matters of contract, to those, and to those only,

which are maritime.”’

Accord: Rea v. The Steamer Eclipse, 135 U. S, 599,

10 S. Ct. 873, 34 L. Ed. 269.

Pillsbury Flour Mills Co. v. Interlake SS. Co. (C. C.

A, 2), 40 F. (2d) 439, certiorari denied in 282 U. S. 845,

51 S. C. 24, 75 L. Ed. 750: Libel for damage to wheat

shipped under contract for transportation from Mil-

waukee to Buffalo and winter storage at destination.

In denying admiralty jurisdiction the, court said:

‘**A contract to be “‘wholly maritime,’? means

that the principal subject matter of agreement gives

character to the whole.’ * * *, After reviewing

the cases, we concluded that contract rights are mari-

time and within the admiralty jurisdiction when they

relate to the ship as an instrument of commerce,

and pointed out that a contract for the wharfage of

a ship withdrawn from commerce js not maritime

and will not support a maritime lien”?

The Richard Winslow (C. C. A. 7), 71 Fed. 426:

‘“‘A maritime contract must therefore concern trans-

portation by sea. It must relate to navigation, and

to maritime employment. It must be one of naviga-

tion and commerce on navigable waters. Unques-

tionably\there was here a contract for carriage by

sea, and that contract was maritime in its nature.

But there was joined with it a@ contract with respect

to the cargo after the completion of the voyage that

was in no respect maritime in its nature * * vin

ADMIRALTY COURTS ARE NOT COURTS OF

EQUITY.

The Ada (C. C. A. 2), 250 Fed. 194;

Kellum »,. Emerson, Fed. Cas. No. 7669.

ee ee ee ee .

xt en iil A er ee |

eas ee AL "

CONGRESS—LACK OF POWER.

THE CLAIM OF UNCONSTITUTIONALITY HERE-

IN IS DEEP ROOTED. THE POWER OF THE CON-

GRESS IN CONNECTION WITH ADMIRALTY CAN-

NOT TRANSCEND THE JURISDICTION DELE-

GATED BY THE STATES TO THE FEDERAL GOV-

ERNMENT UNDER THE CONSTITUTION. THE OB.

JECTION HEREIN PRESENTS THE SERIOUS

QUESTION WHETHER THE LEGISLATIVE

BRANCH OF THE FEDERAL GOVERNMENT HAS

NOT ENCROACHED UPON THE RESERVED SOYV-

EREIGN POWERS OF THE STATES. THE AT-

TEMPTED GRANT OF ADMIRALTY JURISDICTION

HEREIN WOULD DEPRIVE THE STATES OF RE-

SERVED JURISDICTION OVER NONMARITIME

CONTRACTS BECAUSE FEDERAL ADMIRALTY

JURISDICTION IS EXCLUSIVE. NO STATE STAT-

UTE CREATING A MARITIME LIEN, JUSTICIABLE

IN ADMIRALTY AND THEREBY WAIVING RE-

SERVED STATE RIGHTS, IS INVOLVED. SUBSEC.-

TION K, IF APPLICABLE, IS UNCONSTITUTIONAL.

Vide, The People’s Ferry Co, v. Beers, infra, page 1°,

and The Genesee Chief, infra, page 11.

No interstate commerce is mvolved in the present com>

troversy. It is significant that in Article I, Section 8 Of~

the Constitution, defining the power of the Congress,

the subject of admiralty is not mentioned. The connec-

tion of the Congress with that subject is through Article

III, Section 1 which permits the Congress to apportion

the judicial power conferred by the states but which

cannot sustain an drrogated increase of power.

Crowell v. Benson, 285 U. S. 22, 55, 52 S. Ct. 285, 76

L. Ed. 598, 615, upholding The Longshoremen’s and

Harbor Workers’ Act providing compensation to work-

men for injuries occurring upon navigable waters. This

court, by Mr. Chief Justice Hughes, said:

“These fundamental requirements are that the in-

jury occurs upon the navigable waters of the United

States and that the relation of master and servant

exists. These conditions are indispensable to the

application of the statute, not only because the Con-

gress has so provided explicitly (§ 3), but also because

the power of the Congress to enact the legislation

turns upon the existence of these conditions.

“‘In amending and revising the maritime law, the

Congress cannot reach beyond the constitutional

limits which are inherent in the admiralty and mari-

time jurisdiction. Unless the injuries to which the

Act relates occur upon the navigable waters of the

United States, they fall outside that jurisdiction

" *" ", Again, it cannot be maintained that the

Congress has any general authority to amend the

maritime law so as to establish liability without

fault in maritime cases regardless of particular cir-

cumstances or relations * * *,”?

The Congress cannot enlarge the grant of admiralty

jurisdiction.

Meyer et al. v. Tupper (1861), 66 U. S. (1 Black)

522, 17 L. Ed. 180;

The Lottawanna (1874), 88 U. 8. (21 Wall.) 588,

22 L. Ed. 654.

Federal admiralty jurisdiction to enforce a lien is

exclusive, :

The Moses Taylor v. Hammons, 4 Wall. (71 U. 8.)

411, 18 L. Ed. 397;

The Belfast, 7 Wall. (74 U.S.) 624, 19 L. Ed. 266;

AON PS ate OL

American Steamboat Co. v. Chace, 16 Wall. (83

U. S.) 522, 21 L. Ed. 369;

The J. E. Rumbell, 148 U. S. 1, 13 S. Ct. 498,

37 L. Ed. 345;

The Roanoke, 189 U. S. 185, 23 S. Ct. 491, 47 L.

Ed. 770;

Perry v. Haines, 191 U. S. 17, 24 S. Ct. 8, 48 L.

Ed. 73;

The Winnebago (C. C. A. 6), 141 Fed. 945, certio-

rari denied, 200 U. S. 616.

Subsection K of the Ship Mortgage Act expressly pro-

vides that jurisdiction thereunder shall be exclusive.

Prior to the Ship Mortgage Act an ordinary ship mort-

gage securing a general loan to the ship owner was a

local matter and, as such, was within the jurisdiction

of the state courts both as to actions in personam and

in rem. If the Congress, by its fiat, ean convert such a

mortgage into a maritime lien, the jurisdiction of the

state is automatically divested. This, it is respectfully

contended, cannot be done without the states approval or

amendment of the Constitution.

The Congress may prescribe forms, mode and rules

of judicial proceedings within the defined admiralty jur-

isdiction of the courts but cannot make maritime a non-

maritime cause or transaction. Within such confines

only can it be said that the Congress may amend the

admiralty law. Analysis will disclose no decision up-

holding congressional regulation except as to a matter

unquestionably maritime. For example:

In The General Smith, 4 Wheat. 438, 4 L. Ed. 609, this

court drew the sharp distinction between ‘‘process’’ and

‘‘jurisdiction’’ saying that the creation by local law

of a lien enforceable in rem in admiralty for ship supplies

“ay

. 21

was merely to supply a process in connection with ez-

istent maritime jurisdiction because the contract for sup-

plies was in itself maritime and within the established

jurisdiction of the admiralty court to proceed in personam.

Nothing more than a mode of procedure was involved.

In Meyer et al. v. Tupper et al., infra, page 19, the

same view was taken as to Admiralty Rule 12 recognizing

such liens.

In Providence d N. Y. 8S. 8. Co. v. Hull Mfg. Co., 109

U. S. 578, 3 S. Ct. 379, 27 L. Ed. 1038, this court said:

‘The rule of limited liability prescribed by the Act

of 1851 is nothing more than the old maritime rule

administered in courts of admiralty in all countries

except England from time immemorial; and if this

were not so, the subject matter itself is one that be-

longs to the department of martime law.’’

The underlying cause of action involved was unques-

lionably maritime and over which the admiralty court

had jurisdiction. The act of Congress merely controlled

the procedure relating to the enforcement of that juris-

diction and, in our opinion, did no more than alter a rule

of recoverable damages in such cases. The same is true

of Richardson v. Harmon on which petitioner relies,

wherein the underlying cause of action was the liability

of a ship which, in its navigation, damaged a bridge.

In Crowell v. Benson, infra, page 19, the claims to

Which the Act applied were within the admiralty juris-

diction. This court therein specifically repudiated the

idea that the Congress could create a maritime cause

of action where none previously existed and denied that

the Congress could even substitute findings for ultimate

court decision as to the existence of jurisdictional facts.

Pianta OF Si te

Panama R. Co. v. Johnson, 264 U. S. 375, 44 S. Ct. 391,

68 L. Ed. 748, upheld the Jones Act on the theory that it

did not create a maritime cause of action but merely

regulated procedure.

To create a lien in connection with a matter already

subject to maritime jurisdiction is one thing—but to at-

tempt thereby to create jurisdiction where none existed

is another. That the existence of a lien merely has not

been an accepted basis of our admiralty jurisdiction is

also attested by the fact that under the civil law many

liens against ships existed but such liens were not en-

forceable in original proceedings in rem under our law

because, notwithstanding the existence of such liens, the

underlying cause of action was, by our courts, held to

be nonmaritime.

The states have not voluntarily yielded their control

over nonmaritime mortgages and until they do, it is re-

spectfully submitted, the Congress cannot arbitrarily force

them to do so by conferring exclusive jurisdiction there-

over upon the federal courts. Subsection K is uncon-

stitutional, if it is applicable.

. a ae : Pe

—

APPLICABILITY OF SUBSECTION K, SHIP

MORTGAGE ACT.

A FAIR CONSTRUCTION OF THE SHIP MORT-

GAGE ACT JUSTIFIED THE HOLDING THAT IT

DOES NOT APPLY TO THE PARTICULAR MORT-

GAGES INVOLVED. THE ACT SHOULD BE SO CON-

STRUED.

Crowell v. Benson, infra, page 19:

‘‘When the validity of an act of the Congress is

drawn in question, and even if a serious doubt of

constitutionality is raised, it is a cardinal principle

that this court will first ascertain whether a con-

struction of the statute is fairly possible by which

the question may be avoided. We are of the opinion

that such a construction is permissible and should

be adopted in the instant ease.’’

Accord: Panama R. R. Company v. Johnson, 264 U. 8.

575, 44 8S. C. 391, 68 L. Ed. 748.

Dahnke-Walker Milling Company v. Bondurant, 257 U.

S. 282, 42 6: Ct. 106, 66 L. Ed. 239:

‘‘A statute may be invalid as applied to one state

of facts, and yet be valid as applied to another.’’

The Ship Mortgage Act is also known as Section 30

of the Merchant Marine Act 1920. Vide historical notes

to 46 U. S. C. A., § 861 and § 911.

_ Appellee argues that the decision below will defeat the

desired and necessary results which the Merchant Marine

Act was designed to accomplish.

Section 1 of the Merchant Marine Act, 1920, 46 U. S.

C. A., § 861, reads:

| ‘It is necessary for the national defense and for

Sey © oie iit! ances do ff

the proper growth of its foreign and domestic com-

merce that the United States shall have a merchant

marine of the best equipped and most suitable types

of vessels sufficient to carry the greater portion of

its commerce and serve as a naval or military auxil-

iary in time of war or national emergency, ulti-

mately to be owned and operated privately by citizens

of the United States; and it is declared to be the

policy of the United States to do whatever may be

necessary to develop and encourage the maintenance

of such a merchant marine, and, insofar as may not

be inconsistent with the express provisions of this

chapter, the United States Shipping Board shall, in

the disposition of vessels and shipping property

as hereinafter provided, in the making of rules and

.regulations, and in the administration of the ship-

ping laws keep always in view this purpose and ob-

ject as the primary end to be attained.’’

We can easily perceive that the Congress might have

power to extend admiralty jurisdiction to matters directly

connected with maritime operations and that it might be

contended successfully that a ship construction or purchase

money mortgage, executed as an incident to placing, con-

tinuing or maintaining the ship in operation and naviga-

tion, is a proper subject for, federal legislation, but the

Ship Mortgage Act and the Merchant Marine Act may be

searched in vain for any indication that ship mortgages

given by shipowners for construction and operation of

office buildings and hotels and payment of real estate

bonds and personal obligations of others, would so con-

tribute to the purposes of the acts as to be within their

contemplation. Such mortgages are not only foreign, but

in fact opposed, to the true wmtent and purpose of the

acts. That such a conclusion is not without judicial sup-

port is evident from the following statement in Peoples

Ferry Co. v. Beers, infra, page 13:

* * * it must be borne in mind that liens on

‘

vessels encumber commerce and are discouraged;

* * * 9)

That the liens against The Thomas and The John J.

have encumbered commerce is attested by their consequent

enforced idleness since May, 1921.

Section 36 of the Merchant Marine Act, 46 U. S. C. A.

§ 887, provides:

‘‘Tf any provision of this and the following chapter

is declared unconstitutional or the application of any

provision to certain circumstances be held invalid,

the remainder of such chapters and the application

of such provisions to circumstances other than those

as to which it is held invalid shall not be affected

thereby.’’

The ‘‘following chapter’’ referred to is the Ship Mort-

gage Act.

Even in the absence of such a saving clause the courts

have generally held that partial invalidity does not neces-

sarily require holding an entire act unconstitutional. For

- federal cases making elision and enforcing remainder see ;

list appended to the decision in Roberts v. Atlantic Oil

Producing Co. (C. C. A. 6), 295 Fed. 16, 19.

It is quite significant that the Congress in Subsection K

of the Ship Mortgage Act did not attempt to say that a

preferred mortgage created by the act was to be a

“maritime lien’? but merely provided that such be a

“preferred mortgage lien.’’? It is submitted the act should

not have been accorded an unconstitutional purpose but

was properly held inapplicable to the mortgages herein.

The act, even if inapplicable to the instant mortgages

can nevertheless be applicable to all maritime mortgages

—

and even as to nonmaritime mortgages may possibly have

the lawful effect of establishing the basis of priority as

against true maritime liens.

On page 9 of petitioner’s brief counsel cite:

The Oconee (D. C. Va., 1922), 280 Fed. 927;

; The Nanking (D.C. Cal., 1923), 292 Fed. 642;

: The Lincoln Land (D. C. Mass., 1923), 295 Fed.

358,

Aas eM SS

In the case of The Oconee the court had acquired orig-

ina] jurisdiction under a maritime lien for supplies. The

United States filed an intervening petition claiming pri-

ority payment under a preferred mortgage. It was con-

tended that the whole Ship Mortgage Act was unconsti-

tutional. No question of jurisdiction was involved as

the court had properly acquired jurisdiction over the

res.

In the case of The Nanking the initiatory libel appar-

ently was for enforcement of a true maritime lien fol-

lowed by intervening libel by the mortgagee, to which

libel exceptions based on claimed unconstitutionality of

the Act were overruled.

ALAS | eible Seh tte aan BL ee di diy

In the case of The Lincoln Land the mortgagee ap-

: parently filed the libel, and, so far as the report indi-

: cates, a sale occurred before any attack was made on

the validity or extent of the mortgage. Intervening libels

based on maritime liens for supplies and lighterage were

filed and such claimants denied the priority of the mort-

gage over their claims.

The three cases, as well as those in which constitu-

tionality was assumed, are not in point and present no

conflict with the decision of the Court of Appeals herein.

CONCLUSION.

;

i It is respectfully asked that the petition for writ of

certiorari be denied.

Respectfully submitted,

GEORGE E. BRAND,

THOMAS C. BURKE,

i CHARLES §. DESMOND,

Counsel for Respondent.

April 19, 1934, ae ¢

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Se SOURS. 5 oul woh eNe anv uh anes esses

STATEMENT OF THE CASHES ...............

STATEMENT OF SCOPE OF CONTENTIONS..

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Respondent corporation ..........ccsceeeseen

NINN och cauxe cess 6s haa ha nen

ME ik oa ces cane eh ced 4eccha chan

$200,000 mortgage ‘‘Thomas’”’ ...............

$200,000 mortgage ‘‘John J.”’ ...............

EE: “Gs SAA ean Sen GWAKA SAG U ES LA RO RM ARREARS

STATEMENT OF POINTS OF LAW ...........

I. MORTGAGE NONMARITIME: Prior to

the Ship Mortgage Act it was settled law

that a ship mortgage securing a personal

loan to the shipowner was not, ex proprio

vigore, foreclosable in admiralty—not be-

cause the Congress had not conferred such

jurisdiction—but because, under the Con-

stitution as interpreted by this court,.

neither the loan, the primary contract,

nor the mortgage, the incident thereof, was

a maritime contract. The Congress has

no power to extend original admiralty

jurisdiction to a nonmaritime contract....

The bonds are the primary obligations

to which the mortgages are mere inci-

NE Fe ah ico ee crane cl aeuecnk Kh as

Maritime liens encumber commerce and

en: ok sk veces eeea wen eas

II.

i AS a A Le

The fact that the contracts involved were

not wholly maritime would preclude orig-

inal admiralty jurisdiction ...............

Admiralty courts are not courts of

Tre eka eae kb eee iwka beens

CONGRESS—LACK OF POWER: The

power of the Congress in connection with

admiralty cannot transcend the jurisdic-

tion delegated by the states to the Fed-

eral Government under the Constitution.

The objection herein presents the serious

question whether the legislative branch of

the Federal Government has not encroached

upon the reserved sovereign powers of the

states. The attempted grant of admiralty

jurisdiction, if applicable to the mor€gages

herein, would deprive the states of reserved

jurisdiction over nonmaritime contracts

beeause federal admiralty jurisdiction is

exclusive. No state statute creating a

maritime lien, justiciable in admiralty and

thereby waiving reserved state rights, is

involved. Subsection K, if applicable, is

Pee ee ree err eee

The Congress cannot enlarge the grant

of admiralty jurisdiction ...............-.

Federal admiralty jurisdiction to enforce

a lien is exclusive. Subsection K of the

Ship Mortgage Act expressly provides that

jurisdiction thereunder shall be exclusive. .

The Congress may prescribe forms, mode

and rules of judicial proceedings within the

defined admiralty jurisdiction of the courts

but cannot make maritime a nonmaritime

cause or transaction. Within such confines

only can it be said that the Congress may

iil

amend the admiralty law. Analysis will

disclose no decision upholding congres-

sional] regulation except as to a matter un-

questionably maritime .................. 37

III. APPLICABILITY OF SUBSECTION K,

SHIP MORTGAGE ACT. A fair construe-

tion of the Ship Mortgage Act justified

the holding that it does not apply to the

particular mortgages involved. The act

should be so construed ................. 40

IV. ESSENTIAL JURISDICTION CANNOT

BE CONFERRED BY CONSENT OR

hg | AE year moe eee sor 43

ee re rm rere. renner ie 45

Table of Cases Cited.

Cases.

Re ee ee Se a ic Ce eee SG Racckae eke 25

American Steamboat Co. v. Chace, 16 Wall. (83 ©

Gh ee A Ee bbc wha eck caweaeres 36

Belfast, The, 7 Wall. (74 U. S.) 624, 19 L. Ed. 266 32

Bogart v. The Steamboat John Jay, 17 How.

COB 0), Sd ey Waa ee Na ce ew een 18, 25

Carpenter v. Longan, 16 Wall. (83 U. S.) 271, 21

a. ene ee ee ere ee rey 23

Chelentis v. Luckenbach S. S. Co., 247 U. S. 372, ©

ee A es Oe a a RG eae Kaen 32

Crowell v. Benson, 285 U. S. 22, 55, 52 S. Ct. 285,

2 Be NE ERE Cen CRE ERTL Kaee 27, 38, 40

Dahnke-Walker Milling Co. v. Bondurant, 257 U. S.

goa, 42'S. Ct. 106, 66 L. Bed. 288... uo seen 40

Detroit Trust Co., Trustee, v. Barlum S. S. Co.

06 F. (2d) 455, 2 F. Supp. 733, 68 F. (2d) 946 2

Ne et ae ome

mn Corea, G2. CES ee pvc ks ve cusk ows caseainces 25

Freights of the Kate, The, 63 Fed. 707, 720........ 22

General Smith, The, 4 Wheat. 438, 4 L. Ed. 609... 37

Genesee Chief, The, 12 How. (53 U. S.) 448, 13 L.

EE CRN Ua RRR URNS WEAR CAR SRA CRS TS 18,

SL) RR ere et ee ere rr ree Tre gree 24

Grant-Smith-Porter Co. v. Rohda, 257 U. S. 469,

42 S. Ct. 157, 66 L. Ed. 321, 25 A. L. R. 1008... 21

Se, EEE CE whic e cree vankabeuaans 23

Kellum v. Emerson, Fed. Cas. No. 7669........... 25

Krauss Bros. Lumber Co. v. Dimon S. 8S. Corp.,

pe: Oe! De eer err rere eye 23

Leon v. Galceran, 11 Wall. (78 U. S.) 185, 20 L.

EE on RAE Ce VASES eC kw ease kak aaen ears 32

Lincoln Land, The, 295 Fed. 358 ................. 44

Lottawanna, The, 21 Wall. (88 U. S.) 558, 22 L.

rr ere eee ee es 21, 27

Meyer et al. v. Tupper, 1 Black (66 U. 8S.) 522,

og 7 ree eer Terr a arr 27,37

PELE WROD, TO, 15 F. COR) BOG. onus cc iewcccs cess’ 25

Moses Tavlor, The, v. Hammons, 4 Wall. (71 U.

See 2 ee rer repre eer 31

PRI, 2, Se MS i es ioc eee eee eesanns 44

New England Marine Ins. Co. v. Dunham, 11 Wall.

EB cee Fe Serre reer reek 26

New Jersey Steam Navigation Company, The, v.

The Merchants’ Bank of Boston, 6 How. 344,

PPT eT ere ee eer ee 18

Norton v. Switzer, 3 Otto (93 U. S.) 355, 23 L.

Be SE a Cec wica eR eT UeK ae Rew haces 33

CO, a ee Ebb ccd da caneuwsaeaeua 44

Panama R. R. Co. v. Johnson, 264 U. S. 375, 44

ee ae ee er 38, 40

People’s Ferry Co., The, v. Beers, 20 How. 393,

Be eke ehcane te meen 20, 23, 25, 26, 42

- ett eae hs Am wea 2 ess

tlt,

eee bo Se ined ;

—a—— BOR Re a> ss (AE 5 nnn TA a iid i aR = Is, mes em ame ceaa coca

Perry v. Haines, 191 U.S. 17, 24 8S. Ct. 8, 48 L. Ed.

ee a eas ena eA RRR EE Ch Oa ee Die ea ok 36

Piedmont & George’s Creek Coal Co. v. Seaboard

Fisheries Co., 254 U.S. 1, 41 S. Ct. 1, 65 L. Ed.

ee Coa Cte ye Vales eras ww ENS 4d DNA ES 23, 24

Pillsbury Flour Mills Co. v. Interlake 8S. S. Co., 40

F, (2d) 439, aff’g 36 F. (2d) 390, cert. denied

282 U.S. 845, 51 S. Ct. 24, 75 L. Ed. 750...... 24

Providence & N. Y. 8S. S. Co. v. Hill Mfg. Co., 109

U. 8. 578, 3 8. Ct. 379, 27 L. Ed. 1088......... 38

Rea v. The Steamer Eclipse, 185 U. S. 599, 10 S.

fe & Bay ee eer eT Terre eee 25

Richard Winslow, The, 71 Fed. 426 ............... 24

Richardson v. Harmon, 222 U. S. 96, 32 S. Ct. 27,

ee ee ies Sas fae bok he nese 38

Roanoke, The, 189 U. S. 185, 23 S. Ct. 491, 47 L.

a Lake RRS An eee 35

Roberts v. Atlantic Oil Producing Co., 295 Fed.

RS ee ORS ean eer e sa. ne ere rE eee 43

Rumbell, The J. E., 148 U. S. 1, 13 S. Ct. 498, 37

See Raa Co eee eek are aes SRO 8 aS EA Nn 22, 34

Schuchardt v. Ship Angelique, 19 How. (60 U. S.)

ere re eer eter eee 20

Thames Towboat Co. v. The Schooner Francis

McDonald, 254 U. S. 242, 41 S. Ct. 65, 65 L.

Gack aoe) whch e4 ess ek 4 ee es 21

United States v. Flores, 289 U. S. 137, 53 S. Ct.

as kk and ae sea vanes’ 39

Winnebago, The, 141 Fed. 945, cert. denied, 200

See Ok A Re vs cb cva ch eseaun abn’ 30

Vancouver S. S. Co. v. Rice, 288 U. S .445, 53 S.

we Soe See eee ee ee 38

Vi.

Text.

Ruling Case Law, Vol. 1, pp. 408-11.............. 28-30

Constitution—Acts of Congress.

46 U. S. C., § 951, Subsection K, Ship Mortgage

5 Pe Perr erst tT eee ee eee ey eee 2, 4

46 U. S. C., § 861, Section 1, Merchant Marine

POE aR as A? Ve ba fener od ORE MERS Oe 40, 41

46 U. S. C., § 954, Ship Mortgage Act............ 42

46 U. S. C., § 887, Section 36, Merchant Marine

PL acon Se oh ane k eek bole Reka ua eek 42

Or as Oe hs ose a cae ike vd 4 ee eens 40

Constitution of United States:

po ae re re 17

Pe a ee er rrr errors 17

ME 2 TN nic beehives bance howe ks 26

Judiciary Act of 1789, 28 U.S. C., § 41 (3) ...... 17, 31

4y*

In The ;

Supreme Court of the United States

October Term, 1934.

fe,

’

5 Ny

i i

was

pia

* t

No. 13.

DETROIT TRUST COMPANY, Trustee,

Petitioner,

| v.

\ gTEAMER “THOMAS BARLUM,” Her Engines, Ete,,

BARLUM STEAMSHIP COMPANY, .

Respondent. i

No. 14. f

DETROIT TRUST COMPANY, Trustee,

Petitioner,

STEAMER ‘‘JOHN J. BARLUM,”’ Her Engines, Etc.,

BARLUM STEAMSHIF COMPANY,

Respondent.

RESPONDENT’S BRIEF.

(All Italics Ours.)

| Certiorari to review decision of Circuit Court of Ap-

‘ peals reversing decrees of District Court foreclosing

Aaa hatte apatite cbse tienes

‘‘preferred mortgages’? under the Ship Mortgage Act.

The District Court opinions are reported in 56 F.. (2d)

455, and 2 F. Supp. 733. The opinions of the Circuit

Court of Appeals are reported in 68 F.. (2d) 946.

STATEMENT OF THE CASES.

On May 18, 1931, petitioner, libelant-mortgagee filed

libel 1794 in the District Court at Buffalo to foreclose a

$200,000 ‘‘preferred mortgage’’ under the Ship Mortgage

Act against the steamer ‘‘Thomas Barlum’’ and also

libel] 1795 to foreclose a similar mortgage against the

steamer ‘‘John J. Barlum.’’ Jurisdiction im rem was

predicated solely on the fact that the mortgages were

given and recorded under the Ship Mortgage Act. The

libels did not otherwise allege that the suits were mari-

time im character or mvolved maritime liens (R. 4-9, 39-

44). Both steamers were forthwith seized by the marshal

upon warrants issued in the proceedings and are still in

the marshal’s custody.

On June 1, 1931, respondent, Barlum Steamship Com-

pany, as claimant, filed claims of ownership as to each

steamer (R. 1, 117, 118). On July 14, 1931, respondent

filed amended exceptions (R. 75) to each of the libels on

the stated grounds that the libels did not state a cause

within the admiralty and maritime jurisdiction of the

court; that no maritime lien was alleged and that Subsec-

tion K of the Ship Mortgage Act, 1920 (46 U.S. C., § 951),

insofar as it purports to permit foreclosure of the mort-

gages by suit in admiralty, was unconstitutional. On Feb-

ruary 17, 1932, District Judge Adler filed opinion (R. 75-

76, reported in 56 F. (2d) 455), overruling the excep-

tions, and orders (R. 77-78) were accordingly entered.

On March 3, 1932, respondent filed answers (R. 78-79)

renewing the constitutional objection and, as a further de-

fense, alleging that the mortgage indebtedness was for

loans to it almost entirely for nonmaritime purposes, i. e.,

to enable claimant to loan to other enterprises for reduc-

tion of their bank and other indebtedness and to pay cost

of construction of buildings—in none of which had claim-

ant any interest—all of which was known to libelant when

the mortgages were negotiated, executed and delivered.

Libelant filed exceptions (R. 79-80) alleging that the con-

stitutional objection had been determined on respondent’s

exceptions and that the additional defense was insufficient

in law, irrelevant and immaterial (R. 79). On May 27,

1932, Judge Adler filed opinion (R. 80, reported in 2 F,

Supp. 733), sustaining the exceptions to the constitutional

defense but overruling the exceptions to the additional

defense. Orders were accordingly entered (R. 81) June

7, 1932, and the causes set for hearing.

On March 8, 1932, Parry et al., seamen, were granted

leave to intervene and filed intervening libels for wages 5

(R. 81-82). No process was issued on these libels and

the $2881.91 claimed for wages was not disputed.

The testimony for claimant and libelant was taken by H

deposition (R. 82-180). After hearing and argument f

Judge Adler, on March 10, 1933, filed opinion (R. 180-182) }

sustaining the libels. Detailed findings of fact and conclu- f

ston of law (R. 199-206) were made on April 6, 1933.

Foreclosure decrees (R. 182-199) were entered April 13,

1933, from which the appeals were taken on July 10,

1933, to the United States Circuit Court of Appeals of the

Second Circuit (R. 207-208). The assignments of error

(R. 208-211) alleged, in substance, that the court erred

in overruling respondent’s exceptions to the libels, in

sustaining libelant’s exceptions re constitutionality, in

een aie

Sots

holding that the admiralty court had jurisdiction herein

under the Ship Mortgage Act and in not holding that the

provision of that act conferring admiralty foreclosure

jurisdiction was inapplicable to the mortgages herein or

was unconstitutional.

The Circuit Court of Appeals (Judges Manton, Chase

and Augustus N. Hand, the latter dissenting), 68 F. (2d)

946, reversed the decree of the District Court—holding

against admiralty jurisdiction to foreclose the particular

mortgages involved (R. 215-227).

SCOPE OF CONTENTIONS.

Because the facts involved were exceptional and not

typical of ship mortgage transactions, we preface our dis-

cussion by the following statement:

“Tt is not urged that the Ship Mortgage Act is

unconstitutional in its entirety nor that Congress,

having power to legislate concerning true maritime

liens, could not subordinate certain of such liens to

other, even common law, liens. It is not urged that

a purchase money mortgage or a mortgage placed on

a ship to raise funds for maritime purposes would

be invalid or necessarily without the jurisdiction of

the admiralty court. Such contentions are not neces-

sary or pertinent herein. What is urged 1s that these

particular mortgages, by intendment of the parties

and under the circumstances established by the rec-

ord, were so devoid of connection with maritime pur-

poses that the provisions of Subsection K of the

Ship Mortgage Act, 46 U. S. C., § 951, conferring

original foreclosure jurisdiction on the District Court

in admiralty, either does not, or cannot constttu-

tionally, apply.’”’

EE se tae

This restriction of the issues was clearly recognized by

the Circuit Court of Appeals in the prevailing opinion,

68 F. (2d) 948-949 (R. 218), as follows:

‘*Appellant argues that these mortgages, as the rec-

ord establishes, were so devoid of connection with

maritime purposes and subjects, that the statute

should not be construed to confer and cannot confer

original jurisdiction of foreclosure in admiralty * * *,

‘If it were established that these mortgages were

given to support an issue of bonds ‘to develop and

encourage the maintenance of such a merchant ma-

rine’ and therefore in accord with the objects of the

Ship Mortgage Act, the admiralty jurisdiction to

foreclose would be unquestionable. We need not de-

cide whether or not a loan made for maritime pur-

poses secured by a mortgage on a ship will become

nonmaritime if the borrower, contrary to the agree-

ment of the mortgage, diverts the money to nonmari-

time purposes, nor need we consider what effect any

estoppel in such a case would have. We are not

called upon to say whether or not Congress could in

any event extend the admiralty jurisdiction to a mat-

ter so closely related to transportation by navigable

waters as to provide for the exclusive enforcement

in admiralty of a mortgage on a ship actually en-

gaged in such transportation. It is sufficient to point

out here that the mortgagor and mortgagee both

knew in advance of making these mortgages that the

moneys advanced were not to be used for such pur-

poses, but were intended for and actually were used

for nonmaritime purposes. This was fully disclosed

at the trial. * * *

‘“* * * Nowhere in the Merchant Marine Act

or the Ship Mortgage Act is it anywhere shown that

Congress intended that ship mortgages given by

owners to support outside operations such ag real

estate ventures or to pay past debts not arising in

maritime transactions were in contemplation. Mort-

gage loans of this character are foreign to the idea

of maritime operations. The mortgages in question

| nee ee ae SN Oo ry Se ee

ocd Rian

—

having been shown to be nonmaritime in intent and

character, the admiralty court did not have jurisdic-

tion, and the application to dismiss the suit should

have been granted.”’

The dissenting opinion erroneously assumes and states

(R. 224) that respondent contended that the Congress

could not confer the status of a preferred mortgage upon

any other than a true maritime mortgage. Respondent

made no such contention. Respondent did contend that

there was a distinction between a preferred mortgage lien

and a maritime lien and between the congressional power

to confer preference right upon a nonmaritime mortgage

by subordination of maritime liens thereto and the power

by fiat to convert a nonmaritime lien into a maritime lien

and make it, per se, the subject of original admiralty jur-

isdiction.

The dissenting opinion also assumes that unless original

foreclosure jurisdiction under Subsection K of the Ship

Mortgage Act is upheld herein the power of the Congress

to give a mortgage preference in distributions is neces-

sarily destroyed. That problem is not involved im this rec-

ord.

The unusual facts referred to require additional state-

ment.

STATEMENT OF FACTS.

The facts are not in dispute.

Respondent.

Respondent, Barlum Steamship Co., is a West Vir.

ginia corporation with principal office at Detroit, Michi-

gan. At the times involved it was, and stil] is, owner of

two stee] steamers, plying the Great Lakes, known as

the ‘‘Thomas Barlum’’ and “John J. Barlum.’’ John

J. Barlum was president and Thomas J. Barlum was

secretary, of the company (R. 31). In 1927 and 1928 its

3200 shares were held by 14 stockholders, John J. Bar-

lum holding 2561 shares. In 1929, the company had 11

stockholders, John J. Barlum holding 2651 shares (R.

133-135, 170). As a matter of convenience the company

maintained separate bank accounts for the steamers (R.

128) and in separate banks (R. 112).

Other Enterprises.

John J. Barlum was connected with several enter-

prises. Detroit Trust Co. for years had done business

with Mr. Barlum and certain of these enterprises (R. 83).

‘“Barlum Land Co.’’ was an assumed name used by Mr.

Barlum in connection with certain of his individual fee

and leasehold real estate holdings including those known

as Lawyers Building, Dixie Land and Lewis Hotels. In

1925 Mr. Barlum and wife executed a $1,250,000 bond

issue mortgage to Detroit Trust Co. as Trustee covering

these properties and thereafter conveyed them to “Bar-

lum Land & Improvement Co.” a Michigan corporation,

in exchange for its entire capital stock (R. 100, 111, 137,

Blige 4

etal on

144). ‘‘Barlum Realty Co.’’ is a Michigan corporation

owning a forty-story Detroit office building in which cor-

poration John J., Thomas J. and Louis Barlum, propor-

tions not shown, owned the entire capital stock (R. 112,

144). ‘‘Cadillac Square & Improvement Co.’’ is a limited

partnership association which built, owns and operates

a twenty-story hotel known as Barlum Hotel, Detroit

(R. 125). The stock in the association is owned by the

three Barlum brothers, William B. Thompson and his

two sons, and three sisters of the Barlums—neither the

Thompsons nor the sisters having any interest in the

steamship company (R. 144). ‘‘Thémas Barlum €& Sons

Co.’’ was a Michigan corporation engaged in the meat

packing business in Detroit. Its stock was owned by

John J., Thomas J. and Louis P. Barlum. John was

manager and head (R. 136, 144). It had made extensive

loans from Detroit Trust Co. (R. 136). Respondent steam-

ship company had no interest in the stock or assets of Bar-

lum Land Co. (R. 138), Barlum Land & Improvement Co.

(R. 123, 138), Barlum Realty Co. (R..138), Cadillac Square

Improvement Co. (R. 125, 138), or Thomas Barlum €

Sons Co. (R. 144), nor did any of these have any interest

in respondent (R. 138).

We revert to the transactions leading up to the two

mortgages involved in the foreclosure decrees herein.

Prior Mortgages.

$100,000 Mortgage, ““Thomas,’”’ December 1, 1924.

The first mortgage (not under foreclosure herein) exe-

cuted by respondent was a $100,000 trust mortgage dated

December 1, 1924, on the ‘‘Thomas’’ executed to Detroit

Trust Co. as trustee to secure an issue of claimant’s

bonds guaranteed by John J. Barlum, evidencing a loan

eS a 29

by the trust company to respondent (R. 83, 84, 144). The

application by respondent to the Michigan Securities Com-

mission relating to the bond issue stated the purpose

of the issue was ‘‘Settlement of tax claims with the United

States Government based on questions of depreciation

and invested capital’? (R. 85). The Government at the

time was asserting a claim of about $100,000 against re-

spondent for additional income and profits taxes. Re-

spondent had employed a tax expert and got the claim re-

duced to $74,403.29. Respondent had no other pressing

obligation (R. 108-109, 136). Mr. Butler, vice-president

of the trust company handled the loan for the trust com-

pany and knew the purpose of it (R. 135, 137, 152-153).

At the time the loan was made the ‘‘Thomas”’ was laid

up (R. 109, 136). The loan was not required for the care

or maintenance of the steamer (R. 136). Mr. Butler was |

informed as to the purpose of the loan (R. 137). The ;

trust company purchased the $100,000 of bonds at par

and remitted the entire proceeds to respondent which,

after payment of the trust company’s expense paid $16,-

786.27 to Barlum Land Co., $5000 to Barlum Realty Co.,

and $58,204.24 in temporary reduction of claimant’s

bank indebtedness. In February and March, 1925, re-

spondent paid the Government $74,403.29 in settlement,

using the balance of the proceeds of the loan and pro-

curing the remainder by further bank loan (R. 110-111).

$75,000 Mortgage, “Thomas,” February 15, 1927.

In January, 1927, $50,000 remained unpaid on the first

$100,000 ‘‘Thomas’’ mortgage. It was decided that the

trust company make respondent a refunding loan on the

‘‘Thomas.’’ On January 28, 1927, the trust company, per

Mr. Butler, vice-president, wrote respondent offering

to purchase from it a $75,000 issue guaranteed by John

Laeatintds * ws.

ee Tee

J. Barlum—the papers to be drawn by the trust com-

pany’s attorneys—$50,000 of the proceeds to be used to re-

tire the $50,000 balance on the first mortgage (Exhibit 3;

R. 153-155, 88-89). The trust company (Exhibit 4; R.

155, 90) accounted for the $75,000 proceeds and $450

interest as follows: Balance first mortgage $51,916.65,

2% premium and expenses $1320.20, remittance to re-

spondent $23,213.15. Respondent deposited the $23,213.15

in its ‘‘Steamer Thomas Barlum”’ bank account at Ameri-

can State Bank (R. 112) and used same as follows: Over-

draft $1618.49; wages to the master of the ‘‘John J.’’

$1000; loans to Thomas Barlum & Sons Co. $1800; salaries

to office employees $199.68; transferred to account of the

‘* John J.’’ $1000; loan to the Barlum Realty Co. $12,500;

loan to Louis P. Barlum $600; paid to American Spiral

Pipe Company on a running account $1840; paid to Boland

& Cornelius, claimant’s agents for their advancements for

past fitting out purposes $2400; paid captain of the

‘“‘Thomas’”’ $150 and bank $112.37. The $1000 trans-

ferred to the account of the ‘‘John J.’’ was deposited in

a bank account known as ‘‘Steamer John J. Barlum’’ in

the National Bank of Commerce, out of which bills al-

located to that ship were paid (R. 113-117).

$200,000 Mortgage, ‘“‘Thomas,” March 1, 1929.

This is the mortgage foreclosed by the decree of the

District Court herein in suit No. 1794.

By February, 1929, the $75,000 mortgage had been re-

duced to $50,000. Negotiations were had with the trust

company (then known as Detroit and Security Trust Com-

pany) for an increased loan (R. 92). On February 21,

1929, the trust company by Mr. Butler, vice-president,

wrote respondent (Exhibit 7; R. 156-158, 92-93) offering

to purchase, at 97%, $200,000 of bonds secured by mort-

a , Wate! ee STE Be IC Ne ORY haar 38 HRs kA adie

gage on the ‘‘Thomas’’ guaranteed by John J. Barlum,

documents fo be prepared by the trust company’s attor-

neys, and (R. 157) stating:

‘“‘It-is understood that as a condition of the above

the proceeds of the purchase of said bonds by us are

to be used as follows:

To pay the note issue now outstanding se-

cured by mortgage on the same steam-

MAG eee EE Sheelagh Th a ee $50,006.00

ath scone C ETE TS eee 125.00

Annual fee due the trustee .............. 25.00

Closing fee due the trustee ...........__. 25.00

Attorneys’ charges estimated........__. 750.00

Trustee’s fee for certifying new bonds... 200.00

Cost of printing new bonds estimated. ... 100.00

held by us to the amount eee 100,000.00

Balance to Steamship Company for repairs

and refitting the steamers ‘Thomas

Barlum’ and ‘John J. Barlum’ for the

Pe EU OO ce 42,775.00”’

The $100,000 debt of Mr. Barlum and Thomas Barlum

¢ Sons Co. was for collateral loans long previously made

to them respectively by the trust company and had no

relation to respondent. Mr. Butler was fully informed as

to the details of such debt (R. 93, °6-98, 105-106) and it

was contemplated that the debt should be paid as indt-

cated (R. 139).

The mortgage, prepared by the trust company’s attor-

neys (R. 147), dated as of March 1, 1929, was executed

and delivered about March 22, 1929, while the boat was

laid up. Exhibit A attached to libel (R. 9-38) is a copy

of the mortgage.

‘

The application to the Securities Commission (prepared

by the trust company) relating to this $200,000 mortgage,

stated the purpose of the issue was to ‘‘refinance’’ (R.

95; Exhibit 9, R. 160). As shown by the trust company’s

statement (Exhibit 8, R. 158-159), it withheld from the

proceeds of the issue $50,358.33 to take up the balance

i of the previous issue, $1545.23 for trustee and attorney

fees, printing, recording, ete., and:

‘‘Amount required to take up Thomas

Barlum & Sons note being principal

NE I 5s 6x cee cn peawkeeer as $45,510.00

Amount necessary to take up John J.

Barlum note, being printipal and in-

OE cies oma a ae eee canes 33,566.50

Amount to apply on account of principal

of John J. Barlum note . .$20,745.50

* Accrued int. to March 25th.. 178.00

20,923.50

Balance to Barlum Steamship Company 42,896.44’’

Respondent deposited the $42,896.44 in bank account

‘‘Steamer John J. Barlum’’ at National Bank of Com-

merce and paid therewith about $22,000 of accounts re-

lating to the ‘‘John J.’”’ and transferred $20,000 of the

balance to the bank account ‘‘Steamer Thomas Barlum”’

at the American State Bank and out of which were paid

running accounts allocated to the ‘‘Thomas’’ on account

of its previous season’s operations (R. 118-122; Exhibit

19, R, 167-170).

Exhibit 23 (R. 171-172) dated March 7, 1929, is a con-

| sent of John J., Thomas J., and Louis P. Barlum, stock-

holders holding 2641 of the 3200 shares of respondent’s

stock, to the $200,000 mortgage in question. Exhibit 24

(R. 173-174) dated March 7, 1929, is an accompanying res-

olution of respondent’s directors authorizing the mort-

gage. Exhibit 8-A (R. 159-160) is respondent’s written |

a os oe a

authorization to the trust company to disburse the pro-

ceeds of the bonds as agreed (R. 94). These documents

were prepared by the trust company, respondent not be-

ing represented by counse] (R. 147).

$200,000 Mortgage, “John J.,” December 15, 1927.

This is the mortgage foreclosed by the decree of the

District Court herein in suit No. 1795.

Exhibit 13 (R. 166, 162, 99) is the accepted written offer

by the trust company to respondent, dated December 23,

1927, to purchase an issue of $200,000 of its bonds on the

“John J.’’ at 98, to be guaranteed by John J. Barlum,

documents to be satisfactory to trust company’s attor-

neys. The mortgage, dated as of December 15, 1927

(Exhibit A to libel, R. 44-72), prepared by the trust com-

pany’s attorneys (R. 147) was executed about January 5,

1928, while the boat was laid up. The understanding was

that $82,281.25 was to be withheld by the trust company

to pay $50,000 ‘principal and $32,281.25 interest on the

$1,250,000 bond issue mortgage executed by John J. Bar-

lum and wife to the trust company on the individual

real estate and leaseholds of Mr. and Mrs. Barlum as

aforesaid (this brief, pages ....), and also that $10,000

was to be retained by the trust company and applied on

an wdividual note executed by Mr. Barlum to the trust

company dated August 11, 1927, evidencing a personal

loan made to Mr, Barlum by the trust company (Exhibit

15, R. 162-163; Exhibit 15-A, R. 163, 100-101, 140).

Respondent had no connection with such items for which

said sums were to be withheld. Such items, together with

certain trustee and attorney fees and expenses, were with-

held according to the understanding. The remainder of

ia the proceeds of the loan was deposited in the bank account

4 of the ‘‘Thomas’’ and used as follows: Paid to Luke

BAN i re BR adic SR eS OLDER RAIN LANE es perc

Hie i sme ae le

PD iskeattectecseeisiiiceiascce Set ished riick

Manion, engineer of the ‘‘Thomas’’ for past season serv-

ices $500; loan to Thomas Barlum & Sons Co. $4000;

loan to Cadillac Square Improvement Co. $52,500; loan

to Barlum Realty Co. $18,600; loan to John J. Barlum

personally $5500 (used by him in paying an individual

note held by the Romeo Savings Bank); loan to Lewis

Hotel $19,000 (being one of the properties covered by the

$1,250,000 mortgage given by John J. Barlum and wife

to the trust company); paid to the captain of the ‘‘John

J.’’ $500 for services in connection with that steamer and

$2000 was transferred to the ‘‘Steamer John J. Bar-

lum’’ account (R. 122-127). Out of the entire proceeds of

the issue only the $500 paid to the master of the ‘‘John

J.’’ and the $2000 transferred to its account had any con-

nection with the “John J.’’ (R. 126).

Application was made by respondent to the Securities

Commission as to the bonds (Exhibit 14, R. 162). Exhibit

25 (R. 174-176), dated January 4, 1928, is a consent of

John J., ThomasyJ. and Louis P. Barlum, holding 2716 of

the 3200 shares of respondent’s stock, to the mortgage in

question. Exhibit 26 (R. 176-178), dated January 4,

1928, is an accompanying resolution of respondent’s di-

rectors authorizing the mortgage. Exhibit 15 (R. 162-

163), dated January 7, 1928, is respondent’s written au-

thorization to the trust company to disburse the proceeds

of the bonds in accordance with the understanding (R.

100). These documents were prepared by tha trust com-

pany, respondent not being represented by counsel (R.

147).

Defaults.

Respondent admits the defaults in the two mortgages as

alleged in the libels, i. e., nonpayment on February 1,

1931, of $25,000 principal of bonds re the ‘‘Thomas”’

—

(R. 7, 39), and $50,000 principal of bonds re the ‘‘ John

J.’’ December 15, 1930 (R. 42, 73). The amounts found

due by the decrees are not questioned.

Remedy Provided In Mortgages.

The sole remedy for foreclosure stipulated in the mort-

gages ts by seizure and sale ‘‘WITHOUT”’ process of

any kind (R. 22-23, 57-58).

STATEMENT OF POINTS OF LAW.

PRIOR TO THE SHIP MORTGAGE ACT IT WAS SETTLED

LAW THAT A SHIP MORTGAGE SECURING A PERSONAL

LOAN TO THE SHIPOWNER WAS NOT EX PROPRIO VIGORE,

FORECLOSABLE IN ADMIRALTY—NOT BECAUSE THE CON-

GRESS HAD NOT CONFERRED SUCH JURISDICTION—BUT

BECAUSE, UNDER THE CONSTITUTION AS INTERPRETED

BY THIS COURT, NEITHER THE LOAN, THE PRIMARY CON-

TRACT, NOR THE MORTGAGE, THE INCIDENT THEREOF,

WAS A MARITIME CONTRACT. THE CONGRESS HAS NO

POWER TO EXTEND ORIGINAL ADMIRALTY JURISDICTION

TO A NONMARITIME CONTRACT (HEREIN, PAGES 17-25).

II.

THE POWER OF THE CONGRESS IN CONNECTION WITH

ADMIRALTY CANNOT TRANSCEND THE JURISDICTION

DELEGATED BY THE STATES TO THE FEDERAL GOVERN-

MENT UNDER THE CONSTITUTION. THE OBJECTION HERE-

IN PRESENTS THE SERIOUS QUESTION WHETHER THE

LEGISLATIVE BRANCH OF THE FEDERAL GOVERNMENT

HAS NOT ENCROACHED UPON THE RESERVED SOVEREIGN

POWERS OF THE STATES. THE ATTEMPTED GRANT OF

ADMIRALTY JURISDICTION, IF APPLICABLE TO THE MORT-

GAGES HEREIN, WOULD DEPRIVE THE STATES OF RE-

SERVED JURISDICTION OVER NONMARITIME CONTRACTS

BECAUSE FEDERAL ADMIRALTY JURISDICTION IS EXCLU-

SIVE. NO STATE STATUTE CREATING A MARITIME LIEN,

JUSTICIABLE IN ADMIRALTY AND THEREBY WAIVING RE-

SERVED STATE RIGHTS, IS INVOLVED. SUBSECTION K, IF

APPLICABLE, IS UNCONSTITUTIONAL (HEREIN, PAGES 26-

40).

Il.

A FAIR CONSTRUCTION OF THE SHIP MORTGAGE ACT

JUSTIFIES A HOLDING THAT IT DOES NOT APPLY TO THE

PARTICULAR MORTGAGES INVOLVED. THE ACT SHOULD

BE SO CONSTRUED (HEREIN, PAGES 40-43).

IV.

ESSENTIAL JURISDICTION CANNOT BE CONFERRED BY

CONSENT OR ESTOPPEL (HEREIN, PAGES 43-45).

—

LAW ARGUMENT.

MORTGAGE NONMARITIME.

PRIOR TO THE SHIP MORTGAGE ACT IT WAS

SETTLED LAW THAT A SHIP MORTGAGE SECUR-

ING A PERSONAL LOAN TO THE SHIPOWNER

WAS NOT, EX PROPRIO VIGORE, FORECLOSABLE

IN ADMIRALTY—NOT BECAUSE THE CONGRESS

HAD NOT CONFERRED SUCH JURISDICTION —

BUT BECAUSE, UNDER THE CONSTITUTION AS

INTERPRETED BY THIS COURT, NEITHER THE

LOAN, THE PRIMARY CON TRACT, NOR THE MORT-

GAGE, THE INCIDENT THEREOF, WAS A MARI.

TIME CONTRACT. THE CONGRESS HAS NO

POWER TO EXTEND ORIGINAL ADMIRALTY JUR-

ISDICTION TO A NONMARITIME CONTRACT.

Article III of the Constitution provides:

“Section 1. The judicial Power of the United

States, shall be vested in one Supreme Court, and

in such inferior Courts as the Congress may from

time to time ordain and establish * * ar i

“Section 2. The judicial Power shall extend * * *

to all Cases of admiralty and maritime jurisdiction ;

* 8 & 955

Perforce Section 1, supra, the Congress, by the Judi-

ciary Act of 1789, conferred upon the District Courts

original jurisdiction:

‘Of all civil causes of admiralty and maritime jur-

isdiction, saving to suitors in all cases the right

of a common law remedy where the common law is

competent to give it, * * *.’? 28 U.S.C., § 41 (3).

This court early dispelled the idea that the admiralty

/ jurisdiction thus conferred upon the federal courts was

_the circumscribed power of the English admiral] at the

aa Ps oe ct re.

time of the adoption of the Constitution.

The New Jersey Steam Navigation Company v.

The Merchants’ Bank of Boston (1848), 6 How.

344, 12 L. Ed. 465.

That this court was fully conscious of the desirability of

making federal admiralty jurisdiction as comprehensive

as the needs of navigation, is attested by the above case

--as well and by the decision of The Genesee Chief (1851),

12 How. (53 U. S.) 443, 13 L. Ed. 1058, holding that the

admiralty jurisdiction was not limited to tide waters.

Certainly this court accorded the constitutional provisions

a broad, rather than a restricted, interpretation and in

view of such a tendency this court’s refusal to uphold

jurisdiction over ship mortgages is of great significance.

Bogart v. The Steamboat John Jay (1854), 17 How.

(58 U. S.) 399, 15 L. Ed. 95: Libelants had sold the

steamer to McMurray, taking a purchase money mort-

gage for part of the sale price. Upon default in payment

of the mortgage note libelants filed libel against the

steamer.

‘*To this libel George Logan, by way of answer,

put in a claim of ownership of The John Jay, by a

bona fide purchase from McMurray; and he further

denies the jurisdiction of the court, upon ground

that the contract between the libelants and McMurray

was not maritime, or a case of admiralty and mari-

time jurisdiction * * *.

‘‘Upon the hearing of the cause in the District

Court, the libel was dismissed * * *. We think

that the affirmance of the judgment of the District

Court was right, and will here briefly give our rea-

sons for that opinion. ‘i

“It has been repeatedly decided in the admiralty

and common law courts in England, that the former

have no jurisdiction in questions of property between

a mortgagee and the owner. No such jurisdiction

has ever been exercised in the United States. No

case can be found in either country where it has been

done. In the case of The Neptune, 3 Hagg., Adm.

Rep. 132, Sir John Nicholl, in giving his judgment,

observes: ‘Now, upon questions of mortgage, the

Court of Admiralty has no jurisdiction, whether a

mortgage is foreclosed, whether a mortgagee has

a right to take possession of a chattel personal,

whether he is the legal or only the equitable owner,

and whether a right of redemption means that a

mortgagee is restrained from selling in repayment of

his debt till after the time specified for the redemp-

tion is passed, the decision of these questions belongs

to other courts; they are not within the jurisdiction

or province of the courts of admiralty, which never

decide on questions of property between the mort-

gagee and owner.’

‘This is not so, because such a jurisdiction had

been denied by the jealousy of the courts of the com-

mon law. Its foundation is, that the mere mortgage

of a ship, other than that of an hypothecated bot-

tomry, is a contract without any of the characteristics

or attendants of a maritime loan, and is entered into

by the parties to it, without reference to navigation

or perus of the sea. It is a security to make the

performance of the mortgagor’s undertaking more

certain; and whilst he continues in possession of the

ship, disconnecting the mortgagee from all agency

and interest in the employment and navigation of her,

and from all responsibility for contracts made on her

account. Such a mortgage has nothing in it analogous

to those contracts which are the subjects of admiralty

jurisdiction. In such a case, the ship is the object

for the accomplishment of the contract, without any

reference to the use of her for such a purpose. There

cannot be, then, anything maritime in it. A ysatlure

to perform such a contract cannot make it mari-

time.’’

—

the

There was no dissent from this opinion and seven of

justices who participated in the decision of The

* Genesee Chief in 1851 were still members of this court.

Schuchardt v. Ship Angelique (1856), 19 How. (60

U. 8.) 239, 15 L. Ed. 625.

Mortgagees filed /cbel in the District Court against the

proceeds of a ship sold under decrees entered upon other

libels based on maritime liens. The court dismissed the

mortgagee’s libel, saying:

“‘The libel filed in this case is a libel simply to

foreclose a mortgage, or to enforce the payment of

a mortgage, and the proceeding cannot therefore be

upheld within the case of Bogart v. The John Jay,

heretofore decided by this court (17 How.) 58 U. S.

399,

‘‘The proper course for the mortgagees was to

have appeared as claimants to the libels filed against

the vessel, in which the questions presented in the

case might have been raised and considered; * * *.”’

The People’s Ferry Co. v. Beers (1858), 20 How.

(61 U. S.) 393, 15 L. Ed. 961.

bel against a new ferry boat for balance due the

builders for its construction under a contract reserving

a lien to secure payment. The District Court upheld

admiralty jurisdiction. In reversal, this court said:

Bratecincry. Ashen asm

‘‘The lien reserved by the contract, is not set up

in the libel, nor can it avail, as it amounted to noth-

ing more than a mortgage on the vessel for a debt.

* * *

“‘The question presented involves a contest be-

tween the State and Federal Governments. The

latter has no power or jurisdiction beyond what

the Constitution confers; * * *. The extent of

power withdrawn from the States, and vested in the

General Government, depends on a proper construc-

tion of the constitutional provision above cited. Its

terms are indefinite, and its true limits can only be

ascertained by reference to what cases were cog-

nizable in the maritime courts when the Constitution

was formed—for what was meant by it then, it must

mean now; what was reserved ‘to the States, to be

regulated by their own institutions, cannot be right-

fully infringed by the General Government, either

through its Legislative or Judiciary Department. The

contest here is not so much between rival tribunals,

as between district sovereignties, claiming to ezer-

cise power over contracts, property, and personal

francises, * * *

“‘The admiralty jurisdiction, in cases of contract,

depends primarily upon the nature of the contract,

and is limited to contracts, claims, and services,

purely maritime, and touching rights and duties ap-

pertaining to commerce and navigation. * * *

‘In considering the foregoing description, it must

be borne in mind that liens on vessels encumber com-

merce, and are discouraged; so that where the owner

is present, no lien is acquired by the materialman;

nor is any, where the vessel is supplied or repaired

in the home port * * *. So far from the contract

being purely maritime, and touching rights and

duties$appertaining to navigation (on the ocean or

elsewhere), it was a contract made on land, to be per-

formed on land. The wages of the shipwrights had

no reference to a voyage to be performed: they had

no interest or concern whatever in the vessel after she

was delivered to the party for whom she was built;

they were bound to rely on their contract.” * * *

Accord: Grant Smith-Porter Co. v. Rohda, 257 U. S.

469, 42 S. Ct. 157, 66 L. Ed. 321, 25 A. L. R. 1008; Thames

Towboat Company v. The Schooner Francis McDonald,

254 U. S. 242, 41 8. Ct. 65, 65 L. Ed. 245.

The Lottawanna (1874), 21 Wall. (8s U. S.), 558, 22

L. Ed. 654:

“‘In this case the appellants themselves have no

Aa ek hei TG Na a a:

batik Ae OEE! eto ey Ng «A

maritime lien, but merely a mortgage to secure an or-

dinary debt not founded on a maritime contract.

They, therefore, have no standing in court, except un-

der the 43rd Admiralty Rule, and in the manner above

indicated.’’

The J. E. Rumbell (1892), 148 U. S. 1, 13 S. Ct. 498,

37 L. Ed. 345:

‘An ordinary mortgage of a vessel, whether made

to secure the purchase money upon the sale thereof,

or to ratse money for general purposes, is not a

maritime contract. A court of admiralty, therefore,

has no jurisdiction of a libel to foreclose it or to

assert either title or right of possession under it

* * *,. But it has jurisdiction, after a vessel has

been sold by its order and the proceeds have been

paid into the registry, to pass upon the claim of the

mortgagee, as of any other person, to- the fund, and

to determine the priority of the various claims, upon

petitions such as were filed by the mortgagees and

the materialmen in this case. * * *

‘The mortgage, on the other hand, is not a mari-

time contract, and constitutes no maritime lien,

* * * 99

The Freights of the Kate (D. C. N. Y.), 63 Fed. 707,

720, in which Mr. Justice Brown said:

‘A letter of credit, like a loan of money, is in it-

self indifferent in character; it may be maritime,

or nonmaritime, according to the objects of the loan,

the intent of the parties, and the circumstances at-

tending it. Maritime contracts are contracts that

pertain to maritime commerce and navigation. A

letter of credit issued for the purpose of directly

aiding the prosecution of current voyages, and upon

the faith of the freights to be earned, as a part

of the contract, is as purely maritime as a bottomry

bond; and no commercial transactions are more char-

acteristically maritime than these.’’

THE BONDS ARE THE PRIMARY OBLIGATIONS TO WHICH

THE MORTGAGES ARE MERE INCIDENTS.

Carpenter v. Longan, 16 Wall. (83 U. 8.) 271, 21

L. Ed. 313.

The foregoing decisions (pages 18-23 hereof) state

the factors which render a loan and ship mortgage non-

maritime in character. The loans herein were merely

personal contracts, in no way involving navigation or the

perils of the sea. The mortgages were mere security

for performance of the personal contract and in no way

involved the use of the steamers in navigation.

MARITIME LIENS ENCUMBER COMMERCE AND ARE

STRICTI JURIS.

Krauss Bros. Lumber Co. v. Dimon 8S. 8. Corp.,

Vol. 78 Adv. Op. page 91;

Piedmont ¢ George’s Creek Coal Co. v. Seaboard

Fisheries Co., 254 U. S. 1, 41 S. Ct. 1, 65 L, Ed.

97 ;

The Kalfarli (C. C. A. 2), 277 Fed. 391;

The People’s Ferry Co. v. Beers, infra, page 20.

§ 971) quoted in petitioner’s brief, page 54, creates a lien

enforceable by suit in rem for repairs, supplies, etc., to

all ships, without the necessity of proving that credit was

given to the vessel. So far as pertinent this section is

the same as Section 1 of Act June 23, 1910, c. 373 (36

Stat. at L. 604), which was construed in Piedmont &

George’s Creek Coal Co. v. Seaboard Fisheries Co., supra

petitioner’s brief, page 25) to exclude admiralty jur-

isdiction to enforce a lien for coal furnished to an em-

barrassed canning and fishery company for use in its

factory and fishing steamers on the understanding that

Decictttercnic. OTN a aca 2iNu

under the law the coal company would have such a len.

This court commented:

‘¢ And it was clearly understood that the purchasing

corporation would apply part of the coal to a non-

maritime use.’’ me

THE FACT THAT THE CONTRACTS INVOLVED WERE NOT

WHOLLY MARITIME WOULD PRECLUDE ORIGINAL AD-

MIRALTY JURISDICTION.

Grant v. Poillon, 20 How. (61 U. S.) 162, 15 L.

Ed. 871:

Piedmont & George’s Creek Coal Co. v. Seaboard

Fisheries Co. ante, page 23.

Pillsbury Flour Mills Co. v. Interlake SS. Co. (C. C.

A. 2), 40 F. (2d) 439, certiorari denied in 282 U. S. 845,

51 S. C. 24, 75 L Ed. 750: Libel for damage to wheat

shipped under contract for transportation from Mil-

waukee to Buffalo and winter storage at destination. In

denying admiralty jurisdiction the court said:

‘¢*A contract to be ‘‘wholly maritime,’’ means that

the principal subject matter of agreement gives char-

acter to the whole.’ * * *. After reviewing the

cases, we concluded that contract rights are mari-

time and within the admiralty jurisdiction when they

relate to the ship as an instrument of commerce,

and pointed out that a contract for the wharfage of

a ship withdrawn from commerce is not maritime

and will not support a maritime lien.’’

The Richard Winslow (C. C. A. 7), 71 Fed. 426:

‘‘ 4 maritime contract must therefore concern trans-

portation by sea. It must relate to navigation, and

to maritime employment. It must be one of naviga-

tion and commerce on navigable waters. Unques-

tionably there was here a contract for carriage by

sea, and that contract was maritime in its nature.

OPEL 8 GS MD Ss th RRS eel NN eT — Pa

But there was joined with it a contract with respect

to the cargo after the completion of the voyage that

was im no respect maritime in its nature.’’

Accord: The Milwaukee (D.C. N. Y.), 15 F. (2d) 886;

El Oriente (D. C. N. Y.), 5 F. (2d) 251.

ADMIRALTY COURTS ARE NOT COURTS OF EQUITY.

Bogart v. The Steamboat John Jay, infra page

18;

The People’s Ferry Co. v. Beers, infra page 20;

Rea v. The Steamer Eclipse, 135 U. 8. 599, 10 S. Ct.

873, 34 L. Ed. 269;

The Ada (C. C. A. 2), 250 Fed. 194;

Kellum v. Emerson, Fed. Cas. No. 7669.

CONGRESS—LACK OF POWER.

II.

THE POWER OF THE CONGRESS IN CONNEC-

TION WITH ADMIRALTY CANNOT TRANSCEND

THE JURISDICTION DELEGATED BY THE STATES

TO THE FEDERAL GOVERNMENT UNDER THE

CONSTITUTION. THE OBJECTION HEREIN PRE-

SENTS THE SERIOUS QUESTION WHETHER THE

LEGISLATIVE BRANCH OF THE FEDERAL GOV-

ERNMENT HAS NOT ENCROACHED UPON THE

RESERVED SOVEREIGN POWERS OF THE

STATES. THE ATTEMPTED GRANT OF ADMIR-

ALTY JURISDICTION, IF APPLICABLE TO THE

MORTGAGES, WOULD DEPRIVE THE STATES OF

RESERVED JURISDICTION OVER NONMARITIME

CONTRACTS BECAUSE FEDERAL ADMIRALTY

JURISDICTION IS EXCLUSIVE. NO STATE STAT-

UTE CREATING A MARITIME LIEN, JUSTICIABLE

IN ADMIRALTY AND THEREBY WAIVING RE-

SERVED STATE RIGHTS, IS INVOLVED. SUBSEC-

TION K, IF APPLICABLE, IS UNCONSTITUTIONAL.

Vide, The People’s Ferry Co. v. Beers, infra, page 20,

and The Genesce Chief, infra, page 18.

The New England Marine Ins. Co. v. Dunham, 11 Wall.

(78 U. 8.) 1, 20 L. Ed. 90:

‘As far as regards civil cases, therefore, the jur-

isdiction of these courts was thus made coextensive

with the constitutional gift of judicial power on this

subject.’’

No interstate commerce is involved in the present con-

troversy. It is significant that in Article I, Section 8 of

lea EE Pe RE Ie NS Sn aw ae Ss

the Constitution, defining the power of the Congress,

the subject of admiralty is not mentioned. The connec-

tion of the Congress with that subject is through Article

III, Section 1 which permits the Congress to apportion

the judioggl power conferred by the states but which

cannot sustain an arrogated increase of power.

Crowell v. Benson, 285 U. S. 22, 55, 52 S. Ct. 285, 76

L. Ed. 598, 615, upholding The Longshoremen’s and

Harbor Workers’ Act providing compensation to work-

men for injuries occurring upon navigable waters. This

court, by Mr. Chief Justice Hughes, said:

“These fundamental requirements are that the

injury occurs upon the navigable waters of the United

States and that the relation of master and servant

exists. These conditions are indispensable to the

application of the statute, not only because the Con-

gress has so provided explicitly (§ 3), but also because

the power of the Congress to enact the legislation

turns upon the existence of these conditions.

‘“‘In amending and revising the maritime law, the

Congress cannot reach beyend the constitutional

limits which are inherent in the admiralty and mari-

time .jurisdiction. Unless the injuries to which the

Act relates occur upon the navigable waters of the

United States, they fall outside that jurisdiction

* " *. Again, it cannot be maintained that the

Congress has any general authority to amend the

maritime law so as to establish liability without

fault in maritime cases regardless of particular cir-

cumstances or relations.’? * * *

THE CONGRESS CANNOT ENLARGE THE GRANT OF AD-

MIRALTY JURISDICTION.

Crowell v. Benson, supra;

Meyer et al. v. Tupper (1861), 1 Black (66 U. S.)

522, 17 L. Ed. 180; a

The Lottawanna (1874), 21 Wall. (88 U. S.), 588,

22 L. Ed. 654,

6 AB eta Wd nie bis

FEDERAL ADMIRALTY JURISDICTION TO ENFORCE A

LIEN IS EXCLUSIVE. SUBSECTION K OF THE SHIP MORT-

GAGE ACT EXPRESSLY PROVIDES THAT JURISDICTION

THEREUNDER SHALL BE EXCLUSIVE.

Prior to the Ship Mortgage Act an ordinary ship mort-

gage securing a general loan to the ship owner was a

local matter and, as such, was within the jurisdiction

of the state courts both as to actions in personam and

in rem. It the Congress, by its fiat, can convert such a

mortgage into a maritime lien, the jurisdiction of the

state is automatically divested. This, it is respectfully

contended, cannot be done without the approval of the

state or amendment of the Constitution.

That it should not be done is also clear. For example,

take the mortgages herein. The steamers were laid up in

Buffalo when the mortgages were executed and deliv-

ered. They might never have left the Buffalo docks be-

fore default. Could the state courts of New York con-

stitutionally be deprived of foreclosure jurisdiction in

such event? Supposing these were construction mort-

gages and the steamers had not been completed and the

mortgages became in default. Could not the state courts

entertain foreclosure? That the state courts would have

such jurisdiction is clear. That they would lose such jur-

isdiction if Subsection K is upheld is equally clear. That

the state courts cannot be deprived of such rights would

seem to follow although it is " necessary to go that

far to decide the instant cases. We stress the statement

that no state statute creating an admiralty lien, and there-

by surrendering the state’s jurisdiction, is involved and

refer to the following text and cases which indicate the

circumstances under which a state’s power may become

subordinate to federal admiralfv jurisdiction.

1 Ruling Case Law:

‘*Where a state statute creates a new right of ac-

tion touching a subject which is held to be maritime

im its nature, the District Court may give effect to the

enactment by a suit in rem, if the statute gives the

lien necessary to support that form of proceeding, or

by a suit im personam in case no lien is granted. Nor

is such an enactment invalid because the state courts

have no jurisdiction to enforce it by a proceeding in

rem. The District Courts are not bound to enforce

liens created by state laws, but will do so nevertheless

whenever the interests of justice will be promoted

and the provisions of the statute are not antagonistic

to or in derogation of the principles of the maritime

law. Of course the right of action created by the

statute must arise out of a transaction which relates

to navigation and things maritime”? (p. 408).

(Referring to the Judiciary Act of 1789): ‘The

states are held thereby to be prohibited from estab-

lishing courts having cognizance of cases of ad-

miralty and maritime jurisdiction, according to the

course of proceedings in courts of admiralty; and

hence a state court can have no jurisdiction of a

suit in rem which is cognizable by the District Court.

*“* * (pp. 408-9)

‘‘As previously shown, the states may not give

their courts the right to proceed ix rem for maritime

causes of action. All causes which the admiralty

courts have declared to be maritime in character, and

which those courts have held to give rise to maritime

liens, are within the jurisdiction of the District

Courts exélusively * * *, Thus, for example, con-

tracts for the construction of vessels, and for the

furnishing of materials therefor, before they are

launched, being nonmaritime, liens and proceedings

in rem to enforce such liens are under state control,

and may be enforced in the state aa ~*~ =

p. 410)

‘It remains to consider the jurisdiction of a state

court to enforce by proceedings in rem a lien given

by local statute in aid of a cause which the admiralty

courts have held to be maritime in character but not

supported by a lien under the general maritime law.

i SR PE eh? M8 4

YA Alpe shyt tee wininaiy coe |

adroit, 2B beta

It is established that a lien created by such a statute

is so far maritime that the admiralty courts may en-

force it by process in rem; and while there seems to

have been at one time some difference of opinion on

the point, and some state decisions are to the con-

trary, the Supreme Court now declares the jurtsdic-

tion of the District Courts to be exclusive in such

cases, denying the power of local statutes to confer

upon the state courts jurisdiction of proceedings in

rem, even though the maritime law does not give a

Hen.” ** * tm, S05)

The Winnebago (C. C. A. 6), 141 Fed. 945, certiorari

denied, 200 U. S. 616, 50 L. Ed. 621:

‘‘Passing from these predicates, we ce that

it is also to be accepted as settled law that contracts,

whether for the building of ships or for furnishing

materials for their construction are not maritime in

their nature, nor are liens given upon ships while in

course of.eonstruction maritime liens. This doctrine

was affirmed by this court in The John B. Ketchem,

97 Fed. 872, 38 C. C. A. 518, and is supported by

many decisions of the Supreme Court. * * *

‘‘It seems to follow by obvious sequence that, in

creating liens of this character and conferring upon

their own courts the power to enforce them, state

legislation does not derogate from the jurisdiction

of the admiralty courts of the United States * * *.

If the contract is not of a maritime nature, it is of no

concern to the federal jurisdiction what remedies

the state may provide, whether wm rem or otherwise.

‘If,’ said Mr. Justice Brown, in Knapp, Stout & Com-

pany v. McCaffrey, supra, ‘a lien upon a vessel be

created for a claim over which a court of admiralty

has no jurisdiction in any form, such lien may be en-

forced in the courts of the state. Thus, as the ad-

miralty jurisdiction does not extend to a contract

for building a vessel, or to work done or material

furnished in its construction, * * * we held, in.

Edwards v. Elliott, 21 Wall. 532, 22 L. Ed. 487,

that, in respect to such contracts, it was competent

for the states to enact such laws as their legislatures

might deem just and expedient, and to provide for

their enforcement in rem.’ The owner of a ship may

make a nonmaritime contract and mortgage his ship

to secure it, or it may be seized on mesne or final

process; and wm both cases the ship may be sold for

the satisfaction of the debt on the order of a common

law court without recourse to the admiralty jurisdic-

tion.”’

The Moses Taylor v. Hammons, 4 Wall. (71 U. S.) 411,

18 L. Ed. 397. California statute provided for state court

‘proceedings in rem against a shi for nonperformance of

£ £

contracts of transportation. In holding that the state

court had no such jurisdiction Mr. Justice Field said:

‘*The question presented for our determination is,

therefore, whether such cognizance by the Federal

Courts is exclusive; and this depends either upon the

constitutional grant of judicial power, or the validity

of the provision of the 9th section of the Act of

Congress, * * *

‘‘The Judiciary Act of 1789, in its distribution of

jurisdiction to the several Federal] Courts, recognizes

and is framed upon the theory that in all cases to

which the judicial power of the United States extends,

Congress may rightfully vest exclusive jurisdiction

in the Federal Courts. * * *

‘‘The case before us is not within the saving clause

of the 9th section. That clause only saves to suitors

‘the right of a common law remedy, where the com-

mon law is competent to give it.’ It is not a remedy

in the common law courts which is saved, but a com-

mon law remedy. A proceeding in rem, as used in

the admiralty court is not a remedy afforded by the

common law; it is a proceeding under the civil law.

When used in the common law courts, it is given

by statute.’’

| ee =

ae a

The last quoted paragraph was quoted with approval

in the recent case of Chelentis v. Luckenbach S. S. Co.,

247 U.S. 372, 38 S. Ct. 501, 62 L. Ed. 1171.

The Belfast, 7 Wall. (74 U. S.) 624, 19 L. Ed. 266.

Alabama statute provided for lien for supplies furnished

ships within the state and enforcement by libel in state

courts. Libel dismissed.

‘‘Original cognizance is exclusive in the District

Courts, except that the suitor may, if he sees fit,

elect to pursue a common law remedy in the state

courts, or in the Cireuit Court, as before explained,

in all cases where such a remedy is applicable. Com-

mon law remedies are not applicable to enforce mart-

time lien by a proceeding in rem and, consequently,

the original jurisdiction to enforce such a lten by

that mode of proceeding is exclusive in the District

Courts. The Moses Taylor, Si

‘‘State legislatures have no authority to create a

maritime lien, nor can they confer any jurisdiction

upon a state court to enforce such a lien by a suit

or proceeding im rem, as practiced in the Admiralty

a *

Leon v. Galceran, 11 Wall. (78 U. 8S.) 185, 20 L. Ed. 74.

Right to proceed im personam in state court for mariner’s

wages upheld.

‘‘State legislatures have no authority to create a

maritime lien, nor ean they confer any jurisdiction

upon a state court to enforce such a lien by a suit

or proceedings in rem, as practiced in the admiralty

courts; but whenever a maritime lien arises the

- injured party may pursue his remedy by a suit in

personam or by a proceeding in rem at his election.

Such a party may proceed in rem in the admiralty,

and if he elects to pursue his remedy in that mode,

he cannot proceed in any other form, as the jurisdic-

tion of the admiralty courts is exclusive in respect

to that mode of proceeding, but such a party is not

restricted to that mode of proceeding even in the ad-

miralty court, as he may waive his lien and proceed

im personam against the owner or master of the vessel

in the same jurisdiction, nor is he compelled to pro-

ceed in the admiralty at all, as he may resort to his

common law remedy in the state courts, or in the Cir-

cuit Court, if he and his debtor are citizens of differ-

ent states. * * *

‘“Common law remedies are not competent to en-

force a maritime lien by a proceeding in rem and,

consequently, the original jurisdiction to enforce such

a lien by that mode of proceeding is exclusive in the

District Courts * * *, Authority, therefore does

not exist in a state court to hear and determine a

suit m rem, founded upon a maritime contract in

which a maritime lien arises, for the purpose of en-

forcing such a lien. Jurisdiction in such cases is

exclusively in the District Courts, subject to appeal

as provided in the acts of Congress, but such a lien

does not arise in a contract for material and sup-

plies furnished to a vessel in her home port, and

in respect to such contracts it is competent for the

states to create such liens as their legislatures may

deem just and expedient, not amounting to a regula-

tion of commerce, and to enact reasonable rules and

regulations prescribing the mode of their enforce-

ment.’

Norton v. Switzer, 3 Otto (93 U.S.) 355, 23 L. Ed. 903,

holding maritime lien does not arise under contract for

ship repairs in home port.

‘“‘Authority does not exist in the state courts to

hear and determine a suit in rem as in the Admiralty

Courts to enforce"a maritime lien * * *

‘Contracts for ship building are held not to be

maritime contracts and, of course, they fall within

the same category; but in all cases where a maritime

lien arises, the original jurisdiction to enforce the

same by a proceeding in rem is exclusive in the Dis-

trict Courts sitting in admiralty.’

The J. E. Rumbell, 148 U. S. 1, 13 S. Ct. 498, 37 L.

Ed. 345. Question whether priority of a mortgage given

by state statute over maritime liens was binding in ad-

miralty. Mr. Justice Gray said:

‘‘In the admiralty and maritime law of the United

States, as declared and established by the decisions of

this court, the following propositions are no longer

doubtful: * * *

‘‘For repairs or supplies in the home port of the

vessel, no lien exists, or can be enforced in admiralty,

under the general law, independently of local stat-

ies”

‘“‘Whenever the statute of a state gives a lien to be

enforced by process in rem against the vessel, for

repairs or supplies in her home port, this lien, being

simuar to the lien arising in a foreign port under

the general law, is in the nature of a maritime lien,

and therefore may be enforced in admiralty in the

courts of the United States. * * *

“‘This lien, in the nature of a maritime lien, and

to be enforced by process in the nature of admiralty

process, is within the eacluswe jurisdiction of the

courts of the United States, sitting in admiralty.

* * *

‘‘The fundamental reasons on which these prop-

ositions rest may be summed up thus: The ad-

miralty and maritime jurisdiction is conferred on

the courts of the United States by the Constitu-

tion, and cannot be enlarged or restricted by the

legislation of a state. No state legislation, there-

fore, can bring within the admiralty jurisdiction

of the national courts a subject not maritime in its

nature. But when a right, maritime in its nature,

and to be enforced by process in the nature of ad-

miralty process, has been given by the statute of

a state, the admiralty courts of the United States

have jurisdiction, and exclusive jurisdiction, to

enforce that right according to their own rules of

procedure, * * *

‘*An ordinary mortgage of a vessel, whether made

to secure the purchase money upon the sale thereof,

or to raise money for general purposes, is not a mari-

time contract. A court of sadmiralty, therefore, has

ho jurisdiction of a libel to foreclose it, or to assert

either title or right of possession under it * * *,

But it has jurisdiction, after a vessel has been sold

by its order and the proceeds have been paid into

the registry, to pass upon the claim of the mortgagee,

as of any other person, to the fund, and to determine

the priority of the various claims, upon petitions

such as were filed by the mortgagees and the mate-

rialmen in this case * * *.

‘‘It would seem to follow that any priority given

by the statute of a state, or by decisions at common

law or in equity, is immaterial; and that the admiralty

courts of the United States, enforcing the lien be-

cause it is maritime in its nature, arising upon a

maritime contract, must give it the rank to which it

is entitled by the principles of the maritime and

admiralty law.’’

The Roanoke, 189 U. S. 185, 23 S. Ct. 491, 47 L. Ed.

770. State statute provided for priority lien on ships

for repairs and enforcement thereof in admiralty. Libel

for such lien was filed in the Federal District Court:

6c* *

* we have several times had occasion to

hold that where Congress has dealt with a subject

within its exclusive power, or where such exclusive

power is given to the Federal Courts, as in cases of

admiralty and maritime jurisdiction, it is not com-

petent for states to invade that domain of legisla-

tion, and enact laws which in any way trench upon

the power of the Federal Government. * * *

‘‘Bearing in mind that exclusive jurisdiction of

all admiralty and maritime cases is vested by the

Constitution in the Federal Courts, * * * the

statute of the state of Washington, insofar as it

attempts to control the administration of the maritime

law by creating and superadding conditions for the

benefit of a particular class of creditors, and thereby

depriving the owners of vessels of defenses to which

they would otherwise have been entitled, is an un-

lawful interference with that jurisdiction, and to that

extent is unconstitutional and void.’’

American Steamboat Co. v. Chace, 16 Wall. (83 U. 8S.)

522, 21 L. Ed. 369:

ce * 6 Jurisdiction to enforce maritime liens by

proceedings in rem is exclusive in the admiralty

courts. State courts, therefore, are incompetent to

afford a remedy in such a case, as they do not pos-

sess the power to issue the appropriate process to

enforce the lien and give effect to the proceeding.

Vested exclusively as such power is in the admiralty

courts, it is settled law that the state legislatures

cannot authorize state courts to exercise jurisdiction

in such a case by a proceeding in rem.’’

Perry v. Haines, 191 U. 8. 17, 24 S. Ct. 8, 48 L. Ed. 73,

opinion by Mr. Justice Brown:

‘‘This case raises the question of the construction

and constitutionality of the statutes of the state of

New York, giving a lien for repairs upon vessels,

and providing for the enforcement of such lien by

proceedings in rem * * *, That a state may pro-

vide for liens in favor of materialmen for neces-

saries furnished to a vessel in her home port, or

in a port of the state to which she belongs, though

the contract to furnish the same is a maritime con-

tract, and that such liens can be enforced by proceed-

ings im rem in_the District Courts of the United

States, is so well settled by a series of cases in this

court as to be no longer open to question.

* * *

‘‘It is equally well established that, for causes of

action not cognizable in admiralty, either in rem or

in personam, the states may not only grant liens, but

may provide remedies for their enforcement. Con-

tracts for the building of a ship are the most prom-

inent examples of such as are not maritime in their

character, and hence within this rule. * * * :

‘In all these cases the distinction is sharply drawn

between a common law action in personam, with a con-

current attachment against the goods and chattels of

the defendant, subject, of course, to any existing

liens, and a proceeding in rem against the vessel as

the debtor or ‘offending thing,’ which is the charac-

teristic of a suit in admiralty, * * * The former

is in strict analogy to a common law proceeding, and

is a concurrent remedy. The latter is a proceeding

distinctively maritime, of which exclusive jurisdic-

tion is given to the admiralty courts.’’

THE CONGRESS MAY PRESCRIBE FORMS, MODE AND

RULES OF JUDICIAL PROCEEDINGS WITHIN THE DEFINED

ADMIRALTY JURISDICTION OF THE COURTS BUT CANNOT

MAKE MARITIME A NONMARITIME CAUSE OR TRANSAC-

TION. WITHIN SUCH CONFINES ONLY CAN IT BE SAID

THAT THE CONGRESS MAY AMEND THE ADMIRALTY LAW.

ANALYSIS WILL DISCLOSE NO DECISION UPHOLDING CON-

GRESSIONAL REGULATION EXCEPT AS TO A MATTER UN-

QUESTIONABLY MARITIME.

For example:

In The General Smith, 4 Wheat. 438, 4 L. Ed. 609, this

court drew the sharp distinction between “*process’’ and

‘‘jurisdiction’’ saying that the creation by local law of

a lien enforceable in rem in admiralty for ship supplies

was merely to supply a process in connection with ex-

tstent maritime jurisdiction because the contract for sup-

plies was in itself maritime and within the established

jurisdiction of the admiralty court to proceed in per-

sonam. Nothing more than a mode of procedure was in-

volved,

In Meyer et al. v. Tupper et al., 1 Black (66 U. 8.), 522,

17 L. Ed. 180, the same view was taken as to Admiralty

Rule 12 recognizing such liens.

In Providence € N. Y. S. S. Co. v. Hill Mfg. Co., 109

U. S. 578, 3 S. Ct. 379, 27 L. Ed. 1038, this court said:

‘*The rule of limited liability prescribed by the Act

of 1851 is nothing more than the old maritime rule

administered in courts of admiralty in all countries

except England from time immemorial; and if this

were not so, the subject matter itself is one that be-

longs to the department of maritime law.”’

The underlying cause of action involved was unques-

tionably maritime and over which the admiralty court

had jurisdiction. The act of Congress merely controlled

the procedure relating to the enforcement of that juris-

diction and, in our opinion, did no more than alter a rule

of recoverable damages in such cases. The same is true

of Richardson v. Harmon, 222 U. 8S. 96, 32 S. Ct. 27, 56

L. Ed. 110, on which petitioner relies, wherein the under-

lying cause of action was the liability of a ship which,

in its navigation, damaged a bridge.*

In Crowell v. Benson, infra, page 27, cited also by

petitioner, the claims to which the Act applied were within

the admiralty jurisdiction. This court therein specifically

repudiated the idea that the Congress could create a

maritime cause of action where none previously existed

and denied that the Congress could even substitute find-

ings for ultimate court decision as to the existence of

jurisdictional facts.

Panama R. Co. v, Johnson, 264 U. S. 375, 44 S. Ct. 391,

68 L. Ed. 748, upheld the Jones Act on the theory that it

*Similarly, in Vancouver S. S. Co. v. Rice, 288 U. S. 445, 58 S.

Ct. 420, 77 L. Ed. 885, the injuries to the stevedore were inflicted on

the vessel in the course of loading in navigable waters. The lien

on the vessel given by the state statute for the resulting death on

shore was held to be subject to admiralty jurisdiction.

did not create a maritime cause of action but merely

regulated procedure.

To create a lien in connection with a matter already

subject to maritime jurisdiction is one thing—but to at-

tempt thereby to create jurisdifion where none existed

is another. That the existence of a lien merely has not

been an accepted basis of our admiralty jurisdiction is

also attested by the fact that under the civil law many

liens against ships existed that were not enforceable in

original proceedings in rem under our law because the

underlying cause of action was, by our courts, held to

be nonmaritime.

The states have not voluntarily yield-€ their control

over nonmaritime mortgages and until trey do, it is re-

spectfully submitted, the Congress cannot arbitrarily

force them to do so by conferring exclusive jurisdiction

thereover upon the federal courts. Subsection K is un-

meee ih as i . 7

constitutional, if it is applicable.

*We see nothing in United States v. Flores, 289 U. S. 187, 58 S.

Ct. 580, 77 L. Ed. 1086 ( petitioner’s brief, page 36), which militates

against our contentions. The murder, in that case, was committed

on an American vessel while unloading in a foreign port. Both the

crime and the operation of the ship were within the recognized scope

of maritime jurisdiction.

Al oF RNB ee ee

APPLICABILITY OF SUBSECTION K, SHIP

MORTGAGE ACT.

Ill.

A FAIR CONSTRUCTION OF THE SHIP MORT-

GAGE ACT JUSTIFIED THE HOLDING THAT IT |

DOES NOT APPLY TO THE PARTICULAR MORT-

GAGES INVOLVED. THE ACT SHOULD BE SO CON-

STRUED.

Crowell v. Benson, infra, page 27:

‘‘When the validity of an act of the Congress is

drawn in question, and even if a serious doubt of

constitutionality is raised, it is a cardinal principle

that this court will first ascertain whether a con-

struction of the statute is fairly possible by which

the question may be avoided. We are of the opinion

that such a construction is permissible and should

be adopted in the instant case.’’

Accord: Panama R. R. Company v. Johnson, 264 U. 8S.

375, 44 S. Ct. 391, 68 L. Ed. 748.

Dahnke-Walker Milling Company v. Bondurant, 257

U. S. 282, 42 S. Ct. 106, 66 L. Ed. 239:

‘*A statute may be invalid as applied to one state

of facts, and yet be valid as applied to another.’’

The Ship Mortgage Act is also known as Section 30

of the Merchant Marine Act 1920. Vide historical notes

to 46 U.S. C. A., § 861 and § 911.

Petitioner argues that the decision below will defeat the

desired and necessary results which the Merchant Marine

Act was designed to accomplish.

- . ow 5,> ~ we ~~ Shan eR +i ae

Section 1 of the Merchant Marine Act, 1920, 46 U. S.

C., § 861, reads:

‘“‘It is necessary for the national defense and for

the proper growth of its foreign and domestic com-

merce that the United States shall have a merchant

marine of the best equipped and most suitable types

of vessels sufficient to carry the greater portion of

its commerce and serve as a naval or military auxil-

iary in time of war or national emergency, ulti-

mately to be owned and operated privately by citizens

of the United States; and it is declared to be the

policy of the United States to do whatever may be

necessary to develop and encourage the maintenance

of such a merchant marine, and, insofar as may not

be inconsistent with the express provisions of this

chapter, the United States Shipping Board shall, in

the disposition of vessels and shipping property as

hereinafter provided, in the making of rules and

regulations, and in the administration of the shipping

laws keep always in view this purpose and object

as the primary end to be attained.”’

We can easily perceive that the Congress might have

power to extend admiralty jurisdiction to matters directly

connected with maritime operations and that it might be

contended successfully that a ship construction or pur-

chase money mortgage, executed as an_ incident’ to

placing, continuing or maintaining the ship in operation

and navigation, is a proper subject for federal legisla-

tion, but the Ship M ortgage Act and the Merchant Marine t

Act may be searched in vain for any indication that ship

mortgages given by shipowners for construction and

operation of office buildings and hotels and payment of

real estate bonds and personal obligations of others,

would so contribute to the purposes of the acts as to be

within their contemplation. Such mortgages are not only

foreign, but in fact opposed, to the true intent and pur-

pose of the acts. That such a conclusion is not without

VEEN SRSA TRI SO rere paneer ore

: PEDO LEE OR SN iy Worcs) 2

-s

judicial support is evident from the following statement

in People’s Ferry Co. v. Beers, infra, page 20:

.<* * * it must be borne in mind that liens on

vessels encumber commerce and are discouraged;

« * 2 99

That the liens against The Thomas and The John J.

have encumbered commerce is attested by their conse-

quent enforced idleness since May, 1931.

Petitioner’s counsel in appendix to their brief, pages

44-45, quoting the Ship Mortgage Act, omitted § 954

thereof (46 U. S. C., § 954) providing:

‘‘(a) Upon the default of any term or condition

of a preferred mortgage upon a vessel, the mortgagee _

may, in addition to all other remedies granted by

this chapter, bring suit in personam in admiralty in

a District Court of the United States, against the

mortgagor for the amount of the outstanding mort-

gage indebtedness secured by such vessel or any

deficiency in the full payment thereof.

‘‘(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 7 rem in admiralty

of the rights of the mortgagee in respect to such

realty or personalty other than vessels.”’

It would seem that this provision, like the entire act,

is dehors the power of the Congress unless restricted

in scope to maritime contracts.

Section 36 of the Merchant Marine Act, 46 U. S. C.,

§ 887, provides:

‘‘If any provision of this and the following chapter

is declared unconstitutional or the application of any

— WE: ine eee a

provision to certain circumstances be held invalid,

the remainder of such chapters and the application

of such provisions to circumstances other than those

as to which it is held invalid shall not be affected

thereby.”’

The ‘‘following chapter’’ referred to is the Ship Mort-

gage Act.

Even in the absence of such a saving clause the courts

have generally held that partial invalidity does not neces-

sarily require holding an entire act unconstitutional. For

federal cases making elision and enforcing remainder see

list appended to the decision in Roberts v. Atlantic Oil

Producing Co. (C. C. A. 6), 295 Fed. 16, 19.

It is significant that the Congress in Subsection K

of the Ship Mortgage Act did not attempt to say that a

preferred mortgage created by the act was to be a

““maritime lien’’ but merely provided that such be a

“‘oreferred mortgage lien.’’ It is submitted the act should

not have been accorded an unconstitutional purpose but

was properly held, as to Subsection K, inapplicable to

the mortgages herein. The act, even if inapplicable to

the instant mortgages can nevertheless be applicable to

all maritime mortgages and even as to nonmaritime

mortgages may possibly have the lawful effect of estab-

lishing the basis of priority as against true maritime

liens.

TETRIS CRE MIE cr Re at: a

IV.

ESSENTIAL ORIGINAL ADMIRALTY JURISDIC-

TION CANNOT BE CONFERRED BY CONSENT OR

ESTOPPEL.

Counsel’s suggestion of an estoppel would be material

if respondent was denying the validity or preferred

status of the mortgages as mortgage liens rather than

questioning the essential original jurisdiction of the

court to foreclose them.

Petitioner’s counsel seem to have exaggerated the con-

sequences which will follow affirmance.

On pages 28-29 of petitioner’s brief are cited:

The Oconee (D.C. Va., 1922), 280 Fed. 927;

The Nanking (D. C. Cal., 1923), 292 Fed. 642;

The Lincoln Land (D. C. Mass., 1923), 295 Fed.

358,

In the case of The Oconee the court had acquired orig-

inal jurisdiction under a maritime lien for lies.” The

United States filed an intervening petition claiming pri-

ority payment under a preferred mortgage. It was con-

tended that the whole Ship Mortgage Act was unconsti-

tutional. No question of jurisdiction was involved as

the court had properly acquired jurisdiction over the

res,

In the case of The Nanking the initiatory libel appar-

ently was for enforcement of a true maritime lien fol-

lowed by intervening libel by the mortgagee, to which

libel exceptions based on claimed unconstitutionality of

the Act were overruled.

In the case of The Lincoln Land the mortgagee ap-

parently filed the libel, and, so far as the report indi-

cates, a sale occurred before any attack was. made on

the validity or extent of the mortgage. Intervening libels

based on maritime liens for supplies and lighterage were

filed and such claimants denied the priority of the mort-

gage over their claims.

The three cases, as well as those in which constitution-

ality was assumed, are not in point and present no con-

flict with the decision of the Court of Appeals herein.

CONCLUSION.

It is urged that the decrees of the Cireuit Court of

Appeals be affirmed.

Respectfully submitted,

GEORGE E. BRAND,

THOMAS C. BURKE,

CHARLES §. DESMOND,

Counsel for Respondent.

September 24, 1934.

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