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THE SOUTHERN CROSS

July 5, 1938

THE SOUTHERN CROSS; THE PAN AMERICA


The opinion of the court was delivered by: BYERS

BYERS, District Judge.

These cases are before the court on motions by the libelant to overrule exceptions, and to dismiss exceptive allegations filed by claimants and sundry interveners.

These pleadins are common to all such parties, but are separately presented. The causes are substantially identical, and one opinion will serve to dispose of both causes, so far as this motion is concerned.

 The libelant, the United States of America, sold the Southern Cross to Munson Steamship Line on December 5, 1925; that is to say, a bill of sale dated November 28, 1925, was delivered and recorded in the office of the Collector of Customs of the Port of New York on the first named day, when registry was issued and a preferred ship mortgage, dated contemporaneously with the bill of sale, in the sum of $769,500.00 at 4 1/2% interest, was executed, delivered and recorded in the same office.

 Payments of notes for which the mortgage was given as security have been made as to $181,900.00, and the balance of principal is in default. Some interest on the notes has been paid. This cause in rem has for its object the foreclosure of that mortgage.

 In 1934, the mortgagor sought reorganization pursuant to Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207, and trustees were duly appointed by the United States District Court for the Southern District of New York, who have continued until this time to administer the company.

 The trustees make claim to the vessel. Guaranty Trust Company, as trustee under a mortgage which in terms is understood to be subordinate to that described in the libel, has intervened for the purpose of contesting the preferred status of the Government's mortgage.

 Tietjen & Lang Dry Dock Company, and Robins Dry Dock & Repair Company, et al., maritime lienors, have also intervened, and offer a like contention.

 It does not appear that the liens which the latter assert were incurred until subsequent to the execution, delivery and recording of libelant's mortgage, and there was no failure of indorsement upon the ship's papers. In other words, so far as these particular interveners are concerned, their position is in clear contrast to that of the prevailing lienor in Morse Dry Dock & Repair Co. v. The Northern Star, 271 U.S. 552, 46 S. Ct. 589, 70 L. Ed. 1082.

 The questions presented are readily divisible into the exceptions which are addressed to one proposition; namely, that it appears on the face of the libel that the instrument pleaded is not a Preferred Mortgage by statutory exclusion; and the exceptive allegations, which would impose upon the court the duty of ascertaining what was done in respect of the documentation of the vessel as to her home port, by the mortgagor as owner; and whether the requirements of the law were met so as to constitute the Southern Cross a vessel of the United States at the time of the execution, delivery and recording of the mortgage.

 These are not matters within the knowledge of the court, and no conclusion can be reached with respect to their bearing upon the controversy without an examination of the documents and the possible taking of testimony concerning, among other things, a certain action taken by the Commissioner of Navigation under date of December 2, 1925, referred to in the trustees' brief but not appearing in the pleadings under examination.

 So far as this cause is concerned, the exceptive allegations are deemed not to be available to accomplish their avowed purpose, and the motion to dismiss will be granted, without prejudice to the right of the several interveners to plead these matters in their respective answers if they be so advised.

 The exception is buttressed by much interesting discussion in the briefs. If logic were an end in itself, the argument in support of the contention, that since the United States is not a citizen of itself, the mortgage pleaded cannot have a preferred status (Title 46, U.S.C., § 922, subd. 5, 46 U.S.C.A. § 922, subd. 5) and hence the court is without jurisdiction, would at least be plausible. But when logic and common sense are approaching head-on, it is not the latter which must give way.

 The only decision on the subject is The Northern No. 41, D.C., 297 F. 343, which is squarely ...


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