318 F. Supp. 1196 | S.D. Fla. | 1968
ORDER ON MOTIONS FOR SUMMARY JUDGMENT
This order grants in part and denies in part the motions for summary judgment filed by the State of Israel and the Intervenor Dade Trading Corp.
I FACTS
On December 17, 1963, the Nili-Somerfin Car Ferries Limited
On October 14, 1964 the Owner-Mortgagor signed a financing agreement with the Bank of Scotland (hereinafter the Bank). Under this financing agreement the Bank was to loan 2,078,400 pounds sterling to the Owner-Mortgagor. This amount covered the 80 per cent payment of the purchase price due on the vessel’s delivery. The financing agreement provided that within fifteen days the Owner-Mortgagor would obtain a letter from the State of Israel (hereinafter Israel) promising Israel’s execution of a guarantee for the due repayment of the 2,-078,400 pounds sterling. Within fifteen days Israel agreed to execute the requested guarantee; the guarantee to be executed upon the Owner-Mortgagor’s receipt of the vessel. The Bank in turn was committed to advance the funds only after: (1) delivery of the Nili, (2) its registry at a port in Israel in the name of the Owner-Mortgagor, and (3) the issuance of the guarantee by Israel.
On May 25, 1965 Israel and the Owner-Mortgagor executed a contract of Guarantee.
On June 8, 1965 Israel issued its Guarantee to the Bank
On December 12, 1965, promissory note number 31 came due and was paid by the Owner-Mortgagor. Two more promissory notes came due on June 12, 1966. On June 14, 1966 Israel was notified by the Bank that the notes were not paid. On June 21 the Bank demanded that Israel pay the notes as required under the Guarantee. Israel complied with that demand. On June 30, Israel demanded repayment from the Owner-Mortgagor for the amount Israel had paid under the Guarantee. On November 8, 1966 Israel again demanded repayment of the amounts paid under the Guarantee and in addition elected under clause 13A of the mortgage deed to accelerate the debt.
On November 17, 1966 Israel filed this action to foreclose its mortgage. This Court ordered the vessel sold on December 29, 1966 and on January 30, 1967 the United States Marshal sold the vessel to the State of Israel for $4,200,000.00.
In addition to the claim of Israel, $885,500.21 in other claims have been filed against the vessel. Of these claims $76,349.21 worth were either settled or dismissed leaving $809,151 in claims against the vessel not including the $8,-014,644.00 claim of Israel under its mortgage. At this point in the litigation the validity and amount of these claims have not been determined. But to put the case in a proper context, a very rough classification of this $809,151 in claims is helpful.
II THE QUESTIONS PRESENTED
The motions for summary judgment raise two legal questions. First, is the mortgage valid and enforceable in this court? Second, is the mortgage’s lien preclusionary clause valid and effective?
III. THE VALIDITY OF THE MORTGAGE
The State of Israel seeks to foreclose its mortgage under 46 U.S.C. § 951 which gives this Court jurisdiction to foreclose certain foreign ship mortgages that are “preferred mortgages” within the meaning of the statute.
Throughout this lengthy litigation numerous objections have been made to the validity of the mortgage and this Court’s jurisdiction to foreclose that mortgage. A hearing on May 29, 1968 materially clarified and limited these objections. At that hearing the lienors conceded the proper registration and recordation of Israel’s mortgage.
The lienors argue that there never was an acceleration of the secured debt and at most Israel can only recover amounts actually paid under the Guarantee to the Bank. Exhibit 10 attached to Israel's motion for summary judgment clearly answers this objection. Exhibit 10 is a letter from the Accountant General of Israel to the Owner-Mortgagor dated November 8, 1966. In this letter Israel notified the Owner-Mortgagor of Israel’s election under clause 13A of the mortgage
The record clearly shows the acceleration of the secured debt.
B. Authority of Israel to Guarantee the Debt of a Private Corporation
The lienors also argue there is no showing of Israel’s authority to guarantee the debt of a private corporation. Thus, both the guarantee and the mortgage arising out of it are ultra vires and of no effect.
The record contains evidence of Israel’s authority to guarantee this private debt. The Guarantee attached to the Complaint as Exhibit II and executed by the Minister of Finance of Israel recites his power and authority to execute the guarantee and refers to explicit enabling legislation.
In the face of this evidence supporting Israel’s authority to guarantee the Owner-Mortgagor’s private debt, the lienors boldly raise the general and unsupported objection that there is ho such authority. This objection fails for two reasons. First, the objection is insufficient under Federal Rule 56(e). Israel has supplied affidavits and comprehensive, detailed documents tending to show its authority to execute the guarantee. The lienors have supplied nothing. Rule 56(e) places a burden on the lienors; they have not met it.
The second reason the objection fails is the presumption of regularity of a pub-
For the above reasons, I find that the State of Israel had authority to guarantee the Owner-Mortgagor’s private debt.
C. Is the Lien of the Mortgage a Maritime Lien?
The lienor’s third objection is based on the fact that the debt secured here was a shipbuilding loan. The lienors argue that the guarantee and mortgage grew out of the shipbuilding loan and can be in no better position than the loan. Since a shipbuilding contract under American admiralty law does not create a maritime lien, the lienors argue that the lien of Israel’s mortgage is not a maritime lien. This objection is based on three unstated assumptions: (1) that the normal admiralty rule concerning shipbuilding contracts applies to the lien of a preferred ship’s mortgage under the Ship Mortgage Act,
Detroit Trust Co. v. “Thomas Barium”
[T]he term “preferred mortgage” shall include * * * any mortgage, hypothecation, or similar charge created as security upon any documented foreign vessel * * * if such mortgage, hypothecation, or similar charge has been duly and validly executed in accordance with the laws of the foreign nation under the laws of which the vessel is documented and has been duly registered in accordance with such laws * * * (emphasis added).
The language of § 951 clearly requires application of Israeli law in construing and interpreting Israel’s mortgage. The second assumption must therefore fail.
The decision to apply Israeli law brings me to the third assumption which is now better stated in the form of a question: Must the Israeli mortgage have maritime lien status under Israeli law in order to be treated as a preferred mortgage under the Ship Mortgage Act? A negative answer is preferable since it is a literal interpretation of § 951. Section 951 contains no requirement that the “mortgage, hypothecation, or similar charge” have maritime lien status under the foreign
While a negative answer is preferable, for the sake of completeness I will assume the opposite.
Israel’s Shipping (Vessels) Law, 5720-1960
The owner of a vessel registered under this law or the owner of a share in a vessel * * * may mortgage his right in the vessel as security for an existing, future or contingent liability by the drawing up of a mortgage deed and its registration under this law.
Section 72 of Chapter 5 states in part:
Where any of the conditions of the mortgage deed the nonfulfillment of which confers the right of realization has not been fulfilled, the mortgagee may institute before the court [the maritime Court] an action in rem for the realization of the mortgage, and in such an action the court may (1) make an order for the sale of the vessel or the mortgaged share * * *
There is nothing in these sections which prohibits securing a shipbuilding loan by a mortgage. The language of Section 55 is clearly broad enough to cover such a mortgage. In addition, a close scrutiny of other statutory provisions reveals that this type of mortgage was clearly contemplated and intended by the statute. Section 4 of Chapter 2 deals with registration of vessels and reads:
A vessel under construction in Israel or abroad which fulfills the conditions of eligibility mentioned in Section 2 [a vessel more than half of which is owned by an Israeli corporation is eligible for registration] * * * may be registered * * * and upon being so registered it shall be deemed to be a vessel unless the contrary intention appears.
As pointed out, Section 55 of Chapter 5 allows “the owner of a vessel registered under this Law” (emphasis added) to mortgage his right in the vessel. Considering Sections 4 and 55 together it is clear that the statute allows a vessel under construction to be registered and mortgaged. These provisions clearly intended to allow a shipbuilding loan to be secured by a maritime mortgage on the vessel while it is still under construction. Considering the statute as a whole it is clear that the instant mortgage has maritime lien status under the laws of Israel.
In conclusion, the lienor’s third objection fails because Israeli law, not American law, controls the classification of this mortgage. Further, the objection fails because there is no requirement in § 951 that the foreign mortgage be maritime in status. And finally, even if there was a requirement of maritime status, this requirement is met since the instant mortgage is clearly of maritime lien status under Israeli law.
D. Does This Court Have Jurisdiction To Foreclose a Foreign Ship Mortgage Held by a Foreign Mortgagee?
This lienors’ final objection is that this Court does not have jurisdic
The statutory language of the 1954 Amendment contains no requirement that the mortgagee be a United States citizen.
A study of the policy considerations before Congress shows that foreign
mortgagees are within the statute. The primary concern of Congress in enacting the amendment was to provide the United States government with an efficient method for enforcing its mortgages on foreign vessels.
Finally, and most importantly, the Fifth Circuit has clearly held foreign mortgagees within the statute.
Considering the judicial authority, the clear statutory language, and the legislative history, Israel can foreclose its mortgage under § 951.
Having found Israel’s mortgage to be a preferred foreign ship mortgage within the meaning of § 951, the next question is the validity and effect of the mortgage’s lien preclusionary clause. An effective lien preclusionary clause would not alter the priority of the approximately $82,000 in tort and maintenance and cure claims.
The real battle over the lien preclusionary clause’s effectiveness is between American maritime lienors and Israel. Recognizing the fate of any claim which is subordinate to Israel’s mortgage, the American lienors argue strongly that their liens (approximately $275,000) are prior to the preferred mortgage by operation of the proviso of § 951. This proviso reads:
Provided, however, that such “preferred mortgage lien” in the case of a foreign vessel shall also be subordinate to maritime liens for repairs, supplies, towage, use of drydock or marine railway, or other necessaries, performed or supplied in the United States.
Israel responds to the American lienors reliance on this proviso by arguing that the lien preclusionary clause relegates all suppliers’ liens to a non-maritime status and thus subordinates them to the mortgage.
The lien preclusionary clause here in question appears in paragraph 5(d) of the mortgage:
The mortgagor hereby undertakes: (d) subject to the provision of this clause, not sell or encumber the vessel temporarily or permanently * * *.
Equally important in this case is paragraph 5(f) of the mortgage:
The mortgagor hereby undertakes: (f) To exhibit in prominent form on one of the walls of the map room and in the captain’s cabin in the vessel a printed notice in Hebrew and English stating that on this vessel a first mortgage has been granted in favor of the State of Israel, in accordance with the Shipping (Vessels) Law 5720-1960 of the State of Israel, and that under the terms of this mortgage the owner, employees of the vessel or their representatives have no right to create, grant or allow any encumbrance whatsoever on this vessel, and to keep such notice exhibited as aforesaid at all times.
The above notice was posted as required at all times.
A. Israel’s Argument in Favor of the Lien Preclusionary Clause’s Validity
There are three steps in Israel’s argument supporting the lien preclusionary clause. The first step rests heavily on 46 U.S.C. § 973 which provides:
The officers and agents of a vessel specified in Section 972 of this title shall be taken to include such officers and agents when appointed by a charterer, by an owner pro hac vice, or by an agreed purchaser in possession of*1204 the vessel; but nothing in this chapter shall be construed to confer a lien when the furnisher knew, or by exercise of reasonable diligence could have ascertained, that because of the terms of a charter party, agreement for sale of the vessel, or for any other reason, the person ordering the repairs, supplies or other necessaries was without authority to bind the vessel therefor. (Emphasis added.)
Israel argues that the words “or for any other reason” are broad enough to encompass a lien preclusionary clause contained in a foreign ship mortgage. Israel further argues that posting the notice required by paragraph 5(f) of the mortgage was sufficient notice to potential lienors under the notice requirement of § 973. In short, Israel argues that its lien preclusionary clause is sanctioned by § 973.
Having argued the validity of its lien preclusionary clause, Israel argues as a second step that as a mortgagee it can invoke the protection of § 973 and thus relegate the liens of American suppliers to a non-maritime status.
Finally, as a third step, Israel points out that relegation of the American suppliers’ liens to non-maritime status avoids any problem with the proviso of § 951. If the American suppliers had maritime liens then the proviso of § 951 would elevate these liens above its preferred mortgage. But Israel argues that since these American suppliers have only non-maritime liens they cannot take advantage of the proviso.
B. The Inability of the Lien Preclusionary Clause to Change the Proviso of the 1954 Amendment to § 951.
(1) The 19 5 U Amendment to § 951-a conditional grant of jurisdiction.
Israel's argument for the lien preclusionary clause’s effectiveness fails for a number of reasons. The primary reason is the clear intent of Congress in passing the 1954 Amendment to § 951.
Prior to 1954, the Ship Mortgage Act did not allow the foreclosure of foreign ship mortgages. In 1954, § 951 of the Ship Mortgage Act was amended by adding the second paragraph of § 951. This amendment was a jurisdictional amendment to allow certain qualifying foreign ship mortgages to be foreclosed under the Act. But the increase in jurisdiction was accompanied by a proviso that subordinated preferred foreign ship mortgage liens to maritime liens for supplies furnished in the United States. The reports of both the Senate and the House reflect the importance of this proviso.
The State of Israel attempts to defeat this clear Congressional purpose by some very sophisticated reasoning. Israel first enters the Ship Mortgage Act through the 1954 Amendment to § 951. (Initially, Israel ignores § 951’s proviso). Having entered the Act, Israel seizes upon § 973 and asserts a valid lien preclusionary clause based on this section. Then, armed with the lien preclusionary clause Israel returns to § 951 and nullifies the 1954 Amendment’s proviso. Thus, Israel accomplishes exactly what Congress intended not to happen.
Israel is only in this court because of the 1954 Amendment. To gain admittance Israel must recognize the substantive limitation on its rights contained in the 1954 Amendment’s proviso. Israel cannot use the 1954 Amendment to gain the benefits of the statute which are then in turn used to destroy the limitation contained in the 1954 Amendment.
(2) The application of Morse Dry Dock v. The Northern Star.
Assuming Israel is correct in Step 1 of its argument that § 973 sanctions the use of a lien preclusionary clause in a maritime mortgage,
The above mentioned principle concerning the effect of a mortgage’s lien preclusionary clause was first stated by the Supreme Court in Morse Dry Dock, etc. v. The Northern Star.
When supplies are ordered by the owner the statute [§ 973] does not attempt to forbid a lien simply because the owner has contracted with a mortgagee not to give any paramount securities on the ship.
Despite some initial criticism of The Northern Star holding as dicta the case has been followed.
There is brief comment in two decisions of the Fifth Circuit which seem to say that a mortgage lien preclusionary clause coupled with sufficient notice are together capable of destroying the maritime status of suppliers’ liens.
The most such a contract [a mortgage lien preclusionary clause] can do is to postpone the claims of a party chargeable with notice of it to that of the mortgagee. (Emphasis added)
Thus, even with the additional element of notice, the Supreme Court still reasoned that the maritime status of a supplier’s lien could not be destroyed by a mortgage lien preclusionary clause.
In conclusion, the Supreme Court’s holding in The Northern Star, the reasoning behind the decision, and the cases that follow the decision all prove that the second step in Israel’s argument is fatally defective.
(3) The proviso of § 951 — its impact on priorities.
Once Step 2 of the mortgagee’s argument fails and the American suppliers’ liens are assured maritime status, then step 3 of the mortgagee’s argument fails also. This follows because once the maritime status of these suppliers’ liens is recognized, their priority vis a vis a preferred foreign ship mortgage is controlled by the proviso of § 951. Israel can only prevail if it destroys the maritime status of the American supplier’s lien. The principle enunciated in The Northern Star forbids this destruction. Thus the American suppliers retain their maritime liens and the proviso of § 951 elevates their liens to priority over the preferred ship mortgage lien of Israel.
Israel contends that its position^ is supported by the legislative history of the 1954 Amendment. Congress in passing the 1954 amendment was concerned with the problem faced by American suppliers when they were requested to furnish supplies and services to a foreign vessel.
The short answer to this analysis is that while Congress might have limited the protection of proviso in this manner it clearly chose not to do so. The proviso’s language does not give American suppliers priority “only where there was no actual notice of the mortgage.” The proviso’s language does not give this priority “only where notice of the foreign mortgage was not posted.” The proviso clearly gives the American suppliers priority always and says it in unqualified and unambiguous language.
Israel also argues the significance of the proviso’s use of the word “subordinate.” Israel points out that the proviso did not say that a preferred foreign ship mortgage lien could never take ahead of American suppliers; the proviso only states that these mortgage liens are subordinate to American suppliers’ liens. This use of the word “subordinate,” according to Israel, meant that Congress contemplated the application of common law principles that have always surrounded mortgages. One such principle is that the first mortgagee can negate the authority of the mortgagor to further encumber the res. This common law principle, argues Israel, is specifically sanctioned by § 973 and should be applied in this case. In short, Congress intended to incorporate in the 1954 Amendment the same balancing of equities respecting due diligence as has always existed between third parties and a mortgagee.
Again, Israel’s argument is defeated by a clearly expressed Congressional desire. It was the technicalities and procedural problems of common law property principles which were the very reason for the 1954 Amendment.
(5) Summary
Israel’s lien preclusionary clause cannot destroy the American lienors’ priority under the proviso to § 951. This
V CONCLUSION
I find that Israel’s mortgage is a valid preferred foreign ship mortgage as defined in § 951 and that this Court has jurisdiction under § 951 to foreclose this mortgage. To this extent the motion for summary judgment filed by the State of Israel is granted.
I find that the respective priorities in the fund now in the Registry of this Court are:
First, preferred maritime liens as defined in § 953;
Second, the maritime liens of American suppliers as defined in the proviso to § 951;
Third, the preferred mortgage lien of the State of Israel.
To this extent, and without adjudicating the existence or amount of any lien, the motion for summary judgment filed by the intervenor Dade Trading Corp. is granted.
. A company incorporated under the laws of the State of Israel and having its registered office at 98 Haatzmouth Road, Haifa in the State of Israel.
. This agreement was modified by an addendum dated August 11, 1964 which is not material to the present litigation.
. Exhibit D-l and D-2 with Israel’s motion for summary judgment.
. Exhibit E-l and F-2 with Israel’s motion for summary judgment.
. Exhibit H-l and H-2 with Israel’s motion for summary judgment.
. The Owner-Mortgagor has never paid any of these demanded amounts to Israel. Affidavit of E. Landau, Exhibit 17 with Israel’s motion for summary judgment. The Owner-Mortgagor also defaulted on certain mortgage requirements concerning insurance coverage of the Nili.
. This is indeed a rough classification. Many of the claims are highly complex and involve difficult factual and legal questions.
. This concession solves any problem that may arise under the following italicized language of § 951:
[T]he term ‘preferred mortgage’ shall include * * * any mortgage, hypothecation, or similar charge * * * if such mortgage, hypothecation, or similar charge * * * has been duly registered in accordance mth such laws [laws of the country of the vessels documentation] in a public register either at the port of registry of the vessel or at a central office; * * *
. The mortgage is attached to the complaint as Exhibit I and to the motion for summary judgment as Exhibit B-l and B-2.
. Paragraph 14 of the Complaint.
. The Guarantee on page 2 reads: “[I], the Minister of Finance of the Government of Israel, acting on behalf of the State of Israel by virtue of the powers conferred upon me by the State Guarantees Law 5718-1958 and with the approval of the Finance Committee of the Kenesset, DO HEREBY GUARANTEE. s|i ifi sfr tt
. Paragraphs 6 and 11 of the Complaint.
. This affidavit was filed on February 15, 1967.
. Exhibit 15 with Israel’s motion for summary judgment.
. The same reasons that warrant the use of presumptions at trial warrant their use in a motion for summary judgment. Becker v. Safelite Glass Corp., 244 F.Supp. 625 CD.Kan.1965); 6 J. Moore, Federal Practice ¶ 56.11 [10] (2d ed. 1953),
. United States v. Chemical Foundation, 272 U.S. 1, 14-15, 47 S.Ct. 1, 71 L.Ed. 131 (1926). See also Sabin v. United States, 44 F.2d 70, 70 Ct.Cl. 574 (1930).
. United States v. King, 44 U.S. (3 How.) 773, 785-786, 11 L.Ed. 824 (1845); Boissonnas v. Acheson, 101 F.Supp. 138 (S.D.N.Y.1951).
. Originally passed in 1920 and now codified as 46 U.S.C. §§ 911-984.
. 293 U.S. 21, 55 S.Ct. 31, 79 L.Ed. 176 (1934);
. These two possible answers are discussed in G. Gilmore & C. Black, Admiralty, § 9-51 p. 578 (1957).
. Passed by the Kenesset on the 11th Av., 5720 (August 4, 1960)/ and published in Sefer Ha-Chukkim No. 315 of the 21st Av., 5720 (August 14, 1960), p. 70; the Bill and an Explanatory note were published in Hatza ot Cliok No. 392 of 5720, p. 338.
. Laws of the State of Israel, Yol. 14, 5720-1960 p. 72, [Hereinafter Laws of Israel].
. Laws of Israel, p. 76.
. Laws of Israel, p. 61.
. For a clear statement of this view of the statute see Rederiaktierbolaget v. Compania de Navegacion, 139 F.Supp. 327, 336 (Canal Zone 1955).
. At the time of the amendment the United States government had outstanding 371 of these mortgages totaling $116,870,476.33. Hearings on H.R. 6276 Before the Committee on Merchant Marine and Fisheries, 83rd Cong. 2d Sess., 11 (1954) [Hereinafter Hearings on H.R. 6276].
. Mr. Prizer of the Maritime Association of the United States in testifying before the House Committee stated:
There is an international phase of this, too. We have been working with foreign associations for several years to obtain, insofar as possible, uniformity in other countries. There are foreign countries today which will enforce foreign ship mortgages, not only for their own citizens but for other citizens, too. Other countries, particularly Great Britain, do not. Great Britain’s law, for all practical purposes, is similar to our own now. But the secretary of the English Maritime Law Association has had the matter up, as I understand, before members of the judiciary before whom justice bills originate, and then there is a strong indication if our bill has passed we will get a similar result in Great Britain, which would be very beneficial to the United States Government and American mortgages in that if vessels could not be found in this country and could be found in England, there would be a remedy there.
Hearings on H.R. 6276 at 5. See also S.Rep.No.1219, 83rd Cong., 2d Sess. 5 (1954).
. This view is expressed in Rederiaktierbolaget v. Compania de Navegacion, 139 F.Supp. 327, 336 (Canal Zone 1955). A further indication of the “international phase” of the amendment is that except for the proviso, and the lists of types of vessels excluded the amendment copies Article I of the Brussels Convention of 1926 for the Unification of Certain Rules of Law Relating to Maritime Liens and Mortgages. An English translation of the convention is contained in 6 A. Knauth, Benedict on Admiralty 383 (1958).
. Tropicana Shipping, S. A. v. Empresa Nacional “Elcano”, 366 F.2d 729 (5th Cir. 1966); Brandon v. S. S. Denton, 302 F.2d 404 (5th Cir. 1962).
. This follows because of 46 U.S.C. § 953 (a) (2).
. Foreign lienors who could qualify under § 953(a) (2)i would not be subordinate to the mortgage but would have priority because of § 953 (b)i.
. Captain Radan’s deposition p. 4, 9, 13.
. Id. at 17-18.
. See Pascagoula Dock Station v. Merchants and Marine Bank, 271 F.2d 53 (5th Cir. 1959); Point Landing, Inc. v. Alabama Dry Dock & Shipbuilding Co., 261 F.2d 861 (5th Cir. 1958). Contra, The Bergen, 64 F.2d 877 (9th Cir. 1933) reversing, 50 F.2d 447 (S.D.Cal.1931); The Trade wind, 144 F.Supp. 408, 413-414 (D.Md.1956).
. The House report contained a letter from Secretary of Interior Sinclair Weeks which stated:
While thus providing a forum on the admiralty side of the United States courts in the enforcement of defaulted foreign mortgages, the bill does not give these foreign ship mortgages the same order of priority over subsequent repair and other liens given under existing United States laws to preferred ship mortgages on United States flag vessels. A proviso at the end of the bill provides that, in case of mortgages on foreign vessels, the mortgage lien shall be subordinated to maritime liens for repairs, supplies, towage, use of drydoek or marine railway, or other necessaries. Under existing United States law, preferred mortgage liens on United States flag vessels come ahead of maritime liens for repairs, supplies, and necessaries furnished subsequent to the mortgage liens. On the other hand, the bill improves the position of the holder of a mortgage on a foreign vessel, for under existing United States law he may only foreclose in an equity proceeding in the United States court and in such*1205 ease the mortgage lien is subordinate to all maritime liens.
* * * Thus, while the bill does not give the holder of a mortgage on a foreign vessel the same preference or priorities as the holder of a mortgage on a United States vessel, it provides him an expeditious foreclosure proceeding and takes away no procedural or substantive right which he now has.
H.R.Rep. No. 6276, 83rd Cong., 2d Sess., 2-3 (1954).
The Senate Report contained a letter from Attorney General William P. Rogers which stated:
The proviso in the bill, subordinating the mortgage lien in the case of foreign vessels to the liens of suppliers, appears to have been written to meet the objection of drydock and repair yard owners in the United States. They assert that in the short time available in their business, their facilities for discovering the existence of a foreign ship mortgage are not adequate as is the case with American-flag vessels. They ask, therefore, that their liens for repairs, supplies, towage, use of drydocks, or marine railway, or other necessaries, should be prior to the mortgagee’s claim where mortgages of foreign ships are involved. S.Rep. No. 1219, 83rd Cong., 2d Sess. 3-4 (1954).
. This assumption is probably incorrect. Judge Watkins in The Tradewind, 144 F.Supp. 408, 416-417 (D.C.Md.1956) carefully traces the history of § 973 in relation to other provisions of the Ship Mortgage Act to show that § 973 was not intended to include a preferred ship mortgage.
. The maritime supplies in the instant case were ordered by the owner or his admitted agent.
. 271 U.S. 552, 46 S.Ct. 589, 70 L.Ed. 1082 (1926) (hereinafter The Northern Star).
. Id. at 554, 46 S.Ct. at 590.
. The Bergen, 50 F.2d 447, 448 (D.C.Cal.1931), reversed, 64 F.2d 877 (9th Cir. 1933).
. International Refugee Organization v. Maryland Drydock Co., 179 F.2d 284 (4th Cir. 1950); The Bergen, 64 F.2d 877 (9th Cir. 1933) reversing, 50 F.2d 447 (S.D.Cal.1931); Rockport Yacht & Supply Co. v. M/V Contessa, 209 F.Supp. 396 (D.C.Tex.1962); The Tradewind, 144 F.Supp. 408 (D.C.Md.1956).
. The Northern Star principle is also necessary to maintain an internal consistency within the Ship Mortgage Act. In discussing this point in The Tradewind, 144 F.Supp. 408, 418, 419 (D.C.Md.1956) Judge Watkins states:
Accordingly, this court holds that Section 973 was enacted and re-enacted as an exception in favor of the vessel owner and deals only with the authority of a third person to represent the owner so as to create a lien. It does not prevent the creation of a lien as such (the status of the lien being another matter) against the vessel by an owner in favor of a supplier irrespective of the prohibitory terms of any mortgage covenant made by the owner to the mortgagee. To hold otherwise would be to nullify the effect of other provisions of the Ship Mortgage Act, 1920, in that a ship’s mortgage which failed to comply with the procedural requirements of the Act, necessary to achieve the status of a preferred mortgage, could nevertheless not only gain priority over the supplier’s claim but would relegate it to a non-maritime status where the supplier knew, or with due diligence could have learned, of the terms of the mortgage.
. In Pascagoula Dock Station v. Merchants and Marine Bank, 271 F.2d 53, 55 (5th Cir. 1959), Judge Brown in speaking for the Court stated:
A printed or written notice in the wheelhouse or some other obvious place is, of*1207 course, good practice, but it is not required. It serves a dual purpose of bringing actual knowledge home to the potential lienor of the existence of a preferred ship mortgage and may, if carefully drafted, constitute a notice prohibiting liens at all as permitted under the maritime lien statute. 46 U.S.C. § 973.
In Point Landing, Inc. v. Alabama Dry Dock & Shipbuilding Co., 261 F.2d 861, 867 (5th Cir. 1958), Judge Brown, again speaking for the Court stated :
Indeed, it seems incongruous to argue that the taking of a mortgage on the vessel, the very subject of a maritime lien, is evidence of a purpose to rely solely on the personal credit of the owner. If it proves anything, it proves just the opposite. This is all the more true since any such chattel mortgage by its very nature has little real value against the claims most likely to defeat it— maritime liens for suppliers and torts— unless, as this one did not, an outright prohibition against liens is expressed and knowledge thereof'imputed to the lienor under Section 973.
. See footnote 36 supra.
. 271 U.S. 552, 554, 46 S.Ct. 589, 590.
. This is exactly the result reached by Judge Watkins in The Tradewind, 144 F.Supp. 408 (D.C.Md.1956). In discussing The Tradewind’s holding on this point Gilmore and Black state:
“The statute is notably obscure on this point, but Judge Watkins holding seems the only way of giving effect to the clearly declared Congressional policy of preferring American materialmen over foreign ship mortgages; given the opposite holding, the materialmen would be as badly off, vis a vis the foreign ship mortgage, as they now are with respect to ships under charter or American flag ships subject to a preferred mortgage. That result Congress evidently wished to prevent, even though the mortgagee in many cases (not, however, in The Tradewind) will be the United States. If the Tradewind holding does not accurately express the congressional intent, it should be up to Congress to clarify the statute.” G. Gilmore & C. Black, Admiralty, § 9-70 p. 614 (1957).
. See footnote 36 supra. Also see Hearings on H.R. 6276, p. 10.
. There was good reason for this clarity. The backers of the amendment wanted a non-controversial bill. Hearings on H.R. 6276 p. 7. Prior to the amendment American suppliers always enjoyed priority over mortgages on foreign vessels. Conferring the preferred status of § 953 on certain designated foreign ship mortgages threatened to change this favorable position of the American suppliers. The backers of the bill recognized that such a change would make the amendment controversial and threaten its passage. Thus the proviso was added to assure that the amendment in no way changed the rights of American suppliers. If the suppliers had for a moment expected to lose their favorable position merely by the insertion of a clause in the mortgage and the posting of notice in the wheelhouse the bill would have ceased to be non-controversial.
. S.Rep. No. 1219, 83rd Cong., 2d Sess. pp. 3, 4; Hearings on H.R. 6276, p. 2.
