6. Are Mortgages Maritime Contracts?—
An ordinary mortgage upon a vessel, whether made to secure the purchase money or to obtain funds for general purposes, is not a maritime contract. This is the rule in this country, as announced by the Supreme Court in the J. E. Rumbell, 148 U. S. 1, although it is different under the general maritime law in other countries. Accordingly, courts of admiralty in the United States, have no jurisdiction of a libel to foreclose a mortgage or to enforce title or right to possession under it. If, however, the ship has been sold under admiralty process, and there are proceeds in the registry after satisfying maritime liens, the court will pay over the surplus, to a mortgagee in preference to the owner or general creditors.
The Ship Mortgage Act (supra) makes a sweeping exception to the foregoing rule in cases of American vessels where the mortgagee is an American citizen and where the parties fulfill certain formalities required by the Act and discussed in the next section. The Act provides that these mortgages shall be known as "preferred mortgages" and confers upon the courts of admiralty exclusive jurisdiction to foreclose them. There has yet been no judicial interpretation of this Act. Some doubt may be entertained whether it is within the power of Congress to convert ship mortgages into maritime contracts; that is to say, can Congress take a transaction, which has always been regarded as wholly foreign to the admiralty and confer upon it a maritime quality? The decision of this point is of the utmost importance and will be awaited with the greatest concern by every one interested in ships and shipping.