The law of the sea

by George L. Canfield; J. Y. Brinton; George W. Dalzell

(2) The names of the parties to the sale;

(3) The time and date of receiving the bill of sale; and

(4) The interest in the vessel so sold.

It is also provided that no bill of sale can be recorded unless the interest of the grantor in the vessel is stated, also the interest sold, nor unless the bill has been acknowledged before a notary public or other officer authorized to take acknowledgements. In the case of a change in the port of documentation, no bill of sale may be recorded at the new port unless a certified copy of the record of the vessel at the former port is furnished by the collector of that port.

III. Preferred Mortgages Under Merchant Marine Act

The law in regard to ship mortgages is highly technical and reference only will be made here to the general provisions of the Merchant Marine Act which makes far-reaching changes in the existing system in an effort to give added value to mortgage security on a ship, a form of security which heretofore has been of very limited value on account of the subordination of the mortgage, which is not a maritime contract, to all maritime liens, whether arising out of contract or tort.

The present law gives to a duly recorded preferred mortgage priority except as to (1) liens arising prior to the recording of a mortgage in strict conformity to the provisions of the act; (2) liens for damages arising out of tort; (3) liens for wages of stevedores when employed directly by the owner, operator, master, ship's husband or agent of the vessel; (4) liens for wages of the crew of the vessel; (5) liens for general average; (6) liens for salvage, including contract salvage; and (7) court costs and expenses.

If a mortgage covers a ship of over 200 gross tons the material facts regarding it must be endorsed on the ship's papers. There must also be filed an affidavit that the mortgage was made in good faith, without the intent to delay or defraud. It must appear that the mortgagee is a citizen of the United States and that the mortgage does not stipulate that the mortgagee waives its preferred status. If the mortgage includes property other than a vessel it must provide for the separate discharge of such property by the payment of a specified amount, and if it includes more than one vessel it must similarly provide for the separate discharge of each vessel on the payment of a specified amount, in default of which, the court, in a suit on the mortgage, is to determine the proportionate charge.

Two certified copies of every preferred mortgage are to be delivered by the collector to the mortgagor, who is required to use due diligence to retain one copy on board the vessel, and to cause it and the ship's documents to be exhibited by the master to any person having business with the vessel which may give rise to a maritime lien or to the sale of the vessel. Upon request, the master is required to exhibit to such person the ship's documents and this copy of the mortgage. Upon request of the mortgagee, the mortgagor is required to disclose in writing, before the execution of any preferred mortgage, the existence of any maritime lien prior to the mortgage, that is known to the mortgagor, and, without the consent of the mortgagee, the mortgagor is forbidden, after the execution of the mortgage and before the mortgagee has had reasonable time to record the mortgage and have the necessary endorsements made, to incur any obligations creating liens on the vessel other than those for wages, for general average or for salvage.

The law permits the preferred mortgage to bear any rate of interest agreed to by the parties. It provides severe penalties upon the master for failing to exhibit the ship's documents or the copy of the mortgage, when demanded, and permits local inspectors to suspend or cancel the master's license for any such violation. As to the mortgagor who fails to make disclosure of liens already referred to, or who incurs new liens with attempt to defraud, the law provides a maximum fine of $1,000 and imprisonment for two years, and makes the mortgage then immediately payable. It also subjects the collectors of customs and the mortgagor to personal liability for loss occasioned by their failure to perform their duties under the act and opens the federal courts to such suits.