The De Smet

10 F. 483, 1881 U.S. App. LEXIS 2584

This text of 10 F. 483 (The De Smet) is published on Counsel Stack Legal Research, covering U.S. Circuit Court for the District of Eastern Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
The De Smet, 10 F. 483, 1881 U.S. App. LEXIS 2584 (circtedla 1881).

Opinion

Pardee, 0. J.

Tbe question presented in this case is as to the priority of certain lienholders on funds (proceeds of the sale of the De Smet) in the registry of the court. The appellee claims the funds under a mortgage duly recorded according to the act of congress in that behalf, and bearing date of January 24, 1880. The appellants claim under liens and privileges granted the furnishers of supplies and material-men in the home port by the laws of the state of Louisiana, some of prior and some of later date than the mortgage of appellee. Since the adoption of the constitution of Louisiana, of 1879, such liens and privileges do not require to be recorded in order to rank prior mortgages, or to bo valid against third persons. See article 177, Const. La. 1879. And the twelfth admiralty rule has not been changed since 1872. So that the questions upon which the Lottawanna Case, 21 Wall. 580, was decided cannot be made in this case, [484]*484and we are without any decision of the supreme court to guide us in the matter. The decisions of the various circuit and district courts reported, in which the precise question of this case has been answered, are very numerous, and as conflicting as the testimony of witnesses in a collision case. In this circuit, the rule followed by the district judge in this case, in favor of the recorded mortgage, has prevailed since 1877. It may, therefore, be set down as an open question, in the country at large, to remain so until the supreme court shall finally settle it.

The whole question seems to turn upon the effect to be given to section 4192 of the Eevised Statutes of the United States, which declares that—

“Ho bill of sale, mortgage, hypothecation, or conveyance of any vessel or part of any vessel, of the United States, shall be valid against any person other than the grantor or mortgagor, his heirs and devisees, and persons having actual notice thereof, unless such bill of sale, mortgage, hypothecation, or conveyance is recorded in the office of the collector of the customs where such vessel is registered or eni-olled. The lien by bottomry on any vessel, created during her voyage, by a loan of money, or materials necessary to repair or enable her to prosecute a voyage, shall not, however, lose its priority, or be in any way affected by the provisions, of this section.”

The question, is, does this section create a lien in favor of a mortgage recorded according to its provisions ? The language of the section is in the negative form. If put in the affirmative form, on the theory of its creating liens or granting rights, then the following three propositions comprise the whole substance, as far as said section declares'liens or rank of liens:

(1) Bottomry liens, etc., shall not be affected by recordation or non-recordation.

(2) A recorded conveyance or mortgage, etc., shall be valid against all persons.

(3) An unrecorded conveyance or mortgage shall be valid against the grantor or mortgagor, his heirs and devisees, and persons having actual notice.

It ought to follow, then, that if this section gives a lien to recorded mortgages, it gives one also, though of a limited scope, to unrecorded mortgages. And as liens created by congress are superior in rank to state liens, it follows that an unrecorded mortgage has priority over state liens.

Again, considering from the lien hypothesis, the lien given by section 4192 to a recorded mortgage ranks the lien given by state laws to material-men. The lien given to material-men by state laws [485]*485ranks unrecorded mortgages, which latter have no United States lien. An unrecorded mortgage ranks a recorded mortgage when the holder of the latter has actual notice of the unrecorded mortgage.

Now let us take a case where there is an unrecorded mortgage, a subsequent recorded mortgage, where the mortgagee and holder has actual notice of the first mortgage, and a lien, under the state law, for a material-man; and this is the actual state of facts in the case of The John T. Moore, 3 Woods, 61. In that case, Judge Woods, who maintains that section 4192 gives a lien to a recorded mortgage, says:

“This fact of notice gives the mortgage to Swift’s Iron & Steel Works and Long (unrecorded) precedence over the mortgage (recorded) of John T. Moore & Co., and entitles it to priority of payment over all the claims, even though, as between the mortgage to Swift’s Iron & Steel Works and Long, and claims inferior to the mortgage of John T. Moore & Co., the latter would he entitled to priority if the mortgage of John T. Moore & Co. were out of the case.”

It would seem to have been just as logical to have said; As the mortgage of John T. Moore & Co. was duly recorded, it has precedence over the lien given by the state law to W. G-. Coyle & Co. for supplies, and is entitled to priority of payment over all the claims, even though, as between the mortgage of John T. Moore & Co. and claims inferior to the state lien, the latter would be entitled to priority were the state lien to Coyle & Co. out of the case. Or to have said: As the state lien given to Coyle & Co. has precedence over the unrecorded mortgage of the Swift Iron Works, it is entitled to priority of payment over all the claims, even though, as between the state lieu to Coyle & Co. and claims infejior to the Swift Iron Works mortgage, the latter would be entitled to priority were the-mortgage to the Swift Iron Works out of the case.

It is true that Judge Woods follows two Ohio cases, Brazee v. Lancaster Bank, 14 Ohio, 318, and Holliday v. Franklin Bank of Columbus, 16 Ohio, 533, but there, where the controversy was between judgment liens and mortgages, the court arbitrarily cut the knot by deciding that each lien should prevail according to its age. That Ohio court says:

“ The first-named proposition is known to the profession as the triangular question,” and “if it be attempted to settle the question on the principle of superiority, it runs in a circle and produces no result.”

And it is also true that if the dilemma exists as Judge Woods found it in the John T. Moore Case, his method of extrication, following the Ohio cases, may be right; but a construction of a statute [486]*486that produces such results should be avoided if possible. But there is a further inconsistency resulting from the construction claimed, and it is shown als.o in the John T. Moore Case. This decision, which declares that the law of congress that—

“No bill of sale, mortgage, hypothecation, or conveyance of any vessel, or part of any vessel, of the United States, shall le valid against any person other than the grantor or mortgagor, his heirs and devisees, and persons having actual notice thereof, unless such bill of sale, mortgage, hypothecation, or conveyance is recorded in the office of the collector of customs where such vessel is registered or enrolled,” etc.

—Is valid and must be enforced, concludes by actually enforcing an unrecorded mortgage of a vessel against third persons without notice, in the direct face of the statute, for it gives priority to an unrecorded mortgage over lienholders without notice.

And there is another consideration.

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Bluebook (online)
10 F. 483, 1881 U.S. App. LEXIS 2584, Counsel Stack Legal Research, https://law.counselstack.com/opinion/the-de-smet-circtedla-1881.