  1. How Title Acquired.—Title to a ship is acquired in the same ways as other personal property, by construction, purchase, gift or exchange. It may pass by delivery, without any bill of sale or other written document. This method, however, is neither advisable nor practicable where the value is substantial or active business is contemplated.[2] 2. Registration and Regulation.—The United States, like other commercial countries, provides a complete system for the registry and regulation of all ships entitled to the privileges of American vessels. These laws do not require registry or enrollment unless such privileges are desired. The owner may acquire and dispose of his boat without reference to them, but, until it is registered or enrolled, it is not a vessel of the United States and cannot engage in any trade. It is therefore usual to have all matters in relation to the title and transfer of a ship in writing and according to customary forms. This is a safe and salutary rule. 3. Shipbuilding Contracts.—The builder of a ship is the first owner unless there is a special contract under which he merely performs labor upon materials which the other party supplies. This is unusual. The shipbuilder generally constructs the vessel upon an order or contract, which, if properly drawn, provides for In the United States v. Ansonia Co., 218 U.S. 452, a shipbuilder in Richmond, Va., became insolvent while engaged in constructing three vessels for the government; one war dredge for the War Department; one a revenue cutter for the Treasury Department; and the third a cruiser for the Navy. In each instance the shipbuilder was to furnish the labor and materials and perform the work and was to receive partial payments from time to time as the construction progressed. In the case of the dredge, the contract provided that the parts of the vessel as its construction progressed should become the sole property of the United States, although it was further provided that the government might subsequently reject defective work or parts and might even reject the completed vessel, should it fail to pass inspection. The contracts for the revenue cutter and cruiser, on the other hand, contained no provision for the passing of title before completion, but did provide that the government should have a superior lien upon the vessels for all payments made on account. The Supreme Court (Day, J.) said: It is undoubtedly true that the mere facts that the vessel is to be paid for in installments as the work progresses, and to be built under the superintendence of a government inspector, who had the power to reject or approve the materials, will not of themselves work the transfer of the title of a vessel to be constructed, in advance of its completion. But it is equally well settled that if the contract is such as to clearly express the intention of the parties that the builder shall sell and the purchaser shall buy the ship before its completion, and at different stages of its progress, and this purpose is expressed in the words of the contract, it is binding and effectual in law to pass the title. The court further held that the lien reserved in the contracts for the revenue cutter and cruiser was not superior to the liens of material men under the laws of Virginia. 4. Not Within Admiralty Jurisdiction.—Until the vessel is launched and completed she is not within the jurisdiction of the maritime law but, like any other piece of construction, is subject to the local laws of the State wherein the work is carried on. The Admiralty courts of the United States decline jurisdiction of all contracts for the building of a ship. 5. Enrollment and Registration.—When the ship is completed, she should be registered or enrolled as an American vessel. These words are synonymous; vessels in the foreign trade are "registered" and those in the domestic or coastwise trade are "enrolled"; (The Mohawk, 3 Wall. 566; Huus v. Co., 182 U.S. 392, 395). Vessels of less than twenty tons and more than five tons are neither registered or enrolled but should be licensed. 6. Ships Entitled to.—This proceeding is accomplished at the office of the collector of customs of the district in which the home port of the vessel may be (Rev. St. §4141, Morgan v. Parham, 16 Wall. 471). The home port is the port at or nearest which the owner, or managing owner, resides. The registration, enrollment and licensing of vessels is fully covered by Regulations originally promulgated by the Secretary of the Treasury under the navigation laws of the United States, which may now be obtained in revised form by application to the Department of Commerce at Washington. Ships entitled to such registration or enrollment are: 1. Vessels built in the United States and owned by a citizen. 2. Vessels captured in war and condemned as prize, and owned by a citizen. 3. Vessels forfeited and sold for breach of the laws of the United States and purchased and owned by a citizen. 4. Seagoing vessels whether steam or sail which have been certified by the Steamboat Inspection Service as safe to carry dry and perishable cargo, wherever built, which are to engage only in trade with foreign countries, being wholly owned by citizens of the United States or corporations organized and chartered therein, the president and managing directors and the holders of the control of which shall be citizens of the United States; also vessels answering the foregoing description which are to trade with the Islands of Guam and Tutuila until February 1, 1922, and thereafter as governed by Sec. 21 of the Merchant Marine Act (see Appendix). 5. Vessels wrecked in the United States, and purchased and repaired by a citizen, if the cost of the repairs is equal to three times the appraised value of the wreck as salved. 7. Steamboats employed in a river and bay of the United States and owned wholly or in part by an alien resident within the United States. 8. Yachts owned by citizens and employed exclusively for pleasure. These, although foreign built, may be licensed to proceed from one domestic port to another so long as they do not trade or carry passengers. 7. Incidents of Enrollment or Registration.—The law provides that vessels registered pursuant to law and no others (except those qualified according to law for carrying on the coasting or fishing trade) shall be deemed vessels of the United States and entitled to the benefits and privileges pertaining to such vessels. When a vessel ceases to be wholly owned by citizens of the United States or a corporation created under the laws of the United States, control of which is held by citizens, or ceases to be commanded by a citizen of the United States, she forfeits her rights, benefits and privileges of a vessel of the United States. Pilots and officers having charge of a watch must be citizens of the United States. A capital distinction to be borne in mind is that between vessels entitled to engage in coastwise trade and those not so entitled. No vessel of foreign registry may engage in that trade. No foreign-built vessel of American registry, with certain exceptions,[3] may engage in that trade under penalty of a fine, although it is within the power of the Secretary of Commerce to waive the imposition of such fine, and this has sometimes been done where an emergency arising out of exceptional circumstances has made it necessary for an unauthorized vessel to trade between ports of the United States. Vessels entitled to engage in the coastwise trade are those which, being built within and owned by citizens of the United States, are enrolled for that trade. Vessels owned by corporations may not engage in the coasting trade unless 75 per cent. of the interest therein is owned by citizens. The coasting trade consists of trade between continental ports of the United States, either directly or by way of a foreign port; that is to say, if you depart from New York with merchandise Trade between the east and west coasts via the Panama Canal or Cape Horn is coastwise. Trade between ports of the United States and those of Hawaii, Porto Rico and Alaska is coasting trade, though the Shipping Board may issue permits to foreign vessels to carry passengers between Hawaii and the Pacific coast until February 1, 1922. Trade between ports of the United States and those of the Philippine Islands is by statute not coasting until February 1, 1922. Thereafter it is governed by Sec. 21 of the Merchant Marine Act, which will be found in the Appendix. Trade between ports of the United States and those of the Panama Canal Zone is not coasting. By the coasting trade is not meant the mere putting in of a vessel at a port of the United States after leaving another port for bunkers or supplies (which is not forbidden) but trading between such ports, e.g., the carriage of cargo and passengers from one such port and their discharge at another. 8. How Obtained.—This registration or enrollment is obtained by proof of the collector that the vessel was built within the United States, or otherwise meets conditions mentioned; and that no foreigner is interested in her (Rev. St. §4142); her size, characteristics and other points of identification are shown by certificates of the master carpenter under whose direction she was built, and surveyors appointed for the purpose, in accordance with R.S. 4147-4153; security is given that the certificate obtained shall be solely used for the ship, and thereupon the collector issues in statutory form his certificate of registration or enrollment, as the case may be (Rev. St. §§4155, 4319). The title to the ship may vest in one or more individuals or a corporation. In either case the residence or domicile of the owner is important. The law considers that for purposes of jurisdiction This vessel, the Arctic, was upon the high seas at the time of the assignment (for the benefit of creditors). The status at that time decides the question of jurisdiction.... We hold that she was subject to the disposition made by the laws of Massachusetts and that for the purpose and to the extent that title passed to the assignees, the vessel remained a portion of the territory of that state. The ship's registry or enrollment, therefore, fixes her home port and she will be considered as belonging to the state in which such port is located and as foreign to all other states and countries. Ordinarily she is liable to taxation as personal property only in the state in which her home port is situated, but this is subject to the qualification that her situs as personal property is, for purposes of taxation, governed by the same rules applicable to other personal effects. The general rule is that the situs of personal property is the domicile of the owner, and a ship will be liable to taxation in the state where the owner resides, irrespective of the location of her home port as shown on the ship's documents. Thus in So. Pac. Co. v. Ky., 222 U.S. 63, a corporation organized in Kentucky, owned a number of vessels enrolled at New York. They were held taxable in Kentucky. The law further requires that every change in the title, command Under present practice the owners of a ship usually incorporate. Such corporations take the complete title and are treated as the sole owner in all respects. There is nothing in the admiralty law which differentiates corporations from other owners. It is also popular to incorporate as "single ship companies" and in this way a double protection against liabilities in excess of the amount invested may be obtained. 9. Recording of American-built Foreign Ships.—Vessels of foreign ownership built in the United States may be measured and recorded in the office of the Collector for the district in which they are built and a certificate of record issued. The advantage of having this is in having the official record already made in case the vessel subsequently becomes the property of citizens and entitled to registry. Changes of name and master of recorded vessels must be endorsed on the certificate of record and reported to the Collector at the port of record (Rev. St. §§4180-4184). 10. Name.—A new vessel is registered under the name selected by her owners and must continue to bear that name—which is required to be painted upon her bows, stern, pilot house and lifeboats in letters of specified size,—unless permitted to change it. By Act of Congress approved February 19, 1920, changes of name may be made by the Commissioner of Navigation, United States Department of Commerce, "when in his judgment there shall be sufficient cause for so doing." Before authorizing a change of name, the Commissioner requires "such evidence as to age, condition, where built, and pecuniary liability of the vessel as may be deemed necessary to prevent injury to public or private interests," including the interests of the vessel's creditors. The purpose of these requirements is to prevent imposition upon the public by masquerading old, worn-out vessels under new names, and to prevent the loss of a vessel's identity, in fraud of her creditors, by changing her name. 11. Sale.—The sale of a ship is usually evidenced by a bill of sale on a government form which will be furnished by the collectors. It is essential that it should include a copy of the last registry or enrollment and licenses, executed in the presence of two witnesses and acknowledged before a notary public. Mortgages may be made upon similar forms and the statute provides that, "No sale, conveyance, or mortgage which, at the time such sale, conveyance, or mortgage is made, includes a vessel of the United States, or any portion thereof, as the whole or any part of the property sold, conveyed, or mortgaged shall be valid, in respect to such vessel, against any person other than the grantor or mortgagor, his heir or devisee, and a person having actual notice thereof, until such bill of sale, conveyance, or mortgage is recorded in the office of the collector of customs of the port of documentation of such vessel." (Ship Mortgage Act, 1920, Subsection C (a). See Appendix, Merchant Marine Act, 1920, §30.) While a prudent man will invariably evidence the sale of a ship by a written instrument, this is not essential to the validity of the sale, if the common law essentials to a sale of personal property—delivery or payment, in whole or in part, or both,—are present. The requirement of the statute (Rev. St. §4170; Ship Mortgage Act 1920, Subsection H; See Merchant Marine Act 1920, §30) that a bill of sale be given, containing a copy of the registry or enrollment, and recorded in the Collector's Office, is for the purpose of giving notice to the world of the transfer. Without these formalities, the sale is valid as against the grantor and persons having actual notice only; not as against any other persons claiming an interest in the ship. If an American vessel be sold to an alien without obtaining the Shipping Board's approval and without recording the transfer, the vessel is liable for forfeiture. 12. Transfer of Flag and Sales to Foreigners.—The Merchant Marine Act of June 5, 1920 (see Appendix), provides that no American vessel shall be sold or transferred to any one not a citizen or placed under foreign registry without obtaining the approval of the Shipping Board. Any vessel transferred in violation of this provision is subject to forfeiture and fine. An American vessel may not be sold by order of a district court of the United States in a suit in rem in admiralty to any person not an American citizen. 13. Admiralty Sales.—The title to the ship may also be transferred by a sale in admiralty. This passes a new and complete title to the purchaser and absolutely frees the ship from all existing liens, titles or encumbrances. Such a sale is only made in the course of a suit in admiralty against the ship for the enforcement of a maritime lien, or other matter within the jurisdiction of the court. A ship which passes through such a sale becomes in effect an absolutely new vessel so far as prior title or encumbrances are concerned, and all previous claims are relegated to the proceeds in the registry of the court (The Garland, 16 Fed. 283). The Ship Mortgage Act, 1920 (§30 Merchant Marine Act, Subsection O), which creates preferences in favor of certain mortgages, provides that, on the sale in admiralty of a ship upon which there has existed a preferred mortgage the court shall, on request of an interested party, require the purchaser at the judicial sale to give a new mortgage on terms similar to the old one and, if such new mortgage is given, the mortgagee shall not be paid from the proceeds of the sale and the amount of the purchase price shall be diminished by the amount of the new mortgage. It is essential that the court should have full and complete jurisdiction to make the sale. Such sales are made by the marshal under a writ issued in a pending suit in admiralty; neither the officer nor the court warrants anything and the title given depends wholly upon the regularity of the proceedings and the jurisdiction of the court. The essentials are simple and it is easy to ascertain if they have been complied with. For example, when the marshal seizes a ship under admiralty process, he is required to give public notice of the seizure and the return-day of the writ in order that all the world may be bound by the proceeding. This is accomplished by taking actual possession of the vessel, posting a copy of the writ in some conspicuous place, and publishing an appropriate notice in some newspaper within the district. Sometimes this publication is omitted or deferred to a later stage of the proceedings. In Gould v. Jacobson, 58 Mich. 288, the results of such an omission were fatal to the title of the purchaser at a marshal's sale of the Pickwick. The ship had been seized in admiralty and sold to pay her debts. The marshal had failed to publish notice of the seizure; the Court held that the sale was quite void and that replevin would lie in favor of the representatives of the original owner against the marshal's vendee. 14. Sales by Trustees and Executors.—These will only transfer the title of the true owner if the conditions of the trust or power given by the will are strictly observed. The rules are no different than in sale of other personal property and create no further exemption from maritime liens or other encumbrances than sales by ordinary owners. The warranty is usually less sweeping. 15. Sales by Mortgagee.—Foreclosures of vessel's mortgages are frequently by virtue of the power of sale contained in the instrument and, if that power is carefully observed, will convey all the title of the mortgagor. Until the enactment of the Ship Mortgage Act of 1920, these proceedings were outside of admiralty jurisdiction. That act made substantial changes, not only in the status of mortgages of American ships, but in the manner of enforcing them. It is discussed under the title "Mortgage" infra and is printed in full in the Appendix (Merchant Marine Act 1920, §30). 16. Sales by Master.—In case of actual necessity the master may sell the ship and convey a good title to the purchaser, free of all liens. Such sales become necessities within the meaning of the maritime law, where the master cannot communicate with the owner and there is nothing better that can be done for him or the others concerned in the adventure. If the master has an honest purpose to serve those who are interested in the ship and can clearly prove that the situation required the sale, he will be entirely justified and the purchaser's title secure. Good faith and necessity must concur. If, within a reasonable time, the master can consult with the owner, he should do so, because, if possible, the owner's judgment must control; and, in any event, the master should not sell without the advice of competent persons on the spot, whose opinions should be taken as to whether it is better judgment to repair or sell. His authority does not depend on their recommendation, but if he acts on it, his justification will be the more secure. Where possible, the facts should be presented by a survey of the ship and the surveyors' report give in detail the steps they take and their conclusions, with the facts necessary to vindicate them. When a vessel is lawfully sold by the master all existing liens are divested and an absolute title passes. The liens attach to the proceeds, however, which become, in the view of the maritime law, the substitute for the ship. A good title will pass by such a sale even if no bill-of-sale is executed. The principles governing the sale of a vessel by her master are set forth very clearly by Mr. Justice Davis, in delivering the opinion of the Supreme Court in the case of the Amelie, 6 Wall. 18: The Amelie on her voyage from Surinam to Boston encountered perils of the sea, and was obliged to seek the harbor of Port au Prince, Hayti, and was sold there at public auction by the master, and purchased by Reviere, the claimant. The owner of the cargo, because of its non-delivery, filed a libel and insisted that the sale of the vessel was not justifiable and passed no title to Reviere, the claimant; and even if the sale was proper under the circumstances, that Reviere took title subject to all existing liens. The sale of a ship becomes a necessity within the meaning of the commercial law, when nothing better can be done for the owner, or those concerned in the adventure.... In order to justify the sale, good faith in making it and the necessity for it must both concur, and the purchaser to protect his title must be able to show their concurrence. The question is not whether it is expedient to break up a voyage and sell the ship, but whether there was a legal necessity to do it. If this can be shown, the master is justified; otherwise not. And this necessity is a question of fact, to be determined in each case by the circumstances in which the master is placed, and the perils to which the property is exposed. If the master can within a reasonable time consult the owners, he is required to do it, because they should have an opportunity to decide whether in their judgment a sale is necessary. At this point it may be observed that modern means of communication by cable and wireless render consultation with the owner feasible in many instances where it was not formerly possible, and there can be no doubt that it is the master's duty to avail himself of these means before selling the vessel. The court proceeds: He should never sell, when in port with a disabled ship without first calling to his aid disinterested persons of skill and experience, who are competent to advise, after full survey of the vessel and her injuries, whether she had better be repaired or sold. And although his authority to sell does not depend on their recommendation, yet, if they advise a sale, and he acts on their advice, he is in a condition In this case the ship was surveyed by competent surveyors, who made a full report and advised that the vessel be sold as the cost of repairs would exceed her value. The court continued: After this advice, the master who was bound to look to the interest of all parties concerned in the venture, had no alternative but to sell. In the face of it, had he proceeded to repair his vessel, he would have been culpable. Being in a distant port, with a disabled vessel, seeking a solution of the difficulties surrounding him; at a great distance from his owners, with no direct means of communicating with them; and having good reason to believe the copper of his vessel was displaced, and that worms would work her destruction, what course so proper to pursue as to obtain the advice "of that body of men who by the usage of trade have been immemorially resorted to on such occasions?" (Gordon v. Mass. Ins. Co., 2 Pick. 264). No prudent man, under the circumstances, would have failed to follow their advice, and the state of things, as proved in this case, imposed on the master a moral necessity to sell his vessel and reship his cargo. ***** It is insisted, even if the circumstances were such as to justify the sale and pass a valid title to the vendee, he, nevertheless, took the title subject to all existing liens. If this position were sound, it would materially affect the interests of commerce, for, as exigencies are constantly arising, requiring the master to terminate the voyage as hopeless, and sell the property in his charge for the highest price he can get, would any man of common prudence buy a ship sold under such circumstances, if he took the title encumbered with secret liens, about which, in the great majority of cases, he could not have the opportunity of learning anything? The ground on which the right to sell rests is, that in case of disaster, the master, from necessity, becomes the agent of all parties in interest and is bound to do the best for them that he can, in the condition in which he is placed and, therefore, has the power to dispose of the property for their benefit. When nothing better can be done for the interests of those concerned in the property than to sell, it is a case of necessity, and as the master acts for all, he sells as well for the lien holder as the owner. The very object of the sale, according to the uniform current of the decisions, is to save something for the benefit of all concerned; and if this is so, the proceeds of the ship, necessarily, by operation of law, stand in place of the ship. If the ship can only be sold in case of necessity, where the good faith of the master is unquestioned, and if it be the purpose of the sale to save something for the parties in interest, does not sound policy require a clean title to be given the purchaser in order that the property may bring its full value? If the sale is impeached, the law imposes on the purchaser the burden The sale in this case was made by parole; the master delivered the vessel to the purchaser, without, so far as appeared, executing any document evidencing the sale. On this subject, the court said: The title of Reviere, the claimant, was questioned at the bar, because he did not prove the master executed to him a bill of sale of the vessel. We do not clearly see how this question is presented in the record, for there is no proof, either way, on the subject, but if it is, it is easily answered. A bill of sale is not necessary to transfer the title to the vessel. After it was sold and delivered, the property was changed and no written instrument was needed to give effect to the title. The rule of common law on this subject has not been altered by statute. The law of the United States which requires the register to be inserted in the bill of sale on every transfer of a vessel, applies only to the character and privileges of the vessel as an American ship. It has no application to this vessel in this case. Sales of vessels by their masters are less common now than formerly in view of the modern facilities for communication with owners. If such sales are subject to the restrictions of the recent acts of Congress, heretofore mentioned, it would appear to be practically impossible for a master to sell an American ship to a foreigner. Whether such sales, arising as they do, ex necessitate, under the general principles of maritime law, are to be regarded as outside of the provisions of these statutes, has not been decided. There is no reason to suppose that the requirements of the statutes are suspended in such cases. 17. Sale of Ship at Sea.—Such vessels may be sold or mortgaged by delivery of a proper instrument without the actual presence of the property and are entirely valid if possession be taken within a reasonable time after it comes within the purchaser's reach. The new owner should record the title in the custom house for the district in which his residence is, and observe all the requirements of law in regard to a new registration if he desires In the case of a transfer of a vessel at sea, where it is desired to preserve her nationality, it is necessary, upon her arrival at her home port, to deliver up her certificate of registration and obtain a new certificate. In the case of United States v. Willings, 4 Cranch, 48, a share in an American vessel was transferred by parole while she was at sea; and, before she reached port, was re-transferred, also by parole, to the original owners. The government challenged her right to the American flag, but the court held that the requirement that, upon transfer, the certificate of registery be surrendered, did not mean that the ship would forfeit the flag unless such surrender were contemporaneous with the sale, since a sale may be made by parole, and, inasmuch as the ship carries her papers with her, the registration could not be attended to until she returned. The Court, speaking through Chief Justice Marshall, held that the ship, having been sold at sea by parole and bought back by her original owners, also, by parole, before she reached port, had been twice legitimately sold and as her ownership when she returned was the same as when she started, her nationality remained unchanged. 18. Appurtenances.—A bill of sale or mortgage of the ship should describe the interest conveyed, either the whole or a fractional part, and include the appurtenances. These are covered by the usual phrase, "engines, boilers, machinery, masts, bowsprit, sails, boats, anchors, cables, and all other necessaries thereunto appertaining and belonging." Whatever is on board for the object of the voyage and belonging to the owners will ordinarily be included, like provisions, supplies, compasses, chronometers as well as new articles purchased for the ship but not yet installed on board. As in other cases of sales, the intention of the parties, so far as it can be ascertained, will control and it is desirable to have an inventory of separate articles in order to avoid misunderstandings or disputes. 19. Warranties and Representations.—The law is the same as in other cases of sales. The buyer must take care. The seller must not deceive. Material representations made to effect the sale are equivalent to warranties. If the ship is built or sold for REFERENCES FOR GENERAL READINGShipping and Admiralty, Parsons, Vol. I, Chapter III. Commentaries, Kent, III, Lecture XLV. Sales, Benjamin (2d Am. ed.), §§336-339. White's Bank v. Smith, 7 Wall. 646. Fleming v. Fire Assoc., 147 Mich. 404. U.S. v. Forester, Newb. Adm. 81. John Jay, 17 How. 399. Admiralty, Benedict, §158. Huus v. S.S. Co., 182 U.S. 392. [2] Rev. St., §4170, is as follows: "Whenever any vessel, which has been registered, is, in whole or in part, sold or transferred to a citizen of the United States, or is altered in form or burden, by being lengthened or built upon, or from one denomination to another, by the mode or method of rigging or fitting, the vessel shall be registered anew, by her former name, according to the directions hereinbefore contained, otherwise she shall cease to be deemed a vessel of the United States. The former certificate of registry of such vessel shall be delivered up to the collector to whom application for such new registry is made, at the time that the same is made, to be by him transmitted to the Register of the Treasury who shall cause the same to be canceled. In every such case of sale or transfer there shall be some instrument of writing, in the nature of a bill of sale, which shall recite at length, the certificate; otherwise the vessel shall be incapable of being so registered anew." This is discussed in §10, infra, this chapter. [3] The exceptions are foreign-built vessels purchased from the United States Shipping Board and foreign-built wrecks repaired in the United States as indicated in §6, supra, this chapter. Also all foreign-built vessels admitted to American Registry, owned on February 1, 1920, by citizens so long as they continue to be so owned. [4] While a vessel is part of the territory of her home jurisdiction for jurisdictional purposes, the doctrine of her territoriality does not extend to treating her as part of the soil for all purposes. Thus the Supreme Court has held that foreign seamen brought to the United States to work on an American ship engaged in foreign commerce, were not engaged "to perform labor within the United States" within the meaning of the contract labor law. (Scharrenberg v. Dollar S.S. Co., 245 U.S. 122.) |
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