must have been employed as a merchant vessel at the time of accrual of the liability, and that to make it a condition of enforcing the liability that it should continue to be so employed would be to largely impair the beneficial intention of the statute.

The section is very ambiguous, for it is a little uncertain whether or not the clause should be read that the vessel through which the liability accrued is employed as a merchant vessel by a corporation in which the United States owns the entire stock or is a tugboat operated by such corporation. By section 4 of the same act (Comp. St. Ann. Supp. 1923, § 12514c), it is provided that, if a privately owned vessel, not in the possession of the United States, or of such corporation, is arrested or attached upon any such cause of action, in that case the United States may obtain the release of the vessel without bond, or stipulation therefor, upon its statement to the court that it desires such release and assumes liability for the satisfaction of any decree obtained by the libelant in the cause.

Comparing these two sections together, it would appear not to be without plausibility that section 2 provides for the bringing of the proceedings only in the cases in which the United States or its corporation are still in possession of the vessel, and section 4 provides for a case where the vessel may have passed out of their hands by transfer to private individuals, and that in the latter case the proceeding lies in the first instance against the United States.

Judge Hand of the Southern district of New York has lately decided (October 9, 1922), in the case of Mack Engineering & Supply Co. v. United States of America (D. C.) 291 F. 713, 1923 A. M. C. 197, that the libel, in order to give jurisdiction to the court, must allege and show that the vessel at the time of the filing of the libel is employed as a merchant vessel. He does not consider the question whether or not it must also still be in the possession of the United States.

On the whole, and considering that the statute should be construed strictly, it is the opinion of the court that it would be wiser to follow the reasoning of Judge Hand, and hold that, in order for the court to have jurisdiction under the terms of the act, the libel must allege that the vessel is employed as a merchant vessel at the time of the filing of the libel.

It is therefore ordered and adjudged that the exception on this point be sustained, and that the libel be dismissed.

THE CULGOA.

W. & A. FLETCHER CO. et al. v. THE CULGOA (UNITED STATES, Intervener).

(District Court, D. New Jersey. July 3, 1923.) 1. Maritime liens 37-Repairman held entitled to maritime lien on vessel superior to lien of unrecorded mortgage.

Maritime lien for repairs furnished vessel held, under Merchant Marine Act June 5, 1920, $30, subsecs. P and Q (Comp. St. Ann. Supp. 1923, §§ 81464000, 81464p), superior to lien not and could not be recorded because of nonof mortgage held by government, which was compliance with named statute. 2. Maritime liens 4-No lien for supplies furnished vessel after its seizure by United States marshal, in admiralty proceedings, can be acquired.

No lien for supplies furnished vessel after miralty proceedings, can be acquired. its seizure by United States marshal, in ad

In Admiralty. Libel by the W. & A. Fletcher Company and another against the steamship Culgoa, etc., wherein the United States of America intervened. Commissioner's report determining priority of liens confirmed, and exceptions dismissed.

Kirlin, Woolsey, Campbell, Hickox & Keating, of New York City (Frank A. Bernero, of New York City, of counsel), for W. & A. Fletcher Co.

Walter Schaffner, of New York City, and Walter G. Winne, of Hackensack, N. J.,

for the United States.

Frederick M. P. Pearse, of Newark, N. J., and Rumsey & Morgan, of New York City (John T. Carpenter, of New York City, of counsel), for Michael McAndrew and Certain Seamen.

Duncan & Mount, of New York City (William B. Mendes, of New York City, of counsel), for American Bureau of Shipping.

Foley & Martin, of New York City (William Shea, of New York City, of counsel), for Dyer Supply Co.

BODINE, District Judge. The Culgoa was formerly owned by the United States navy. An intervening petition was filed, setting forth that the United States held a preferred mortgage and was entitled to foreclose the same and to receive the proceeds from the sale of the vessel to the amount of its mortgage.

Proofs were taken before United States Commissioner John Wahl Queen, who reported in favor of the libelant, W. & A. Fletcher Company and the other claimants, and allowed the claims in full.. To this report, exceptions have been filed.

The principal points urged by the government are that the Navy Department had a preferred mortgage, and that the W. & A. Fletcher Company, and other claimants, did not acquire maritime liens. The repairs for which the Fletcher maritime lien is claimed were made between September 26, 1922, and November 9, 1922, while the Culgoa lay at the libelant's yards in Hoboken, N. J. The Navy Department advertised the Culgoa for sale in pursuance of acts of Congress, in the spring or summer of 1922. Lucius H. Stewart's bid was accepted August 1, 1922. A bill of sale was executed and acknowledged on that day, but was not delivered. On August 28, 1922, Stewart executed and acknowledged a mortgage to the government purporting to be drawn under the Ship Mortgage Act of 1920 (Comp. St. Ann. Supp. 1923, §§ 81461⁄4jjj-81461⁄4rr). On October 6, 1922, the Secretary of the Navy forwarded to the Collector of Customs the bill of sale and the preferred mortgage, with instructions to record. The mortgage seems never to have been recorded. On August 28, 1922, Stewart took possession of the Culgoa and brought her to New York.

Subsection P of section 30 of the Merchant Marine Act of June 5, 1920 (Comp. St. Ann. Supp. 1923, § 81464000), provides as follows:

"Any person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by a suit in rem, and it shall not be necessary to allege or prove that credit was given to the vessel."

authorized to place maritime liens on her for necessaries.

Neither the Fletcher Company, nor any of the other lien claimants, knew of the existence of the ship's mortgage, and reasonable inquiry would have disclosed nothing with respect thereto. The claims allowed by the Commissioner are entitled to a preference. The mortgage to the government to become a preference must be recorded. This has not been done, and cannot be done, since it does not comply with the requirements of the Merchant Marine Act; hence there can be no preference. Section 30 of the Merchant Marine Act, June 5, 1920.

[2] Obviously the libelant can acquire no lien for supplies furnished after the seizure of the vessel by the United States marshal in admiralty proceedings. See New York Dock Co. v. S. S. Poznan (D. C.) 297 F. 345, 1923 A. M. C. 413, at page 414. The commissioner's report is confirmed, and the exceptions are dismissed.

"The following persons shall be presumed to have authority from the owner to procure repairs, supplies, towage, use of dry dock or marine railway, and other necessaries for the vessel: The managing owner, ship's husband, master, or any person to whom the management of the vessel at the port of supply is intrusted. No person tortiously or unlawfully in possession or charge of a vessel shall have authority to bind the vessel."

[1] There was no suggestion that Stewart was tortiously or unlawfully in possession of the vessel. It is apparent that he, as the person to whom the management of the vessel at the port of supply was intrusted, was

In Admiralty. Libel by Anthony O'Boyle, and another, doing business under the tradename and style of the Liberty Dry Dock & Repair Company, against the barges Eddie, Edgar, Jr., and Benjamin H. Warford, and the W. F. & R. Boat Builders, Inc., claimant. Decree for libelant, with provision for credit to claimant.

Decree affirmed 8 F. (2d) 65.

Macklin, Brown & Van Wyck, of New York City (Pierre M. Brown and Richard F. Lenahan, both of New York City, of counsel), for libelant.

Herbert Green, of New York City, for claimant.

WINSLOW, District Judge. This is a libel filed against the three barges for repair work. In or about November, 1920, claimant, owner of the three barges above mentioned, sold them to one William D. Dittmar under a conditional bill of sale; no title passing. Part payment was made by Dittmar, and, under the contract, Dittmar operated the barges. Title was not to pass until the full purchase price had been paid. It was further provided that the barges should be insured for account of the libelant "as interest may appear." Thereafter the barges were damaged, and were taken by Dittmar to libelant's shipyard to be repaired. The insurance company, after such repair work had been done, paid to Dittmar the net amount of $14,189.39; this amount being less than the bill for the repairs on the three barges. Payment of the loss by the insurance company to Dittmar required the consent of the claimant, which was given. The libelant, upon receipt of the insurance from Dittmar, applied it on antecedent bills for other repair work done by libelant for Dittmar, and not on account of the specific bills for repairs involved in this action.

The only question to be determined by the court is whether this amount thus paid, $14,189.39, should be credited to claimant for the repair work performed by libelant. The evidence satisfies the court beyond a doubt that libelant knew that the boats were owned by claimant at the time he did the repair work, and that they were insured by Dittmar for claimant's account. There was considerable delay in the adjustment of the insurance, and the libelant from time to time asked Dittmar when the insurance money would be paid. The libelant's demands became more urgent as payment of the repair bills was delayed. When the claimant consented that the money be paid by the insurance companies directly to Dittmar, claimant says that he so consented upon the distinct understanding that the money should be received by Dittmar to be applied on these particular repairs. The libelant contends that when he received the insurance money he did not know that the money was the proceeds of the insurance. But the significant fact is that, when the insurance check was received, either Dittmar telephoned libelant, or libelant telephoned Dittmar, that it had been received, and Dittmar said it would be paid the following day to libelant. The fact is that the very next day after its receipt from the

insurance company, Dittmar did pay the net amount to libelant.

From the testimony of the witness O'Boyle, which was far from frank, and his responses to interrogations made, I am convinced that O'Boyle knew when the insurance was paid, and knew that it was for the account of claimant, and immediately on the following day, after acquiring such knowledge, received from Dittmar the proceeds thereof.

In view of the large amount of antecedent indebtedness, Dittmar was, to some extent, at the mercy of libelant, and whatever Dittmar may have said at the time of payment as to the application of the insurance, he did not, or could not, control libelant in his attempted application of the moneys to other bills. O'Boyle says that at the time of the payment of this insurance money, however, Dittmar told him that the insurance claim was not yet adjusted. I am satisfied that this is not true. The witness Woods, a member of claimant's concern, testified that the libelant and claimant had adjoining offices in New York City, and that he had talked with libelant concerning the various transactions. The witness

Davison has also testified as to conversations

which would indicate knowledge of the essential facts on the part of libelant, and, while these conversations, or the substance of them, is denied, I am convinced that, so far as they indicate knowledge on the part of libelant, they have been truthfully stated.

The insurance money belonged to claimant. This is not seriously disputed. I am convinced beyond peradventure that the libelant knew that the money belonged to claimant, as indicated by the testimony of Woods and Davison, as well as the witness James O'Boyle, and that, at the time of the payment by Dittmar to libelant, Dittmar told libelant that the money was the proceeds of the insurance policies, and had previously told them, on the day prior to its receipt, that the money had been paid and would be paid to him on the following day, which was actually done. It is possible, even without this knowledge, that equity might require that the money be applied for claimant's account, but this phase it is unnecessary to consider, in view of the facts found by the court.

An interlocutory decree in favor of libelant will be entered, with the provision that the sum of $14,189.39 received by him be applied as a credit to the claimant.

and offered to turn over $40,000 of the same to the company. Representatives of defendant superintendent, having reason to suspect that the bonds might have been stolen, required them to be sold and the proceeds turned over, which was done. Held, that by acceptance of such proceeds the company ratified the agency of M., to procure the money and was chargeable with his knowledge of the manner in which it was obtained.

4. Insurance 50-Insolvency; assets pass subject to defective title of corporation.

Shortly after an insurance company had received the proceeds of stolen bonds under circumstances which charged it with notice and while it still retained the same its assets were by order of court placed in the hands of the state superintendent of insurance for liquidation; but before the order was made, notice was given in open court that the bonds were stolen. Held, that the superintendent took no better title to such proceeds than the company had, but took the same chargeable with its knowledge.

5. Principal and agent 161 (5)—Ratification of agency by receiving proceeds of stolen property.

That the interests of one who stole bonds, and of another to whom he turned over the proceeds, were not identical, where both were served by his act, does not entitle such other to retain the proceeds of the theft and repudiate the agency of the thief.

6. Insurance

50-Insolvency; liquidator held chargeable with knowledge of defective title to assets.

A state superintendent of insurance had been advised by various responsible persons that M., who controlled an insurance company, had a very unsavory record, that he had been charged with illegal and dishonest acts, and that, unless care was taken there was danger that he would wreck the company. He also knew that thereafter, at the instance of M., the by-laws were changed so that checks could be drawn on the company's funds without the signature of the president, and that large deposits of funds had been made in a bank, also controlled by M., which was of doubtful solvency. Held, that when, in order to delay threatened liquidation proceedings, M. offered to turn over to the company $40,000 in negotiable bonds, which he had in fact stolen, it was the duty of the superintendent to inquire as to the title to the bonds, and that when, without such inquiry, he refused to permit the company to accept the bonds, but directed that they be immediately sold and the proceeds paid to the company, his action was such as to negative his good faith and to charge him legally with knowledge of the theft.

vestment of its funds in the usual course of business.

8. Trusts 357(1)-Receiver of proceeds of stolen bonds held trustee for owner of bonds.

Where an insurance company, on demand of the superintendent of insurance to raise a certain sum to avoid immediate liquidation proceedings, obtained the money from the man who controlled it, which was the proceeds of bonds stolen by him and sold by direction of the superintendent, a subsequent resolution also passed at the instance of the superintendent, authorizing delivery in payment for the money of a certificate of deposit and check on a bank, which was in fact believed by the parties to be insolvent, was merely a device to give the transaction a legitimate appearance, and did not make the company a good-faith purchaser, so as to deprive the owner of the bonds of the right to follow and claim their proceeds, as held in trust for its benefit.

9. Trusts 357 (1)-Contract held not to confer ownership of fund held in trust.

A superintendent of insurance, on taking possession of the assets of an insurance company for liquidation, made a contract of reinsurance with another company, by which the latter was to receive all the assets of the insolvent company "except an amount thereof sufficient to liquidate the business of said company." Among such assets received by the superintendent was a sum of money which was the proceeds of stolen bonds, and held by the insolvent company and the superintendent in trust for the true owner of the bonds, and subject in the hands of both to its lien. The reinsuring company had notice of such claim before the time fixed for turning over the assets and probably before signing the contract, but made and carried out the contract, notwithstanding, leaving the sum in dispute in the hands of the superintendent to await the outcome of litigation. Held, that it was not a purchaser of such fund in good faith without notice, and had no superior equity as against the true owner.