Barnum, John, Chemical Bank New York Trust Co. - 34 16 Tankard, John R., Assistant General Counsel, Division of Mortgage Additional material supplied by- Decision in Chemical Bank New York Trust Co. v. SS "Westhampton" Embassy of the Federal Republic of Germany- Aide memoire dated July 6, 1965 Note verbale dated August 17, 1965. Life Insurance Association of America, suggested technical revisions Griffiths, George R., Acting Deputy Maritime Administrator, letter dated April 23, 1965, enclosing an analysis of the case in relation to Hensel, H. Struve, letter dated September 27, 1965, enclosing addi- July 20, 1965, enclosing an aide memoire from the Republic of August 31, 1965, enclosing a note verbale dated August 17, 1965, 24, 39 SHIP MORTGAGE BONDS WEDNESDAY, SEPTEMBER 22, 1965 HOUSE OF REPRESENTATIVES, OF THE COMMITTEE ON MERCHANT MARINE AND FISHERIES, Washington, D.C. The subcommittee met at 10 a.m., pursuant to call, in room 1334, Longworth House Office Building, Hon. Thomas N. Downing presiding. Mr. DOWNING. The meeting will please come to order. This morning the Subcommittee on Merchant Marine will consider three bills which seek to amend sections 9 and 37 of the Shipping Act, 1916, and subsection 0 of the Ship Mortgage Act, 1920. The purpose of this legislation is to meet certain problems created by a decision of the U.S. Court of Appeals for the Fourth Circuit on April 5, 1965, Chemical Bank New York Trust Company v. The Steamship Westhampton. This decision could affect trust indentures and bond financing on American-flag vessels. The Subcommittee on Merchant Marine and Fisheries of the Senate Committee on Commerce held 3 days of hearings on a similar bill, S. 2118, this past June and July. S. 2118 (as amended) was reported out by the Senate Committee on Commerce, and passed the Senate on September 8, 1965. H.R. 10883 by Mr. Garmatz is identical to S. 2118 (as amended). A copy of Senate Report No. 686 on S. 2118 (as amended) is before each member of the subcommittee. Let the bills, H.R. 9494, H.R. 9581, H.R. 10883, S. 2118, Senate Report 686 and the departmental reports appear at this point in the record. (Documents referred to follow :) [H.R. 9494 and H.R. 9581, 89th Cong., 1st sess.] BILLS To amend the Shipping Act, 1916, and the Ship Mortgage Act, 1920, relating to certain mortgages, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the third paragraph of section 9 of the Shipping Act, 1916 (46 U.S.C. 808), is amended by adding at the end thereof the following new sentence: "Any bond, note, or other evidence of indebtedness heretofore or hereafter made or issued under a trust indenture in connection with a mortgage on a vessel, or in connection with an assignment of the owner's right, title or interest in respect of a vessel under construction, shall not be deemed to be such an interest in the vessel, the sale, mortgage, delivery, or transfer in any manner of which without the approval of the Secretary of Commerce is prohibited by this section, if the trustee designated in such trust indenture, including any successor or assign, is a citizen of the United States within the meaning of section 2 of this Act." SEC. 2. Paragraph (b) of section 37 of the Shipping Act, 1916 (46 U.S.C. 835), is amended by inserting immediately before "; or" the following: "except that any bond, note, or other evidence of indebtedness heretofore or hereafter made or issued under a trust indenture in connection with a mortgage on a vessel, or in connection with an assignment of the owner's right, title, or interest in respect of a vessel under construction, shall not be deemed to be such an interest in the vessel, the sale, mortgage, delivery, or transfer in any manner of which without first obtaining the approval of the Secretary of Commerce is prohibited by this section, if the trustee designated in such trust indenture including any successor or assign, is a citizen of the United States within the meaning of section 2 of this Act". SEC. 3. Subsection O(d) of the Ship Mortgage Act, 1920 (46 U.S.C. 961), is amended by striking out the period at the end of the first sentence thereof and inserting in lieu thereof a comma and the following: "except that any bond, note, or other evidence of indebtedness heretofore or hereafter made or issued and secured by a mortgage on a vessel of the United States shall not be deemed to constitute a right under such mortgage within the meaning of this subsection if such mortgage is held by a trustee who is a citizen of the United States within the meaning of section 2 of the Shipping Act, 1916 (46 U.S.C. 802).” SEC. 4. If any provision or portion of this Act, or the application thereof in any particular circumstances, is held invalid, the remainder of the Act and the application of such provision or portion to other circumstances shall not be affected thereby. SEC. 5. Nothing in this Act shall be construed to alter retroactively the rights of any secured or unsecured creditor of the owner of a vessel in any litigation pending upon the effective date of this Act. h 1 [H.R. 10883 and S. 2118, 89th Cong., 1st sess.] A BILL AND AN ACT To amend sections 9 and 37 of the Shipping Act, 1916, and subsection O of the Ship Mortgage Act, 1920 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 9 of the Shipping Act, 1916 (46 U.S.C. 808), is amended by inserting a new paragraph between the existing third and fourth paragraphs thereof as follows: "The issuance, transfer, or assignment of a bond, note, or other evidence of indebtedness which is secured by a mortgage of a vessel to a trustee or by an assignment to a trustee of the owner's right, title, or interest in a vessel under construction, to a person not a citizen of the United States, without the approval of the Secretary of Commerce, is unlawful unless the trustee or a substitute trustee of such mortgage or assignment is approved by the Secretary of Commerce. The Secretary of Commerce shall grant his approval if such trustee or a substitute trustee is a bank or trust company which (1) is organized as a corporation. and is doing business, under the laws of the United States or any State thereof, (2) is authorized under such laws to exercise corporate trust powers, (3) is a citizen of the United States, (4) is subject to supervision or examination by Federal or State authority, and (5) has a combined capital and surplus (as set forth in its most recent published report of condition) of at least $3,000,000. If such trustee or a substitute trustee at any time ceases to meet the foregoing qualifications, the Secretary of Commerce shall disapprove such trustee or substitute trustee, and after such disapproval the transfer or assignment of such bond, note, or other evidence of indebtedness to a person not a citizen of the United States, without the approval of the Secretary of Commerce, shall be unlawful. The trustee or substitute trustee approved by the Secretary of Commerce shall not operate the vessel under the mortgage or assignment without the approval of the Secretary of Commerce. If a bond, note, or other evidence of indebtedness which is secured by a mortgage of a vessel to a trustee or by an assignment to a trustee of the owner's right, title, or interest in a vessel under construction, is issued, transferred, or assigned to a person not a citizen of the United States in violation of this section, the issuance, transfer, or assignment shall be void." SEC. 2. Section 37 of the Shipping Act, 1916 (46 U.S.C. 835) is amended as follows: (a) By relettering the existing subsections (c), (d), and (e) as (d), (e), and (f) and by inserting a new subsection (c) as follows: |