Where A, the owner of a sea-going vessel, executes to B, a mortgage thereon, which is recorded in the custom-house of her home port, B commences suit to foreclose the mortgage, and makes C a party defendant thereto, on the ground that he has purchased the vessel, subject to the lien of plaintiff's mortgage, C, in his defence, avers that the mortgage was void under our Statute of Frauds, and that he now held the vessel discharged from the same: Held, that the mortgage was a valid lien, and that the record of the mortgage was sufficient notice thereof to C.
The power of Congress to regulate commerce, is exclusive, when exercised. The act of Congress of July 29th, 1850, authorizing mortgages of this kind to be recorded, and making the record thereof notice to third parties, being in conflict with our Statute of Frauds, the latter must yield.
Where notice of a mortgage is had by a subsequent purchaser or mortgagor, he is not protected by our Statute of Frauds.
Burnett, J., after stating the facts, delivered the opinion of the Court—Terry, C. J., concurring. The complaint alleges the execution of the note and mortgage, hoth of which are set out in full, and also the recording of the mortgage. There is no allegation in the complaint, that the vessel, (except a recital of that fact in the copy of the mortgage) had been enrolled, and the only allegation in reference to the defendant Lawrence was this : “ And plaintiff further avers that defendant Lawrence has purchased the said brig, subject to the lien of said mortgage, and now holds the same.”
It is insisted, by the defendant Lawrence, that this allegation is insufficient to show any cause of action, as against him, as it states a conclusion of law, and not of fact, in alleging that he purchased subject to the mortgage.
There is certainly much force in the argument of counsel. It is well settled that the pleadings should state facts. The best pleading, and the most consistent, is a simple narration of the facts necessary to constitute a cause of action. But where more facts are stated than required, it is no ground of demurrer. Mere surplusage is not a ground of demurrer, but of a motion to strike out. § 57. A defendant can only demur for the causes specified in section forty.
To ascertain whether an allegation be sufficient, it is always necessary to remember the end for which it is made. In this case, the only object of the allegation was to show a sufficient interest in Lawrence to make him a party. The object in making him a party was to settle any claim he might choose to set up to the property mortgaged. The intention was to avoid a multiplicity of suits. In cases like this, a very slight allegation is necessary. The claim of defendant must be affirmatively set forth by him in his answer. Practice Act, § 46. The plaintiff is supposed not to know the particulars of the defendant’s adverse claim. All that is required of the plaintiff is, to state enough to show that the particular defendant claims an interest in the mortgaged property. In this case, if we strike out the words,
“ subject to the lien of the mortgage,” the allegation would be sufficient for the purposes intended. As against the adverse claim of Lawrence, the position of the plaintiff was substantially that of a defendant.
But by far the most important questions arising upon the record are two, and may be stated thus : First, was the record of the mortgage sufficient notice to Lawrence ? Second, if not, was actual notice to him sufficient, under our Statute of Frauds, to defeat his purchase, as against the lien of the mortgage ?
These questions, it is thought, have never been determined by this Court, and are certainly difficult, as well as important. The seventeenth section of our Statute of Frauds, passed April 19th, 1850, Com. L., 201, provides that "no mortgage of personal
propérty, heretofore made, shall 6e valid against any other person than the parties thereto, unless possession of the mortgaged property be delivered to, and retained by, the mortgagee.” The next section makes an exception in favor of contracts of bottomry, respondentia, and assignments, and hypothecations of vessels or goods at sea, or in foreign States, or without this State; provided, the assignee or mortgagee shall take possession of such vessel or goods, as soon as may be after the arrival thereof within this State.
The first section of the act of Congress passed July 29th, 1850, United States Statutes at Large, vol. 9, p. 440, provides that no bill of salé, 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, be recorded in the office of the collector of the customs, where such vessel is registered or enrolled. \\
Among the powers conferred upon Congress, by the eighth section of the first article of the Constitution is, the power “ to regulate commerce with foreign, nations, and among the several States, and with the Indian tribes.”
The first inquiry arising under the first question is, whether the provisions of our statute and those of the act of Congress, are necessarily in conflict. It is insisted by the learned counsel for the defendant, that there is no necessary conflict, and that, therefore, the provisions of both may stand. It is also substantially contended, that conceding there is a necessary conflict, the provision of our statute should stand, as it only assumes to regulate the evidence of title to the vessel, and not the manner of its employment; and that the subject of title to a vessel regularly enrolled and licensed, either for foreign or coasting trade, is a matter legitimately within the control of the several States, and not within the power of Congress.
It will be seen, that the act of Congress and our statute relate precisely to the same thing, and that these provisions are different in their character. To give effect to both, we must carry out the intention of each. If the clear intention of both acts can be fully carried out, and practically applied, then there is no necessary conflict; but if the intention of both cannot be fully carried out, then there must be a necessary conflict, and one or the other must yield.
The provisions of both acts, relate to the validity of the same instruments as against the same parties. To make the instrument valid, the act of Congress requires it to be recorded, while our statute requires actual possession to be taken of the property itself. The entire right of the party to the same description of [371]property, depends, in the contemplation of each act, solely and exclusively upon that which it alone prescribes.
If, then, Congress intended to give a party certain perfect rights, upon the performance of certain specified conditions, can the act of the Legislature require the party to do more without abridging his already perfected rights. And if these perfected rights are abridged by the statute, is it not substantially in conflict with the act of Congress ? The act of Congress intended to accomplish a given end, by the use of specified means, and that end is defeated by the statute, when it requires other means to be used to attain the same end. The act of Congress expressly makes the record of the instrument full notice as to third parties; while the statute says it is not such notice. And if we carry out the provisions of our statute, and give them full force, then the record of the instrument accomplishes nothing, and the provision of the act of Congress is practically idle. It accomplishes no end, and a compliance with it, gives the party no rights. As both acts relate to the subject of notice to third parties, and as the provisions of each are different, and make the same rights of the party depend upon a compliance with these different provisions, the two are necessarily in conflict, and both cannot stand. And this case is not like the power to tax the same property, existing at the same time, in the State and Federal Government. Taxation, as existing in these different governments, is the right to take different portions for different purposes of the same divisible mass; and the taking of one portion, by one government, for one purpose, is not in conflict with the taking of another portion by the other, for a different purpose. If each had the right to take the whole, and each attempted to exercise this right in full, then there would be a necessary conflict, and the exclusive right in both could not exist. So, in this case, Congress and the Legislature have both assumed to declare all that shall constitute notice to third parties, and as they differ, there must, of necessity, be a conflict.
If, then, it be true, that there is a necessary conflict, which act is paramount ? And the solution of this question depends upon the construction of that clause of the Constitution of the United States, which gives Congress the power to regulate commerce.
In the great case of Gibbons v. Ogden, 9 Wheaton, this clause received a most thorough examination. In that case, it was held, that the power to regulate commerce is general and exclusive, and no part of it can be exercised by a State. But when this power has not been exercised by Congress, but lies dormant, and a .State, in the meantime, exercises such power over a given subject, the question, whether the action of the State be void in such a case, was left in doubt, as it did not necessarily arise. But in the subsequent cases of Wilspn and others, v. The Black[372]bird Creek Marsh Company, 2 Peters, 243, and The City of Few York v. Miln, 11 Peters, 102, it was held, that such action of a State, would be valid, until the dormant power of Congress should be exercised. From, these authorities it would follow, that the statute of this State was valid, whether the power rightfully belongs to Congress or not, until the passage of the act of July, 1850. In all these cases, it was held, that, when Congress acts, the statute of the State must yield, where the two conflict. “ In every such case,” says Chief Justice Marshall, “ the act of Congress or the treaty is supreme; and the law. of the State, though enacted in the exercise of powers not controverted, must yield to it.”
The only remaining inquiry arising under the first question is, whether this provision of the act of Congress, is within the power to regulate commerce. This power to regulate is the power “ to prescribe the rule by which commerce is to be governed. This power; like all others vested in Congress, is complete in itself; may be exercised to its utmost extent, and acknowledges no limitations, other than those prescribed in the Constitution.” 9 Wheaton, 196.
The power of Congress to regulate commerce being general and exclusive; when exercised, it becomes important to know what commerce is, and what means may be used by Congress to attain the ends contemplated. When power to attain a certain end is given, and no restriction, express or implied, is imposed; the choice of the means necessary and appropriate to the end, must rest with the agent upon whom-the power is conferred;, and the right to use such means is of course implied. And in this case it is conceived, the inquiry regards the fact whether the right to regulate the evidence of title to the vehicle of commerce, is a necessary means to cai;ry out efficiently in practice the power to regulate.commerce itself. If it be a means substantial and immediate, and not contingent and remote, it would seem clear that Congress had the right to pass the act in question.
“Commerce,” says Chief Justice Marshall, “undoubtedly is traffic, but it is something more; it is intercourse. It is the commercial intercourse between nations, and parts of nations, in all its branches, and is regulated by prescribed rules for car7 rying on that intercourse.” 9 Wheaton, 189. “Commerce,” says -Mr. Justice Johnson, “in its simplest signification, means an exchange of goods; but in the advancement of society, labor, transportation, intelligence, and various mediums of exchange, become commodities, and enter into commerce; the subject, the.vehicle, the agent, and their various operations, become the objects of commercial regulation. Ship-building, the carrying trade, and propagation of seamen, are such vital agents of commercial prosperity, that the nation which could not legislate [373]over these subjects, would not possess power to regulate commerce.” 9 Wheaton, 230. And the same learned" Judge held, that the power conferred upon Congress to regulate commerce, “ was not that power to regulate commerce which previously existed in the States.” It was admitted by all counsel in that case, that “ unaffected by a state of war, by treaties, or by municipal regulations, all commerce among independent States was legitimate..
In the same case, Justice Johnson- uses this forcible and clear language:
“ The power of a sovereign State over commerce, therefore, amounts to nothing more than a power to limit and restrain it at pleasure. And since the power to prescribe the limits to its freedom, necessarily implies the power to determine what shall remain unrestrained, it follows that the power must be exclusive —it can reside but in one potentate.”
The rights of migration and of commerce are founded upon natural law, and they cannot be rightfully restrained, except when such restraint is necessary for the good of society. Men have the right to buy and sell, export and import, all commodities they please, unless restrained by some positive law. And as to the question when, how far, and in what manner they should he restrained, the law-making power must determine.
The legislation of Congress, under this grant of power to regulate commerce, has uniformly proceeded upon the idea that the vehicles of commerce were but agents of trade, and the right to regulate them was included in the right to regulate the end for which they were used. Acts have been passed in reference to the enrollment and licensing of vessels engaged in commerce, either with foreign nations, or among the ¡States. The power of Congress to regulate commerce, is justas great in the one case as in the other, for the reason that the Constitution confers it equally in'both cases, without restriction.
If, then, Congress can pass laws regulating the contracts of seamen, the form, capacity, and size of vessels, the number of passengers in proportion to tonnage, and other matters concerning these vehicles of trade, could not Congress equally regulate the manner in which a sale or a mortgage should be made and recorded. If Congress has the right in one case, it is difficult to say the right does not exist in the other. The only plain and intelligible rule would seem to be, that the power of Congress to • regulate commerce extends to all the immediate agents and vehicles of commerce j and as it extends to these vehicles for some purposes, it must for all. The power to prescribe the manner in which these vehicles may be sold or mortgaged, may, in its exercise vitally affect commerce itself. If the power of selling or mortgaging these vehicles of commerce, be improperly restrained, commerce itself must be immediately affected. The [374]provisions of the seventeenth and eighteenth sections of our statute, afford a good illustration.
To require the mortgagee, in all cases, to take possession of the vessel is a harsh provision, and must operate greatly in restraint of commerce. How the master of a vessel, who is a part owner, could 'execute a mortgage, and still remain on board, und,er the stringent provisions of our statute, it is difficult to see. By requiring every one who lends money to a vessel to take and keep possession of the property, the right and opportunity to raise means are greatly abridged. Few persons would be willing to aid a vessel on such terms. The provisions of the act of Congress are far more reasonable and beneficial, and equally just and safe for all parties concerned. The record system is as applicable to vessels navigating the ocean, as to lands situated within the limits of a State.
It must be conceded that commerce with foreign nations and among the States, requires uniform and fixed laws and usages. Persons engaged in this pursuit learn law from experience and information. There is,x therefore, a fitness, and even necessity in giving this power to Congress.
If there was any one object riding over every other in the adoption of the Constitution,” says Mr. Justice Johnson, “ it was to keep the commercial intercourse among the States free from all invidious and partial restraints.” 9 Wheaton, 231.
The act of Congress has established a uniform, plain, juactical and secure rule, for the sale and mortgage of vessels; and this regulation leaves the owners of these vehicles of commerce, and all persons dealing with them, the means of protection without injury to either party. But if these vessels arc still subject to the laws of the different States, after Congress has legislated upon the subject, then there can be no certain and uniform rule. From the rapid extension and increasing importance of our commerce, these provisions of the act of Congress become indispensable.
Another very strong reason to support this provision of the act of Congress, is to be found in the fact, that the federal government can only protect the rights of vessels navigating the ocean.
Mr. Webster, in his letter to Lord Ashburton, with reference to the case of the “ Creole,” laid down the doctrine substantially, that the vessels of a nation, are considered as parts of its territory, and that her jurisdiction and laws accompanying her ships, not only over the high seas, but into ports and harbors, or wherever else they may be water-borne. Cited in Flanders on Maritime Law, § 54, note 1.
"Vessels completely engaged in the internal commerce of a State, and that never go beyond its limits, are admitted to be within the exclusive jurisdiction of the State. (9 Wheaton, 194.) [375]But vessels engaged in commerce with foreign nations, or among the several States, constitute a peculiar class of property, and the jurisdiction of the national government accompanies them wherever they may go. Under our peculiar system the federal government can only negotiate with foreign nations, and can only be responsible to them for injuries to their commerce. It is therefore, necessary that Congress should have entire power over all vehicles of commerce in such cases.
If these views be correct, the record of the mortgage was sufficient notice to the defendant Lawrence. But conceding, for the sake of argument solely, that they are not, we will proceed to consider the second question.
In reference to conveyances of real estate and the sále of personal property, the contract in both cases is valid as between 'the parties, without a record in the first or a change of possession in the second instance. But in regard to third parties, to make the contract good as against them, the deed must be recorded in the one case, and the possession of the personal property changed in the other. The object contemplated by the law in both cases, is the protection of others against fraud. This is accomplished by giving notice of the deed or sale; and this notice is given in one case by the record, and in the other by a change of possession.
In reference to conveyances of land, as the object of recording the deed is to give notice to subsequent purchasers, it has always been held that although the deed was not in fact recorded, yet if t(he subsequent purchaser took with actual notice, he was not injured, and the first deed must stand. As the end contemplated by the law had been attained, the intent of the law had been fulfilled, and the protection designed by it accomplished. The recording statute only protects the subsequent purchaser in good faith.
It would seem that the same rule must apply to the sale of personal property, where the seller retains possession, and the subsequent purchaser takes with actual notice. The fifteenth section of our Statute of Frauds only makes the sale of personal property without a change of possession, “ conclusive evidence of fraud as against subsequent purchasers in good faith.” To make such a sale void as against a subsequent purchaser, he must purchase in the same “ good faith," as a subsequent purchaser of real estate. If, therefore, he has actual notice, he cannot be a purchaser in good faith in the one case any more than in the other. The language of the statute is the same in both cases, and must receive the same construction. And the reason and justice of the rule are the same in both cases.
In reference to mortgages of personal property, the language of the seventeenth section of our Statute of Frauds, is in a different form, and does not contain the expression “ subsequent [376]purchaser in good faith.” It will be perceived that it is positive, and without condition or qualification, that “no mortgage shall be valid against any other person than the parties thereto, unless the mortgaged property be delivered to and retained by the mortgagee.”
If this provision stood alone, without any" connection with other provisions in the same act, it would show an intention on the part of the Legislature to make a distinction between the case of a sale and a mortgage of personal property. And if we give this seventeenth section a literal construction, a- change of possession in the ease of a mortgage of personal property would be indispensable to the validity of the mortgage as against third parties. But it would seem from the scope and purpose of the Statute of Frauds, as well as of the statute concerning conveyances, that this could not have been the intention of the Legislature. There is no good reason, it is .conceived, why a subsequent purchaser of real or personal estate, with notice, should not be permitted to defeat the prior sale, and yet a subsequent mortgagee be allowed to do so. The mortgagee has certainly no greater claim than the purchaser. The law should protect, or defeat, both alike. They are both equally innocent without notice, and equally guilty with it. And, in both cases, the man who takes with actual notice, and therefore, with the deliberate intent to defraud others, should never be sustained in a Court of Justice. The object of the law in all eases is the protection of the innocent, and not the reward of the guilty. He who takes a. second conveyance or mortgage with actual notice of the first, deliberately aids and abets the fraudulent grantor or mortgagor in the attempted commission of a fraud, and should justly suffer the consequences.
In this case the proof of notice was sufficient, and the finding of the Court below correct. For these reasons, I think the judgment of the Court below should be affirmed.
AI Brief
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Holding. The federal act requiring the recording of vessel mortgages is supreme over state statutes requiring physical possession of the vessel, and actual notice of a prior mortgage is sufficient to defeat the claim of a subsequent purchaser regardless of statutory recording or possession requirements.
Issues
Whether a state statute requiring possession of mortgaged personal property conflicts with a federal act requiring the recording of vessel mortgages.
Whether the federal power to regulate commerce includes the authority to prescribe the manner of recording vessel mortgages.
Whether actual notice of a prior mortgage is sufficient to defeat the claim of a subsequent purchaser of personal property.
Disposition. affirmed
Quotations verified verbatim against the opinion
“The act of Congress expressly makes the record of the instrument full notice as to third parties; while the statute says it is not such notice.”