tion, after court decisions which are overcome by the curative statute, but which have not become final at the time of the enactment of the statute. In Goddard v. Frazier (156 F. 2d 938 (10th Cir.), cert. denied, 329 U.S. 765 (1946)), the court upheld curative legislation enacted by Congress after an adverse decision in the court of appeals and the district court. The court said:

"Where the object and effect of the curative statute is to 'correct an innocent mistake, remedy a mischief, execute the intention of the parties, and promote justice, then both as a matter of right and of public policy' the law is consti tutionally valid ***. Furthermore, a legislative act which cures the illegality or defect may be passed and become operative after suit is brought to enforce the rights accruing by reason of the illegality or defect. The bringing of the suit vests in a party no right to a particular decision" (156 F. 2d at 942).

Likewise, curative legislation passed by the U.S. Congress while a case was on appeal was upheld by the Texas Supreme Court in National Carloading Corp. v. Phoenix-El Paso Express, Inc. (176 S.W. 2d 564, 569-70 (Tex. 1943), cert. denied, 322 U.S. 747 (1944). See Graham & Foster v. Goodcell (282 U.S. 409 (1931)).

Congress has been held, moreover, to have the power in bankruptcy cases to apply legislation changing the order of priorities in bankruptcy matters to proceedings pending at the time of the enactment of the legislation. New York Credit Men's Adjustment Bureau, Inc. v. A. Jesse Goldstein & Co. (276 F. 2d 886 (2d Cir. 1960)); Coin Mach. Acceptance Corp. v. O'Donnell (192 F. 2d 773 (4th Cir. 1951)).

Accordingly, we join the Department of Commerce in urging that the subcommittee adopt S. 2118 in its original form and leave to the courts the determination whether any parties to pending litigation would be treated unfairly by application of the new act to those cases.

Mr. BARNUM. Thank you, sir.

Mr. STOKES. I would like to say I didn't mean to cast any reflections at all on the behavior of counsel for Chemical. I was merely pointing out the fact that we were caught fairly short, and we realize, of course, that we are technically on notice of anything that appears in the record.

If there was any reflection on the behavior of counsel for Chemical. I wish to apologize.

Senator BARTLETT. The committee will not so infer. This has been one of the mildest hearings in a long time. [Laughter.] The committee will stand in recess on this particular bill until July 7, 8, or 9, and, tomorrow morning, we are meeting in room 457, Old Senate Office Building, on S. 1958.

SHIP MORTGAGE BONDS

FRIDAY, JULY 9, 1965

U.S. SENATE,

COMMITTEE ON COMMERCE,

SUBCOMMITTEE ON MERCHANT MARINE AND FISHERIES,

Washington, D.C.

The subcommittee met at 10:10 a.m., in room 1318, New Senate Office Building, Hon. E. L. Bartlett presiding.

Senator BARTLETT. The committee will be in order to continue hearings on S. 2118.

The first witness this morning is Thomas L. Meyer, Washington representative, Seafarers International Union.

Mr. Meyer.

STATEMENT OF THOMAS L. MEYER, WASHINGTON REPRESENTATIVE OF THE SEAFARERS INTERNATIONAL UNION OF NORTH AMERICA, AFL-CIO

Mr. MEYER. Mr. Bartlett, before I proceed with my testimony, in reading it over this morning I noticed that on page 4—and possibly this should be off the record

(Off the record.)

Senator BARTLETT. All right.

Mr. MEYER. Thank you, sir.

Mr. Chairman, my name is Thomas L. Meyer. I am the Washington representative of the Seafarers International Union of North America. I greatly appreciate this opportunity to appear before your committee.

I would like to comment on S. 2118, introduced by Senator Bartlett (by request), on June 10, 1965. This bill proposes to amend certain sections of the Shipping Act of 1916 and the Ship Mortgage Act of 1920 dealing with the transfer of "interests" in American-flag vessels to aliens. The bill, itself, says nothing whatsoever specifically concerning "Title XI: Government-Insured Mortgages," but the memorandum in support of the bill which was prepared for presentation by Senator Bartlett talks only about Government-insured mortgages.

The attorneys for the Seafarers pension and welfare plan and the Seafarers vacation plan have been litigating the case of Chemical Bank New York Trust Company v. The Steamship Westhampton since January 1963, and there is a recent decision in this case by the Court of Appeals, Fourth Circuit, which is given as the reason for this legislation.

Our lawyers tell us that neither the U.S. District Court of Maryland nor the Court of Appeals for the Fourth Circuit has said anything whatsoever about Government-insured mortgages, and our case does not involve a Government-insured mortgage, but involves a mortgage wherein a German bank is the sole bondholder with the broadest type of control imaginable over the trustee, Chemical Bank New York Trust Co., under a trust indenture.

Accordingly, our case, wherein the courts have held that the mortgage is not a valid preferred ship mortgage because it violates our statutes, in no way involves Government-insured mortgages. However, let us assume the language of the Court of Appeals for the Fourth Circuit might possibly have some effect on Governmentinsured mortgages, as is stated in the memorandum.

If the proponents of the bill had come to us, we obviously would have cooperated in supporting legislation clarifying anything that needed clarifying because, as we understand, in Government-insured mortgages, the Government, under the law, always has complete control of the situation regardless of who may own the bonds, and no vessel insured can ever be operated or purchased by aliens through foreclosure or otherwise without governmental approval.

If S. 2118 covered only Government-insured mortgages or bonds I wouldn't be speaking here today.

The "joker" is that this bill, quietly and between the lines, covers all trust indenture mortgages, past, present, and future, insured and uninsured, regardless of who the trustee may be, who owns the bonds, and what control is given to the alien bondholder over the trustees by the trust indenture itself.

We say that this bill, if passed, enables aliens to obtain control of American-flag vessels through the trust indenture mortgage device, where no Government insurance is involved, contrary to the law, contrary to the decision of our U.S. courts, contrary to congressional intent from 1916 to date, and contrary to all known rulings by the Shipping Board or Maritime Administration from 1920 until 1949.

As early as 1924, the General Counsel of the U.S. Shipping Board took the firm position that no bond should be sold or assigned to an alien without previous approval of the U.S. Shipping Board under section O(d) of the Ship Mortgage Act of 1920, which is one of the sections which this bill seeks to amend. The General Counsel, in his written opinion, stated:

It is easy to imagine that a person not a citizen of the United States might acquire all of the bonds secured by a mortgage. It would thus become the owner of the entire interest under the mortgage and obviously such a transaction is the very one which Congress sought to prohibit.

The changes proposed by S. 2118 seek to enable bonds to be held by aliens, even if the alien holds the only bond or all the bonds issued. contrary to the aforementioned 1924 opinion of the General Counsel of the Shipping Board, and contrary to the present decision of the Court of Appeals for the Fourth Circuit.

I understand that this bill, S. 2118, if passed as drawn, would enable even a Russian bank, which could not directly be the mortgagee, to indirectly be the mortgagee, by having an American citizen as trustee who could be living in Russia and even be an employee of the bank and then the Russian bank itself hold the only bond issued under a

trust indenture, which would give the Russian bank holding the bond complete control over the trustee. All of this could be done without requiring the approval of the Maritime Administration or any other governmental agency.

What could be more ridiculous and contrary to the welfare of our American merchant marine, contrary to the security of our country, and contrary to the intent of Congress.

We oppose any such changes to the law regarding uninsured mortgages and suggest that this committee should also oppose such changes.

Secondly, we want to protest and object to the manner in which this legislation was brought into being. The Westhampton case has been in litigation in the U.S. courts since January 1963, is still in litigation and in all probability will end up in the Supreme Court. While this litigation still is pending, the attorneys for the Committee of American Steamship Lines, without notifying us or our attorneys, quietly, and without a true and full explanation of the effect of this bill, requested Senator Bartlett to introduce the bill as an emergency measure on June 10, 1965. Had we not been alert, a matter as vital as this bill could possibly have quietly slipped through, to the detriment of our entire country. Since the bill is drawn to have a retroactive effect it would wipe out the decisions of our U.S. courts thereby harming many American citizens who have claims against the Westhampton. This also would result to the detriment of general creditors of the Kulukundis companies involved, including the U.S. Government itself which is looking for more assets of Kulukundis in an effort to collect certain moneys which the Government claims are due.

This, we say, is not the way in which members of CASL or people represented by CASL, should be conducting themselves if they truly are interested in developing our merchant marine, and are desirous of obtaining the full support of the American people behind our

merchant marine.

I suggest that this committee urge that all interested Government agencies and departments check into the effect of this proposed bill, and that they be given a reasonable opportunity to be heard. We strongly and urgently recommend that if any change is made in the law, it be a simple change excluding "Title XI: Government Insured Mortgages" from the sections involved, since the law regarding Government-insured mortgages already assures that the vessels affected cannot pass into alien ownership or control through the mortgage device.

Again, I thank you for the opportunity of appearing before your committee.

Senator BARTLETT. Thank you.

I am going to give Mr. Foster an opportunity in a moment to ask some questions. But before doing so, I want to say only that I disagree emphatically with one part of your statement, that is where you said that "this bill could have been quietly slipped through."

My experience has been the Seafarers International and all others, as a matter of fact, interested in the merchant marine are too alert to allow any such thing to happen.

Mr. MEYER. We try to be, sir.

Senator BARTLETT. Mr. Foster?

Mr. FOSTER. Thank you, Mr. Chairman.

Mr. Meyer, would you state again for the committee how the SIU is concerned, involved in the Westhampton case?

Mr. MEYER. Yes, sir. We have at the moment, I believe, about $103,000 involved in contributions to our various funds, which are owned by the owners of the vessel, the Westhampton. These are obligations of the ship to deposit to the account or for the men who were employed aboard the ships, at least the Westhampton prior to the time it got into its present financial difficulty.

Mr. FOSTER. And if this legislation were passed in its present form that would, by itself, defeat your claim?

Mr. MEYER. As I understand it; yes, sir, on the advice of attorneys. Mr. FOSTER. There was proposed at one time during some earlier hearings an amendment which would have the effect of saving any rights in litigation pending at the time the act would become law. Would this meet your objections?

Mr. MEYER. Mr. Foster, I would prefer-we have here today as another witness, the attorney for the various pension and welfare funds of the Seafarers International Union, and I would think that Mr. Kaplan would probably be better qualified as the attorney for the fund to answer that particular question.

Mr. FOSTER. In other words, you made some suggestions but in terms of specific wording he would be in a position to be of assistance. Mr. MEYER. Yes; Mr. Kaplan would be in position to suggest changes to you, sir.

Mr. FOSTER. Your concern is, as I understand it, that the Russians might take control of the American fleet?

Mr. MEYER. They could very well, if they acquired enough bonds of the various American-flag ships, and as I understand it, there is nothing to stop them from acquiring these interests, and transferring the ships to foreign flags, thereby defeating the entire purpose of the American merchant marine.

Of course, it would terminate the employment of our men. Once they went in-under the foreign flag under the proposed bill it could be done. I don't say this is going to be done but it could very readily be done legally.

Mr. FOSTER. You seriously think this is a threat?

Mr. MEYER. Oh, yes, anything that is ambiguous, this particular thing, we consider anything a threat to the American merchant marine today. Too many powers working against us.

Mr. FOSTER. But you don't consider it a threat if the vessel has on it a title XI mortgage?

Mr. MEYER. No, sir; we believe this is enough protection, sufficient protection under a title XI mortgage to assure that this does not happen.

Mr. FOSTER. The protection you have under title XI mortgage that you don't otherwise have is what?

Mr. MEYER. Would you repeat that, sir?

Mr. FOSTER. The protection that you have under a title XI mortgage that you do not otherwise have is what?

Mr. MEYER. Well, the Government assumes, takes over the obligations and so forth and has control of the disposition of the vessel under title XI where it doesn't have it under these private mortgages.