holder of any contract "alleged to have been made" pursuant to the provisions of the Merchant Marine Act, 1928, and if such contractor shall be agreeable to such determination, the Commission is authorized, concurrently with the dismissal of any suit, to execute a settlement agreement with the contractor, such settlement to be reviewed by the Attorney General, who if dissatisfied therewith "shall notify the Commission and the contractor in writing within 60 days and upon such notice the settlement agreement shall become null and void; * * The proposed amendment further provides that "nothing herein shall affect any right which such contractor may now have (see sec. 402 (c) of the Merchant Marine Act, 1936) to maintain a suit arising out of such contract against the United States in the Court of Claims unless such suit is dismissed as provided herein."

By way of summary, it may be observed that the principal features of the proposed amendment are (a) a proposal to exclude from application in this instance certain acts of the Congress; (b) the conferring of jurisdiction upon the Commission to adjust differences and claims arising out of mail "contracts alleged to have been made"; (c) the conferring of appellate or final reviewing authority upon the Attorney General rather than the Court of Claims; (d) the authorization to withdraw a suit now pending in the Court of Claims-where any judgment rendered pursuant to suit filed under section (c) would be payable only after scrutiny and appropriation by the Congress-and to place the controversy involved in the hands of the Commission, subject to review by the Attorney General, with the authorization to pay any award made out of "any funds controlled by the Commission or hereafter appropriated for that purpose"; and (e) the making of the determination by the Commission and the Attorney General final in any case considered after dismissal for that purpose in the Court of Claims.

It would appear that the only contract affected by the proposed amendment is that of the Seatrain Lines, Inc., since the wording of the jurisdictional clause"holder of any contract alleged to have been made"-apparently covers only the contract of that company dated October 31, 1931, on FOM Route No. 56, payments under which were refused by this office due to doubt as to the legality thereof and pursuant to the specific provisions of the acts making appropriations for the Treasury and Post Office Departments for the fiscal years 1934 to 1937, inclusive, each of which acts as mentioned in the proposed amendment-contained a provision to the effect that no part of the funds appropriated "shall be paid on contract No. 56 of the Seatrain Co." For further information with respect to the doubt as to legality of the above contract see hearings as follows: Post Office appropriation bill, 1933, subcommittee of House Committee on Appropriations, Seventy-second Congress, first session.

Treasury and Post Office Departments appropriation bill, 1933, subcommittee on Appropriations, United States Senate, Seventy-second Congress, first session. Post Office appropriation bill, 1934, subcommittee of House Committee on Appropriations, Seventy-second Congress, second session.

Treasury and Post Office Departments appropriation bill, 1934, subcommittee of the Committee on Appropriatoins, United States Senate, Seventy-second Congress, second session.

Post Office appropriation bill, 1935, subcommittee of House Committee on Appropriations, Seventy-third Congress, second session.

The records of this office show that by petition filed in the Court of Claims March 1, 1934, No. 42607, the Seatrain Lines, Inc., sought to recover from the United States the sum of $3,500,000 under the above contract. It has been informally ascertained that this suit is now pending in said court, and in the circumstances it is not apparent that any useful purpose could be accomplished by the change in procedure which apparently is contemplated by the proposed bill. Accordingly, this office is not disposed to recommend favorable action on the bill.

However, should the bill receive favorable consideration, it is suggested the bill be amended as follows: Page 2, line 1, change the figures "239" to "446", strike out "and" after said change and insert "May 14, 1935 (49 U. S. Stat. L. 239), and".

Sincerely yours,

R. N. ELLIOTT, Acting Comptroller General of the United States.

UNITED STATES MARITIME COMMISSION,

Hon. S. O. BLAND,

Washington, April 18, 1938.

Chairman, Committee on Merchant Marine and Fisheries,

House of Representatives.

MY DEAR MR. CHAIRMAN: The Commission has received your letters of March 4, 1938, and March 17, 1938, in regard to H. R. 9577, a bill to amend section 402 of the Merchant Marine Act, 1936, to further provide for the settlement of oceanmail-contract claims.

This bill, although drawn in general terms, has been introduced for the purpose of authorizing the Maritime Commission to adjust a claim of the Seatrain Lines, Inc., now pending in the United States Court of Claims. Should Congress see fit to authorize the Maritime Commission to attempt to adjust the differences between the Government and Seatrain Lines, Inc., it is believed that H. R. 9577 should be amended in two respects:

(1) That on page 3, lines 13 and 14, there be deleted the words "from any funds controlled by the Commission or hereafter appropriated for that purpose," and insert in lieu thereof "out of such appropriation as the Congress may hereafter provide for this purpose from funds controlled by the Commission or from the general fund of the Treasury."; and

(2) That on page 4, line 6, there be added at the end of the bill the following proviso: "Provided further, That nothing herein shall be construed to affect any right or defense of any party in any suit pending in the Court of Claims."

Very sincerely yours,

E. S. LAND, Chairman.

CHANGES IN EXISTING LAW

In compliance with paragraph 2a of rule XIII of the Rules of the House of Representatives the change in section 402 of the Merchant Marine Act, 1936, as amended, as proposed by this bill are shown as follows (existing law in which no change is proposed is shown in roman and new matter is printed in italics):

SEC. 402. (a) The holder of any mail contract that is to be terminated as provided in section 401 of this title may, within ninety days after the passage of this Act, file an application with the Commission to adjust and settle all the rights of the parties under such contract and to substitute in whole or in part therefor a contract or contracts authorized in titles V and VI of this Act in accordance with the conditions hereinafter prescribed. Such application shall be in such form and filed under such regulations as the Commission may prescribe.

(b) As soon as practicable after the filing of any such application, the Commission shall proceed to attempt to adjust all differences with such contractor, including any claims of the contractor against the United States and any claims of the United States against such contractor, arising out of its foreign ocean mail contract. In adjusting such differences and claims, the Commission shall not take into consideration any prospective or speculative future profits, but shall consider any and all payments theretofore made by the United States pursuant to such mail contract, and the profits realized as a result thereof, and the interest paid and the interest due according to law on construction loans, and all other facts deemed pertinent. If the contractor shall be wing to accept such determina ion and receive payment for the amount determined by the Commission to be a fair adjustment of such differences the Commission is authorized and directed to enter into and execute a settlement agreement with such contractor, wherein such contractor shall release the United States from any and all further claims arising from such contractor's mail contract: Provided, That the Attorney General of the United States may, if he is dissatisfied with such finding, appeal the same to the Court of Claims within a period of sixty days from the date such settlement is agreed upon, of record, by the Commission and the contractor. If such appeal is not taken for the United States by the Attorney General within sixty days from the record agreement between the Commission and the contractor, the contractor shall be paid any sum of money due him under such settlement agreement from any funds controlled by the Commission or hereafter appropriated for that purpose; or if such appeal is taken by the Attorney General, then, within sixty days from the rendition of the final judgment by the courts, the contractor shall

be paid any sum of money due him under such judgment, from any funds controlled by the Commission or hereafter appropriated for that purpose.

(c) If the holder of any ocean mail contract terminated by the provisions of section 401 of this title does not enter into and execute a settlement agreement as provided in subsection (b) hereof, such holder may sue the United States in the United States Court of Claims, but such suit shall not be maintained unless brought before January 1, 1938. If suit is filed in the Court of Claims the claimant and the United States shall have the right in such court to set up and have determined and adjusted by the court all legal and equitable claims, differences, offsets, credits, and recoupments to which either may be entitled, to the end that all conflicting claims, assertions, and rights may be fully, fairly, and completely settled and adjudged by the court, including any question as to the legality of the contract as originally made or as modified, altered, or amended. The jurisdiction of said court to award any damages or payments to the ocean mail contractor is hereby expressly limited to an award of just compensation under the provisions heretofore set forth and such just compensation shall not include any allowances for prospective profits or for speculative future profits that might have been realized by the claimant if permitted further to carry out the contract. The remedy herein provided shall be exclusive and no other suit shall be maintained by the applicant or by any other person in any court of the United States arising out of any claims under or connected with said contract.

(d) Notwithstanding_the_provisions of the Acts making appropriation for the Treasury and Post Office Departments for the fiscal years ending June 30, 1934, June 30, 1935, June 30, 1936, and June 30, 1937, which were approved, respectively, March 3, 1933 (47 U. S. Stat. L. 1510), March 15, 1934 (48 U. S. Stat. L. 239), and June 23, 1936 (49 U. S. Stat. L. 1850), as soon as practicable after the enactment of this subsection, and within six months after its enactment, the Commission shall proceed to attempt to adjust all differences with the holder of any contract alleged to have been made by the Postmaster General pursuant to the provisions of the Merchant Marine Act of 1928 for the carriage of mail, in cases where a suit, pending in the Court of Claims at the time of the enactment of this subsection and based upon the alleged termination or breach of such contract, had been filed by such contractor prior to July 1, 1937, including any claims of the contractor against the United States and any claims of the United States against such contractor, arising out of said contract. In adjusting such differences and claims the Commission shall not take into consideration any prospective or speculative future profits, but shall consider any and all payments theretofore made by the United States pursuant to such mail contract, and the profits realized as a result thereof, and the interest paid and the interest due according to law on construction loans, and all other facts deemed pertinent. If the contractor shall be willing to accept such determination and receive payment for the amount determined by the Commission to be a fair adjustment of such differences, the Commission is authorized and directed, concurrently with the dismissal of any suit based upon the alleged termination or breach of such contract filed by such contractor with prejudice and without costs, to enter into and execute a settlement agreement with such contractor, wherein such contractor shall release the United States from any and all claims arising from such contractor's mail contract: Provided, That the Attorney General of the United States shall review such settlement agreement, and if he is dissatisfied with such finding shall notify the Commission and the contractor in writing within sixty days and upon such notice the settlement agreement shall become null and void, otherwise the contractor shall be paid any sum of money due him under such settlement agreement from any funds controlled by the Commission or hereafter appropriated for that purpose: Provided, That if any sum of money is payable to the contractor under the terms of any settlement agreement made pursuant to this subsection, such sums shall be applied (a) as a credit upon any amount owing by the contractor to the United States on any loan agreement entered into under section 11 of the Merchant Marine Act of 1920, as amended, or upon unpaid ship sales mortgage notes, (b) Federal taxes of the contractor due or to become due for the taxable year in which the settlement is made, and (c) on any other indebtedness of the contractor to the United States. If any such sums are applied as a credit as aforesaid, then the Comptroller General of the United States shall execute a discharge of the amount of such debts satisfied thereby. Nothing herein shall affect any right which such contractor may now have to maintain a suit arising out of such contract against the United States in the Court of Claims unless such suit is dismissed as provided herein. о

75TH CONGRESS HOUSE OF REPRESENTATIVES 3d Session

SUBORDINATION OF LIENS

{

REPORT No. 2322

MAY 10, 1938.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed

Mr. BLAND, from the Committee on Merchant Marine and Fisheries, submitted the following

REPORT

[To accompany H. R. 10337]

The Committee on Merchant Marine and Fisheries, to whom was referred the bill (H. R. 10337) to amend title VI of the Merchant Marine Act, 1936, and for other purposes, having had the same under consideration, have made one amendment to said bill and, as so amended, recommend that the bill do pass.

The amendment recommended by your committee is as follows: Page 1, line 8, after the word "made" insert the words "for working capital".

The purpose of this amendment is to make clear the purpose for which the loan will be made.

The purpose of the bill as amended is to authorize the Maritime Commission to subordinate its interest as mortgagee in any subsidized vessel in favor of any loan made by the Reconstruction Finance Corporation for working capital, provided the Commission finds that the making of the loan would be in furtherance of the merchant marine policy, or that the loan would serve to protect the mortgage interest of the Commission in the vessel.

In the administration of the Merchant Marine Act of 1936 and in its efforts to readjust lines and routes, the Commission has found that certainly one, and probably some other subsidized lines, may need additional working capital. Unless some refinancing in this instance is accomplished without undue delay, the line may cease to operate, in which event the loss to the Commission and to American shipping and the merchant marine will assume much larger proportions than any possible risk to the Government if its operation is continued.

Additional capital can be procured from the Reconstruction Finance Corporation only upon the basis of giving, as security for the loans, first mortgages on one or more units of the fleet on which the Commis

sion now holds ship sales or ship construction loans secured by first mortgages. It is apparent that, in order to permit the refinancing, the liens held by the Commission would have to be subordinated to liens securing the new capital loans.

There is legal precedent for such action in similar cases of extreme emergency, but the Commission has deemed it advisable to have its authority settled by express statutory provisions. The present bill will cover the situation, and your committee recommends its adoption. It is essentially only a means of protecting the interests of the Government, inasmuch as the Commission would be authorized to subordinate the liens held by it to those in favor of the Reconstruction Finance Corporation, another agency of the Government. Transfer of the obligations evidencing such loans as may be made by the Reconstruction Finance Corporation is prohibited, except to some other governmental agency. This provision would prevent private interests from obtaining securing interests in the vessels having a preference over the mortgages of the Commission.

The Government will have the protection of the judgment of both the Maritime Commission and the Reconstruction Finance Corporation on the sufficiency of the security offered.

It is urgent that this legislation shall be enacted at this session of Congress so that it will be prepared to handle emergency situations promptly. These situations will not wait until Congress meets. Temporary or permanent cessation of services will inflict irreparable injury. Trade lost cannot be easily regained, and the Maritime Commission should not be embarrassed in its difficult work by the absence of needed authority.

There follows a letter from the Chairman of the United States Maritime Commission recommending the legislation:

Hon. S. O. BLAND,

UNITED STATES MARITIME COMMISSION,
Washington, April 27, 1938.

Chairman, Committee on Merchant Marine and Fisheries,

House of Representatives.

MY DEAR MR. CHAIRMAN: You have requested the views of the Commission upon H. R. 10337, a bill to amend title VI of the Merchant Marine Act, 1936, and for other purposes.

This bill provides for the amendment of title VI of the Merchant Marine Act, 1936, by adding at the end thereof a new section to read as follows:

"SEC. 613. The Commission is authorized to subordinate its interest as mortgagee in any vessel subsidized under the provisions of this title in favor of any loan made by the Reconstruction Finance Corporation under the Reconstruction Finance Corporation Act, as amended, if the Commission finds that the making of such loan by the Reconstruction Finance Corporation would be in furtherance of the policies of this Act or would, in its opinion, preserve or protect its mortgage interest in said subsidized vessel: Provided, That the obligations evidencing such loans by the Reconstruction Finance Corporation shall not be transferred, except to some other governmental agency."

The Commission favors the enactment of this bill.

As a result of its experience in administering the act, the Commission has found that some of the subsidized lines require additional capital which, if obtainable at all even from the Reconstruction Finance Corporation, can be procured only upon the basis of giving as security for the loans, first mortgages on one or more units of the fleets on which the Commission now holds ship sales or ship construction loans.

While there is legal precedent for the subordination of first liens held by the Government, under extreme cases of emergency, it seems desirable that the Commission's authority be settled by express statutory provisions. The present bill will cover the situation.