Northwest Marine Works v. United States

In this case, the United States, by means of stipulations to which appellants were not parties, has kept a ship operating for a long time and at a considerable loss, purportedly under the authority of orders of the court in an action to foreclose a ship mortgage. The result, if the judgment below is permitted to stand, is to freeze out appellants, who held valid maritime liens upon the vessel when the foreclosure libel was filed. It may have been in the public interest to keep the ship operating. Congress has provided a means of doing so, under which the rights of appellants would be protected. But the government chose a different means and now claims rights that it would not have, had it followed the procedure established by Congress. We think the government is not entitled to the rights it claims, and are therefore reversing.

The Audrey II was sold by the United States to Universal Oil Carriers (Universal) in 1951. As part of the purchase price, the government received a promissory note and a preferred ship mortgage. During 1953 and 1954, appellants obtained maritime liens upon the ship, the validity and amount of which are not contested. On May 14, 1954, pursuant to…