## Facts

- Detroit Trust Company, as trustee, held ship mortgages on the Great Lakes cargo vessels *The Thomas Barlum* and *The John J. Barlum* securing public bond issues.
- The mortgagor, Barlum Steamship Company, executed the mortgages to qualify as “preferred mortgages” under the Ship Mortgage Act of 1920.
- Substantial portions of the borrowed funds were used for nonmaritime purposes (including repayment of personal and land-based business debts), with only part used for vessel-related needs such as repairs, refitting, or operations.
- Detroit Trust filed two admiralty suits in federal district court seeking foreclosure and sale under the Act.
- The mortgagor appeared as claimant and challenged admiralty jurisdiction, arguing the transactions were not maritime in substance because the proceeds were largely applied to nonmaritime uses.
- The district court rejected the jurisdictional objection, found the statutory conditions satisfied, and entered foreclosure and sale decrees.
- The court of appeals reversed for lack of admiralty jurisdiction.
- The Supreme Court granted certiorari and consolidated the matters.

## Issues

1. Whether admiralty courts have jurisdiction to foreclose ship mortgages absent congressional authorization, and whether the Ship Mortgage Act supplies that jurisdiction for “preferred mortgages.”
2. Whether “preferred mortgages” under the Ship Mortgage Act include trust deeds securing publicly sold bonds and are foreclosable exclusively in admiralty when statutory formalities are met.
3. Whether preferred status and admiralty foreclosure jurisdiction depend on the application of loan proceeds to maritime purposes.
4. Whether Congress constitutionally may confer admiralty jurisdiction and set lien priorities for enforcement of qualifying ship mortgages.

## Decision

- The Supreme Court reversed the court of appeals and reinstated the district court’s foreclosure decrees.
- Admiralty has no inherent jurisdiction to foreclose ship mortgages, but Congress may confer it by statute.
- The Ship Mortgage Act validly creates “preferred mortgages” enforceable exclusively in admiralty, with statutory lien priorities, when the Act’s recording, endorsement, and related conditions are satisfied.
- Trust deeds securing bonds sold to the public fall within the Act’s definition of preferred mortgages.
- Preferred status does not turn on whether the loan proceeds were used for maritime purposes; that condition is not required by the Act and cannot be implied.
- Congress acted within its constitutional authority in providing admiralty enforcement and regulating priorities for qualifying ship mortgages.

## Legal Principles

- In the absence of an Act of Congress, admiralty courts lack jurisdiction to foreclose a ship mortgage.
- Under the Ship Mortgage Act of 1920, a qualifying “preferred mortgage” (including a bond-secured trust deed) is foreclosable exclusively in admiralty, with lien priorities governed by the statute, if statutory formalities are satisfied.
- A mortgage’s preferred status under the Act does not depend on the borrower’s use of the loan proceeds for maritime purposes.
- Congress may shape federal maritime law within the sphere of admiralty and maritime jurisdiction by conferring admiralty enforcement for preferred ship mortgages and establishing lien priorities to advance national maritime interests.

## Conclusion

The Court held that the Ship Mortgage Act supplies exclusive admiralty jurisdiction to foreclose statutorily compliant preferred ship mortgages, including bond-secured trust deeds, and that preferred status does not depend on whether the borrowed funds were applied to maritime uses; Congress may constitutionally prescribe both jurisdiction and lien priorities for such mortgages.


Detroit Tr. Co. v. The Thomas Barlum, 293 U.S. 21 (1934)