Ocean Cargo Lines, Ltd. v. North Atlantic Marine Co.

Decision Date24 March 1964
PartiesOCEAN CARGO LINES, LTD., as Owner of the S.S. Atlantic Sun, Libelant, v. NORTH ATLANTIC MARINE CO., Inc. and The Sub-Freights of the S.S. Atlantic Sun, Respondents, and Texaco, Inc., Claimant. TEXACO, INC., Libelant, v. The Sub-Freights of the S.S. ATLANTIC SUN, Respondent.
CourtU.S. District Court — Southern District of New York

COPYRIGHT MATERIAL OMITTED

Zock, Petrie, Sheneman & Reid, New York City, for the libelant-owner, Ocean Cargo Line, Ltd.; Howard M. McCormack, New York City, of counsel.

Boal, McQuade & Fitzpatrick, New York City, for the claimant-libelant, Texaco Inc.; Arthur M. Boal, Jr., New York City, of counsel.

FEINBERG, District Judge.

This case involves the assertion of competing maritime liens against the same fund. The proceeding was commenced by the filing of a libel in rem by Ocean Cargo Line, Ltd. ("Shipowner"), owner of the S.S. Atlantic Sun ("Atlantic Sun"), to enforce a maritime lien for unpaid charter hire due under a time charter with North Atlantic Marine Co., Inc. ("Charterer") for an amount in excess of attached subfreights of $6,053.81.1 Subsequently, Texaco Inc. filed a libel against the same subfreights, claiming a maritime lien, also in excess of the attached subfreights, for bunkers (fuel oil) furnished at Port of Spain, Trinidad to the Atlantic Sun.2

Most of the basic facts giving rise to the competing liens asserted by Shipowner and Texaco are not in dispute. On November 2, 1959, Charterer entered into a voyage charter for carriage of a cargo of wheat from Houston, Texas to Rio de Janiero and/or Santos, Brazil.3 On November 25, Charterer nominated the Atlantic Sun as the vessel to perform under the voyage charter.4 This ship had, in turn, been chartered from Shipowner under the terms of a time charter,5 dated November 20,6 and was delivered to Charterer at 9:00 A.M. on December 10.7

After loading was completed, the Atlantic Sun sailed from Houston and arrived at Port of Spain, Trinidad to take on bunkers that Charterer had requested from Texaco via telephone on December 18. The bunkers were furnished on December 20 and 21,8 pursuant to directions received from Charterer's agents at Trinidad who had been informed by the ship's master of the quantity required.9 The reasonable value of the bunkers is $11,844.35, for which Texaco has not been paid.10 On December 26, a semi-monthly installment of hire in the amount of $21,621 became due and payable to Shipowner under the terms of the time charter.11 This installment remaining unpaid, Shipowner, at 9:45 A.M. on January 8, 1960, served written notice upon Charterer — the vessel by this time having arrived at Santos, Brazil — that unless the hire due December 26, 1959 was received by noon that day, Shipowner would withdraw the vessel from service "on completion of discharge. * * *"12 On January 11, 1960, the next installment of charter hire accrued. On January 14, Charterer filed a petition in this Court for an arrangement, and was adjudicated a bankrupt on March 1, 1960.13 Neither the December 26 nor the January 11 installment was paid. Discharge of cargo was completed at 6:30 P.M. on January 20.14 Shipowner rechartered the Atlantic Sun, and received from the new charterer the sum of $7,900 for fuel oil on board at the time of delivery of the vessel to the new charterer, at 6:30 P.M. January 20.15

I Validity of Texaco's Lien

Texaco's primary reliance is on the Maritime Lien Act (the "Act"), 46 U. S.C. §§ 971-975, which gives a maritime lien to "any person furnishing * * * supplies * * * to any vessel * * * upon the order of the owner of such vessel, or of a person authorized by the owner. * * *." 46 U.S.C. § 971.16 The Act also provides that a ship's master "shall be presumed to have authority from the owner to procure * * * supplies * * *." 46 U.S.C. § 972.17 It is Texaco's contention that the master of the Atlantic Sun on the voyage in question "participated" in procuring the bunkers and that, therefore, the fuel for which it claims a lien was furnished upon the order of one having presumptive authority under the statute.

However, the Act also provides that "nothing in this chapter shall be construed to confer a lien when the furnisher knew, or by exercise of reasonable diligence could have ascertained, that because of the terms of a charter party, * * * the person ordering the * * * supplies * * * was without authority to bind the vessel therefor." 46 U.S.C. § 973.18

Clause 18 of the time charter in the instant case contains a standard prohibition of lien clause providing as follows:

"Charterers will not suffer, nor permit to be continued, any lien or encumbrance incurred by them or their agents, which might have priority over the title and interest of the owners in the vessel."

It is clear that when services are furnished on the order of a charterer or his agent, the materialman is charged with notice of the charter's existence and of the terms of the charter even though there may have been nothing to put him on notice as to its existence, unless he can show that even by the exercise of reasonable diligence he could not have discovered the true ownership of the vessel. United States v. Carver, 260 U.S. 482, 43 S.Ct. 181, 67 L.Ed. 361 (1923); see Dampskibsselskabet Dannebrog v. Signal Oil & Gas Co., 310 U.S. 268, 275, 60 S.Ct. 937, 84 L.Ed. 1197 (1940); Schilling v. A/S D/S Dannebrog, 320 F. 2d 628, 632 (2 Cir. 1963); Tampa Ship Repair & Dry Dock Co. v. Esso Export Corp., 237 F.2d 506, 507 (5 Cir. 1956). In Carver, supra, the Supreme Court declared with regard to the meaning of the language of Section 973 quoted above (260 U.S. at 489, 43 S.Ct. at 182, 67 L.Ed. 361):

"We regard these words as too plain for argument. They do not allow the material-man to rest upon presumptions until he is put upon inquiry, they call upon him to inquire. To ascertain is to find out by investigation. If by investigation with reasonable diligence the material-man could have found out that the vessel was under charter, he was chargeable with notice that there was a charter; if in the same way he could have found out its terms he was chargeable with notice of its terms."

Some doubt has been expressed as to whether a materialman is charged with notice of a charter's existence when supplies are furnished on the order of a master appointed by the owner, rather than on the order of a charterer. See Gilmore and Black, Admiralty 556-57 (1957). However, it is not necessary to decide that question here since I find that the bunkers in the instant case were furnished upon the order of Charterer. The only role played by the master in the procurement of the bunkers was to furnish Charterer's agent in Trinidad with specifications as to the quantity of fuel required and to sign the bunker receipt.19

I also find that at the time the Atlantic Sun arrived at Port of Spain, there was aboard a copy of the time charter dated November 20, 1959, containing the prohibition of lien clause referred to above,20 but that no employee, officer or agent of Texaco inquired into the existence of a charter or attempted in any other way to ascertain the ownership of the vessel.21 That the copy of the charter carried aboard the vessel may have been unexecuted, as Texaco maintains,22 is immaterial. It is questionable whether the failure of the vessel to carry any copy of the charter relieves the materialman of his obligation to inquire into the ownership of the vessel, see Lindbar, Inc. v. St. Louis Fuel & Supply Co., 276 F.2d 882, 885-86 (6 Cir. 1960); United States v. Daniels Towing & Drydock, Inc., 214 F.2d 501, 502-03 (5 Cir. 1954); The Kongo, 155 F.2d 492, 495-96 (6 Cir. 1946); Gilmore and Black, op. cit. supra at 567, but, in any event, the presence aboard the Atlantic Sun of an unexecuted copy of the charter party containing the prohibition of lien clause was sufficient to place the burden of inquiry upon the materialman Texaco, see United States v. Robins Dry Dock & Repair Co., 13 F.2d 808, 809-10, 812 (1 Cir. 1926) ("while the new sales agreement was never executed * * * the ship * * * was being operated under an arrangement in substantial accordance therewith"). Having failed to exercise the "reasonable diligence" required by the rule set forth in Carver, supra, Texaco is thereby precluded from asserting a maritime lien against the subfreights of the vessel.

Texaco points out that Charterer signed the voyage charter "as Agents for Owners."23 Why this is significant in this context is not readily apparent, but it may be that Texaco is suggesting that if Charterer was agent for Shipowner, it had presumptive authority under Section 972 of the Mari-time Lien Act to procure fuel for the Atlantic Sun; that Texaco could rely on such presumptive authority in furnishing bunkers to the vessel and is, therefore, entitled to a lien on subfreights. See Gilmore and Black, op. cit. supra at 555.

Examination of the documents submitted in evidence and reference to the law applicable to the construction of charter parties leads to the conclusion that the relationship between Shipowner and Charterer was that of owner-charterer and not principal-agent. Apparently, the maritime practice is that if an individual contracts to provide a vessel under a charter party, and intends to furnish a ship that he has chartered rather than his own, he is described in the subcharter party as "Chartered owner," "Freight contractor," "Disponent," or, sometimes, as "Agent or owner." Scrutton, Charter Parties 4, Note 2 and n. (t) (16th ed. 1955). The voyage charter in the instant case, in conformity with such practice, describes Charterer as "Agents for Owners or Disponent," and addendums Nos. 1 and 2 to the voyage charter refer to Charterer as "Agents for Owners or Desponent Owners."24 Moreover, there is no other evidence in the record indicating that Charterer had any authority to act as agent for Shipowner.25 Cf. States Marine Corp. of Delaware v. Victory Carriers,...

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