The Anna E. Morse

Decision Date05 December 1922
Docket Number2865-2869.
Citation286 F. 794
PartiesTHE ANNA E. MORSE. v. HENDERSON et al., and four other similar cases. UNITED STATES
CourtU.S. Court of Appeals — Third Circuit

Rehearing Denied March 13, 1923.

George W. Coles, U.S. Atty., and Joseph L. Kun, Sp. Asst. U.S Atty., both of Philadelphia, Pa. (F. R. Conway, of Washington, D.C., of counsel), for the United States.

Lewis Adler & Laws, of Philadelphia, Pa. (Otto Wolff, Jr., of Philadelphia, Pa., of counsel), for appellees.

Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.

WOOLLEY Circuit Judge.

These actions were brought by the Phoenix Paint & Varnish Company a copartnership, against the United States of America, as owner of the several ships named in the caption, for supplies furnished them while being operated by the United States Transport Company, Inc. They were instituted by libels in personam and prosecuted, as if in rem, in the manner provided by the Suits in Admiralty Act of March 9, 1920, 41 Stat.chapter 95, page 525, exempting vessels owned by the United States and its agencies from seizure in admiralty causes. As they arose out of the same facts and involve the same questions of law we shall dispose of them in one opinion.

The actions were founded on the Act of June 23, 1910 (36 Stat. chapter 373, page 604, Comp. St. Secs. 7783-7787), as re-enacted in the Merchant Marine Act of June 5, 1920, 41 Stat.page 988, chapter 250, section 30, subsections P, Q, R, S, and T. At the trial the libellants introduced evidence that they had furnished supplies to five ships owned by the United States and in the operation of the United States Transport Company, and maintained that the United States Transport Company was, within the terms of the statute, the 'person to whom the management of the (vessels) at the port of supply (had been) intrusted' and as such was 'presumed to have authority from the owner to procure' supplies and necessaries. The Yankee, 233 F. 919, 147 C.C.A. 593; The Penn (C.C.A.) 273 F. 990. In defense, the United States introduced a number of contracts of confusing details covering the building of the ships by the Virginia Shipbuilding Corporation, the financing of their construction by the United States Shipping Board Emergency Fleet Corporation, the adjustment of disputes, conveyance of title of the ships to the United States of America, delivery thereafter to the United States Transport Company for operation pending a proposed sale to the Shipbuilding Corporation, on which it (the United States) based the contention, not exactly that it was not the owner of the ships for which the supplies had been furnished, for the title papers were against this position, but that the Transport Company was operating the ships, not for it, but for the Virginia Shipbuilding Corporation. The issue was so framed that, on facts to be mentioned presently, a finding that the ships were operated for the United States would sustain the libels, or a finding that they were operated for the Virginia Shipbuilding Corporation would defeat the libels. The District Court found against the United States and entered decrees for the libellants. The cases are here on the respondent's appeals.

In reviewing the complicated facts of these cases it should be understood that they are not actions between the United States, the United States Shipping Board Emergency Fleet Corporation, the United States Shipping Board, the Virginia Shipbuilding Corporation, the United States Transport Company, Inc., or any of them, arising out of contracts for building ships and advancing money. They are simple actions in admiralty brought against the United States by one furnishing its ships with supplies. Also, it should be noted that the libellants at the time they furnished the supplies were wholly uninformed of the situation between the United States and its several agencies. They came on the scene as strangers. Still another matter of importance is to determine at what point in this complicated controversy we should enter in order to find and follow the issue raised by the libellants. The proctors for the United States began at the first historical stage of the transactions between the Emergency Fleet Corporation and the Virginia Shipbuilding Corporation and followed them down into and through the litigation. This chronological order perhaps has advantages, but it tends to add to the confusion by placing the libellants in company with a group of corporations at a time and under circumstances with which they had nothing to do. Therefore, having in mind that the libellants brought these suits in admiralty under a statute enacted specially for the protection of persons in their situation, we think the place at which to start is where the libellants started and where also the law starts.

The libellants began by furnishing supplies, concededly necessaries, to five ships in the operation of the United States Transport Company, upon its order, made with authority from the owner, presumed by statute, to procure the supplies on the credit of the ships. It cannot be questioned that, upon the face of this transaction so far as it has been stated, the libellants had a right to assume that the Transport Company was the person to whose management, within the terms of the statute, the ships had been entrusted at the port of supply, and that, as such, it was clothed with authority by the owner to procure supplies, under a presumption which the law, in its modern policy, makes in favor of the person furnishing them. But the law goes farther and provides that, notwithstanding this liberal provision for one furnishing supplies, it shall not--

'be construed to confer a lien when the furnisher knew, or by the exercise of reasonable diligence could have ascertained, that because of the terms of a charter party, agreement for sale of the vessel, or for any other reason, the person ordering the repairs, supplies or other necessaries was without authority to bind the vessel therefor.'

Thus, speaking broadly, the law presumes the owner's authority in one entrusted with a ship to procure supplies on the pledge of the ship, unless the owner has withheld his authority and the furnisher knew it or by diligence could have ascertained it. The Havana, 64 F. 496, 12 C.C.A. 361; The Yankee, 233 F. 919, 147 C.C.A. 593; The Oceana, 244 F. 80, 156 C.C.A. 508, certiorari denied, see Morse Dry Dock & Repair Co. v. Conron Co., 245 U.S. 656, 38 Sup.Ct. 13, 62 L.Ed. 533; The Dana (D.C.) 271 F. 356; Northwestern v. Dunkley, 174 F. 121, 98 C.C.A. 95; The Valencia, 165 U.S. 264, 17 Sup.Ct. 323, 41 L.Ed. 710; The Kate, 164 U.S. 458, 17 Sup.Ct. 135, 41 L.Ed. 512; The Huron (D.C.) 271 F. 781. The exception to the remedy which the law affords one furnishing supplies is operative only when by reason of some circumstance he either knew or by diligence could have ascertained that the person ordering the supplies was without the authority of the owner which otherwise the law presumes.

The United States urges, quite correctly we think, there is in these cases one such circumstance which, at the threshold, imposed upon the libellants the duty of inquiry. It was a letter dated March 30, 1920, written by the Transport Company to the libellants, out of which grew the order for supplies. The material parts are as follows:

'We desire to know whether you wish to furnish us with list prices of paint for vessels under our operation. Part of this fleet are United States Shipping Board vessels and part belonging directly to this company. Upon the vessels belonging to the Shipping Board, payment for their bills will be prompt, that is, within approximately ten to fifteen days; upon vessels owned directly by us it will be slower, credit of possibly sixty days in some cases.'

Clearly this was notice to the libellants diligently to ascertain whether the Transport Company, 'because of a charter party, agreement for sale of the vessel, or for any other reason,' 'was without authority to bind the (vessels) ' of the United States Shipping Board for the supplies it was about to order. The libellants made no such inquiry. This was a mistake.

But the matter can not stop here for the next question is, what would they have found if they had inquired? This: They would have found a contract between the United States of America 'represented by the United States Shipping Board Emergency Fleet Corporation,' on the one part,...

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