310 U.S. 268 (1940), 662, Dampskibsselskabet Dannebrog v. Signal Oil & Gas Co. of California

• Docket Nº: No. 662
• Citation: 310 U.S. 268, 60 S.Ct. 937, 84 L.Ed. 1197
• Party Name: Dampskibsselskabet Dannebrog v. Signal Oil & Gas Co. of California
• Case Date: May 20, 1940
• Court: United States Supreme Court

Page 268

310 U.S. 268 (1940)

60 S.Ct. 937, 84 L.Ed. 1197

Dampskibsselskabet Dannebrog

v.

Signal Oil & Gas Co. of California

No. 662

United States Supreme Court

May 20, 1940

Argued April 1, 1940

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE NINTH CIRCUIT

Syllabus

1 Where, by the terms of a charter party, the charterer has the direction and control of the vessel, and there is no prohibition against the creation of liens for necessary supplies ordered by the charterer, one who, on the order of the charterer, supplies fuel oil to the vessel is entitled to a maritime lien, even though the charter requires the charterer to "provide and pay for" fuel. Construing the Act of June 23, 1910, as amended. Pp. 271, 275.

Semble, where the charter party prohibits the creation of a lien for supplies ordered by the charterer, no lien will attach.

2. The fact that the supplier had a general contract with the charterer to supply "the fuel oil requirements of any and all vessels owned, chartered, or operated" by the latter held not to defeat the lien where such contract did not provide that the oil should be supplied on the sole credit of the charterer or negative the creation of maritime liens for supplies actually furnished to the vessels in satisfying their requirements. P. 276.

3. The Act of June 23, 1910, as amended, provides that "any person to whom the management of the vessel at the port of supply is entrusted" shall be presumed to have authority to procure supplies upon the credit of the vessel. Held that, where, apart from mere navigation, the vessel is placed under the direction and control of the charterer as the hirer of the vessel, who as such may determine to what port she shall go and what she shall carry, subject only to specified exceptions, then the charterer, in the absence of any provision to the contrary, is deemed to be entrusted with the vessel's management, within that provision of the Act. Pp. 277, 279-280.

106 F.2d 896 affirmed.

Certiorari, 309 U.S. 644, to review the affirmance of decrees in admiralty, 25 F.Supp. 594, sustaining maritime liens.

Page 269

HUGHES, J., lead opinion

MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.

The question is whether the respondent is entitled to maritime liens for fuel oil delivered to petitioners' vessels.

In September, 1932, respondent, Signal Oil and Gas Company, made a contract with the Anglo Canadian Shipping Company, Limited, agreeing to sell fuel oil to any vessel which the Anglo Canadian Company might own, charter or operate. In May, 1933, the parties modified the contract so as to include the fuel oil requirements of vessels owned, chartered or operated by W. L. Comyn & Sons. Later, the respective owners of the two vessels here in question, the "Stjerneborg" and the "Brand," chartered them to W. L. Comyn & Sons.

The charters were time charters on the so-called "Government form." The owners agreed "to let," and the charterers "to hire," the vessel "from the time of delivery" for a specified period, the vessel to be placed "at the disposal of the charterers" at such place as the charterers may direct, being, on her delivery, ready to receive cargo and to be employed in carrying merchandise as stated. The owners agreed to provide and pay for all provisions, wages, and shipping and discharging fees of the captain, officers, engineers, firemen, and crew; to pay for the insurance of the vessel, and to maintain her in a thoroughly efficient state in hull, machinery, and equipment. The charterers agreed to "provide and pay for" coals and fuel oil, port charges, pilotages, etc., and all other usual expenses

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except as before stated. The charterers were to pay "for the use and hire" of the vessel a stipulated amount commencing "on and from the day of her delivery" and to continue until "the day of her redelivery in like good order and condition, ordinary wear and tear excepted, to the owners (unless lost) at a safe port" as designated. It was provided that the captain, although appointed by the owners, should be "under the orders and direction of the charterers as regards employment of agency," and the charterers were to load, stow, and trim the cargo at their expense under the supervision of the captain. If the charterers should have reason to be dissatisfied with the conduct of the captain, officers, or engineers, the owners, if necessary, should make a change in the appointments. The charterers were allowed to appoint a supercargo to accompany the vessel and "see that voyages are prosecuted with the utmost despatch." It was further provided that nothing in the charter should be [60 S.Ct. 939] construed as a "demise," and that the owners were to remain responsible for the navigation of the vessel. The charters contained no prohibition against the creation of liens for necessary supplies ordered by the charterers.

Respondent libeled the vessels for fuel oil supplied to the vessels respectively on the charterers' order, and the owners appeared and filed answers alleging that the oil was furnished upon the charterers' credit, and not upon that of the vessel.

The District Court sustained the liens, 25 F.Supp. 594, and the Circuit Court of Appeals affirmed the decrees. 106 F.2d 896. Because of an alleged conflict with decisions of the Circuit Court of Appeals of the Fifth Circuit in The Cratheus, 263 F. 693, and Pensacola Shipping Company v. United States Shipping Board, 277 F. 889, certiorari was granted. 309 U.S. 644.

The Circuit Court of Appeals in the instant case followed its decisions in The Portland, 273 F. 401, and The

Page 271

Golden Gate, 52 F.2d 397. The Golden Gate was a case of a time charter which required the charterer to provide and pay for fuel oil, but contained no provision denying the right of the charterer to bind the ship for necessary supplies. The court said that, in the absence of such a prohibition, the ship was bound whether the supplies were ordered by the charterer or by the master. The ruling was reiterated by the same court in The Luddco, 41, 66 F.2d 997-998. In further support of its position, respondent cites the following cases from other circuits: The Everosa, 93 F.2d 732, 735; The J. W. Hennessy, 57 F.2d 77, 79, 80; The Anna E. Morse, 286 F. 794, 798; Munson Inland Water Lines v. Seidl, 71 F.2d 791, 793.

Petitioners rely upon our decisions in The Kate, 164 U.S. 458, 464, and The Valencia v. Zeigler, 165 U.S. 264, to the effect that, where the charter party requires the charterer to provide and pay for supplies, the supplier, being charged with knowledge of the provisions of the charter party, was not entitled to a maritime lien for supplies furnished to the vessel upon the order of the charterer.

These decisions, however, were prior to the passage of the Act of June 23, 1910, 36 Stat. 604, which governs the present case. The text of the Act, as amended, is set forth in the margin.¹ Its purpose was to simplify and

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clarify the rules as to maritime liens as to which there had been much confusion. The Act did away with the artificial distinction between [60 S.Ct. 940] repairs, supplies etc., furnished in home ports and those furnished in foreign ports. It did away with the doctrine that, when the owner of a vessel contracted in person for necessaries or was present in the port when they were ordered, it was presumed that the materialman did not intend to rely upon the vessel's credit. It substituted a federal statute for numerous state statutes purporting to confer liens. Piedmont & George's Creek Coal Co. v. Seaboard Fisheries Co., 254 U.S. 1, 11.²

In so doing, the statute provided a series of simple and comprehensive rules. While it was said not to be intended to change the general principles of the law of maritime

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liens,³ it was intended to operate in aid of those who supply necessaries to ships,and it correspondingly restricted the rights of the owners of the vessels. Any person furnishing repairs, supplies, etc., to a vessel, whether foreign or domestic, "upon the order of the owner" or "of a person authorized by the owner," is to have a maritime lien which may be enforced by suit in rem. It is not necessary to allege or prove that credit was given to the vessel. The "managing owner, ship's husband, master, or any person to whom the management of the vessel at the port of supply is entrusted" is presumed to have authority to procure the necessaries. The officers and agents thus specified include those appointed "by a charterer, by an owner pro hac vice, or by an agreed purchaser in possession of the vessel." These broad provisions are then subjected to the qualification that nothing in the Act should 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, 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.

Despite the aim thus to provide simple and clear rules, there has been no little contrariety of opinion in the application of the statute -- well illustrated by the conflicting decisions to which we have referred with respect to the existence of maritime liens where supplies have been ordered by a charterer who has agreed with the owner to provide and pay for them. As, in such a case, the supplies are furnished on the charterer's order, there is no question that the supplier is charged with knowledge of the provisions of the charter when he either knows them

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or by reasonable diligence could have ascertained them. So far, the principle of The Kate and The Valencia, supra, is embodied in the statute. But it does not follow that, in the light of the statute, The Kate and The Valencia can still be regarded as authority for the view that the mere fact that the charterer is...