808 F.2d 697 (9th Cir. 1987), 85-6351, Foss Launch & Tug Co. v. Char Ching Shipping United States, Ltd.

• Citation: 808 F.2d 697
• Party Name: FOSS LAUNCH & TUG CO., et al., Plaintiffs, and Transamerica I.C.S. Inc. and Nautilus Leasing Services, Inc. and Flexi-Van Leasing, Inc., a corporation, and Itel Containers International Corporation and Genstar Container Corporation, and Interpool Limited, Plaintiffs-Appellees, v. CHAR CHING SHIPPING U.S.A., LTD., et al., Defendants, and Char Yigh M
• Case Date: January 20, 1987
• Court: United States Courts of Appeals, U.S. Court of Appeals — Ninth Circuit

Page 697

808 F.2d 697 (9th Cir. 1987)

FOSS LAUNCH & TUG CO., et al., Plaintiffs,

and

Transamerica I.C.S. Inc. and Nautilus Leasing Services, Inc.

and

Flexi-Van Leasing, Inc., a corporation,

and

Itel Containers International Corporation and Genstar

Container Corporation,

and

Interpool Limited, Plaintiffs-Appellees,

v.

CHAR CHING SHIPPING U.S.A., LTD., et al., Defendants,

and

Char Yigh Marine (Panama), S.A. claimant of vessel M/V C.C.

SAN FRANCISCO, her engines, boiler, tackle,

appurtenances, furniture and fixtures,

in rem, Defendant- Appellant.

No. 85-6351.

United States Court of Appeals, Ninth Circuit

January 20, 1987

As Amended Feb. 5, 1987.

Page 698

William F. Daley, Jr., Long Beach, Cal., James B. Nebel, Graham & James, San Francisco, Cal., Ronald D. Kent, Gerald M. Fisher, Fisher, Porter & Kent, Long Beach, Cal., for plaintiffs-appellees.

David E. R. Woolley, Lillick, McHose & Charles, Los Angeles, Cal., for defendants-appellants.

Appeal from the United States District Court for the Central District of California.

Before GOODWIN, WALLACE and ANDERSON, Circuit Judges.

GOODWIN, Circuit Judge.

The only substantial question in this appeal is whether a lessor of container boxes to a company that operates a fleet of container ships can assert a maritime lien against a vessel pursuant to 46 U.S.C. Secs. 971-975. The district court granted summary judgment for the lien claimant. We reverse.

The essential facts are not in dispute. Appellees leased containers to CC Line under a series of separate lease agreements. The containers were to be used by CC Line in connection with its transpacific shipping service between various ports in Asia and the United States. Under the lease agreements, containers were delivered to CC Line at different times in a variety of locations. The containers are substantially uniform in design and construction, and are treated by carriers as fungible. Some deliveries under the Flexivan agreements were apparently made to CC Line's own container yards that service its transpacific operations. The Transamerica, Nautilus, Genstar, and Itel leasing contracts, however, provided for the delivery of containers to CC Line at container manufacturing plants and at the lessor's own container depots. Once the CC Line took possession of the containers, CC Line had unrestricted authority to designate which containers would be placed aboard the particular vessels operating in its transpacific service. ¹ The lease agreements likewise did not restrict the use of the leased containers to exclusive use in maritime transportation. These boxes are designed for intermodal transportation.

The vessel "C.C. San Francisco" entered CC Line's transpacific service in 1983. It was specially designed for carrying cargo packed in containers. One or more of each lessor's containers was actually used aboard the "C.C. San Francisco" for the transport of ocean cargo.

In late August, 1984, the vessel "C.C. San Francisco" was arrested in Los Angeles in an in rem maritime action by appellees. The registered owner of the vessel, "Char Yigh Marine (Panama) S.A.," thereafter appeared in district court and sought a post-seizure hearing to have plaintiffs-appellees justify their maritime lien claims. Cross-motions for summary judgment were filed with the district court and on August 20, 1985, the district court ruled in favor of plaintiffs' liens. The district court held:

(1) that the plaintiffs' container leases with "CC Line" are maritime contracts; (2) that plaintiffs' containers served as the functional equivalent of the hold of the "CC San Francisco" and are therefore "necessaries" within the meaning of 46 U.S.C. Sec. 971; (3) that plaintiffs "furnished" containers to the "CC San Francisco" within the meaning of 46 U.S.C. Sec. 971; (4) that plaintiffs have valid maritime liens for necessaries against the vessel "CC San Francisco" for all containers carried aboard that vessel; and (5), that the maritime lien encompasses

Page 699

all periods plaintiffs' containers served as the functional equivalent of the hold of the "CC San Francisco," including incidental land use.

Flexivan Leasing, Inc. v. M/V C.C. San Francisco, 628 F.Supp. 1077, 1080 (C.D.Cal.1985).

Appellants raise a number of issues on appeal. The first issue is whether the district court had admiralty jurisdiction. Disputes involving the interpretation of contractual duties in maritime contracts can be proper subjects for resolution in admiralty. Hinkins Steamship Agency, Inc. v. Freighters, Inc., 498 F.2d 411, 412 (9th Cir.1974) (per curiam) (contract relating to a ship in its use as such, or to commerce or navigation on navigable waters, is subject to maritime law and falls under admiralty jurisdiction). We have no difficulty in following the cases which have found similar container leases to be sufficiently related to maritime transportation to support the extension of federal admiralty jurisdiction. CTI-Container Leasing Corp. v. Oceanic Operations Corp., 682 F.2d 377, 380-81 (2d Cir.1982); American President Lines, Ltd. v. Green Transfer & Storage, Inc., 568 F.Supp. 58, 60 (D.Or.1983); Integrated Container Service, Inc. v. Starlines Container Shipping, Ltd., 476 F.Supp. 119, 125 (S.D.N.Y.1979). ²

Of the remaining issues raised on appeal, each turns on an interpretation of the governing federal maritime lien statute, 46 U.S.C. Sec. 971. That statute provides as follows:

Any person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall not be necessary to allege or prove that credit was given to the vessel.

46 U.S.C. Sec. 971 (1982).

A recent decision of this court, Farwest Steel Corp. v. Barge Sea-Span 241, 769 F.2d 620, 623 (9th Cir.1985), instructs that there are three requirements for the grant of a maritime lien under 46 U.S.C. Sec. 971. A person lien claimant must have: (1) furnish[ed] repairs, supplies, or other necessaries, (2) to any vessel, (3) "upon the order of the owner of such vessel, or of a person authorized by the owner." 46 U.S.C. Sec. 971.

The "necessaries" requirement presents no substantial difficulty. The term, in modern interpretations, has been expanded to encompass any item which is "reasonably needed for the venture in which the ship is engaged." 2 S. Friedell, S. Bellman, A. Jenner & J. Loo, Benedict on Admiralty Sec. 37 at 3-27 (7th ed. 1986). See also Farwest Steel Corp., 769 F.2d at 623 ("[t]he term 'necessaries' under section 971 refers to 'supplies which are necessary to keep the ship going' ").

The wide range of items that can be characterized as "necessaries" under the Act is exemplified by the result in Equilease Corp. v. M/V Sampson, 793 F.2d 598, (5th Cir.1986) (en banc). In Equilease, the court stated: "The term 'necessary' under the FMLA [Act] includes most goods or services that are useful to the vessel, keep her out of danger, and enable her to perform her particular function.... What is a 'necessary' is to be determined relative to the requirements of the ship." Equilease, 793 F.2d at 603 (citations omitted). The court's resulting conclusion was that "because insurance is essential to keep a vessel in commerce, insurance is a 'necessary' under 46 U.S.C. Sec. 971." 793 F.2d at 604.

During all relevant periods of the operations of the "C.C. San Francisco," cargo

Page 700

containers of the type leased by appellees were more than reasonably necessary to the successful operation of the vessel. Although theoretically it might have been possible to convert the "C.C. San Francisco" from a container carrier to another type of cargo vessel, such transformation or modification was not attempted here. The vessel entered service in 1983 designed to transport cargo containers of the type supplied by appellees. It was engaged in container shipping throughout its time-charter period of operation by CC Line. We therefore hold that containers provided to the "C.C. San Francisco" under the leasing agreements were "necessaries" within the meaning of 46 U.S.C. Sec. 971. ³ Accord Transamerica ICS, Inc. v. M/V Panatlantic, 1984 A.M.C. 489, 490 (S.D.Fla.1983) ("the Court is convinced that containers are 'necessaries' within the meaning of 46 U.S.C., sec. 971"); Nautilus Leasing Services, Inc. v. M/V Cosmos, et al., 1983 A.M.C. 1483 (S.D.N.Y.1983) ("we have no difficulty holding that the containers in the instant case are 'necessaries' within 46 U.S.C., sec. 971").

The third requirement, that items be furnished to a vessel under the direction of an "owner" or "authorized person" can also be easily addressed. It is now well established that a bareboat time-charterer of a vessel holds sufficient legal authority over the management of the vessel to subject the vessel to maritime liens. Gulf Trading & Transportation Co. v. M/V Tento, 694 F.2d 1191, 1194 (9th Cir.1982), cert. denied, 461 U.S. 929, 103 S.Ct. 2091, 77 L.Ed.2d 301 (1983). The 1971 amendments to the Federal Maritime Lien Act, see H.R.Rep. No. 92-340, 92nd Cong., 1st Sess. 1, 3, reprinted in 1971 U.S.Code Cong. & Admin.News 1363, 1365, were also partly intended to ensure that any person to whom the management of a vessel is entrusted will be presumed to have authority to procure necessaries and supplies which may give rise to maritime liens. 46 U.S.C. Sec. 973; Farwest Steel Corp., 769 F.2d at 623-24.

In this action, no extraordinary circumstances have been put forward to suggest that CC Line was not in fact entrusted with management authority over the "C.C. San Francisco" during relevant periods of its operation. Accordingly, we hold that the appellees entered into container leases with a party...