American Trust Co. v. W. & A. Fletcher Co.

• Decision Date: 18 August 1909
• Docket Number: 822.,821
• Citation: 173 F. 471
• Parties: AMERICAN TRUST CO. v. W. & A. FLETCHER CO. BERWIND-WHITE COAL MINING CO. v. SAME.
• Court: U.S. Court of Appeals — First Circuit

173 F. 471

AMERICAN TRUST CO. v. W. & A. FLETCHER CO.

BERWIND-WHITE COAL MINING CO. v. SAME.

Nos. 821, 822.

United States Court of Appeals, First Circuit.

August 18, 1909

Avery F. Cushman (Elmer P. Howe and William A. Sargent, on the brief), for appellant American Trust Co.

Alfred H. Strickland, for appellant Berwind-White Coal Mining Co.

Harrington Putnam and Edward S. Dodge, for appellee W. & A. Fletcher Co.

Brandeis Dunbar & Nutter and Robinson, Biddle & Benedict, amici curiae.

Before COLT and LOWELL, Circuit Judges, and BROWN, District Judge.

LOWELL Circuit Judge.

The Steamship Company, a Maine corporation, being concerned in the operation of steamships, on May 16, 1905, mortgaged its property to the Trust Company, a corporation of Massachusetts. This mortgage was stated to cover after-acquired property. It was recorded in the custom house at Bath, Me. At some time in 1905 or 1906 the Steamship Company contracted for the building of the steamers Yale and Harvard. The hulls were constructed in Pennsylvania, and were afterwards brought at different times to the Fletcher Company's yard at Hoboken, N.J., where, under contract between the Steamship Company and the Fletcher Company, they were supplied with engines and other machinery and fittings. Before they were completed they were enrolled in Bath, Me.; the Yale on May 23, 1907, and the Harvard on August 12th. On May 25, 1907 the Yale was expressly conveyed by the Steamship Company to the Trust Company by an instrument making it subject to the mortgage of 1905. This instrument was immediately recorded at Bath. The Harvard was conveyed by a like conveyance, likewise recorded. The steamers were thereafter fitted up and employed in navigation, but there remained a balance for work done upon them, due from the Steamship Company to the Fletcher Company. A creditors' bill was filed against the Steamship Company January 29, 1908, in the Circuit Court for the district of Maine, and a receiver was appointed by that court. Ancillary proceedings were had in Massachusetts and in the Southern District of New York. The receiver took possession of the Yale and Harvard, which were then laid up at Boston, Mass., for the winter of 1907-08. In the summer and autumn of 1908 they were run by the receiver between Boston and New York. The Fletcher Company brought a petition in the Circuit Court for Maine to enforce a lien alleged to arise in its favor upon the Yale and Harvard under the statutes of New Jersey. In that proceeding the Trust Company intervened, as claiming rights in the steamers superior to those of the Fletcher Company. The Fletcher Company's petition was thus resisted, both by the mortgage creditor and by unsecured creditors. The Circuit Court granted the prayer of the petition, and the Trust Company brought the case here by way of appeal.

The case before us is concerned with an alleged lien upon vessels. At the risk of declaring commonplaces, we start from first principles. At common law the builder or repairer, like other mechanics, had a possessory lien upon the ship. 'A shipwright, indeed, who has taken a ship into his own possession to repair it, is not bound to part with the possession until he is paid for the repairs, any more than any other artificer. But if he has once parted with the possession, or has worked upon it without taking possession he is not deemed a privileged creditor, having any claim upon the ship itself. ' The General Smith, 4 Wheat. 438, 443, 4 L.Ed. 609. The objection supposed to lie against secret liens is not applicable to these possessory liens. They are not secret, as they are advertised by the lienor's possession. The purchaser of the chattel takes title subject to them. By the maritime law, on the other hand, a lien existed for the construction, supply, and repair of a vessel having an application more extended. It was not possessory. Indeed, the maritime lien was deemed to be given in order that a vessel might go on its way unembarrassed by the lienor's attempt to obtain immediate payment. The origin of this lien we need not investigate. Where it exists, it prevails over the rights of a bona fide purchaser for value. It follows the ship apart from possession. It is not divested by a subsequent sale. It may prevail even over a prior sale or mortgage, and it has a fixed order of preference in payment as compared with other maritime liens, such as those for seamen's wages, general average or collision. It has the inconvenience of a secret lien, but the policy of the law deems the inconvenience less important than the advantage which the lien secures to navigation.

The general maritime lien for construction, repairs, and supplies has been recognized very imperfectly by the law of England, and even by that of the United States. In the English courts questions of jurisdiction were long confused with questions of substantive law, until all difference was lost sight of. Even the courts of the United States, though having a broader knowledge of the admiralty law, did not emerge at once from English limitations and inconsistencies. See the historical remarks in The Underwriter (D.C.) 119 F. 713. All refinements of the Anglo-American doctrine being laid aside, the lien is held to exist here only for supplies furnished in a foreign port, those which we may call for convenience foreign repairs and supplies. In respect of these, the lien has the incidents of the maritime lien above described.

The convenience and justice of a lien for the construction of a vessel and for its domestic repair and supply have been so generally recognized, however, that many of the states, by statute, have given a lien to the builder and to the domestic repairer and supply man. Stimson's American Statute Law, Sec. 4643. These statutes vary considerably in the nature and rank of the lien given. Many of them require some record in order that the lien may be preserved. Ordinarily the work must be done within the state (McDonald v. The Nimbus, 137 Mass. 360); but not always (Ward v. Willson, 3 Mich. 1). In all cases, however, the lien exists apart from possession. The effect given by the federal courts to state statutes, fixing liens upon a vessel, is anomalous. The contract for domestic repairs and supplies is said to be maritime, though of itself it creates no maritime lien. The state statute, operating on the maritime contract, is held to create a maritime lien, enforceable in a court of admiralty by its peculiar process, and of equal rank with the strictly maritime lien for foreign supply and repairs given by the admiralty law. Jones on Liens, Sec. 1772. Like the latter, it is unconnected with possession, enforceable without regard to the locality of the court, and indestructible by private sale. It imports a tacit hypothecation of the vessel, it is a jus in re, it accompanies the property into the hands of a bona fide purchaser, and it is enforceable in a court of admiralty by process in rem. Whatever be the provisions of the state statute, they cannot be made effective to give a state court jurisdiction to enforce this lien by proceedings of this sort. A proceeding by way of attachment, summons to the owner, if known, and sale of the vessel thereunder, has been held to be thus excluded from the state courts in the enforcement of a lien for domestic repairs and supplies. 'The form of proceeding against the vessel, provided for in the statute of Massachusetts, now in question, is clearly in the nature of admiralty process in rem, and is undistinguishable from the proceedings, provided for in statutes of other states, which have been held by this court to be exclusively within the admiralty jurisdiction of the courts of the United States. The lien upon the vessel is created as soon as the money is due for labor performed or materials furnished, and continues until the debt is satisfied, unless the lien is dissolved by failure to record a statement of the claim, as required by statute. The petition is to be served by an attachment of the vessel, and a summons to the owners, if known. A dissolution of the attachment does not dissolve the lien, and any number of persons having such liens upon the same vessel may join in one petition to enforce them. ' The Glide, 167 U.S. 606, 623, 17 Sup.Ct. 930, 936, 42 L.Ed. 296.

The cause of the want of jurisdiction in the state courts to enforce by process in rem the lien for domestic supplies should be noted. That a state statute cannot provide for this enforcement in a state court arises, not from any general infirmity in the statute, but solely because of the exclusive gift to the federal courts of judicial power in 'all cases of admiralty and maritime jurisdiction. ' Where this exclusive federal jurisdiction exists, it necessarily ousts the jurisdiction which would have otherwise been enjoyed by the state courts. Jurisdiction in the state courts is excluded only so far as the federal Constitution gives it exclusively to the federal courts. Knapp v. McCaffrey, 177 U.S. 638, 648, 20 Sup.Ct. 824, 44 L.Ed. 921. Where exclusive jurisdiction does not exist in the federal courts, it may exist in the courts of a state. Thus the contract for domestic supplies may be enforced in the state courts by an ordinary action for breach of contract, and, theoretically, the lien which the statute causes to arise out of the contract may also be enforced in the state courts by proceedings not in rem. But the method of enforcing the lien in a court of admiralty is so much more effective than the method allowed to the state courts that the former has become practically exclusive.

Concerning the statutory lien for the construction of a vessel, the federal courts have reached a different conclusion from that reached concerning the statutory lien for...