Bermuda Exp. N.V. v. M/V Litsa (Ex. Laurie U)

• Decision Date: 09 May 1989
• Docket Number: No. 88-1362,88-1362
• Citation: 872 F.2d 554
• Parties: BERMUDA EXPRESS, N.V., Southeastern Maritime Company, Port Stevedoring Company, Inc., Ryan-Walsh Stevedoring Company, Inc., NRS Financial Corp., Assignee of Malone Marine Group, Inc., Zalesky, Marvin d/b/a Seaside Marine Supply of Houston, Charles L. Molho, d/b/a Manhattan Ship Supply and Thurmond Supply Co., Inc. v. M/V LITSA (EX. LAURIE U) In Rem, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 554

872 F.2d 554

1989 A.M.C. 1537

BERMUDA EXPRESS, N.V., Southeastern Maritime Company, Port

Stevedoring Company, Inc., Ryan-Walsh Stevedoring Company,

Inc., NRS Financial Corp., Assignee of Malone Marine Group,

Inc., Zalesky, Marvin d/b/a Seaside Marine Supply of

Houston, Charles L. Molho, d/b/a Manhattan Ship Supply and Thurmond Supply Co., Inc. v. M/V LITSA (EX. LAURIE U) In Rem, Appellant.

No. 88-1362.

United States Court of Appeals, Third Circuit.

Argued Dec. 6, 1988.

Decided April 13, 1989.

Rehearing and Rehearing In Banc Denied

May 9, 1989.

Donald F. Mooney (argued), New York City, Douglas H. Riblet, Rawle & Henderson, Philadelphia, Pa., for appellant.

Faustino Mattioni, Francis X. Kelly (argued), Mattioni, Mattioni & Mattioni, Ltd., Philadelphia, Pa., for appellee, Southeastern Maritime Co.

Thomas E. Seus (argued), Amy L. Currier, Kelly, Harrington, McLaughlin & Foster, Philadelphia, Pa., for appellees, Port Stevedoring Co., Inc. and Ryan-Walsh Stevedoring Co., Inc.

Before SLOVITER and BECKER, Circuit Judges, and BARRY, District Judge ^*.

OPINION OF THE COURT

SLOVITER, Circuit Judge.

I. ISSUES

The appellant vessel in an in rem action appeals from the district court's final adjudication and judgment awarding three stevedoring companies the full amount of their claims based on maritime liens for unpaid invoices for stevedoring services provided to the vessel before it was sold to its present owner. The principal issue on appeal is whether the claims of the stevedore lienors were barred by the equitable doctrine of laches. The conflicting interests involve, on one hand, those of maritime lienors whose services are essential for the smooth functioning of maritime commerce and, on the other hand, those of bona fide purchasers in good faith of vessels which may be subject to such liens. We must also decide the scope of "necessaries" which give rise to maritime liens under 46 U.S.C. Sec. 971 (1982).

II. FACTS

Most of the facts relevant to this appeal are not in dispute. Appellees, Port Stevedoring, Inc. (Port), Ryan-Walsh Stevedoring Company (Ryan-Walsh), and Southeastern Maritime Company (Semco), are in the business of supplying stevedoring services to vessels at various ports in the southern portion of the United States. In 1982, Uiterwyk Corporation (Uiterwyk), the general agent for Uiterwyk Lines, Ltd. which owned the vessel, contracted with appellees to provide stevedoring services for vessels nominated by Uiterwyk. This contract covered the vessel involved in this litigation, then known as the M/V LAURIE U, which sailed under Liberian registry. The contracts all called for payment of 80% of the amount due for services rendered upon completion of such services for each vessel and presentation of an invoice. Under the Port and Semco contracts, the balance became due a reasonable time after presentation of duly documented bills, while under the Ryan-Walsh contract final payment was due within sixty days after the presentation of such bills.

Semco provided services to the M/V LAURIE U on May 27 and 28, 1982 in Charleston, giving rise to a claim of $22,184.87. Ryan-Walsh provided services to the M/V LAURIE U on July 26-August 6, 1982 in New Orleans, giving rise to a claim for $25,404.21. Port provided services to the M/V LAURIE U in Houston on three occasions in 1982, May 13-23, August 11-14, and October 14-20, giving rise to claims for $112,994.71, $46,692.26, and $71,873.97 respectively.

On October 21, the M/V LAURIE U left United States waters and did not return until April 2, 1983. In the interim, two significant events took place. On December 8, 1982, Uiterwyk Lines, Ltd. sold the M/V LAURIE U to Star Warrant Shipping Corp. (Star), a shipping company operating out of Piraeus, Greece. In the contract of sale, Uiterwyk Lines, Ltd. warranted to Star that there were no maritime liens against the vessel, and Star's search of the Liberian registry in New York revealed that no claims had been filed against the ship. Star renamed the vessel M/V LITSA. Shortly after the sale, on January 27, 1983, Uiterwyk, the general agent, filed a petition in bankruptcy in the Middle District of Florida.

Upon learning of the bankruptcy, appellees filed individual claims in the bankruptcy court and contacted Lloyds Watch of London to determine the status of Uiterwyk vessels which they had serviced. Lloyds informed appellees of the purchase of the M/V LAURIE U and the name change, and continued to track the vessel's movements until it returned to United States waters on April 2, 1983. Bermuda Express, another claimant who has since settled with Star, arrested the M/V LITSA in the Port of Philadelphia on April 6, 1983. The district court had jurisdiction over this suit in admiralty under 28 U.S.C. Sec. 1333 (1982).

Appellees intervened as plaintiffs and proceeded to trial against the M/V LITSA on their claims. After a bench trial, the district court determined that all three appellees had acted with the extraordinary degree of diligence required to preserve their maritime liens, and that neither their participation in the bankruptcy proceedings nor their failure to file notice of their maritime liens waived their right to assert those liens. The court entered the following judgments which represent the full amounts of the claims and prejudgment interest: Port, $324,185.31; Ryan-Walsh, $35,588.16; Semco, $31,078.28.

The vessel appeals, arguing that the district court erred in its analysis of the laches issue, that its finding of no waiver was clearly erroneous, that some of the claims were not necessaries giving rise to maritime liens, and that the award of prejudgment interest was not warranted.

III. LEGAL PRINCIPLES

A.

Our standard of review on the laches issue has various components. We review factual findings such as length of delay and prejudice under the clearly erroneous standard; we review the district court's balancing of the equities for abuse of discretion; and our review of legal precepts applied by the district court in determining that the delay was excusable is plenary. See Churma v. United States Steel Corp., 514 F.2d 589, 592-93 (3d Cir.1975).

The statute governing maritime liens provides that persons supplying various enumerated services or "other necessaries" to a vessel are entitled to a maritime lien on the vessel "which may be enforced by suit in rem." 46 U.S.C. Sec. 971. ¹ The statute does not require maritime lienors to file claims of their liens. At common law maritime In The Bold Buccleugh, 7 Moore, P.C. 267 (1852), the English Privy Council case which serves as the original authority on the issue, G. Gilmore & C. Black at 595, the court enforced a maritime lien against the ship although it had since been sold; the court, however, noted that the lien may be lost "by negligence or delay where the rights of third parties may be compromised." Id. at 285.

liens had historically been considered secret liens, good even against a good faith purchaser of a ship without notice of the lien's existence. See Piedmont & Georges Creek Coal Co. v. Seaboard Fisheries Co., 254 U.S. 1, 12, 41 S.Ct. 1, 4, 65 L.Ed. 97 (1920); G. Gilmore & C. Black. The Law of Admiralty 588 (2d ed. 1975). Both at common law and under the statute, however, maritime liens may be lost by laches in their prosecution. See G. Gilmore & C. Black at 588.

Shortly thereafter, the United States Supreme Court enunciated a similar principle. In The Key City, 81 U.S. (14 Wall.) 653, 660, 20 L.Ed. 896 (1872), the Court stated that "laches or delay in the judicial enforcement of maritime liens will, under proper circumstances, constitute a valid defence;" that there is no "arbitrary or fixed period of time" for its operation but that the determination that a lienor was guilty of laches would "depend on the peculiar equitable circumstances of that case;" and that "where the lien is to be enforced to the detriment of a purchaser for value, without notice of the lien, the defence will be held valid under shorter time, and a more rigid scrutiny of the circumstances of the delay, than when the [party claiming laches] is the owner at the time the lien accrued."

The parties dispute whether a maritime lienor must exercise "extraordinary diligence" in order to preserve a claim against a bona fide purchaser, see McLaughlin v. Dredge Gloucester, 230 F.Supp. 623, 630 (D.N.J.1964); see also G. Gilmore & C. Black at 767 & n. 387, or whether "reasonable diligence" is sufficient, see The Bold Buccleugh, 7 Moore, P.C. at 285 ("where reasonable diligence is used, and the proceedings are had in good faith, the lien may be enforced, into whosesoever possession the thing may come"). While it is possible that the difference in semantics would not be dispositive since diligence by its very nature requires "steady, earnest, attentive, and energetic application and effort," Webster's Third New International Dictionary (1976), we believe that the lienor should be held to a "reasonable diligence" standard. See Merchants & Marine Bank v. The T.E. Welles, 289 F.2d 188, 190 (5th Cir.1961) (applying a reasonable diligence test). The lienor must take such steps as are appropriate under the circumstances. The district court used the standard most favorable to the vessel and found nonetheless that the lienors exercised the "extraordinary high degree of diligence" required to preserve and enforce the liens. App. A at 376. If we conclude that there is the requisite support for a conclusion of reasonable diligence, we are bound to affirm.

B.

Appellant argues that in considering the diligence of the lienors in this case, we need look no further than the analysis used by the courts in the two Everosa cases decided half a century ago. In the first Everosa case, The Everosa (Southern Coal & Coke Co. v. Kugniecibas), 93 F.2d 732 (1st Cir.1937), the libelant, Southern Coal & Coke Company, had provided coal to the vessel at issue on November 22, 1933 and May 8, 1934 for...