Cardinal Shipping Corp. v. M/S Seisho Maru

• Decision Date: 22 October 1984
• Docket Number: 83-3030,Nos. 83-2338,s. 83-2338
• Citation: 744 F.2d 461
• Parties: CARDINAL SHIPPING CORPORATION, Plaintiff-Appellant Cross Appellee, v. M/S SEISHO MARU, her engines, tackle, etc., Defendant-Appellee, Aizawa Kaiun K.K., Claimant-Defendant Cross-Appellant. The GOVERNMENT OF the REPUBLIC OF INDONESIA and Bandan Urusan Logistik, Plaintiffs-Appellants Cross Appellees, v. M/V GLAFKOS, her engines, tackle, apparel, furniture, etc., in rem, et al., Defendants-Appellees, Glafkos Shipping Co., Ltd., Defendant-Appellee Cross Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 461

744 F.2d 461

1985 A.M.C. 2630

CARDINAL SHIPPING CORPORATION, Plaintiff-Appellant Cross Appellee, v. M/S SEISHO MARU, her engines, tackle, etc., Defendant-Appellee, Aizawa Kaiun K.K., Claimant-Defendant Cross-Appellant.

The GOVERNMENT OF the REPUBLIC OF INDONESIA and Bandan

Urusan Logistik, Plaintiffs-Appellants Cross Appellees, v. M/V GLAFKOS, her engines, tackle, apparel, furniture, etc., in rem, et al., Defendants-Appellees, Glafkos Shipping Co., Ltd., Defendant-Appellee Cross Appellant.

Nos. 83-2338, 83-3030.

United States Court of Appeals, Fifth Circuit.

Oct. 22, 1984.

Leach & Paysse, Philip A. Fant, New Orleans, La., Delson & Gordon, Daniel J. O'Callaghan, New York City, for plaintiffs-appellants cross appellees in No. 83-3030.

James J. Sentner, Jr., Houston, Tex., for amicus curiae, Haight, Gardner, et al. in No. 83-3030.

Chaffe, McCall, Phillips, Toler & Sarpy, J. Francois Allain, John H. Clegg, New Orleans, La., for defendants-appellees in No. 83-3030.

Haight, Gardner, Poor & Havens, James J. Sentner, Jr., Houston, Tex., R. Glenn Bauer, Haight, Gardner, Poor & Havens, New York City, for Cardinal Shipping Corp. in No. 83-2338.

Royston, Rayzor, Vickery & Williams, Ted C. Litton, William R. Towns, Houston, Tex., for Seisho and Aizawa in No. 83-2338.

Appeals from the United States District Court for the Eastern District of Louisiana.

Appeals from the United States District Court for the Southern District of Texas.

Before GOLDBERG, RUBIN and REAVLEY, Circuit Judges.

GOLDBERG, Circuit Judge:

The two cases consolidated for this appeal both involve maritime liens and the effectiveness of "Prohibition-of-Lien" clauses contained in charterparties. We will treat the two cases separately, however, because they raise different peripheral issues and their factual settings differ.

I. CARDINAL SHIPPING v. M/S SEISHO MARU

Aizawa Kaiun K.K. ("Aizawa") owns the M/S Seisho Maru. Aizawa time-chartered the vessel to Nakamura Steamship Co., Ltd., ("Nakamura") under a charterparty dated August 17, 1979. Aizawa and Nakamura are both Japanese Corporations, and the Seisho Maru sails under a Japanese flag. The charterparty gave Nakamura the right to use or sublet the vessel for a set period. The actual operation of the vessel, however, would be the responsibility of a Master and crew provided by Aizawa. On November 17, 1980, Nakamura time-chartered the Seisho Maru to Clover Trading Corporation ("Clover"), a Liberian Corporation. The period of this charter was two years, plus or minus one month at the charterer's option. The charterparty provided for payment of hire to be made in London, semi-monthly in advance.

The time charter from Nakamura to Clover, as well as the head charter from Aizawa to Nakamura, were drawn on the standard New York Produce Exchange form. Both charters contained the following lien clause:

18. That the Owners shall have a lien upon all cargoes, and all sub-freights for any amounts due under this Charter, including General Average contributions, and the Charterers to have a lien on the Ship for all monies paid in advance and not earned, and any overpaid hire or excess deposit to be returned at once. Charterers will not suffer, nor permit to be continued, any lien or encumbrance incurred by them or their agents, which might have priority over the title and interest of the owners in the vessel.

(emphasis added).

On October 5, 1981, in Charlotte, N.C., Clover entered into a voyage charterparty with Cardinal Shipping Corporation ("Cardinal"), a United States Corporation. The charter contemplated the carriage of six thousand metric tons of steel coils from Oxeloesund, Sweden, to the ports of Detroit and Chicago. Cardinal executed the charter in order to meet its contractual commitment with a shipper of the cargo. ¹

In accordance with the charterparty, Clover delivered the Seisho Maru to Cardinal in Oxeloesund. ² On November 3, 1981, Cardinal began loading the cargo of coils on board. In the meantime, a dispute had developed between Nakamura and Clover. Payment of hire under their time charter became due on October 28, 1981. The day before, Clover had advised Nakamura that it had instructed its bankers to transfer the amount due to Nakamura's bank. Nakamura's representatives, relying on this communication, waited several days for the transfer of funds. When the transfer had not occurred by November 3, Nakamura's representatives contacted Clover seeking clarification as to the non-payment of hire.

On the following day, November 4, 1981, Nakamura instructed the vessel that loading should cease immediately. Approximately 1800 of the 6000 metric tons had already been loaded; but neither Nakamura nor the Master of the Seisho Maru had signed bills of lading for the cargo. Since payment was not forthcoming, Nakamura gave formal notice on November 5 of the default in payment of hire, expressly reserving Nakamura's right under the charterparty to withdraw the vessel and affording Clover three banking days to cure the default.

When Clover failed to remit payment within that time, Nakamura announced that it would withdraw the vessel from the time charter. Some discussions ensued between Nakamura and Cardinal concerning the carriage of the cargo of steel coils, but no agreement could be reached. Thus, in mid-November, Nakamura discharged the cargo already on board and withdrew the Seisho Maru.

Cardinal made alternate arrangements to ship the cargo, allegedly suffering losses as a result. It filed suit in district court to recover damages for breach of the voyage charter. Cardinal brought this action in rem, asserting a lien against the Seisho Maru. Aizawa appeared as claimant of the vessel and filed a Motion to Dismiss Cardinal's in rem complaint. Cardinal, in turn, filed an Opposition to that motion as well as its own Cross-Motion for Summary Judgment. The trial court granted Aizawa's Motion to Dismiss, holding that the Prohibition-of-Lien Clause in Aizawa's charterparty precluded Cardinal's assertion of a lien. This appeal follows.

A. Issues

A major squall has brewed in this case because Cardinal is suing for breach of a charter to which Aizawa was not a party. Cardinal nevertheless asserts that the Seisho Maru itself is bound to that contract. Cardinal argues that ancient maritime doctrine creates reciprocal liens between the vessel and her cargo once the cargo is loaded on board. Aizawa responds that such a lien does not arise in this case and, in any event, is precluded by the Prohibition-of-Lien clause in the Nakamura-Clover charter. The shipowner argues that Cardinal had a duty of reasonable diligence to discover that clause. Finally, Aizawa argues that Swedish law should apply to this dispute under choice-of-law principles.

Approaching this storm line from the opposite heading, we hold that Swedish law does not apply but that American law precludes Cardinal's lien.

1. Choice of Law

This Circuit has held that the Restatement (Second) of Conflicts of Law [hereinafter cited as Second Restatement ] provides the proper model for resolving maritime choice-of-law problems. See Gulf Trading & Transportation v. the Vessel Hoegh Shield, 658 F.2d 363, 366 (5th Cir.1981), relying on Lauritzen v. Larsen, 345 U.S. 571, 73 S.Ct. 921, 97 L.Ed. 1254. ³ In Gulf Trading, an American supplier ("Gulf") had delivered bunker fuel to a vessel in American waters. Failing to receive payment from the charterer of the vessel, Gulf seized the vessel and asserted a maritime lien. This Court, in deciding whether American law should govern the validity of the lien, followed the analysis of the Second Restatement and evaluated the various points of contact between the transaction and the governments whose competing laws might apply.

Looking first at the bunkering contract between Gulf and the charterer, we considered the contacts specified in section 188 of the Second Restatement:

[I]n the absence of an effective choice of law by the parties, the forum contacts to be considered include: (a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties.

Gulf Trading, 658 F.2d at 366.

We also recognized, however, that a maritime lien does not arise solely by operation of contract law. Therefore, in addition to the section 188 contacts, we considered more general factors set forth in Second Restatement Sec. 6:

In the absence of statutory directives and subject to constitutional restrictions, the relevant factors include (a) the needs of the international system, (b) relevant policies of the forum, (c) relevant policies of other interested states, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied.

658 F.2d at 367.

We concluded that federal statutory law reflected a strong policy of protecting American suppliers and would lead to a uniform, predictable result in future cases. We also determined that the alternative forum (England) did not have a great interest in regulating the relationship between an American supplier and a non-English vessel. Therefore, we applied forum law rather than British law.

Now, directing the spyglass of precedent toward the deck of our own Seisho Maru, we likewise conclude that American law should govern. The voyage charter between Cardinal and Clover has the most significant contacts with the United States. The charterparty was executed in the United States between an American corporation (Cardinal) and a Liberian corporation (Clover). The places of performance included both Sweden, where the cargo was to be loaded, and the United States, where the cargo was to be discharged. Freight was to be...