Dampskibsselskabet Dannebrog v. Signal Oil Gas Co of California the Stjerneborg

• Decision Date: 20 May 1940
• Docket Number: No. 662,662
• Citation: 310 U.S. 268,1940 A.M.C. 647,60 S.Ct. 937,84 L.Ed. 1197
• Parties: DAMPSKIBSSELSKABET DANNEBROG et al. v. SIGNAL OIL & GAS CO. OF CALIFORNIA. THE STJERNEBORG
• Court: U.S. Supreme Court

310 U.S. 268

60 S.Ct. 937

84 L.Ed. 1197

DAMPSKIBSSELSKABET DANNEBROG et al.

v SIGNAL OIL & GAS CO. OF CALIFORNIA. THE STJERNEBORG.

No. 662.

Argued April 1, 1940.

Decided May 20, 1940.

Mr. Lane Summers, of Seattle, Wash., for petitioners.

Mr. Glenn J. Fairbrook, of Seattle, Wash., for respondent.

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 ex- penses 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 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. 9 Cir., 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, 60 S.Ct. 592, 84 L.Ed. —-, February 26, 1940.

The Circuit Court of Appeals in the instant case followed its decisions in The Portland, 9 Cir., 273 F. 401, and The Golden Gate, 9 Cir., 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, 9 Cir., 66 F.2d 997, 998. In further support of its position, respondent cites the following cases from other circuits: The Everosa, 1 Cir., 93 F.2d 732, 735; The J. W. Hennessy, 2 Cir., 57 F.2d 77, 79, 80; The Anna E. Morse, 3 Cir., 286 F. 794, 798; Munson Inland Water Lines v. Seidl, 7 Cir., 71 F.2d 791, 793.

Petitioners ruly upon our decisions in The Kate, 164 U.S. 458, 464, 17 S.Ct. 135, 137, 41 L.Ed. 512, and The Valencia v. Zeigler, 165 U.S. 264, 17 S.Ct. 323, 41 L.Ed. 710, 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 clarify the rules as to maritime liens as to which there had been much confusion. The Act did away with the artificial distinction between 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 material-man 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 Company v. Seaboard Fisheries Company, 254 U.S. 1, 11, 41 S.Ct. 1, 4, 65 L.Ed. 97.²

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 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 intrusted', 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 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 bound to provide and pay for the supplies excludes the supplier from having a maritime lien when the charter party contains no prohibition against its creation.

We think that our decision in The South Coast, 251 U.S. 519, 40 S.Ct. 233, 64 L.Ed. 386,⁴ negatives such a conclusion. That was a case of a bare-boat charter which provided that the charterer should pay for all supplies and all other charges and save the owner harmless from all liens. The supplies were ordered by the master, but, though appointed by the owner, the master was under the orders of the charterer and thus the master's orders were the charterer's orders. When the supplies were ordered, representatives of the owner at the port of supply warned the supplier that the vessel was under charter and that he must not furnish the supplies on the credit of the vessel. If the owner had power to prevent the attaching of a lien by this warning, the owner had done so. But while under the terms of the charter party it was clearly the duty of the charterer to provide and pay for the supplies and to save the owner harmless, this was held not to preclude the creation of a maritime lien. The Kate and The Valencia were cited unavailingly. When the charter party was examined to see if it prohibited liens it was found that it did not do so; it recognized the possibility of liens. It provided that the owner might retake the vessel in case of the failure of the charterer to discharge within thirty days any debt which was a lien upon it and also for a surrender of the vessel free of liens upon the charterer's failure to make certain payments.

We think that the fair import of our decision in The South Coast is that when the charterer has the direction and control of the vessel and it is his business to provide...