Diaz v. The SS Seathunder

• Decision Date: 01 March 1961
• Docket Number: No. 4002.,4002.
• Citation: 191 F. Supp. 807
• Parties: Jose Garcia DIAZ v. THE S.S. SEATHUNDER, her boilers, engines, tackle, apparel and furniture, and Preston Corporation of Monrovia, Liberia.
• Court: U.S. District Court — District of Maryland

191 F. Supp. 807

Jose Garcia DIAZ

v.

THE S.S. SEATHUNDER, her boilers, engines, tackle, apparel and furniture, and Preston Corporation of Monrovia, Liberia.

No. 4002.

United States District Court D. Maryland.

March 1, 1961.

COPYRIGHT MATERIAL OMITTED

Bernard M. Goldstein, Marvin I. Singer, Baltimore, Md., for libelant.

John H. Skeen, Jr., Baltimore, Md., for Atlantic Cordage & Supply Corp.

Robert H. Williams, Baltimore, Md., for Dalzell Towing Co. and Robert Aikman. Thomas W. Jamison, III, Ober, Williams, Grimes & Stinson, Baltimore, Md., for claimant-respondent. David R. Owen, Semmes, Bowen & Semmes, Baltimore, Md., for Maryland Shipbuilding & Drydock Co. William A. Hackney, Baltimore, Md., for Charles F. Hughes, trading as Vane Brothers.

R. DORSEY WATKINS, District Judge.

The question before the court is whether or not intervening libelants, Maryland Shipbuilding & Drydock Company, Atlantic Cordage & Supply Corporation, Dalzell Towing Company, Inc., et al. and Charles F. Hughes, are entitled to maritime liens against the S. S. Seathunder in view of language prohibiting the creation of liens contained in a bareboat charter dated April 6, 1956, between the corporate respondent, Preston Corporation of Monrovia, Liberia (Preston) as owner, and Ocean Trading Corporation (Ocean) as charterer. A copy of the charter has been filed in these proceedings. Paragraph 19(a) of the charter provides as follows:

"Neither Charterer nor the Master of the Vessel nor any other person shall have the right, power or authority to create, incur or permit to be placed upon the Vessel any lien whatsoever other than for crew's wages or salvage. Charterer will at all times carry a properly certified copy of this charter with the ship's papers on board the Vessel, and will exhibit the same to any person having business with the Vessel, and also exhibit the same to any representative of Owner on demand."

It has been stipulated that the master of the Seathunder, if called as a witness, would testify that at all times there was on board the vessel, among the ship's papers in his desk, a certified copy of this charter which he would have exhibited to anyone who wished to see it.

The Seathunder is a T-2 tanker which was acquired in 1953 by Preston, a Liberian Corporation. She was documented under the laws of the Republic of Liberia at all times involved in this litigation. On April 6, 1956 the vessel was chartered for ten years, under the charter mentioned above, by Preston to Ocean, also a Liberian Corporation. The vessel was delivered by Preston to Ocean under the charter at Baltimore on April 11, 1956, this charter being in effect at all times herein involved. Ocean had time-chartered the Seathunder to Panama Transport Corporation for five years, and the vessel was delivered under said time charter between April 11, 1956 and April 30, 1956. This charter provided it could be suspended for a period of between 30 to 31 months, and in accordance with such provision the charter was suspended in August of 1957. On August 16, 1957 Ocean chartered the Seathunder to Wanda Compania Naviera, S.A. (Wanda) for a number of successive voyages up to and including March 31, 1960. The vessel was delivered under this charter on September 6, 1957, and was under it at the time she arrived at the yard of Maryland Shipbuilding & Drydock Company (Maryland) on March 9, 1958 for her annual inspection, American Bureau of Shipping survey and certain repairs.

Claim of Maryland Shipbuilding & Drydock Company (Maryland)

Maryland's original intervening libel alleged that during March 1958, the Seathunder was in the yard of the intervening libelant and was furnished by said intervening libelant with certain materials, supplies, repairs and other necessaries "at the instance and request of her owner pro hac vice to whom the management of the vessel was intrusted", the reasonable value of the materials, etc. stipulated as being $136,378. Subsequently, Maryland filed an amended intervening libel alleging that the materials, supplies, etc. had been furnished at the instance and request of the demise charterer of the Seathunder to whom the management of the vessel was intrusted; and that these materials, supplies, etc. had been obtained by the fraud of the vessel and of the demise charterer in that at the time when the vessel and the demise charterer accepted and received them, the vessel and the demise charterer were unable to pay for them and had no intention of doing so; that the demise charterer was insolvent; and that such inability to pay and insolvency were fraudulently concealed from Maryland by the vessel and by the demise charterer.

The evidence showed that in January 1958, James May, a salesman employed by Maryland in its New York office, knowing that certain repair work was required for the vessel, solicited the job from Thomas Haller, Marine Superintendent of Ocean. At the request of Haller, Maryland worked up an estimate on the cost of a new set of heating coils and in January advised Haller that Maryland estimated the cost at $35,000. The estimate was prepared by Felix Horvatt, an estimator employed by Maryland at its Baltimore yard. Before the vessel arrived in the yard, Maryland made a firm commitment with Haller to do the work in question for $35,000. Meanwhile Haller decided to give Maryland additional work incident to the annual survey and drydocking required for insurance purposes by the American Bureau of Shipping. Sometime in February 1958, he so informed Maryland. Unlike the heating coil installation, it was impossible to determine in advance the exact extent or cost of the annual survey work, but from past experience Haller and Maryland anticipated that it would be in the range of $50/60,000. Since the total repairs then anticipated would cost in the neighborhood of $90,000, "Maryland was interested in Ocean's plans for paying the bill."¹ On February 27, 1958, Thomas O'Hara, of Maryland's Financial Department, went to New York and had lunch with A. T. Philpotts, Jr., President of Ocean. May was also present. May knew that Ocean did not own the vessel but had her under charter. He assumed that O'Hara was also aware of this fact. O'Hara asked Philpotts to give him a copy of his latest financial statements, together with other financial information. Philpotts declined, saying that he could not then divulge such information because of pending business transactions. O'Hara asked him whether he had a charter for the vessel, and whether he had authority to order the work. Philpotts replied that the vessel was under a favorable long term charter and that he had the right to place the work in hand. As Maryland often accepts assignments of charter hire to cover bills due or to become due to it, O'Hara according to his own testimony would, and should, have asked to see the charter but did not do so as he was afraid that such a request would be refused in view of Philpotts having previously declined to make available to O'Hara other requested financial information. From Philpotts' answers O'Hara stated that he assumed that Ocean was either the owner of the Seathunder or was authorized directly by the owner to contract for the repairs in question. Philpotts then gratuitously added that the placing of this repair order was no different from that on the S. S. Franco Lisi. This was a vessel actually owned by Ocean which Maryland had repaired some time before and on which a balance of $10,000 had been due for at least a year, the major portion of the bill having been covered, and paid, by insurance. O'Hara testified that he next asked Philpotts whether he would pay the $10,000 balance on the Franco Lisi if Maryland would extend credit to Ocean and that Philpotts said that he would. On March 7, 1958 Philpotts wrote to Maryland on behalf of Ocean as follows:

"To confirm our conversations during your visit to New York regarding the intended stay of the subject vessel at your Yard, I wish to outline below our understanding:

"1) The vessel will undergo, under the supervision of Mr. H. T. Haller, our Marine Superintendent, repairs and drydock to complete our annual inspection together with other work at Mr. Haller's direction. Mr. Haller has estimated this work to amount to about $50,000/$55,000.00.²

"2) Upon completion of the above-mentioned work, you have agreed to allow us to pay the then rendered invoice at the rate of $6,500.00 per month if the invoice is $55,000.00 or less and $7,500.00 per month if the invoice is in excess of $55,000.00.

"3) Ocean Trading Corporation now owes your firm $10,000.00 for past work done on the M. T. Franco Lisi. We will pay this amount in full on Monday, March 10.

"If the above is your understanding and meets with your approval, please sign the enclosed copy of this letter and return same to us.

"I wish to say that it was a pleasure to meet with you and I very much appreciate your extending this credit arrangement to us. I am looking forward to meeting with you again in the near future." (Emphasis supplied.)

Philpotts' letter was duly accepted by Maryland upon the authorization of its Secretary-Treasurer subject to the execution by Ocean of notes for the agreed upon monthly payments. These notes, which were never executed by Ocean, expressly reserved any lien Maryland might have against the Seathunder and Maryland's right to proceed in admiralty against the vessel. On March 10, 1958, Maryland received payment in full on the Franco Lisi. On March 9, 1958, the Seathunder arrived in Maryland's yard. Due to arbitration proceedings then in progress representatives of both Preston and Ocean went on board the vessel upon her arrival in the yard on that date. Arbitration had been necessitated by the fact that shortly after the Seathunder had been delivered by Preston to Ocean in April 1956 the vessel broke down at sea. Subsequently she was repaired in various shipyards on the East and Gulf coasts on four different occasions in 1...