Gulf Trading & Transp. Co. v. Vessel Hoegh Shield

• Citation: 658 F.2d 363
• Decision Date: 07 October 1981
• Docket Number: No. 80-1988,80-1988
• Parties: GULF TRADING & TRANSPORTATION CO., Plaintiff-Appellee, v. The VESSEL HOEGH SHIELD, her engines, tackle and appurtenances, in rem, Defendant, A/S Alliance, Claimant and owner of the Vessel HOEGH SHIELD, her engines, tackle and appurtenances, in rem, Claimant-Appellant. . Unit A *
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 363

658 F.2d 363

GULF TRADING & TRANSPORTATION CO., Plaintiff-Appellee, v. The VESSEL HOEGH SHIELD, her engines, tackle and appurtenances, in rem, Defendant A/S Alliance, Claimant and owner of the Vessel HOEGH SHIELD her engines, tackle and appurtenances, in rem Claimant-Appellant.

No. 80-1988.

United States Court of Appeals, Fifth Circuit.

Unit A ^*

Oct. 7, 1981.

Robert M. Julian, Houston, Tex., for claimant-appellant.

James Patrick Cooney, Houston, Tex., for plaintiff-appellee.

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

Before BROWN and TATE, Circuit Judges, and SMITH ^**, District Judge.

JOHN R. BROWN, Circuit Judge:

Before us is an admiralty action in rem brought by plaintiff Gulf Trading & Transportation Company (Gulf), a division of Gulf Oil Corporation. The action was brought against the Vessel HOEGH SHIELD (Vessel), a vessel documented under the laws of and flying the flag of Norway and owned by A/S Alliance of Oslo, Norway. At all material times, the Vessel was under time charter to Multinational Gas & Petrochemical Co. (Multinational). Under the charter, Multinational was required to provide bunkers to the Vessel. About July 1, 1977, Multinational made a request of Gulf's London office to arrange for the delivery of bunkers to the Vessel at Cristobal, Canal Zone. On July 5, 1977, intermediate fuel oil and marine diesel oil were delivered to the Vessel at Cristobal, and an invoice was sent to Multinational in London. The invoice has never been paid.

Subsequent to the above transactions, Multinational became insolvent. About December 1, 1977, the Vessel arrived at the Port of Texas City, Texas. This action was commenced by a complaint which expressly invoked F.R.Civ.P. 9(b) and prayed for the issuance of traditional process and judgment in rem, and a Writ of Seizure was issued, but prior to the seizure of the Vessel, an agreement was reached for the posting of security. No bunkering contract existed between Gulf and the Vessel's owner at any relevant time. The Canal Zone was within the jurisdiction of the United States at all times material to the delivery of the bunkers to the Vessel and the filing of the complaint.

In The District Court

The owner of the Vessel contends that the exercise of in rem admiralty jurisdiction over the Vessel offends the Due Process Clause of the Fifth Amendment of the United States Constitution under the Supreme Court's decision in Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977); see also Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349. The District Court distinguished the rule in Shaffer, which involved sequestration of local assets to obtain jurisdiction over nonresident defendants from an admiralty action in rem to enforce a maritime lien against a foreign vessel that accepts necessaries delivered within the jurisdiction of the United States.

The Vessel's owner also raises the issue of whether the law of the United States, England, or Norway should apply. The District Court held that because the bunker fuel was delivered to a foreign flag vessel by an American supplier within the jurisdiction of the United States, and because the invoice specified payment in the United States, the admiralty and maritime law of the United States applied to this case. ¹

The District Court further held that the bunker fuel delivered by Gulf to the Vessel in the Canal Zone constituted a "necessary" within the meaning of § 971 of Title 46, U.S.C.A., and thus a maritime lien arose upon the furnishing of the fuel absent a finding that the necessary was furnished solely on personal credit. The Court observed that while Gulf obviously relied upon the credit of Multinational, no evidence exists that Gulf relied solely on the personal credit of Multinational or otherwise disclosed an intention to forego its maritime lien on the Vessel. The Court concluded that Gulf acquired a maritime lien in the Vessel upon the delivery of bunkers to that vessel in the Canal Zone.

The District Court found it unnecessary to rule on the constitutionality of Rule C of the Supplemental Rules for Certain Admiralty and Maritime Claims, F.R.Civ.P., and awarded judgment to Gulf for the contract value of the fuel plus interest.

Arguments On Appeal

The Vessel's owner, A/S Alliance, brought this appeal, urging that (i) the applicable substantive law in this case is English Law; (ii) the District Court denied procedural due process of law to the Vessel's owner by rendering judgment without submission of briefs or a hearing on the central issues in this cause, thereby precluding the Vessel's owner from compelling answers to interrogatories relevant to the choice of law issue; (iii) the Vessel's owner received no benefit from the fuel contract between Gulf and Multinational, and Gulf did not rely on the credit of the Vessel, so no maritime lien exists against the vessel even if American law is applied; and (iv) present maritime in rem procedures are insufficient to fulfill Constitutional due process requirements.

The Vessel's owner points out that Gulf and Multinational had a long relationship of contracting in England for fuel for Multinational's chartered vessels, and argued that the stability of the relationship between Gulf and Multinational indicated that they intended English law to apply in these fuel contracts rather than the laws of the many nations where fuel was supplied. Moreover, Gulf's credit clerk, when deposed, suggested that the fuel was furnished on the credit of Multinational. When the fuel was not paid for, the Vessel could have been seized immediately, but Gulf took no such action until Multinational became insolvent, thus depriving the Vessel's owner of any meaningful action against Multinational for whose direct benefit the fuel was ordered. Without prior hearing the Vessel was to be seized by the United States Marshal in Houston. Therein lies the Vessel-owner's claim that the admiralty in rem procedures are constitutionally inadequate, even though the vessel was never actually seized.

Choice Of Law: English Or American?

Of critical importance to the choice of law issue before us is our determination, discussed infra, that a maritime lien on the Vessel existed in favor of Gulf. As will become clear, our conclusion below that United States law applies to the present controversy is limited to the unique circumstances surrounding a maritime lien as well as the statutory directives found in the Maritime Lien Statute, 46 U.S.C. § 971. This is not to say that this Court is permitted to bootstrap its determination of choice of law by a preliminary finding that a maritime lien exists, but only suggests that the initial choice of law determination is significantly affected by the statutory policies surrounding a maritime lien. ²

A modern approach to maritime conflict of law problems was introduced in Lauritzen v. Larson, 345 U.S. 571, 73 S.Ct. 921, 97 L.Ed. 1254 (1953), 1953 A.M.C. 1210. Lauritzen involved a torts claim under the Jones Act, and is thus distinguishable on its facts from the present controversy. Nevertheless, the Court's approach in reviewing many of the factors that are generally conceded to influence choice of law governing a tort claim, and its assignment of weight and significance to each factor, presents a useful outline for our present determination. ³

A distinction must be drawn at the outset between the express contract to provide bunkers involving only Gulf and Multinational and the application of a maritime lien in favor of Gulf against the vessel. Gulf's claim to a maritime lien in the Vessel arises by operation of law rather than by contract because the Vessel's owner was not a party to the contract between Gulf and Multinational. See Rainbow Line, Inc. v. M/V Tequila, 480 F.2d 1024, 1026 (2d Cir. 1973), 1973 A.M.C. 1431, 1433. The present controversy, and the validity of the maritime lien imposed upon the Vessel, is broader than the failure of Multinational to pay for the necessaries provided to the Vessel.

Viewed solely as a contract dispute, the Vessel owner's arguments that English law should apply are persuasive. Section 188 of the Restatement (Second) of Conflicts of Law suggests that in 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. Here the place of contracting was Great Britain, where Gulf contracted to provide bunkers to the Vessel chartered to Multinational. The place of negotiation was also Great Britain, although Gulf argues in its brief to this Court that some negotiations occurred in New York when the order for the delivery of bunkers was confirmed by telex from the Gulf bunkering office in New York. The place of performance, a significant factor, was the Canal Zone, which was at the time of the performance in the jurisdiction of the United States. The location of the subject matter of the contract can also be construed as the Canal Zone. ⁴ Finally, the parties to this action are an American corporation doing business in Great Britain and a Norwegian vessel flying the Norwegian flag. In this isolated analysis, it is arguable that English law would apply to a contract in dispute between Gulf and Multinational. This is, however, only half of the story.

Leaving the contract, and entering the broader context of the maritime lien involving Gulf and the Vessel's owner, the Restatement (Second) of Conflicts of Law § 6 sets forth principles to be applied in choice of law matters. In the absence of statutory directives and subject to constitutional restrictions, the relevant factors include (a) the needs of the international system, (b)...