Itel Containers Intern. Corp. v. Atlanttrafik Exp. Service Ltd., 247

• Citation: 982 F.2d 765,1993 A.M.C. 609
• Decision Date: 14 December 1992
• Docket Number: D,No. 247,247
• Parties: ITEL CONTAINERS INTERNATIONAL CORPORATION, Flexi-Van Leasing Inc., Cross-County Leasing Ltd., now named Textainer, Inc. and Textainer Special Equipment Ltd., Plaintiffs-Appellees, v. ATLANTTRAFIK EXPRESS SERVICE LTD., Sea Containers Ltd., Seaco Services Ltd., Sea Containers Australia Ltd., Seaco Inc., Sea Containers America Inc., Defendants, M/V TAVARA, AES Express, AES Challenge, Nagara and Cavara, their engines, boilers, tackle, freights, etc., in rem, and Nagara Ltd., Nagara Tam Ltd., Contender I Ltd., Strider I Ltd., and Strider IV Ltd., Defendants-Appellants. ocket 92-7464.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 765

982 F.2d 765

1993 A.M.C. 609

ITEL CONTAINERS INTERNATIONAL CORPORATION, Flexi-Van Leasing

Inc., Cross-County Leasing Ltd., now named

Textainer, Inc. and Textainer Special

Equipment Ltd., Plaintiffs-Appellees, v. ATLANTTRAFIK EXPRESS SERVICE LTD., Sea Containers Ltd.,

Seaco Services Ltd., Sea Containers Australia

Ltd., Seaco Inc., Sea Containers America

Inc., Defendants,

M/V TAVARA, AES Express, AES Challenge, Nagara and Cavara,

their engines, boilers, tackle, freights, etc., in rem, and

Nagara Ltd., Nagara Tam Ltd., Contender I Ltd., Strider I

Ltd., and Strider IV Ltd., Defendants-Appellants.

No. 247, Docket 92-7464.

United States Court of Appeals, Second Circuit.

Argued Sept. 23, 1992.

Decided Dec. 14, 1992.

Beth Jacob, New York City (Jonathan F. Mack, Carter, Ledyard & Milburn, New

York City, of counsel), for defendants-appellants

Alfred E. Yudes, Jr., New York City (Cristina Perez, Watson, Farley & Williams, New York City, of counsel), for plaintiff-appellee Itel Containers Intern. Corp.

Michael D. Wilson, New York City (Victor P. Corso, Kirlin, Campbell & Keating, New York City, of counsel), for plaintiffs-appellees Textainer Inc. and Textainer Special Equipment Ltd.

Institute of Intern. Container Lessors, Ltd., Bedford, NY (Edward A. Wooley, Bedford, NY, Kieron F. Quinn, F. Paul Bland, Jr., Quinn, Ward and Kershaw, Baltimore, MD, of counsel) submitted a brief as amicus curiae.

Before: VAN GRAAFEILAND, WINTER and MAHONEY, Circuit Judges.

VAN GRAAFEILAND, Circuit Judge:

Defendants in rem, M/V Tavara, M/V AES Challenge, M/V Nagara and M/V Cavara, and intervening owners, Nagara Tam Ltd., Strider IV Ltd., Nagara Ltd. and Contender I Ltd., appeal from that part of a judgment of the United States District Court for the Southern District of New York (Carter, J.) which sustains maritime lien claims of plaintiffs, Itel Containers International Corporation, Textainer, Inc. and Textainer Special Equipment Ltd. For the reasons that follow, we reverse.

Because the pertinent facts have been discussed in detail in our opinion on a prior appeal, 909 F.2d 698 (2d Cir.1990), and lower court opinions cited therein, a brief factual summary will suffice for present purposes. In 1984, Atlanttrafik Express Service Ltd. ("AES") was formed to operate a container shipping line. The vessels it used, the defendants in rem in this case, were owned by the intervenors-defendants and were chartered to AES. To conduct its operations, AES leased shipping containers from several commercial container lessors, including plaintiffs. Consistent with industry practice, the containers were delivered in bulk and were not designated for use on any particular ship. Also, consistent with industry practice, AES leased up to three times as many containers as it could carry on its ships at any given time. The decisions as to which ships would receive particular containers for transport were made solely by AES.

AES was not a successful venture and ceased operations in early 1986. Thereafter, plaintiffs gave AES notice of default under the container leases, demanded return of their equipment, commenced an action against AES for breach of their leases, and asserted in rem claims against the ships. Plaintiffs later added in personam claims against Sea Containers Ltd. and certain of its affiliates, alleging a joint venture or principal-agent relationship between Sea Containers Ltd. and AES.

After a bench trial, the district court found in defendants' favor and dismissed plaintiffs' complaints. 725 F.Supp. 1303. On appeal, this court affirmed dismissal of the in personam claims but remanded the case for findings of fact and conclusions of law as to the maritime lien claims, as required by Fed.R.Civ.P. 52(a). 909 F.2d at 704.

On remand, the trial court sustained the maritime lien claims of Itel, Textainer and Textainer Special Equipment. 781 F.Supp. 975. Because it was impossible to ascertain which containers were used on board which ships, the court determined the amount of the lien on each ship by apportioning total damages among the ships based on their respective cargo capacities. Id. at 986. This appeal is from the judgment that followed.

DISCUSSION

A maritime lien is:

a special property right in the vessel, arising in favor of the creditor by operation of law as security for a debt or claim. The lien arises when the debt arises, and grants the creditor the right to appropriate the vessel, have it sold, and be repaid the debt from the proceeds.

Equilease Corp. v. M/V Sampson, 793 F.2d 598, 602 (5th Cir.) (en banc), cert. denied, 479 U.S. 984, 107 S.Ct. 570, 93 L.Ed.2d 575 (1986). Under United States law as it existed at all relevant times in this case, a maritime lien exists in favor of "[a]ny person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries, to any vessel." 46 U.S.C. § 971 (1982). ¹

Defendants contend that under this statute maritime liens cannot be claimed for supplies furnished simply to fleet owners and that supplies are furnished to vessels within the meaning of section 971 only when they are either provided directly to or are earmarked for specific vessels. Defendants argue that plaintiffs furnished containers to AES, not to the ships, and that it was AES who furnished the containers to the individual ships. We agree.

The seminal Supreme Court case on this issue is Piedmont & Georges Creek Coal Co. v. Seaboard Fisheries Co., 254 U.S. 1, 41 S.Ct. 1, 65 L.Ed. 97 (1920), in which the Court held that a supplier of coal to both a fish oil factory and a fleet of ships had no maritime lien against the ships. Justice Brandeis, writing for the Court, held that there was no lien because there was:

no understanding when the contract was made, or when the coal was delivered by the libelant, that any part of it was for any particular vessel or even for the vessels then composing the fleet. And it was clearly understood that the purchasing corporation would apply part of the coal to a non-maritime use.

Id. at 13, 41 S.Ct. at 4.

In Gilmore & Black's authoritative work The Law of Admiralty (2d ed. 1975), the authors suggest that Justice Brandeis' overkill recitation of facts negativing the existence of a lien makes Piedmont a "slippery precedent" for those shipowners arguing for a similar result in cases where less than all of the facts are present. Id. § 9-36, at 661. However, as Piedmont has been interpreted in this circuit, it does not support a claim of maritime lien by a supplier who furnishes goods in bulk to a fleet owner or charterer, with apportionment among the ships being made at the discretion of the recipient. In Bankers Trust Co. v. Hudson River Day Line, 93 F.2d 457, 459 (2d Cir.1937), we held that there can be no lien in favor of a materialman:

when he authorizes the owner to distribute the supplies among such of his fleet as he sees fit. In such a case, even though the owner must under the contract deliver the supplies to some ship, it is his decision that controls which ship it shall be. "Furnishing ... supplies ... to any vessel" must, we think, include that factor of choice; otherwise they are furnished to the owner.

We said, quoting The American Eagle, 30 F.2d 293, 295 (D.Del.1929), that supplies must be " 'for the use of named vessels in specified portions.' " Id. at 458 (emphasis in original).

We were not unique in interpreting Piedmont in this fashion. See, e.g., Atlantic Steamer Supply Co. v. The SS Tradewind, 153 F.Supp. 354, 363 (D.Md.1957):

That the necessaries are furnished to the vessel only when they are ordered for a particular vessel and thereafter are either actually put on board or brought within the control of the ship's officers is settled law.

See also West Kentucky Coal Co. v. Dillman, 15 F.2d 25, 27-28 (8th Cir.1926).

The Ninth Circuit, in a comparatively recent case virtually identical to the instant one, cited Bankers Trust as Second Circuit authority in support of its holding that containers leased in bulk to a fleet do not give rise to maritime liens on the individual vessels of the fleet. See Foss Launch & Tug Co. v. Char Ching Shipping U.S.A., Ltd., 808 F.2d 697, 701 (9th Cir.), cert. denied, 484 U.S. 828, 108 S.Ct. 96, 98 L.Ed.2d 57 (1987). No other court of appeals has held to the contrary. Moreover, our interpretation of Piedmont is not lacking in scholarly support:

The importance of this...