Lake U. Drydock Co. v. M/V POLAR VIKING

• Decision Date: 06 February 1978
• Docket Number: No. C76-810B.,C76-810B.
• Citation: 446 F. Supp. 1286,1978 AMC 1477
• Parties: LAKE UNION DRYDOCK COMPANY and Duwamish Shipyard, Inc., Plaintiff-Intervenors, v. M/V POLAR VIKING, her engines, boilers, machinery, tackle, apparel, furniture, and appurtenances, Defendant, Red Circle Transport, Claimant.
• Court: U.S. District Court — Western District of Washington

446 F. Supp. 1286

1978 AMC 1477

LAKE UNION DRYDOCK COMPANY and Duwamish Shipyard, Inc., Plaintiff-Intervenors, v. M/V POLAR VIKING, her engines, boilers, machinery, tackle, apparel, furniture, and appurtenances, Defendant Red Circle Transport, Claimant.

No. C76-810B.

United States District Court, W. D. Washington.

February 6, 1978.

Douglas Fryer of Moriarty, Long, Mikkelborg & Broz, Seattle, Wash., for plaintiff-intervenors.

James H. Bauer of Detels, Draper & Marinkovich, Seattle, Wash., for claimant.

OPINION

BEEKS, Senior District Judge.

In this case plaintiffs Lake Union Drydock Company (Lake Union) and Duwamish Shipyard, Inc. (Duwamish) seek to foreclose maritime liens against the M/V POLAR VIKING pursuant to the Maritime Lien Act.¹ Plaintiffs supplied materials and/or rendered services to the vessel while she was under a sub-demise charter to Northland Marine Lines (NML) from her owner pro hac vice Red Circle Transport (Red Circle), claimant herein. NML filed a Chapter XI petition while the POLAR VIKING was in its possession. This Court has previously determined that it has jurisdiction of the controversy.

Lake Union and Duwamish have filed a motion for summary judgment and, alternatively, a motion for partial summary judgment which involves striking certain contentions of defendant set forth in the Pre-Trial Order. Red Circle claims that the motions for summary judgment are premature and it has filed an alternative counter-motion for summary judgment. Before proceeding to the merits, therefore, it must be determined whether such procedure is proper at this juncture.

On December 10, 1975 Red Circle sub-chartered the POLAR VIKING to NML for a period of one year. Between January 17 and February 18, 1976 Duwamish fabricated a stern roller with hydraulic actuated pins for the POLAR VIKING at the request of NML for $14,153.53. Duwamish did not install the stern roller on the vessel nor was the vessel in Duwamish's yard. Red Circle alleges, and Duwamish does not dispute, that Duwamish knew that NML utilized chartered vessels prior to commencing such work.

Red Circle also contends that Duwamish knew or should have known that NML was facing possible insolvency prior to performing the work, but nothing in the record supports this vague contention. During the four months before Duwamish undertook performance, NML had an outstanding balance of $100,000 and at the time work was begun the balance was over $90,000. For the period from June 30, 1975 to October 11, 1976 the outstanding balance vacillated between $49,399.19 and $143,176.01, and Duwamish received approximately $107,000 in payments.² Duwamish did not learn of any financial difficulty of NML until May, 1976.³

In June and again in August, 1976 Lake Union performed certain repairs on the POLAR VIKING at the request of NML. The first services were invoiced on July 20 in the amount of $10,614.73. The August repairs were invoiced on September 24, 1976 at $3,481.23. According to the deposition of Mr. Stebbins, manager of Lake Union's drydock facility, NML generally hired Lake Union to perform emergency repairs only, as were those performed on the POLAR VIKING.⁴ Over a ten year period NML was generally slow in paying and a payment schedule usually had to be arranged. NML "religiously" followed the payment schedules until about April, 1976.⁵ At that time Lake Union began to file notices of claim of lien against NML vessels "pretty regularly,"⁶ apparently to encourage NML to enter into payment schedules.⁷ As Stebbins put it, they "were just about holding their own."⁸

It was also during April that Lake Union discovered that NML chartered some of its vessels. This was contrary to its previous belief of ten years that NML owned its vessels. This belief was based on the fact that the names of NML vessels always began with POLAR and that the vessels were painted the same colors.⁹

While the POLAR VIKING was in drydock, Lake Union learned that the vessel was under charter.¹⁰ Lake Union then attempted to discover the ownership of the vessel through listings in Dun & Bradstreet, which led to an interior design firm. (The vessel was apparently listed under its former name, OCEAN GULF). Its requests to see NML's charter and a financial statement were refused, but it was assured that NML was negotiating to purchase the vessel at that time and that the account would be paid in a matter of days. Mr. Stebbins called a marine contractor located next door to NML and learned that he had just undertaken a $70,000 job for NML.¹¹ Stebbins then decided to proceed with the work.

On October 27, 1976 NML filed a petition for an arrangement under Chapter XI of the Bankruptcy Act. On November 19 a complaint in rem against the vessel was filed by Peter Pan Seafoods, Inc., (whose claim has since been settled) and the vessel was arrested by the Marshal. Duwamish and Lake Union filed a motion to intervene on November 22. On November 29 Red Circle entered independent stipulations to abide judgment as to the claims of Lake Union and Duwamish and as to the claim of Peter Pan Seafoods. The next day POLAR VIKING was released from the custody of the Marshal. Lake Union and Duwamish were granted leave to intervene on December 13, 1976, two days before the bankruptcy trustee was to have returned possession of POLAR VIKING to Red Circle.

The above facts are not in dispute. Accordingly, this action is a proper one for decision by summary judgment as only questions of law are involved.

Four questions of law are presented. The primary question, which arises from the undisputed fact that the charter agreement between Red Circle and NML contained a no-lien clause, is whether § 973 of the Maritime Lien Act, as amended in 1971, precludes the assertion of such clause against the plaintiffs, thus barring their maritime lien claims. This is a question of first impression. Should it be resolved in favor of plaintiffs, claimant also asserts three affirmative defenses: 1) waiver; 2) laches; and 3) satisfaction of the underlying debt. If claimant succeeds on any one of such defenses, summary judgment must be granted in its favor. Alternatively, plaintiffs must succeed on all four of the legal issues before summary judgment can be granted in their favor.

EFFECT OF THE 1971 AMENDMENT

Prior to 1971 the law of materialmen's maritime liens withdrew with one hand what it gave with the other. It authorized the assertion of a maritime lien against a chartered vessel when the services were requested by one with apparent authority.¹² However, § 973 went on to state that "nothing in this section shall 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 therefore."¹³

As developed by case law, "the duty to inquire provision was, in effect, allowed to swallow up the presumption of authority provisions."¹⁴ In practice, a no-lien charter clause almost always prevented a maritime lien from attaching, the duty to inquire becoming "all but absolute."¹⁵

In 1971 Congress deleted that portion of § 973 which barred the attachment of a maritime lien where the materialman "knew or . . . could have ascertained" that the individual requesting the services was without authority to do so. While this appears to mean that a materialman's lien vests absolutely as a matter of law, as plaintiffs suggest, the Congressional history clouds the picture. The committee report which accompanied the House bill (the version ultimately adopted) recites that the duty of inquiry has been eliminated. "The practical effect of the bill is to negate the operation of a `no lien provision' in a charter to which the American materialism (sic) materialman was not a party and of which he has no knowledge so that he will not be precluded from acquiring a lien for his services to which he would otherwise be entitled."¹⁶ On the one hand, the statute on its face makes no suggestion that any quantum of knowledge will bar the assertion of a lien. Yet, the legislative history indicates that the assertion of a maritime lien will be barred if the materialman has knowledge of a no-lien charter clause.

On the other hand, claimant contends that the amendment changed nothing. It points to the sentence immediately preceding the one just recited which further clouds the picture. That sentence states that the amendment "makes no change in maritime lien law, the priority of maritime liens, or in the accepted definition of necessaries."¹⁷ I believe that both parties have missed the mark.

Claimant adopts the contention of Professors Gilmore and Black that the amended statute merely reinstates the prestatutory general maritime law enunciated in THE KATE¹⁸ and THE VALENCIA.¹⁹ This argument discerns the materialman's general maritime duty of inquiry pursuant to THE KATE and THE VALENCIA to be perceptibly different from his pre-71 statutory duty as developed under U. S. v. Carver.²⁰

I find no such difference, however, and if there be one it is too ethereal for application. The materialmen in the THE VALENCIA and those who supplied the vessel CLIO in U. S. v. Carver possessed the same quantum of knowledge; neither had knowledge that the vessels were chartered. However, the Supreme Court imputed to them constructive knowledge of the charter and its terms. The Court found that the materialmen had a duty to inquire with "reasonable diligence,"²¹ and that such inquiry would have revealed a lack of authority by the party requesting the services to bind the vessel. Thus, the materialman's duty to inquire under general maritime law was identical to his duty under the statute prior to amendment in 1971. The former duty provision of § 973 merely incorporated and codified the general maritime law.²²

Claima...