Lykes Lines Ltd. v. M/V Bbc Sealand

• Decision Date: 18 January 2005
• Docket Number: No. 04-20057.,04-20057.
• Citation: 398 F.3d 319
• Parties: LYKES LINES LIMITED; TMM Lines Limited, LLC, Plaintiffs-Appellees, v. M/V BBC SEALAND, in rem; et al., Defendants, BBC Chartering & Logistics GMBH & Co. KG, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

398 F.3d 319

LYKES LINES LIMITED; TMM Lines Limited, LLC, Plaintiffs-Appellees, v. M/V BBC SEALAND, in rem; et al., Defendants BBC Chartering & Logistics GMBH & Co. KG, Defendant-Appellant.

No. 04-20057.

United States Court of Appeals, Fifth Circuit.

January 18, 2005.

Rehearing Denied February 15, 2005.

COPYRIGHT MATERIAL OMITTED

Chris J. McGrath (argued), Steven E. Goodson, Legge, Farrow, Kimmitt, McGrath & Brown, Houston, TX, for Plaintiffs-Appellees.

Jason P. Waguespack (argued), Michael John Wray, Galloway, Johnson, Tompkins, Burr & Smith, New Orleans, LA, for Defendant-Appellant.

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

Before KING, Chief Judge, and HIGGINBOTHAM and DAVIS, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Defendant BBC Chartering & Logistics GMBH & Co. K.G. appeals the judgment of the district court denying the lien it claimed against cargo owned by Lykes Lines Limited and TMM Lines Limited, L.L.C. It also appeals the award of a lien against its vessel, the BBC SEALAND, in rem, for TMM/Lykes' transshipment costs. We affirm.

I.

BBC Chartering & Logistics GBMH & Co., K.G. ("BBC") is the owner of the vessel M/V BBC SEALAND ("SEALAND"). Argonaut Shipping International and Pegasus Marine Finance ("Argonaut/Pegasus") are two companies owned by sole shareholder Cosvogiannis.¹ TMM Lines Ltd., LLC and Lykes Lines Ltd. ("TMM/Lykes") was the cargo owner. CPS Ships is the parent of TMM/Lykes.

TMM/Lykes contracted via an agent, JBL, with Argonaut/Pegasus to transport cargo in 89 containers from Itajai, Brazil to Puerto Cabello, Venezuela and to Houston, Texas, at a price of $210,600. Argonaut/Pegasus chartered the SEALAND from BBC to transport this and other cargo. No contractual relationship existed between TMM/Lykes and BBC or the SEALAND.

The charter agreement between BBC and Argonaut/Pegasus contained a lien provision which provided that the owner (BBC) would have a lien on the cargo for freight and all other amounts due under the charter including costs of recovery.² The charter agreement also provided that only the vessel owner, master or owner's agent could issue bills of lading. Charter hire was set at $366,000 payable in a lump sum and the charter agreement stated that the vessel would not leave a loading port until the freight was paid in full.

On December 14, 2001, the SEALAND arrived in Itajai and TMM/Lykes' cargo was loaded. BBC advised Argonaut/Pegasus that the vessel was arriving and that it would not sail from the load port until the freight was paid. Despite the fact that the freight was not paid, the SEALAND sailed from Itajai destined for Santos that same day. On December 18, 2001, Argonaut/Pegasus issued bills of lading without authorization from BBC for the cargo loaded in Itajai. The bills of lading contained a lien clause in favor of the "carrier." "Carrier" is defined as "Pegasus and any connecting or substituted Carrier performing transportation under the transportation agreement evidenced by this bill of lading." On December 19th, the SEALAND arrived in Santos, Brazil, where cargo belonging to BBC was loaded. On December, 20, 2001, BBC forwarded draft bills of lading for the TMM/Lykes' cargo to Argonaut/Pegasus, noting that originals would come from BBC's Houston office.

The record reflects that on either December 19th or 26th, 2001, TMM/Lykes paid the full amount it owed in freight to Argonaut/Pegasus. CP Ships' corporate representative testified that freight was paid on December 19th by electronic transfer. He acknowledged that the bills of lading issued by Argonaut/Pegasus were marked "freight prepaid" even though on the date of issuance, December 18th, freight had not yet been paid. Receipts from JBL for the payment are dated December 26th. From these facts BBC contends that the payments were made December 26th. The district court did not make a finding on this point.

On January 8, 2002, the SEALAND arrived offshore Puerto Cabello where TMM/Lykes' cargo was to be discharged. As it had at various stages of the voyage, BBC demanded payment of freight from Argonaut/Pegasus and advised that the SEALAND would wait for 48 hours and if freight was not paid, the vessel would transport the cargo to Houston, its next port of call. The parties attempted unsuccessfully to negotiate a compromise. In e-mails BBC acknowledged that CP Ships (TMM/Lykes' parent) had paid Argonaut/Pegasus but that Argonaut/Pegasus had not yet paid BBC. After 48 hours, the SEALAND sailed for Houston without discharging TMM/Lykes' cargo.

On January 10, 2002, Argonaut/Pegasus forwarded a copy of the BBC/Argonaut charter party to TMM/Lykes' parent, CP Ships. The next day, BBC advised Argonaut/Pegasus and CP Ships that unless it received all freight due, it would assert a freight lien against the cargo once the vessel arrived in Houston. The SEALAND arrived in Houston on January 17, 2002. The cargo was discharged to BBC's warehouse, but later released to TMM/Lykes after posting of security. TMM/Lykes then transshipped the Venezuela cargo from Houston to Venezuela. BBC never received payment due under the charter party.

When the SEALAND arrived in Houston, BBC filed a complaint against the cargo in rem seeking to enforce BBC's lien for nonpayment of freight. The claim was amended to add an in personam claim against Argonaut/Pegasus and Cosvogiannis. TMM/Lykes filed a complaint against the SEALAND, BBC and Argonaut/Pegasus alleging breach of contract, damage to the cargo and conversion. TMM/Lykes also arrested the SEALAND asserting a maritime lien for its claims. In a separate proceeding, BBC obtained an arbitration judgment against Argonaut/Pegasus.

After a bench trial, the district court entered judgment in favor of BBC against Argonaut/Pegasus and Cosvogiannis for $407,486 and in favor of TMM/Lykes against Argonaut/Pegasus and Cosvogiannis for $124,509. No appeal was taken from these awards. The court also found that the SEALAND committed a deviation by failing to deliver the TMM/Lykes cargo to its intended destination, Puerto Cabello, and entered judgment for TMM/Lykes against the SEALAND for TMM/Lykes' cost of transhipping the cargo from Houston to Puerto Cabello. The court concluded that BBC was not entitled to a lien against TMM/Lykes' cargo for the vessel's freight charges and denied relief on that claim. BBC and the SEALAND appeal.

II.

BBC argues that the district court erred by finding that BBC could not assert a carrier's lien for freight against TMM/Lykes' cargo, in rem. BBC is correct that maritime law recognizes a lien arising as a matter of law in favor of the vessel owner against the cargo for charges including unpaid freight. Gilmore & Black, The Law of Admiralty (2d ed.), § 9-20, n. 103, quoting The Bird of Paradise, 72 U.S. (5 Wall) 545, 554, 18 L.Ed. 662 (1866); see also Tetley, Maritime Liens and Claims (2d. ed.), 786-87; 2 Benedict on Admiralty § 45. However, when cargo is shipped under a charter, this lien only extends to cargo that is owned by the charterer. Id.

The cargo in this case was not owned by the charterer, Argonaut/Pegasus, but by a third party shipper, TMM/Lykes.

When cargo shipped under a charter is owned by a third party, general maritime law does not give the shipowner a lien against either the cargo or the freight money. Charter parties, however, customarily provide that the owner shall have lien against cargo and freight and require the charterer to insert appropriate clauses in bills of lading subjecting the bills to the lien provision in the charter.

Gilmore & Black, The Law of Admiralty (2d ed.), § 9-20, n. 103; see also Tetley, Maritime Liens and Claims (2d. ed.), 786-87; 2 Benedict on Admiralty § 45. The charter party between BBC and Argonaut/Pegasus contains such provisions and provides that the vessel owner will have a lien on the cargo for freight and all other amounts due under the charter including costs of recovery.

The lien arising under the charter party does not arise by operation of maritime law, as do other maritime liens. Finora Co. v. Amitie Shipping, 54 F.3d 209, 213 (4th Cir.1995) (citing 2 Benedict on Admiralty § 45 n.5 (1994)). Rather, this lien is a creature of contract and arises from the original charter party between the vessel owner, in this case BBC, and the charterer, in this case, Argonaut/Pegasus. Id. To be enforceable against a third party cargo owner, like TMM/Lykes, who is not a party to the charter party agreement, the vessel owner's lien must be perfected. Id.; Hornbeck Offshore Operators v. Ocean Line, 849 F.Supp. 434, 439 (E.D.Va.1994). To perfect its lien, the vessel owner must give actual notice of the lien provision in the charter party to the cargo owner before the cargo owner pays its freight to the bill of lading issuer. Otherwise the lien is discharged. Toro Shipping Corp. v. Bacon-McMillan Veneer Mfg. Co., 364 F.2d 928 (5th Cir.1966); Finora, 54 F.3d at 211-12; Hornbeck, 849 F.Supp. at 439. Actual notice can be given, for example, by incorporating the lien from the charter party in the bill of lading issued to the shipper or by providing a copy of the charter party to the shipper. Hornbeck.

The district court found that TMM/Lykes did not have actual notice of the lien provision in the BBC/Argonaut charter party until January 10, 2002, when BBC sent a copy of the agreement to TMM/Lykes. The district court did not make a finding as to when TMM/Lykes paid Argonaut/Pegasus. Although the bills of lading dated December 18th were marked "freight prepaid," CP Ships' corporate representative testified that freight was paid on December 19th by electronic transfer. Receipts from JBL for the payment are dated December 26th. From this evidence, we are satisfied that the payments were made no later than December 26th. If the district court is correct that TMM/Lykes did not have actual notice of the lien provision in the charter party until January 10th, it correctly held...