SS Omnium Freighter v. Northwest Marine Ironworks, Inc.

• Decision Date: 18 February 1965
• Docket Number: No. 17798.,17798.
• Parties: S. S. OMNIUM FREIGHTER, Respondent-Appellant, v. NORTHWEST MARINE IRONWORKS, INC., Libelant-Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

341 F.2d 420 (1965)

S. S. OMNIUM FREIGHTER, Respondent-Appellant, v. NORTHWEST MARINE IRONWORKS, INC., Libelant-Appellee.

No. 17798.

United States Court of Appeals Eighth Circuit.

February 18, 1965.

Conrad M. Fredin of Butchart, Fredin & Eaton, Duluth, Minn., made argument for appellant and filed brief.

Edward T. Fride of Sullivan, McMillan, Hanft & Hastings, Duluth, Minn., made argument for appellee and filed brief.

Before VOGEL, MATTHES, and RIDGE, Circuit Judges.

VOGEL, Circuit Judge.

This is a proceeding in admiralty tried to the court without a jury. The parties herein will be designated as they were below. Libelant (appellee), Northwest Marine Ironworks, Inc., claims a maritime lien for repairs to the S. S. Omnium Freighter, respondent (appellant), based upon the provisions of 46 U.S.C.A. §§ 971 and 972. The repairs were made at libelant's shipyard in Portland, Oregon, in March 1963. Seizure of the vessel was effected at Duluth, Minnesota. Subsequent to seizure, bond was filed guaranteeing payment in the event it was determined that the lien was effective and the vessel was permitted to proceed on her way. No dispute exists regarding the performance of the repairs or the reasonableness of libelant's charge. Respondent defended against libelant's claim on the ground that the vessel had been under a bareboat charter at the time in question and that the charter by clear and express terms withheld from the charterer the authority to bind the vessel and that libelant had failed to exercise reasonable diligence to ascertain the existence and terms of this charter as required by 46 U.S.C.A. § 973 as follows:

"Notice to person furnishing repairs, supplies, and necessaries

"The officers and agents of a vessel specified in section 972 of this title shall be taken to include such officers and agents when appointed by a charterer, by an owner pro hac vice, or by an agreed purchaser in possession of the vessel; but nothing in this chapter 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 therefor." (Emphasis supplied.)

Trial before the District Court in St. Paul, Minnesota, resulted in judgment in favor of the libelant. The trial court's opinion directing judgment is published in 228 F.Supp. 943. Respondent perfected this appeal. The only issue remaining in the case at this level is whether the libelant exercised that "reasonable diligence" provided for by § 973, supra, to ascertain the existence of a charter party agreement.

The District Court found:

"XIV.

"During the time that the Steamer Omnium was available to libelant for inspection and repair at Portland, Oregon in March of 1963, and until repairs were completed, no notice of the existence and terms of the bareboat charter was ever posted on board the ship.

"XV.

"Prior to furnishing labor and materials to the Steamer Omnium, libelant searched the pilot house of the vessel for notices and found none.

"XVI.

"To all external appearances the Steamer Omnium, in March, 1963, was owned and operated by Mol Shipping and Trading, Incorporated.

"XVII.

"Libelant exercised reasonable diligence to ascertain whether, because of the terms of a charter party, agreement for sale of the vessel, or for any other reason, the person ordering the repairs was without authority to bind the vessel therefor.

"XVIII.

"Libelant did not know, nor could it have known by exercise of reasonable diligence, that because of the existence of the charter party, or mortgage, the person ordering the repairs was without authority to bind the vessel therefor."

The trial court also found, and it is undisputed, that in September and October 1960, about two and one-half years prior to the making of the repairs herein, that title to the vessel Omnium Freighter was in Mol Shipping and Trading, Inc.; that at that time and also prior thereto libelant had had occasion to inquire and did determine as a fact that the Omnium Freighter was owned by Mol Shipping and Trading, Inc. However, on June 12, 1961, Mol sold the vessel to Laurence Steamship Company. On the same date, Laurence Steamship Company gave Mol a seven-year bareboat charter at a charter hire of $8,035 per month, which charter contained the prohibition against the right, power or authority to create or incur liens on the vessel. When the sale and lease back on the same day were made, the name of the vessel was not changed. Under all of these circumstances, the trial court held that the libelant had exercised that reasonable diligence required by § 973, supra.

There is no dispute in the record about the fact that the sale from Mol to Laurence Steamship Company and the lease of the vessel back to Mol constituted an arm's length transaction. It must also be conceded that the owner, Laurence Steamship Company, did everything within its power to protect against a lien on its vessel and to give notice to the public of the charter's existence. The charter provided, inter alia:

"NOTICE OF BAREBOAT CHARTER:

"This vessel is the property of LAURENCE STEAMSHIP COMPANY. It is under charter to MOL SHIPPING AND TRADING INC. and, by the terms of the charter neither the Charterer nor the Master has any right, power or authority to create, incur, or permit to be imposed upon the vessel any lien whatsoever, except for crew\'s wages and salvage.

"The Charterer agrees also to display on board any notices required by the Mortgagees in a conspicuous place and to maintain same during the life of the mortgage in accordance with requirements of the mortgage."

The mortgage provided that certified copies thereof should be carried with the ship's papers on board the vessel and exhibited on demand and that notices should be prominently displayed in the chart room and in the master's and purser's cabins of the vessel and in such other places on board as may be from time to time and at any time required by the mortgagee. Custom also required such posting.

In appealing, it is claimed by the respondent that:

"The trial court erred in finding that libelant exercised reasonable diligence to ascertain whether or not the persons ordering the repairs to the vessel possessed authority to confer a lien upon the ship."

The determination of fact issues based upon contradictory and disputed testimony rests peculiarly with the trier of the facts, in this case the District Court sitting without a jury. It was the duty of the trial judge, after hearing the testimony and seeing the witnesses, to find the facts and draw conclusions therefrom. Admiralty Rule 46½, 28 U.S.C.A. Appellate review of such findings is extremely limited. In McAllister v. United States, 1954, 348 U.S. 19, at page 20, 75 S.Ct. 6 at page 8, 99 L.Ed. 20, the Supreme Court stated:

"* * * In reviewing a judgment of a trial court, sitting without a jury in admiralty, the Court of Appeals may not set aside the judgment below unless it is clearly erroneous. No greater scope of review is exercised by the appellate tribunals in admiralty cases than they exercise under Rule 52(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A. Boston Ins. Co. v. Dehydrating Process Co., 1 Cir., 204 F. 2d 441, 444; C. J. Dick Towing Co. v. The Leo, 5 Cir., 202 F.2d 850, 854; Union Carbide & Carbon Corp. v. United States, 2 Cir., 200 F.2d 908, 910; Koehler v. United States, 7 Cir., 187 F.2d 933, 936; Walter G. Hougland, Inc. v. Muscovalley, 6 Cir., 184 F.2d 530, 531, certiorari denied, 340 U.S. 935 71 S.Ct. 490, 95 L.Ed. 675; Petterson Lighterage & Towing Corp. v. New York Central R. Co., 2 Cir., 126 F.2d 992, 994-995. A finding is clearly erroneous when `although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed.\' United States v. Oregon State Medical Society, 343 U.S. 326, 339 72 S.Ct. 690, 96 L.Ed. 978; United States v. United States Gypsum Co., 333 U.S. 364, 395 68 S.Ct. 525, 92 L.Ed. 746."

In a quite recent case, the Supreme Court had occasion to reassert the rule. See Guzman v. Pichirilo, 1962, 369 U.S. 698, 702, 82 S.Ct. 1095, 1098, 8 L.Ed.2d 205:

"* * * The determination of the factual content of ambiguous testimony is for the trial court, and such determination can be set aside on review only if `clearly erroneous.\' United States v. National Association of Real Estate Boards, 339 U.S. 485, 495-496 70 S.Ct. 711, 94 L. Ed. 1007 (1950).

"The `clearly erroneous\' rule of civil actions is applicable to suits in admiralty in general, McAllister v. United States, 348 U.S. 19, 20 75 S.Ct. 6, 99 L.Ed. 20 (1954); see Roper v. United States, 368 U.S. 20, 23 82 S.Ct. 5, 7 L.Ed.2d 1 (1961), and to the existence of the operative facts of a demise charter party in particular, Gardner v. The Calvert, 253 F.2d 395, 399 (C.A. 3d Cir.1958). Under this rule an appellate court cannot upset a trial court\'s factual findings unless it `is left with the definite and firm conviction that a mistake has been committed.\' United States v. United States Gypsum Co., 333 U.S. 364, 395 68 S.Ct. 525, 92 L.Ed. 746 (1948)."

First the trial court was presented with a disputed fact question on the matter of posting. Respondent's testimony, through the captain of the vessel, was that he received a copy of the bareboat charter, typed two notices thereof and filed the charter in his cabin. Libelant's testimony through several witnesses was to the effect that the witnesses had looked for notices on board the vessel and had found none. The matter of notice being much in dispute and the trial court's conclusion that no notice was posted being based upon substantial testimony, it may not be set aside here. It is clear, however, that the absence of posting alone is not sufficient...