United States v. Robins Dry Dock & Repair Co.

• Citation: 13 F.2d 808
• Decision Date: 08 June 1926
• Docket Number: No. 1983-1986.,1983-1986.
• Parties: UNITED STATES v. ROBINS DRY DOCK & REPAIR CO. et al., and three other cases. THE NEPONSET CASES.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

13 F.2d 808 (1926)

UNITED STATES v. ROBINS DRY DOCK & REPAIR CO. et al., and three other cases THE NEPONSET CASES.

Nos. 1983-1986.

Circuit Court of Appeals, First Circuit.

June 8, 1926.

Arthur M. Boal, of Washington, D. C., and George R. Farnum, Asst. U. S. Atty., of Boston, Mass. (Harold P. Williams, U. S. Atty., of Boston, Mass., on the brief), for the United States.

Henry Parkman, Jr., of Boston, Mass. (Putnam, Bell, Dutch & Santry, of Boston, Mass., and Haight, Smith, Griffin & Deming, of New York City, on the brief), for Robins Dry Dock & Repair Co.

Charles R. Hickox, of New York City (Frank A. Bernero, of New York City, and Charles S. Bolster, of Boston, Mass., on the brief), for Standard Oil Co. and McCormack Stevedoring Co.

Before BINGHAM and JOHNSON, Circuit Judges, and HALE, District Judge.

HALE, District Judge.

These cases come before us upon four appeals from final decrees of the District Court for the District of Massachusetts.

In No. 1983, the United States proceeded by libel against certain freight moneys due the steamship Neponset. Pursuant to the libel, the freight moneys were paid into court. Then followed certain intervening libels of parties claiming maritime liens superior to the claim of the United States.

In No. 1984, the Standard Oil Company, in this independent libel, as well as in its intervening petition, claims to have furnished fuel oil to the Neponset at San Pedro, Cal., and in the Canal Zone on May 31, 1922, and it appears that the orders for this fuel oil were given in New York by an official of the Elder Steel Steamship Company, Inc., to an official of the Standard Oil Company.

In No. 1985, the McCormack Stevedoring Company, in this independent libel and in its intervening petition, claims to have rendered services to the Neponset at the port of New York, in connection with the cargo discharged at that port in the early part of June, 1922, just before the vessel proceeded to Boston, where she was seized on or about June 19, 1922. The orders in this case were given by an official of the Elder Company to an official of the McCormack Stevedoring Company.

In No. 1986, the Robins Dry Dock & Repair Company, in this independent libel and in its intervening petition, claims to have made certain repairs to the Neponset in the port of New York in March, 1922, on the order of an officer of the Elder Steel Steamship Company.

It does not appear that in any of the above cases there was any order given by the master or any officer of the vessel. The District Court held the three libelants and interveners, the Standard Oil Company, the McCormack Stevedoring Company, Inc., and the Robins Dry Dock & Repair Company, to be entitled to maritime liens on the freight moneys; that these liens were superior to the claim of the United States; and it entered decrees in their favor for the full amount claimed against the freight moneys. From these decrees, appeals are taken to this court.

The case shows that, at all times involved in these proceedings, the steamship Neponset was owned by the United States, as represented by the Shipping Board; that on April 10, 1920, the Shipping Board entered into an agreement with the Elder Steel Steamship Company, Inc., the agreement being known as the "charter agreement," by which it chartered the ship to the Elder Steel Steamship Company, Inc. In pursuance of that agreement the Neponset was delivered to the Elder Steel Steamship Company, Inc., on May 13, 1920. The charter agreement contains these provisions:

"(1) The owner agrees to let, and the charterer agrees to hire, said vessel from the time of delivery for the period of 18 months. * * *

"(2) The charterer shall, at its sole expense, man, operate, victual and supply said vessel. * * *

"The charterer will not suffer nor permit to be continued any lien, incumbrance, or charge which has or might have priority over the title and interest of the owner in said vessel. * * *

"In general, the charterer shall operate the said vessel free of any expense to the owner of any nature or kind whatsoever.

"(4) The charterer shall pay to the owner upon delivery of the vessel the sum of $48,062.16, for the option to purchase hereinafter contained, and in addition thereto shall pay to the owner for the use of said vessel $48,625 ($5 per cwt) per calendar month in advance commencing on and from the day of her delivery as aforesaid, and at and after the same rate for any part of a month; hire to continue until her delivery in like good order and condition to the owner (unless lost or unless charterer exercises option to purchase) at a United States Atlantic port, north of Hatteras. * * *

"The owner shall have a lien upon all cargoes, and all subfreights, for any amounts due under this charter party."

By section 10, the Elder Company had an option to purchase the vessel for $1,922,486.62, and payments of charter hire were to apply as payments on account of the purchase price.

Subsequently to the execution of the charter agreement, negotiations were entered into looking to an outright agreement of purchase. That agreement — which may be called the sales agreement — dated November 24, 1920, was drawn up and executed by the Shipping Board and forwarded to the Elder Company. The company refused to execute the agreement, because it objected to certain sinking fund provisions, and for this reason only. The November agreement — the sales agreement — fixed the purchase price at $1,907,364.25, provided that the buyer (Elder Steel Steamship Company, Inc.) should pay 10 per cent. in cash, $190,736.42, and the rest in stated installments, and provided, also, when the buyer should have paid 50 per cent. of the purchase price, that the seller (the United States) should execute and deliver to the buyer a bill of sale of the vessel, and that the buyer would immediately execute a mortgage (substantially in the form of the mortgage attached to the agreement) to secure the unpaid purchase price. It then provided in section 5 as follows:

"From the time of the delivery of the vessel by the seller to the buyer, and until title to the vessel shall have been transferred to the buyer in accordance with the provisions of paragraph 6 hereof, the buyer agrees among other things to the following:

"`(d) The buyer shall not suffer to be continued any lien or charge having priority to or preference over the title of the seller in the vessel, or any part thereof.

"(g) To carry a properly certified copy of this agreement with the ship's papers, and to take such other appropriate steps designated to it by the seller from time to time as will give notice to the world that the buyer has no right, power, nor authority to suffer or permit to be imposed on or against the vessel any liens or claims which might be deemed superior to or a charge against the interests of the seller in the vessel.'"

The form of mortgage attached to the sales agreement contained the following covenant in section 3:

"Not to suffer nor permit to be continued any lien, incumbrance, or charge which has, or might have, priority over this mortgage of the vessel to the party of the second part."

The agreement of sale also provided in section 3 as follows:

"Upon execution of this agreement, the said charter sales agreement hereinbefore referred to shall be superseded by this agreement."

The charterer, the Elder Company, continued to operate the Neponset until she was seized by the United States marshal on June 19, 1922, at the port of Boston, pursuant to the possessory libel by the United States.

The District Court held that the provisions of the charter sales agreement, namely, the April agreement, prohibited the Elder Steel Steamship Company from imposing maritime liens on the Neponset, but that this agreement had been abandoned. The court based its ruling upon United States v. Carver, 260 U. S. 482, 43 S. Ct. 181, 67 L. Ed. 361, in which case the Supreme Court construed the identical provision contained in the April agreement, namely:

"The charterer will not suffer nor permit to be continued any lien, incumbrance, or charge which has or might have priority over the title and interest of the owner in said vessel."

After the lapse of the 18 months which the charter agreement had to run, and after the sales agreement of November, 1920, had been sent to the Elder Company, that company paid the initial 10 per cent. payment, but still objected to the provision in the agreement that the freight earned by the steamer should be set aside as a sinking fund, and, at its request, the requirement for the sinking fund was extended. The Elder Company did not execute the agreement, but continued in possession and in operation of the ship until she was seized by the United States marshal on June 19, 1922, at the port of Boston, pursuant to a possessory libel filed by the United States. The Elder Company never paid the second installment on the purchase price.

We think the District Court was right in holding that the charter party under which the Neponset was first operated had been abandoned, and that, while the new sales agreement was never executed by the Elder Steel Steamship Company, the Neponset was being operated under an arrangement in substantial accordance therewith.

The District Court ruled that the decision in United States v. Carver requires all furnishers of repairs or supplies always to make inquiry, whether or not they know facts which would lead them to think that the vessel was not owned by the company operating it. The court was clearly right in this ruling. It ruled also that, under the Carver Case, the charterer need go no farther in his investigations, if he finds that the person ordering the repairs or supplies is the owner, or his agent, unless he has reasonable grounds to suppose that the owner was in possession, under an agreement for purchase, which forbade the imposition of liens, and that in the latter case he must use reasonable diligence to...