233 F. 139 | E.D.N.Y | 1916
This is a consolidated action embracing 69 libels asserting maritime liens aggregating $43,289.93 against the steamship Oceana, of which the Morse Dry Dock & Repair Company appears as claimant. For convenience of reference the number given each lien claim in the special commissioner’s report is added to the lienor’s name in the list of appearances of counsel, and the various lienors are hereafter referred to by number. All the claims are for repairs, supplies, or other necessaries, within the meaning of the Act of June 23, 1910 (36 Stat. 604), relating to liens on vessels, save (3), which is in part for two booms and for repairing and carting a coal chute; (25), which is for towage; (27), which is for brokerage and tonnage dues and fees; (32), which is for stevedoring; and (38 to 49), inclusive, which are for pilotage. The consolidated action was referred to James K. Symmers, Esq., as special commissioner. , His report was duly filed, and now comes before the court upon exceptions filed by the claimant and by various libelants. The issues with respect to the claims for repairs, supplies, or other necessaries are confined substantially to the construction and application of the act of Congress of June 23, 1910. The special commissioner allows in full 21 of the claims for repairs, supplies, or other necessaries, aggregating $11,698.36, viz., Nos. (1), (4), 69), (11), (12), (16), (18), (19), (20), (21), (28), (29), (30), (31), (33), (34), (55), (57), (58), (64), and (69). He allows in part 25 of such claims aggregating 821,459.12, to the extent of $10,681.46, viz., Nos. (2), (3), (5), (6), (8), (10), (13), (14), (15), (17), (22), (23), (24), (37), (50), (51), (52), (53), (54), (59), (60), (62), (63), (65), and (66). That is to say, he disallows all repairs and supplies ordered or delivered to the vessel prior to the
As appears by a bill of sale filed in the office of the collector of customs at the port of New York the Oceana was purchased at marshal’s sale March 13, 1914, by the Morse Dry Dock & Repair Company, a New York corporation having its principal place of business in the borough of Brooklyn. On December 5, 1914, while the vessel was lying at its yard at the foot of Fifty-Sixth street, Brooklyn, the Morse Company contracted with the Bermuda-American Steamship Company, Limited, a Bermuda corporation, for her sale for $255,000 upon conditions set forth in the contract. The purchase price was to be paid, $30,000 on account on the date of execution of the contract, the balance in monthly installments of $25,000 each on February 1st, March 1st, and thereafter as specified. Title to the vessel was to remain in the Morse Company until the entire purchase price was paid. The contract further provided that before delivery the purchaser should deliver to the seller certain insurance policies; also, that at the time of delivery the steamer should hold British Lloyds A-l classification and inspection required- for United States registry. The seller was required to provide before delivery certain specified equipment. It was further stipulated that the vessel should be delivered to and accepted by the purchaser not later than December 19th; that in the event of any contingency arising, not with
“(a) To keep said ship clear of any lions from any cause, and. If any lien or libel is filed or asserted the same shall be immediately bonded by the purchaser. The purchaser agrees to promptly pay current bills, for supplies and repairs to said ship and exhibit at reasonable times the ship’s accounts and bills to seller’s representatives.
“(b) To keep said ship and equipment in good repair.”
Pursuant to this agreement, the purchaser paid $30,000 down, and the seller executed an absolute bill of sale of the vessel, which, together with a duplicate copy of the agreement, was deposited in escrow with the Columbia Trust Company. On December 9th the contract was filed in the office of the register of the county of Kings. At the same time it was offered for filing in the register’s office of the county of New York, but was rejected because the vessel was not in that county. Counsel for the Morse Company at the same time sought to file the contract, or a copy thereof, for record in the office of the collector of customs of the port of New York, but it was refused for record on the alleged ground no law authorized the filing there of sucli an instrument.
In order to operate the Oceana under American registry, the Bermuda Company caused to be organized a New York corporation called the Bermuda-American Steamship Company of New York. C. V. Frith, who was a director in both companies, was president of the Bermuda Company. C. W. Morse was president of the New York Company. Crosby, one of the directors of the company, then or formerly purchasing agent of the Hudson Navigation Company, in which C. W. Morse was also interested, was employed as purchasing agent, and the purchaser went forward with its preparations to operate the Oceana in the Bermuda trade. Almost all the repairs and supplies thereafter furnished and here involved were ordered for the Oceana by Crosby, with whom many of the libelants had dealt as purchasing agent under his former employment. In most instances the libelants made no further inquiries; those who did were assured by Crosby that the ship was responsible. Most of the bills for supplies were made to the Oceana, either alone or with the addition of
E. P. Morse, treasurer and. general manager of the claimant company, was often aboard the Oceana while she was in the claimant’s yard, and saw deliveries made on board, and was fully informed. He says he asked to see the purchaser’s accounts within a week after the vessel began to run. He knew early in January that the purchaser owed $10,000 in bills; the latter part of the month he was told by C. W. Morse that the amount was $25,000. About the middle of January (or on January 24th), knowing that liens were being created, he sent auditors to examine the purchaser’s books. The auditors were told that the books had not been written up, and access to tire purchaser’s accounts was only obtained upon threats to seize the vessel. The auditors reported informally on January 30th that there were bills against the ship of $30,000. The auditors’ formal report, dated January 26th, and received by the claimant on February 1st, disclosed bills payable by the purchaser amounting to more than $38,000. The claimant, through E. P. Morse, at once began negotiations with C. W< • Morse about the payment of these bills, but neither then nor at any other time did tire claimant communicate with the supply men. The purchaser’s first installment of $25,000 on the purchase price due February 1st was paid under pressure on February 8th. Through Capt. Pendlebury, who had formerly been in the claimant’s employ,
“Claimant contends that the various libelants were obliged to make inquiry as to the ownership of the Oceana. As will be seen, some of them did make such inquiry of the agents of the agreed purchaser in possession, and were misled. But claimant says this was not due diligence, and that the inquiry should have been made at the custom house, where the legal ownership was a matter of record. Claimant very ably contends that Congress did not intend to alter the law stated by the Supreme Court in the case of the Valencia, and that the supply men who failed to make any Inquiry and ‘shut their eyes’ as to the ownership of the vessel should be denied liens. Were the question one which 1 felt free to consider as open for a commissioner, Í should hesitate before deciding otherwise, but the federal lien act has already been so frequently interpreted by the courts as to show a marked trend of judicial opinion to the effect that Congress intended to say and has said in effect that a supply man may furnish necessaries to a vessel on the order of the owner, or of any one intrusted by the owner with the management of the vessel at the port of supply, and, unless something is brought to his attention which would suggest the duty of inquiry, he may presume that he has a lien for the necessaries so furnished. If the supply man have notice that he is dealing with a charterer or agreed purchaser in possession, then he is obliged to inquire as to the authority of the person with whom he is dealing to confer a lien (The Eureka [D. C.] 209 Fed. 373), and, in the absence of inquiry, it will be conclusively presumed that, if inquiry had been made, the facts would have been ascertained (The II. C. Grady [D. C.] 87 Fed. 237). This is the purpose of the proviso in the third section of the act to the effect that nothing in the act shall be construed to confer a lien when the furnisher knew, or by the exercise of reasonable diligence could have ascertained, that, because of the terms of a charter party, or 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. But the lawful possession and management of a vessel at the port of supply create a presumption of the right to bind the vessel for supplies there furnished. To defeat the lien it must appear that something has been brought to the attention of the supply man which put him upon inquiry as to the right of the person in possession of and operating the vessel to bind her for repairs, supplies, or other necessaries. The Thomas W. Rogers [D. C.] 197 Fed. 772, affirmed 207 Fed. 69 [124 C. C. A. 629); The City of Milford [D. C.] 199 Fed. 956; The Iola [D. C.] 189 Fed. 979; The Ha Ha [D. C.] 195 Fed. 1013; N. Y. Trust Co. v. Bermuda, etc., Co. [D. C.] 211 Fed. 989.”
I agree with the special commissioner’s conclusion, without hesitation. The purpose of the act was to remove by a plain and simple course of procedure the confusion into which the subject had become involved. Therefore it did away with the artificial distinction between foreign and domestic vessels; it removed the presumption of credit to the owner; it superseded the state statutes conferring liens for necessaries; and it resolved the conflict of authority over the distinction between charterers and agreed purchasers in possession. Accordingly, the act gives a lien when supplies are furnished to a vessel upon the
“It is to be understood in such sense as will harmonize it with the general purpose of the act. That purpose was to make the management of a vessel at its port of supply presumptive evidence of the right to bind it for supplies there furnished. That purpose prevails unless it shall be shown that the person so managing the vessel was unlawfully or tórtiously in possession or charge of it, or unless something has been brought to the knowledge or attention of the person furnishing the supplies which in honesty and good conscience puts upon him the duty of inquiry as to whether the person who has the management of the ship has the right to pledge its credit.”
The act does not mean that the furnisher shall not have the right to rely upon the authority to bind the vessel presumed to exist in the officers and agents specified in the second section. It is only when he knows that such officers or agents do not have the requisite authority, or under the circumstances is put upon inquiry as to their powers, that the presumption becomes inoperative. There must be an actual restriction of authority by the owner in the first place, and in the absence of affirmative knowledge of such restriction, or of circumstances which ought to raise a doubt in his mind, the furnisher is entitled to rely upon the presumption and will acquire a lien, even if the officer or agent in fact has no authority. The phrase, “knew, or by the exercise of reasonable diligence could have ascertained,” was adopted from The Kate, 164 U. S. 470, 17 Sup. Ct. 135, 41 L. Ed. 512, and was used in the act of Congress to make it clear that, if the furnisher know of the existence of a charter party or of an agreement for the sale of the vessel, he is put upon inquiry as to its terms, and cannot excuse himself by. denying ignorance, of the terms, should it turn out that the charterer or agreed purchaser had undertaken to furnish the vessel at his own cost.
Turning now to the issues raised by exceptions filed by various lienors, it is contended, in the first place, that the contract provision upon
An issue of more serious import arises out of the lienors’ exception to the conclusion reached by the special commissioner that the Oceana did not actually pass into possession and under the management of the purchaser until December 25th, in consequence of which all necessaries ordered prior to that date were disallowed. The special commissioner’s report on this branch of the case is substantially this: While the New York company, of which Crosby was the purchasing agent, may be considered the agent of the Bermuda company, the agreed purchaser, prior to December 25th, neither Crosby nor the New York company was such an agent, to wit, an agent “appointed by an agreed purchaser in possession of the vessel,” as by the terms
The claimant’s course of conduct in the premises is a consideration which should not be overlooked. All the cases dwell upon the importance of good faith. The proviso of the act is designed to protect the owner only if he has tried to protect himself. New York Trust Co. v. Bermuda-Atlantic Steamship Co. (D. C.) 211 Fed. 989. The conduct of the complainant may be such as to convey the implication that he consents. The Thomas W. Rogers (D. C.) 197 Fed. 772; Id., 207 Fed. 69, 124 C. C. A. 629. Here the seller had not only clothed the purchaser with the insignia of possession and management, but, with knowledge of what was transpiring, had permitted the agreed purchaser to hold itself out as having possession and management. Although E. P. Morse knew early in January that there were bills against the ship for supplies to the extent of $10,000, and by February 1st had all the details of indebtedness aggregating $38,000, neither he nor anybody else on the claimant’s behalf took any steps to warn people who had furnished and were continuing to furnish supplies to the ship that they could not look to the credit of the vessel. He says the purchaser assured him that the bills were being paid. But he knew that they were not. The only inference to be drawn from the evidence is that the claimant’s policy was to keep the vessel running in order to produce the revenue from which the installment payments due under the contract could be secured. When the first installment, due February 1st, was finally paid on the 8th upon threats of seizure, the claimant was content to accept the purchaser’s stale assurance that the outstanding supply bills amounting to more than $38,000 would be paid; and it was only because the purchaser failed to make the second payment on the purchase price that the claimant on March 8th took possession of the vessel. Yet the contract provided that in case of breach of any of its covenants the seller should have the right to take possession of the vessel immediately. The first express covenant required the purchaser to pay promptly current bills for supplies and repairs, and to exhibit the ship’s accounts and bills to the seller. Even the claimant’s excuse that prompt payment meant 30 days’ time is no justification, for, although the auditors’ report received by the claimant on February 1st does not state when the bills therein listed accrued, the auditors had the bills before them, and that information, if not
Other exceptions to the special commissioner’s report are overruled. The report is accordingly confirmed; save in so far as it disallows a lien for repairs, supplies, or other necessaries furnished prior to December 25, 1914, in which respect it is disapproved, and a lien is allowed for all necessaries furnished on and after December 10, 1914, irrespective of the date of the order. Accordingly, the account of all libelants who have filed exceptions to the disallowance of a lien for their account, in whole or in part, on that ground, namely, (2), (3), (5), (8), (14), (15), (17), (22), (37), (52), (54), (56), (59), (60), (61), (63), (65), (66), and (67), will be restated by the special commissioner, to whom the case is returned for that purpose.
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