Opinion
March 27, 1926.
Duncan Mount, of New York City (by Russell T. Mount and Cecil Page, both of New York City), for libelant.
Emory R. Buckner, U.S. Atty., of New York City (by Walter Schaffner, of New York City), for the United States.
In Admiralty. Suit by the New York Harbor Dry Dock Corporation against the United States and the United States Mail Steamship Company, Inc. Decree dismissing libel.
This is a suit in admiralty in personam against the United States under the Act of March 9, 1920 (Comp. St. §§ 1251¼-1251¼ l). The United States Mail Steamship Company was originally joined as a respondent, but its insolvency has eliminated it as a factor in the situation. For convenience it will be spoken of hereafter as the steamship company.
The contract between the steamship company and the United States, which is involved here, is the same contract construed by the Circuit Court of Appeals of this Circuit in Morse Dry Dock Co. v. United States, 1 F.2d 233, and the charter party for the vessel, for the costs of whose reconditioning this suit is brought, is in all respects identical with those examined in that case except as to dates, names, and perhaps some minor matters of pure inconsequence. A reference to the opinion of the court in the Morse Case will therefore supply details as to these matters and make unnecessary any extended reference to them in what may hereafter be said in this case. It is very earnestly insisted on behalf of the libelant that the resemblance of this case to the Morse Case is limited to the matters just referred to, and that, because of this fact, the conclusions of the court in the Morse Case are neither applicable nor binding in this. The facts by which it is claimed this result is accomplished are briefly these: Libelant is, or perhaps it is more accurate to say was, a dry dock and ship repair corporation, organized a few years ago with the active encouragement of the Shipping Board to compete for government work and thus furnish what apparently had been previously lacking in the New York situation; that is to say, active competition in bidding. It had been the low bidder for reconditioning a number of Shipping Board vessels, but had either failed to get the contract or the work had been postponed.
In January, 1920, the Antigone, which had some time previously been chartered to the Steamship Company (with an option to purchase) was ready for reconditioning. Libelant was encouraged by Shipping Board officials to become a bidder for the work and was invited to appear before the Board in Washington and submit its claims. This it did, and in addition furnished the local — that is to say, the New York — representative of the Shipping Board with a copy of its schedule of prices and actively sought the work at the hands of the steamship company.
On January 18 libelant received a letter from the steamship company confirming an oral agreement to recondition the Antigone, having first, as I have already intimated, had a number of personal interviews with the officers of that company, and having likewise received an intimation from Commander Gatewood, then a representative of the Shipping Board, that it would be awarded the contract for reconditioning the Antigone. The letter was brief, and confirmed the agreement to do the work, and fixed the dates of payment for the work in several installments covering the period of a little more than three months after the completion of the work. Apparently in order to secure a somewhat more formal contract, the libelant on January 19 wrote the steamship company the following letter:
"We are in receipt of your letter of the 18th instant, stating the terms of payment for work to be done on the steamship Antigone. In view of the unusual charter conditions, etc., we would like to have a statement from you something like the form of letter inclosed. Should the form be at variance with your ideas, we shall be glad to discuss modifications at your convenience. We assume that it would be proper for us to have the approval of the Shipping Board to the arrangement between us, but will make no move in this direction until we have a complete understanding with you."
The form of letter inclosed with the one just read was substantially like the answer which was received in due course, which was as follows:
"In response to your letter of January 19th, 1921, I beg to reply as follows:
"As charterers of the steamship Antigone, owned by the U.S. Shipping Board, under an agreement which gives us full power and authority to recondition this vessel, subject to the approval of the United States Shipping Board, we hereby authorize you to proceed to recondition the steamship Antigone as a passenger vessel, and to perform any service to or for said vessel, performing said reconditioning according to the rates which have been submitted to us.
"In consideration of your agreement that you will not exact payment in full for said reconditioning, upon progress of the work, we agree to make partial payments to you as outlined below, upon approval of your bills and estimates by our vice president in charge of construction and repairs, under whose supervision this work is to be done; such work to be carried out in accordance with his instructions, said amounts being payable at our office, at 120 Broadway, New York, as follows."
Then follows a list of the installment contracts with their dates of maturity and this sentence, viz.: "It being understood and agreed that you shall not lose your maritime lien against the steamship Antigone in any way by reason of the deferring of payments for such work."
The letter concluded with a statement of the person who is designated to authorize the work and approve it.
As I recall the evidence, the correspondence which is read was submitted in its entirety to the libelant's board of directors, and at the suggestion of a member of the board counsel were employed to advise the board specifically whether the contract as proposed would create a lien on the vessel for the work done. The report of counsel after examination of the contract and charter party between the Shipping Board and the steamship company was that the company might safely proceed with the work, and, in the event of nonpayment by the steamship company, might legally assert its lien against the vessel.
The work was accordingly completed, the ship delivered. Thereafter there was default in the payment of some of the installments. There was a considerable amount of correspondence, in which the chairman of the Shipping Board participated, all in an endeavor to clear the matter in default, which was unsuccessful, and thereafter the Shipping Board, for reasons which appeared to it satisfactory and as it had a right to do, canceled the contract and retook possession of the vessel. A number of letters and likewise details of a number of conversations between the officers of the libelant and the chairman of the Shipping Board and the latter's New York representative, Capt. Gatewood, were introduced and admitted in evidence, it should be said over the objection of counsel for the government. These both oral and documentary tend to show that both Admiral Benson and Capt. Gatewood were impressed with the bona fides of libelant's claim and believed it should be assumed and paid by the United States. Doubtless the reason for this is that both of these gentlemen recognized that the libelant was largely influenced by their encouragement to bid for the work and also by the fact that, in repossessing itself of the vessel, the United States had gotten the benefits and should therefore in good conscience assume the burdens. But, in spite of this and in spite also of Capt. Gatewood's testimony that in conversations with the president of the libelant company about coincident with the making of the contract for the work, he had informed the latter that the steamship company was in his opinion the agent of the United States and the latter was responsible for the debts — I say, in spite of all of this — it is not contended on behalf of the libelant that anything either in the correspondence or in the conversations, either at time the contract was made or after the default in payment of the contract price, created either a ratification by the United States of the contract of the steamship company or bound the United States either as agent or guarantor to discharge that company's indebtedness. No other position than this would in my judgment be tenable, in the absence of some evidence showing authority on the part of these individuals to bind the United States in any respect. Apparently the purpose of the introduction of the evidence was to complete the picture and to demonstrate the fact upon which the claim is urged, viz. that libelant did all that a reasonably prudent man could or should have done to ascertain the facts upon which its rights depended and having acted in good faith, with prudence and diligence, its rights are not foreclosed by the Clio and Morganza decisions.
The fallacy of this position, as I see it, is that it presupposes that the principle announced in those cases depended upon the diligence or lack of diligence upon the part of the lien claimant. It is true that right to a lien under the Act of June 23, 1910 (Comp. St. § 7783-7787), was denied in those cases because of the failure of the lien claimant to ascertain facts which he could have ascertained in the exercise of due diligence, and which, if and when ascertained, would have put him on notice that the person with whom he was dealing had no right, either directly or indirectly, to create a lien on the vessel. In those cases the persons furnishing the supplies, as in the Morse Case, were content to rest upon the ostensible ownership of the vessels by the parties in possession and for failure to make inquiry they lost their rights. In this case inquiry was made; the true facts were ascertained. The contract was examined. The limits and boundaries of the steamship company's rights were known in advance but their legal effect was either misconceived or misconstrued. The contracts themselves, in words which the Supreme Court has held sufficient for that purpose, provided, as did also the charter party, that the steamship company should not and could not create a lien on the vessel. The third section of the Act of 1910 (Comp. St. § 7785), specifically provides that, if the furnisher knew or in the exercise of ordinary care should know this fact, the provisions of the section giving the lien do not apply.
It follows, therefore, that the libel should be dismissed, and a decree will accordingly be entered.