United States Court of Appeals

Fifth Circuit



## FILED

June 13, 2003

Charles R. Fulbruge III

Clerk UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 02-30627

STEVENS SHIPPING AND TERMINAL COMPANY; ET AL

Plaintiffs,

STEVENS SHIPPING AND TERMINAL COMPANY

Plaintiff-Appellant,

VERSUS

JAPAN RAINBOW II MV, its engines, tackle, & apparel, in rem;

Defendant-Appellee,

and

RUBY TRADING S A

Claimant-Appellee.

Appeal from the United States District Court

For the Eastern District of Louisiana, New Orleans

Before DUHÉ, EMILIO M. GARZA, and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

Plaintiff-Appellant, Stevens Shipping & Terminal Co., Inc.,

("Stevens"), claimed a maritime lien for agency and st evedoring

services that it rendered to the M/V JAPAN RAINBOW II in Savannah,2

Georgia, in February 2001. The district court, however, found that

S tevens provided those services with actual knowledge that the

charter party of the M/V JAPAN RAINBOW II contained a prohibition

of liens clause, and that the time charterer who hired Stevens,

Tokai Shipping Co., Ltd. ("Tokai"), could not incur liens or pledge

the credit of the vessel to secure Stevens's charges. The district

court, therefore, held that Stevens could not hold a maritime lien

for the services it provided, and Stevens's in rem claims against

the M/V JAPAN RAINBOW II were dismissed. Stevens now appeals.

I. BACKGROUND AND PROCEDURAL HISTORY

Stevens and Stevedoring Services of America (“SSA”) filed a

complaint under R ule C of the Supplemental Rules for Certain

Admiralty and Maritime Claims of the Federal Rules of Civil

Procedure. Stevens and SSA sought the arrest of the M/V JAPAN

RAINBOW II alleging that Stevens and SSA had not received payment

for services provided to the M/V JAPAN RAINBOW II in Savannah,

Georgia, and New Orleans. Thus, Stevens and SSA alleged they had

maritime liens on the M/V JAPAN RAINBOW II. SSA settled its claims

and is not a party in this appeal.

Tokai chartered the JAPAN RAINBOW II and dispatched Voy age

Instructions to Zodiac Maritime Agencies, L td. (“Zodiac”), the

vessel owners’ managing agent . Ruby Trading (“Ruby”) is the

claimant-appellee in this case. Stevens served as stevedore and

husbanding agent for Tokai. As stevedore, Stevens loaded and3

unloaded the JAPAN RAINBOW II, and as husbanding agent, Stevens

ordered goods and services for the vessel, such as tug and wharfage

services. Stevens would order the services and goods on behalf of

the JAPAN RAINBOW II, pay for them, and receive reimbursement from

Tokai. I f Stevens paid a third party for services provided to the

JAPAN RAINBOW II, it took the third party’s maritime liens as

assignee upon payment.

Clive Ferguson, a Zodiac employee, served as the operations

supervisor of t he JAPAN RAINBOW II. Zodiac had been aware since

late 2000 that Tokai was having financial problems, and F erguson

was instructed to fax a notice of the prohibition of liens clause

in the charter to each agent listed in Tokai’s voyage instructions.

On January 23, 2001, Ferguson faxed the notice to Steve ns at the

fax number listed in Tokai’s voyage instructions. The letter

accompanying the notice requested that Stevens notify other

Savannah providers about the prohibition of liens clause. The

letter also requested that Stevens return an acknowledgment of the

notice to Zodiac. Zodiac received a fax confirmation establishing

that the letter and notice were successfully transmitted to Stevens

at the fax number listed in the voyage instructions. Ferguson

testified that faxes were used in the shipping industry as a

reliable and customary means of communication.

At a deposition of Stevens thro u gh its designated

representative, Frank Coslick, Vice President of Finance, Stevens

conceded that the fax number to which Zodiac se nt the letter and4

notice belonged to a fax machine in the agency department of

Stevens's dow n town corporate office in Savannah, Georgia; but

contended that the fax machine w as in an area separate from the

company's administration and was not one that officers would use.

Coslick testified that office procedure, when such a fax arrived,

would be for Ed Manucy, who was formerly Stevens's general manager

of the operations department, or De borah Tillman, of Stevens's

operations department, to notify an officer of the corpora tion.

Corporate office employees from other departments may have used the

fax machine on an occasional basis.

Additionally, Stevens shared office space with United Arabs

Shipping and a non-profit organization. These entities had their

own fax machines and as a general practice did not use Stevens's

fax machine; however, they did have access to the machine as it was

located off a common area that employees of all three organizations

used to a ccess a break room. The room housing Stevens's fax

machine was not locked.

As to Stevens's knowledge of receipt of the January 23, 2001,

fax, Coslick testified that he did not see the fax. Coslick

concede d that of the 15 employees working in Stevens's downtown

office, he spoke to less than ten people regarding whether they had

seen the fax, and that was approximately one year after the fax was

sent. Coslick also testified that Robbie Harrison, Stevens's

president, informed Coslick that none of the officers who normally

would have been notified of such a fax had seen the document. As5

discussed below, Coslick’s testimony regarding the office procedure

when important faxes arrived and Harrison ’s statement were ruled

inadmissable.

On February 20, 2001, when the JAPAN RAINBOW II arrived in

Savannah, the vessel’s master delivered the notice of the

prohibition of maritime liens to Stevens, after Stevens had already

started work on the vessel. Ed Manucy signed the acknowledgment of

the notice, editing the phrase, which apparently initially read,

“For and on behalf of Charterer’s Agent, I confirm acceptance of

above,” to read, “For and on behalf of Charterer’s Agent, I confirm

receipt of above.” Manucy also interlineated, “All ILA labor and

port/tug charges already committed to prior to receipt of this

document.” This document was dated February 20, 2001. Stevens

provided $50,190.11 of stevedoring services and $35,046.54 of third

parties’ goods and services to the vessel.

Aware that Tokai was in f inancial trouble, Stevens asserts

that it would not have worked the JAPAN R AINBOW II or advanced

funds on its behalf but for Stevens's abi lity to rely on the

vesse l’s credit and receive maritime liens against the vessel.

Rather, Stevens would have demanded payment for the services up

front. Stevens asserted its maritime liens by initiating this

action on March 13, 2001. Stevens asserts that it did not know

about the faxed notice until after it arrested the boat i n New

Orleans.

The parties agreed to a trial on the parties’ joint6

stipulations, respective briefs, depositions, and exhibits, in lieu

of live testimony. Each party submitted a trial brief , a bench

book , and depositions. Stevens attached as exhibits to its trial

memorandum the affidavits of three Stevens employees, Manucy,

Coslick, and Tillman, indicating that none of the three had notice

of the no-liens clause before February 20, 2001. In addition,

Stevens attached a series of email correspondence between Stevens

and its counsel, indicating that as of March 14, 2001, Stevens was

unaware of the January 23, 2001, fax.

Ruby objected to the affidavits and the email correspondence

as hearsay. Ruby also objected to portions of Coslick’s deposition

testimony either because it was hearsay or because Stevens failed

to lay a foundation to show that Coslick had personal knowledge of

the matters to which he testified. Although Stevens filed a reply

to Ruby’s objection to the affidavit and emails, Stevens never

responded to Ruby’s objections to Coslick’s deposition testimony.

The district court sustained Ruby’ s objections and excluded

from the trial evidence the objected-to portions of Coslick’s

deposition, all three affidavits, and the email correspondence. In

granting the motion to strike affidavits, the district court

reasoned that the parties agreed to submit depositions in lieu of

stipulations for the trial on the papers. The parties did not

request permission to submit affidavits. According to the district

court, had the parties requested such p ermission, the district

court would have denied the request, as the submissions were to7

take the place of a trial. The distric t court held that the

affidavits and emails were inadmissable h earsay and that Stevens

had the opportunity to depose the affiants but chose not to do so.

Turning to the merits of the case, the district court noted

t he general rule that a party who has actual knowledge of a

prohibition of liens clause before supplying goods or services to

a vessel cannot later claim a marit ime lien for those goods or

services

. The district court found that the fax confirmation

created a rebuttable presumption that Stevens received the notice.

The district court relied upon Beck v. Somerset Techs., Inc.,

for the proposition that a letter placed in a U.S. Postal Service

mail receptacle creates a presumption that it was actually received

by the person to whom it was addressed. 882 F.2d 993, 996 (5th

Cir. 1989). The district court concluded that, on this record,

Stevens failed to offer competent evidence to rebut the presumption

that the fax was received. Having received the fax, Stevens had

the requisite “actual knowledge” of the prohibition of liens

clause. The district court rejected Stevens's argument that

Ste v ens would have to read and sign the fax to have actual

knowledge of the no-liens clause. The district court reasoned that

a supplier cannot deny knowledge of a no-liens clause when it was

delivered in a manner that is customary and reliable in the

shipping business. The district court entered a judgment in favor

of Ruby and dismissed Stevens's claims with prejudice. Stevens8

timely filed a notice of appeal.

II. DISCUSSION

We review the district court's leg al conclusions d e novo in

admiralty cases tried witho ut a jury. L ake Charles Stevedores,

Inc. v. Professor Vladimir Popov MV, 199 F.3d 220, 223 (5th Ci r

.

1999). We review the district court's factual findings under the

clearl y erroneous standard. F ED

. R. C IV

. P. 52(a). "The clearly

erroneous standard of review does not apply to factual findings

made under an erroneous view of c ontrolling legal principles."

Lake Charles Stevedores, Inc., 199 F.3d at 223.

Stevens raises three arguments on appeal. First, Stevens

asserts that the district court erred in applying the standards of

the Maritime Commercial Instruments and Liens Act ("MCILA"), 46

U.S.C. §§ 31341-31343

, to find that Stevens had actual knowledge of

a prohibition of liens clause in the JAPAN RAINBOW II's charter.

Second, Stevens argues that the district court erred in failing to

distinguish Stevens's direct maritime liens from the liens that

Stevens allegedly held as an assignee. Third, Stevens argues that

the district court erred in striking certain affidavits and email

correspondence in c luded as exhibits to Stevens's trial brief.

Having heard oral arguments, having carefully reviewed the entire

record of this case, and having fully consider ed the parties'

respective briefing on the issues in this appeal, we affirm the

judgment of the district court.9

First, Stevens argues that the district court erred in finding

that the fax confirmation sheet created a rebuttable presumption

that Stevens had actual knowledge of the no-liens clause, thus

shifting the burden to Stev ens to prove it did not have actual

knowledge. On appeal of a district court’s ruling following a

bench trial, this Court revie ws the district court’s factual

findings for clear error and its legal conclusions de novo. C oggin

v. Longview Indep. Sch. Dist., 289 F.3d 326, 330 (5th Cir. 2002).

This Court reviews the allocation of the burden of proof d e novo

and the determinations that the parties met their burdens under the

clearly erroneous standard. H opwood v. Texas, 236 F.3d 256, 263

(5th Cir. 2000).

Maritime liens "enable a vessel to obtain supplies or repairs

necessary to her continued operation by giving a temporary

underlying pledge of the vessel which will hold until payment can

be made or more formal security given." Lake Charles Stevedores,

Inc. v. M/V POPOV, 1 99 F.3d 220, 223 (5th Cir. 1999) (internal

quotations and citation omitted). Under section 31342(a) of the

MCILA, "a person providing necessaries to a vessel on the order of

the owner or a person authorized by the owner--(1) has a maritime

lien on the vessel; (2) may bring a civil action in rem to enforce

the lien; and (3) is not required to allege or prove in the action

that credit was given to the vessel." There is no doubt that

stevedoring services are necessaries. L ake C harles Stevedores,10

Inc.

, at 225. However, a party who knows of a prohibition of liens

clause before supplying goods or services to a vessel cannot later

claim a maritime lien for those goods or services. G ulf Oil

Trading Co. v. M/V CARIBE MAR, 757 F.2d 743, 749 (5th Cir. 1985).

In the case at bar, the district court reasoned that the fax

c onfirmation sheet created a rebuttable presumption that Zo diac

delivered the notice and that Stevens received it. We agree with

the district court in this case. Neither party disputes that

facsimiles are a reliable and customary method of communicating in

the shipping business. To quote the district court, in such an

industry, "[t]he law simply cannot allow a supplier to deny

knowledge of a no lien clause when it was delivered in a manner

that was both customary and reliable in the s hipping business."

Thus, on the facts of this case, the district court did not clearly

err in finding that the preponderance of the evidence showed that

Stevens had actual knowledge of the prohibition of liens clause.

Second, this Court need not address whether the district court

erred in failing to distinguish Stevens's direct maritime liens

from the liens that Stevens allegedly held as an assignee, as the

record shows that Stevens failed to put forth evidence that it made

payments on behalf of the assignor of the liens. S ee Surgical Care

Ctr. of Hammond v. H ospital Serv. Dist. No. 1, 309 F.3d 836, 840

(5t h Cir. 2002). Third, the district court did not commit clear

error in declining to admit the affidavits and email correspondence11

under the residual exception to the hearsay rule. S ee Magouirk v.

Warden, Winn Correctiona l Center, 2 37 F.3d 549, 554 (5th Cir.

2001). Based on the foregoing, we affirm the district court.

AFFIRMED.