Opinion ID: 456284
Heading Depth: 1
Heading Rank: 3

Heading: Does Farwest have a maritime lien under the federal Maritime Lien Act?

Text: 17 The federal Maritime Lien Act grants a maritime lien to any person 1) furnishing repairs, supplies, or other necessaries 2) to any vessel 3) upon the order of the owner of such vessel, or of a person authorized by the owner. 46 U.S.C. Sec. 971. The district court found that Farwest and intervenor corporations did not qualify for a federal lien because the appellants failed to satisfy the third requirement of section 971: they had not acted upon the order of a person authorized to purchase steel on the owner's behalf, either as an agent or as a contractor. 18 Our analysis must proceed under the Lien Act's presumption in favor of materialmen for all repairs, supplies, and other necessaries ordered. The Oceana, 244 Fed. 80, 82 (2d Cir.), cert. denied sub nom. Morse Dry Dock & Repair Co. v. Conron Bros. Co., 245 U.S. 656, 38 S.Ct. 13, 62 L.Ed. 533 (1917); see Dampskibsselskabet Dannebrog v. Signal Oil & Gas Co., 310 U.S. 268, 273, 60 S.Ct. 937, 940, 84 L.Ed. 1197 (1940). This presumption was enhanced in 1971 when Congress deleted the requirement that materialmen inquire about the existence of any no-lien clauses before furnishing supplies to a contractor. See Atlantic & Gulf Stevedores v. M/V Grand Loyalty, 608 F.2d 197, 201-02 (5th Cir.1979) (legislative history of 1971 amendments requires a liberal application of Lien Act); Ray, Maritime Contract Liens, 47 Tul.L.Rev. 587, 591 (1973). Applying the clearly erroneous standard of review to the trial court's finding that Nichols was not a person authorized by the owner of the Barge to order steel from Farwest, see United States v. McConney, 728 F.2d 1195 (9th Cir.) (en banc), cert. denied, --- U.S. ----, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984) (mixed questions of law and fact in which the factual inquiry predominates are subject to clearly erroneous review), we reverse and remand. 19 Of the three elements of section 971, the first two are not in real dispute here. The term necessaries under section 971 refers to supplies which are necessary to keep the ship going, Signal Oil & Gas, 310 U.S. at 280, 60 S.Ct. at 943 (1940). The steel that Farwest supplied was essential for the Barge's repairs and eventual return to service. See Farrell Ocean Services, Inc. v. United States, 681 F.2d 91, 92-93 (1st Cir.1982); Equilease Corp. v. M/V Sampson, 568 F.Supp. 1259, 1263 (E.D.La.1983), aff'd, 742 F.2d 852 (5th Cir.1984) (terms of section 971 should be given a broad meaning, and include supplies or services reasonably needed in a ship's business). The record satisfies us that the trial court correctly found that the steel was supplied to the Barge. It was brought to Nichols' yard and delivered to designated areas for incorporation into the Barge. See The Yankee, 233 Fed. 919, 925 (3d Cir.1916), cert. denied sub nom., Rivers & Harbors Improvement Co. v. Latta, 243 U.S. 649, 37 S.Ct. 476, 61 L.Ed. 946 (1917) (delivery of supplies to vessel's side meets statutory standard). 20 The dispositive issue is whether the third element of section 971 was satisfied: was Nichols a person authorized by the owner of the Barge to order steel from Farwest? Under 46 U.S.C. Sec. 972, persons authorized by the owner shall be presumed to include any person to whom the management of the vessel at the port of supply is intrusted. The district court concluded that (1) Nichols was not a person to whom the management of the vessel ... is entrusted, and (2) that Nichols was a general contractor who ordered steel on its own rather than on the barge owner's behalf. Because we reverse and remand on the basis of the court's second conclusion, we need not determine whether Nichols was entrusted with management of the vessel. 21 Courts have refused to grant a maritime lien to a subcontractor who has furnished supplies to the primary contractor responsible for servicing a ship. [B]ecause it can rarely be shown that the contractor was not acting as a contractor but as the agent of the owner, a subcontractor will normally not be entitled to a lien since he extends credit to the contractor and not the ship. AAB Electric Industries, Inc. v. Control Masters, Inc., 1980 AMC 1795, 1801 (E.D.La.1980) (quoting 2 Benedict on Admiralty, 3-39, n. 2 (7th Ed.1975)). If Nichols was an independent contractor free to make his own arrangements with suppliers, then his steel purchases cannot later be assessed against the barge--unless the seller of the steel relied on the barge as security. Id.; see also Inland Credit Corp., 552 F.2d at 1152 (lien available if the advance was made on the credit of the ship); The Juniata, 277 Fed. 438, 440 (D.Md.1922). Where the supplier relies on the contractor and not the barge as a source of payment, a maritime lien will be denied. 277 Fed. at 440; see In re Marine Transit Corp., 94 F.2d 7, 9 (2d Cir.1938); see also W.A. Marshall & Co. v. S.S. President Arthur, 279 U.S. 564, 570-71, 49 S.Ct. 420, 422, 73 L.Ed. 846 (1929). 22 Here, there are facts from which the district court could have concluded and did in fact conclude that despite concern about Nichols' ability to pay for the steel, Farwest was relying on Nichols for repayment, and that the barge's owner viewed Nichols as an independent contractor. After delivering the steel to Nichols' shipyard pursuant to Nichols' orders, Farwest invoiced Nichols alone for each order of steel. At the end of the month, Farwest sent to Nichols alone a statement of monthly activity. Nichols paid on the basis of statement balances. Pursuant to the contract between Nichols and the original barge owner, Nichols was to keep the owner informed of all expenses, invoices, and deliveries of steel. In fact, this was not done. Neither the originals nor copies of the invoices and statements of monthly activity were sent by either Nichols or Farwest to the barge owner. Nonetheless, West Coast paid Nichols for all supplies furnished to the barge and for all work performed by Nichols. 23 On the other hand, prior to dealing with Nichols, Farwest consulted a lawyer in an attempt to insure itself against the risks of dealing with Nichols. As the district court noted, Farwest then took numerous steps to segregate and identify the steel it sold to Nichols so as to be able to prove any lien that might arise. Similarly, the barge owner also attempted to hedge against any losses by a provision in its repair contract providing that Nichols would pay all suppliers and keep the vessel free from liens. These facts suggest that Farwest relied on the Barge and that West Coast viewed Nichols as an agent whose expenses could ultimately be attributable to West Coast. 24 Whether Farwest placed any reliance on the Barge is a question of fact. We must remand to resolve that factual issue. If the district court finds that Farwest relied exclusively on Nichols, under the Juniata rule it must deny Farwest a federal lien. See AAB Electric Industries, Inc., 1980 AMC at 1802 ([h]aving relied solely upon the credit of Control Masters in performing the work on the generator, AAB Electrical did not obtain a maritime lien); The Juniata, 277 Fed. 438, 440 (D.Md.1922) (the subcontractor extended credit to the contractor, and never thought of seeking to hold any one else liable ... the subcontractor gave credit to the contractor, and looked to it, and not to the ship); The Juniata, 277 Fed. 441, 442 (D.Md 1922) (I find, as a matter of fact, that the subcontractor contracted solely with the contractor and extended credit solely to it). 1 25 However, if the district court finds that Farwest placed some reliance on the Barge, under the statutory presumption in favor of materialmen under the Lien Act, see Atlantic & Gulf Stevedores, 608 F.2d at 201-02 (5th Cir.1979); Inland Credit Corp., 552 F.2d at 1152 (citations omitted); The Oceana, 244 Fed. 80, 82 (2d Cir.), cert. denied sub nom. Morse Dry Dock & Repair Co. v. Conron Bros. Co., 245 U.S. 656, 38 S.Ct. 13, 62 L.Ed. 533 (1917), Farwest is entitled to a federal lien. See Sands Const. Co. v. United Virginia Bank, --- F.Supp. ----, ---- - ---- 1985 A.M.C. 1165, 1169-70 (E.D.Va.1984) (citing The Defiance, 3 F.2d 48, 51 (E.D.N.C.1924); Diaz v. The S.S. Seathunder, 191 F.Supp. 807, 816 (D.Md.1961)); see also Farrell Ocean Services, 681 F.2d 91 (granting lien to subcontractor who supplied transportation services to repair contractor); Shaw v. 46-foot ChrisCraft Camelot, 391 F.Supp. 1026 (W.D.Wa.1975); The Ark, 17 F.2d 446 (S.D.Fla.1926); The Schuylkill, 249 Fed. 781, 782 (E.D.N.Y.1918). In that case, having retained in rem jurisdiction over the Barge despite the vessel's removal, the district court is authorized to arrest the Barge and foreclose the lien of Farwest and intervenor corporations. 26 REVERSED AND REMANDED.