Opinion ID: 427655
Heading Depth: 1
Heading Rank: 3

Heading: maritime liens arising from breach of the charter party.

Text: 14 The term charter party, often shortened to charter, refers to the document setting forth the terms of a contract when one person (the charterer) takes over the use of the whole ship belonging to another (the owner). G. Gilmore & C. Black, The Law of Admiralty Sec. 4-1, at 193 (2d ed. 1975). There are three generally recognized types of charter parties: the first two, the voyage charter and the time charter, occur when the vessel is manned and navigated by the owner. In the voyage charter the ship is engaged to carry a full cargo on a single voyage, whereas in the time charter the charterer engages the ship to carry cargo over a fixed period of time. The third charter is known as a bareboat or demise charter. In this arrangement, the charterer operates the ship and is regarded as the owner of the ship pro hac vice. 6 Id. 15 Cases that address the charterer's right to a maritime lien due to the owner's breach of the bareboat charter are sparse. Professors Gilmore & Black, in listing claims which give rise to maritime liens, include: 16 Charter-parties.... [L]iens arise for breach of charter-party in either direction. The charterer has a lien on the vessel for owner's breach; the owner may have a lien on cargo ... for charterer's breach (which is usually nonpayment of the charter-hire). 17 G. Gilmore & C. Black, supra, Sec. 9-20, at 631 (footnote omitted). 7 18 The fact that the charter party between IMT and Southern Leasing is a bareboat charter does nothing to eliminate the essential maritime nature of the agreement, nor the legal consequences arising therefrom. Although the bareboat charterer might be characterized as the owner pro hac vice as to third parties, the charterer is still the charterer as to the vessel owner and is thus entitled to a maritime lien against the vessel for the owner's breach of the charter party. In The Oceano, 148 F. 131 (S.D.N.Y.1906), the court allowed the time charterer to proceed in rem against the vessel when the owner refused to refund excess advances made by the charterer. In Rainbow Line, Inc. v. M/V Tequila, 480 F.2d 1024 (1973), the ship owner prematurely withdrew the vessel from service and the charterer sought damages for breach of the time charter. The court held that the charterer had a maritime lien against the vessel for the breach of the charter, noting: 19 The American law is clear that there is a maritime lien for the breach of a charter party, and because the damages sought to be recovered by [the charterer] are all of a maritime nature and flow directly from the breach of the charter, it has a maritime lien. 20 The Supreme Court, in dicta, in The Schooner Freeman v. Buckingham, 59 U.S. [ (18 How.) ] 182, 190, 15 L.Ed. 341 (1955), stated that charter parties, must, in the invariable regular course of ... business, be made, for the performance of which the law confers a lien on the vessel. 480 F.2d at 1027 (footnotes omitted). 8 21 Although Rainbow involved the breach of a time charter, we find the court's language applicable to bareboat charters as well: Because the damages sought to be recovered by [the charterer] ... flow directly from the breach of the charter, it has a maritime lien. Id. 22 Persuasive authority exists for the proposition that a bareboat charterer can maintain a lien for the owner's breach, although these cases do not directly address this issue. In Petersen Towing Corp. v. Capt. Abrams, Inc., 388 F.Supp. 1166 (1975), the plaintiffs claimed to be maritime lienors when the owner breached a bareboat charter by prematurely removing the tug from service. The owner maintained that the charter party had never been executed, and that a maritime lien could not attach to this contract. The court, citing Rainbow Lines, Inc. v. M/V Tequila, supra, held that the vessel had been delivered to the charterer, and that the charter party was not executory. Thus, the court held that the plaintiffs were entitled to a maritime lien for breach of the charter. 23 Similarly, in Florida Yacht Brokers, Inc. v. Yacht Huckster, 249 F.Supp. 371 (S.D.Fla.1965), plaintiffs entered into a bareboat charter with the owner of a yacht. After execution of the charter, it was breached by the owner. The court held that the plaintiffs had a lien on the vessel for damages arising from the cancelled contract, as well as for the cost of work and materials furnished the vessel. 24 In the case before us, the district court concluded that four cases from this circuit prevent IMT from acquiring a lien for Southern Leasing's breach of the charter party: Frontera Fruit Co. v. Dowling, 91 F.2d 293 (5th Cir.1937); Challenger, Inc. v. Durno, 227 F.2d 918 (5th Cir.1955); Sasportes v. M/V Sol De Copacabana, 581 F.2d 1204 (5th Cir.1978); and Roberts v. Echternach, 302 F.2d 370 (5th Cir.1970). We find that none of these cases involves the breach of a bareboat charter by the owner and thus the cases are not controlling. 25 In Frontera Fruit Co. v. Dowling, supra, the charterer was in a joint venture with the owner of the boat, and the charterer sought to place a lien on the vessel for wages advanced to the ship's crew. We held a joint venturer cannot acquire a lien for advances since he is primarily liable for the vessel's indebtedness. Since IMT was not a joint venturer with Southern Leasing, this case is inapplicable. 26 Challenger v. Durno, supra, held that a mortgagee in possession of a vessel could not create a maritime lien in its favor by paying materialmen and ship repairers for work and services ordered by him and taking assignment of their rights. Durno involved the authority of a mortgagee to subject the vessel to liens by third parties and thus does not bear on the issue at hand. FMNB does, however, direct our attention to footnote 2 of the Durno opinion, which states that the mortgagee's status as one in control of the vessel is comparable to a charterer pro hac vice who can acquire no maritime lien in his own behalf. 227 F.2d 921 n. 2 (citations omitted). However, this dictum referred to the charterer's right to acquire liens in its own behalf for advances to third parties, and none of the cases cited as authority for this dictum hold that a bareboat charter cannot hold a lien for breach of the charter party. 9 27 Sasportes v. M/V Sol De Copacabana, supra, restates the rule that an owner, part owner, or joint venturer cannot hold a maritime lien. 581 F.2d at 1207. No joint venture was found in Sasportes and the plaintiff was allowed a maritime lien. 28 Finally, in Roberts v. Echternach, 302 F.2d 370 (5th Cir.1962), we held that third parties can acquire a lien for work done on a vessel at the owner's express request, despite the fact that the charter party contains a prohibition of liens clause. However, Roberts does not focus on maritime liens for claims brought on behalf of a bareboat charterer as a result of the owner's breach. 10 29 In sum, we find none of the cases relied upon by the district court to be applicable to the case at hand, nor do they controvert the previously discussed authority giving rise to liens for breaches of bareboat charters. Therefore, we hold that IMT is not prevented from having a maritime lien on the M/V KING'S CHALLENGER as a matter of law. 30 The district court also found that the prohibition of liens clause contained in the charter party bars IMT's lien for Southern Leasing's breach of the charter. Section 7.3 of the charter party between IMT and Southern Leasing provides: 31 Neither the Charterer nor the Master of the Vessel shall have the right, power or authority to sell, assign, or transfer, or to create, incur or permit to be imposed upon the vessel any liens whatsoever except the crews' wages and salvage and inchoate operating expenses not discharged within sixty days from incurrance.... The Charterer agrees to notify any person furnishing repairs, supplies, towage or other necessities to the Vessel that neither the Charterer nor the Master has any right to create, incur or permit to be imposed upon the Vessel any liens whatsoever except crews' wages and salvage as set forth hereinabove. 32 This clause does not undertake to deal with the power of the owner to subject his vessel to maritime liens through his breach of the charter. That clause, and the two sections of the Maritime Lien Act upon which it operates, has to do with the power of others--master, agent, charterer, etc.--to subject the vessel to liens for work done by third parties at the request of those presuming to speak for the ship. Roberts v. Echternach, 302 F.2d 370, 372-73 (5th Cir.1962) (footnote omitted). In fact, as Judge Brown noted with regard to the clause, the circumstances in which the owner could restrict his own power [to subject the vessel to liens] are severely limited and one could safely say, never to permit the owner, as such, to obtain any advantage. Id. at 372. 33 We conclude that the clause does not speak to the issue of liens created by the owner's breach and does nothing to waive charterer's lien rights for damages caused by such a breach, especially considering our strong presumption against such a waiver. See Inland Credit Corp. v. M/T Bow Egret, 552 F.2d 1148, 1152 n. 4 (5th Cir.1977). By its very terms, the clause deals only with the right of the charterer to create liens in favor of third parties, and does not bar the creation of liens in favor of IMT as a result of a breach of the charter party by Southern Leasing. 34