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Docket Number

No. 86-1240.

Attorney(S)

Peter Skoufalos with whom Michael G. Chalos, and Chalos, English Brown, P.C., New York City, were on brief, for appellants. J. Ramon Rivera-Morales with whom Jimenez, Graffam Lausell, San Juan, P.R., was on brief, for appellees.

Judges

Frank Morey Coffin

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Smart Summary

Summary of Opinion: Tramp Oil and Marine, Ltd. v. M/V "Mermaid I"

Factual and Procedural Background

Tramp Oil and Marine, Ltd. (Tramp), a bunker-fuel broker based in England, arranged for bunker fuel to be supplied to the appellee vessel M/V Mermaid I (Mermaid) while the vessel was in Savannah, Georgia. The supply chain was: the Mermaid (through its master) requested fuel from the charterer, Logos Shipping APS (Logos) of Copenhagen; Logos asked J L Bunkers A/S (J L) of Copenhagen to arrange the supply; J L contacted Tramp (the broker); Tramp contracted with Exxon International, which caused Colonial Oil Industries, Inc. (Colonial) to supply the fuel to the Mermaid in Savannah.

Tramp paid Exxon in full, and Exxon paid Colonial. Tramp sent an invoice for $91,360.14 addressed to J L and its parent company Jensen and to the owner and master of the Mermaid. J L billed Logos and Logos paid J L in full. J L, however, paid only $45,000 to Tramp, leaving Tramp with an unpaid balance in excess of $46,000. After unsuccessful collection efforts, Tramp filed an action in rem against the Mermaid, claiming a maritime lien under 46 U.S.C. § 971.

The district court granted the Mermaid's motion for summary judgment, concluding that Tramp was not entitled to a maritime lien (reported at 630 F. Supp. 630). Tramp appealed. The First Circuit had previously considered the case and held the district court erred in dismissing on forum non conveniens grounds (743 F.2d 48), and the current opinion draws factual recitation largely from that earlier opinion.

Legal Issues Presented

Whether Tramp is entitled to a maritime lien against the vessel under 46 U.S.C. § 971 for bunker fuel supplied to the Mermaid when Tramp advanced payment to a supplier (Exxon) rather than supplying directly to the vessel.
Whether, under the rule of advances, Tramp satisfied the requirements for subrogation to or acquisition of the suppliers' maritime lien—specifically whether the payment was made "on the order of" the master or another person authorized by the owner or manager.
Whether equitable principles could transfer or assign the suppliers' maritime lien to Tramp under the circumstances of this case.

Arguments of the Parties

Appellant's Arguments

Tramp contended it acquired the suppliers' maritime lien by making an "advance" (paying Exxon) on behalf of the Mermaid, invoking the admiralty rule of advances which can subrogate an advancer to a lien replaced by the advance.
Tramp argued that the instructions to furnish bunker fuel emanated from the master and the charterer (Logos), implying that the authority to order the fuel (and thus to authorize an advance) existed.

Appellee's Arguments

The appellee (the Mermaid) argued that Tramp did not make its payment "on the order of" the master or another person with authority to bind the vessel as required by the rule of advances; specifically, there was no evidence that the vessel's owner, charterer, or master authorized payment by Tramp on the vessel's behalf.
Appellee further argued that allowing intermediate brokers unknown to the vessel to impose maritime liens would be commercially burdensome to vessels and should be avoided; the opinion describes this point as "persuasively" made by the appellee.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
International Paint Co. v. M/V Mission Viking, 637 F.2d 382 (5th Cir. 1981)	Supports that payments made to third parties on behalf of a vessel may constitute advances that subrogate the payer to a maritime lien.	Used to show that an advance need not be paid directly to the ship to qualify, but the Court concluded that even under that doctrine Tramp failed on other necessary elements (notably, authorized order to make the payment).
Sasportes v. M/V Sol de Copacabana, 581 F.2d 1204 (5th Cir. 1978)	Also recognizes that an advancer may make payments "to the vessel and on its behalf" and thus be subrogated to liens.	Cited alongside International Paint to show that payments to third parties can qualify as advances; the Court found no basis to imply the required order here given Tramp's lack of relationship with the vessel.
Atlantic Gulf Stevedores, Inc. v. M/V Grand Loyalty, 608 F.2d 197 (5th Cir. 1979)	Supports the principle that maritime liens are to be strictly construed.	The Court invoked the strict-construction principle to justify declining to extend maritime-lien protection to a foreign intermediary broker in these circumstances.
Gulf Trading Transportation Co. v. The Vessel Hoegh Shield, 658 F.2d 363 (5th Cir. 1981), cert. denied, 457 U.S. 1119	Identifies congressional intent that American suppliers of goods and services supplied in the United States obtain maritime liens against foreign vessels.	Relied upon to underline the statutory purpose of protecting American suppliers and to distinguish Tramp (a foreign broker) from those intended beneficiaries.
Vandewater v. Mills (The Yankee Blade), 60 U.S. (19 How.) 82 (1857)	Historical statement that maritime lien is a special privilege operating to prejudice general creditors and purchasers without notice.	Quoted to emphasize the special, prejudicial character of maritime liens and to caution against broadening their availability.
In re: prior First Circuit opinion, 743 F.2d 48 (1st Cir. 1984)	Procedural history: the First Circuit previously held the district court erred in dismissing on forum non conveniens grounds and provided factual recitation relied upon here.	The opinion notes that its factual recitation is largely drawn from that earlier First Circuit decision.
District court decision granting summary judgment, 630 F. Supp. 630	Lower-court holding that Tramp was not entitled to a maritime lien.	The First Circuit affirmed that district-court judgment; the district court's conclusion that the advance rule's requirements were not met was sustained.

Court's Reasoning and Analysis

The Court began with the statutory text of the Federal Maritime Lien Act, 46 U.S.C. § 971, which grants a maritime lien to any person furnishing necessaries (such as fuel) "upon the order of the owner of such vessel, or of a person authorized by the owner." The Court accepted that Exxon and Colonial, as direct suppliers who furnished fuel to the Mermaid in the United States, would be entitled to maritime liens under the statute.

Tramp's asserted route to a lien was the admiralty "rule of advances," under which a person who advances money on the order of the master or one entrusted with the ship's management, and whose payment is applied to satisfy outstanding or future lien claims, may be entitled to a lien of equal dignity with the one replaced. The Court identified three elements of that rule: (1) the money be advanced to a ship (or to a third party on its behalf), (2) the advance be made on the order of the master or someone with comparable authority, and (3) the funds be applied to satisfy an outstanding or future lien.

Applying the rule to the present facts, the Court found element (3) satisfied (Tramp's payment was used to satisfy an outstanding lien claim). The Court acknowledged precedent that an advance need not be paid directly to the ship but may be paid to a third party on the vessel's behalf. However, the Court held that Tramp failed to satisfy element (2): there was no evidence that Tramp's payment was made on the order of the master, owner, or a person with authority to order payment on behalf of the vessel.

The Court distinguished the separate question of authority to order the supply of fuel (which was uncontested) from authority to order payment on behalf of the vessel. The record plainly lacked evidence that the vessel's owner or charterer had authorized Tramp to pay on the vessel's behalf; indeed, neither the owner nor the charterer knew of Tramp until after Tramp had made the payment to Exxon. The Court explained that courts have sometimes implied an order when the relationship between the advancer and the vessel showed the vessel wanted or should have wanted the payment; but no such relationship existed here, and the Court declined to stretch that fiction to reach Tramp.

The Court also rejected the theory that Tramp could claim an implied order based on its relationship with J L (the intermediary that arranged purchase of fuel), because there was no evidence that J L's relationship with Logos (the charterer) amounted to management authority rather than a purely contractual purchaser role.

Finally, the Court considered equitable transfer of the suppliers' liens to Tramp and refused to apply equity to achieve that result. The Court stressed the statutory purpose of the Maritime Lien Act—to protect American suppliers who furnish goods or services to foreign vessels in the United States—and noted that Tramp, a foreign broker, was not the intended beneficiary. Given the strict construction afforded maritime liens and the commercial problems that could arise if unknown intermediate brokers could assert liens, the Court concluded it would be inappropriate to extend maritime-lien protection to Tramp. The Court noted that brokers like Tramp have alternative, straightforward protections (e.g., securing an assignment of the supplier's lien and notifying the vessel).

Holding and Implications

Holding: The judgment of the district court is affirmed; Tramp is not entitled to a maritime lien against the M/V Mermaid I.

Implications:

Direct effect on the parties: Tramp may not enforce a maritime lien against the Mermaid for the unpaid balance; the district-court summary-judgment dismissal in favor of the vessel is affirmed.
Scope of maritime liens: The Court declined to extend the rule of advances or equitable doctrines to permit a foreign intermediate broker, unknown to the vessel, to acquire a maritime lien in these circumstances.
Practical guidance: The opinion emphasizes that brokers wishing to protect themselves should obtain assignments of suppliers' liens and notify vessels rather than rely on implied advances or equitable extension of lien rights.
Precedential posture: The Court applied established principles (strict construction of maritime liens; statutory purpose protecting American suppliers) rather than announcing a novel rule expanding lien availability to intermediate brokers unknown to the vessel.

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TRAMP OIL AND MARINE, LTD., PLAINTIFFS, APPELLANTS, v. M/V "MERMAID I", HER ENGINES, ETC., ET AL., DEFENDANTS, APPELLEES.

COFFIN, Circuit Judge.

Appellant Tramp Oil and Marine, Ltd. (Tramp), a broker of bunker fuel, was literally stuck in the middle of the transaction when the appellee-vessel M/V Mermaid I (Mermaid) was supplied with fuel while in the port of Savannah, Georgia. Although everyone else involved in the five-party deal received payment, Tramp was left with an unpaid balance in excess of $46,000. The question before us is whether Tramp is entitled to a maritime lien against the vessel to secure payment of that debt. We conclude that it is not, and therefore affirm the judgment of the district court.

The bunker fuel for which Tramp seeks payment originally was requested by the Mermaid, through its master, from Logos Shipping APS (Logos), of Copenhagen, Denmark. Logos, the vessel's charterer, responded by asking J L Bunkers A/S (J L), also of Copenhagen, to make the arrangements for supplying the fuel. J L, in turn, contacted Tramp, of England, a bunker fuel broker. Tramp entered into an agreement with Exxon International (Exxon), who caused Colonial Oil Industries, Inc. (Colonial) to supply the oil to the Mermaid in Savannah.

In our previous consideration of this case, we concluded that the district court erred in dismissing Tramp's action on the ground of forum non conveniens. 743 F.2d 48 (1st Cir. 1984). Our recitation of the facts is drawn largely from that opinion.

Tramp paid Exxon in full, and Exxon paid Colonial. Tramp then sent an invoice for $91,360.14 for the fuel addressed to J L and its parent company, Jensen and Larsen A/S (Jensen), as well as to the owner and master of the Mermaid. J L billed Logos, who paid J L in full. J L, however, paid only $45,000 to Tramp who, after unsuccessful efforts to collect the balance, filed this action in rem against the Mermaid, claiming a maritime lien against the ship under 46 U.S.C. § 971. The district court concluded that Tramp was not entitled to such a lien, and granted the Mermaid's motion for summary judgment, 630 F. Supp. 630. Tramp then filed this appeal.

II.

The Federal Maritime Lien Act, 46 U.S.C. § 971, provides, in pertinent part:

Any person furnishing repairs, supplies . . . or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem. . . .

No one disputes that Exxon and Colonial, as direct suppliers of the fuel to the Mermaid, would be entitled to a maritime lien. Fuel is unquestionably a "necessary" within the meaning of the Act, and it was furnished upon the order of someone with authority to do so. The question before us is whether Tramp acquired the suppliers' rights to the lien when it paid Exxon in full for the fuel.

Tramp's theory is that it acquired the lien by making an "advance" on behalf of the Mermaid. The rule of advances, developed through admiralty case law, is that:

Any person advancing money to a ship on the order of the master or one intrusted with her management and for the purpose of satisfying outstanding or future lien claims against the vessel is entitled to a lien of equal dignity with the one replaced, provided the amounts so advanced are actually applied to the payment of such debts.

2 Benedict on Admiralty § 33, at 3-12-3-13 (7th ed. 1986) (footnotes omitted). See also G. Gilmore C. Black, The Law of Admiralty (2d ed. 1975); W. Tetley, "Assignment and Transfer of Maritime Liens: Is There Subrogation of the Privilege," 15 J. Mar. L. Com. 393, 411-12 (1984).

Thus, the rule of advances has three significant requirements: (1) that the money be advanced to a ship, (2) that it be advanced on the order of the master or someone with similar authority, and (3) that the money be used to satisfy an outstanding or future lien claim. In this case, there is no question that Tramp's payment was used to satisfy an outstanding lien claim. And while the advance here was not actually made to the ship — the funds instead going directly from Tramp to Exxon — payments made to a third party on behalf of the vessel also may constitute advances. See, e.g., International Paint Co. v. M/V Mission Viking, 637 F.2d 382, 385 (5th Cir. 1981) (catering firm, which paid its employees directly, subrogated to employees' maritime lien against the vessel); Sasportes v. M/V Sol de Copacabana, 581 F.2d 1204, 1207 (5th Cir. 1978) (appellant repeatedly advanced money "to the Copacabana and on its behalf").

This case thus turns only on the second requirement of an advance — whether the money was paid on the order of the master or someone else with proper authority. The district court held that it was not. On appeal, Tramp argues that the district court erred because "[t]he facts in this case clearly demonstrate that the instructions to furnish the Mermaid I with bunker fuel at Savannah, emanated from the master and the charterer, Logos." Tramp's argument is misdirected. The issue here is not whether there was authority for ordering the fuel — which no one contests — but whether there was authority for paying for it on behalf of the vessel. We agree with the district court that the record is devoid of evidence that the payment was authorized.

We recognize that the "order" for an advance apparently need not be explicit. See International Paint, 637 F.2d at 385 (5th Cir. 1981); (no indication that money advanced on behalf of vessel advanced at owner's express request); Sasportes, 581 F.2d at 1210 (same). But there is also no basis in this record for implying such an order. Presumably, the fiction of an implied order has been indulged because the relationship existing between the vessel and advancer warranted a conclusion that the vessel wanted, or should have wanted, the advancer to make the payment. In this case, however, no relationship existed between Tramp and the vessel, and neither the vessel owner nor the charterer even knew of Tramp until after Tramp had made the payment to Exxon. It is already a significant departure from the technical requirements of the advance rule to find an advance when a payment is made not to the ship but to a third party, and only on the implied order of the vessel's manager. To also find an implied order for an advance when no person with authority to issue such an order even knows of the purported advancer stretches the fiction too far. Tramp has pointed us to no case, and we have found none, in which an order for an advance has been implied even in the absence of a relationship between the vessel management and the advancer.

In addition, we reject the notion that an order for an advance could be implied from the relationship of Tramp with J L, on the theory that J L was the agent of the charterer, Logos, and thus had the requisite management authority to order an advance. There is no evidence that the relationship between Logos and J L was other than purely contractual for the sole purpose of purchasing fuel. Thus, we conclude that Tramp did not fulfill the requirements of the advance rule, and therefore did not acquire a maritime lien by operation of law.

We also find no error in the district court's conclusion that the suppliers' maritime lien was not transferred to Tramp under principles of equity. The primary concern of the Federal Maritime Lien Act is the protection of American suppliers of goods and services. See H.Rep. No. 92-340, 92nd Cong., 1st Sess., reprinted in 1971 U.S. Code Cong. Ad. News 1363-65; Gulf Trading Transportation Co. v. The Vessel Hoegh Shield, 658 F.2d 363, 367 (5th Cir. 1981), cert. denied, 457 U.S. 1119, 102 S.Ct. 2932, 73 L.Ed.2d 1332 (1982) ("The congressional intent is that an American supplier of goods, services or necessaries to a foreign vessel obtains a maritime lien in the vessel when the goods or services are supplied or performed in the United States.").

With this purpose in mind, and in light of the principle that maritime liens are to be strictly construed, Atlantic Gulf Stevedores, Inc. v. M/V Grand Loyalty, 608 F.2d 197, 200-01 (5th Cir. 1979), we decline to extend the law for Tramp's benefit in the circumstances of this case. Tramp is a foreign broker, not an American supplier, and thus not the intended beneficiary of the Maritime Lien Act. We are unpersuaded by Tramp's argument that recognizing a lien in favor of intermediate brokers like itself would promote prompter payment to American suppliers since such brokers would be more willing to "advance" payment to the suppliers. Brokers like Tramp already have the means to protect their interests, with no additional delay in payment to the suppliers, by securing an assignment of the suppliers' lien, and notifying the vessel of that simple transaction. See G. Gilmore C. Black, The Law of Admiralty 634 (2d ed. 1975) ("Modern cases without exception assume that liens can be assigned").

We therefore think it unnecessary to protect American suppliers, and unfair to the vessel, to extend the availability of a maritime lien directly to an intermediate broker unknown to the vessel, particularly when the vessel already has made a prompt and full payment for its supplies. Appellee persuasively points out that if any one of a series of intermediate brokers with no relationship to the vessel could impose a maritime lien, a vessel seeking to avoid a lien would be forced to delve far deeper into every transaction than is commercially reasonable. Moreover, it seems clearly preferable to insist upon the slight technical requirement of obtaining an assignment than to open a wide door to the proliferation of maritime liens. The maritime lien is a special privilege, "operat[ing] to the prejudice of general creditors and purchasers without notice," Vandewater v. Mills (The Yankee Blade), 60 U.S. (19 How.) 82, 89, 15 L.Ed. 554 (1857), and its open-ended extension could radically change the presuppositions of maritime commerce.

As Tramp observes, the Lien Act represents a balance between the equities of the "innocent" vessel and those of American materialmen. A lien in this case would weigh heavily on the vessel without affording comparable benefit to the materialmen. We therefore hold that Tramp is not entitled to a maritime lien against the Mermaid.

The judgment of the district court is affirmed.

TRAMP OIL AND MARINE, LTD. v. M/V MERMAID I