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Docket Number

No. 2189.

Attorney(S)

George W.P. Whip, of Baltimore, Md. (Pillsbury, Madison Sutro, of San Francisco, Cal., and Rawle Henderson, of Philadelphia, Pa., Lord Whip, of Baltimore, Md., Felix T. Smith, of San Francisco, Cal., and Joseph W. Henderson, of Philadelphia, Pa., on the brief), for appellant. F.R. Conway, of Washington, D.C. (A.W. Woodcock, U.S. Atty., of Baltimore, Md., on the brief), for appellees.

Judges

Charles Albert Woods

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Smart Summary

Case Summary: Standard Oil Co. v. United States, No. 2189 (4th Cir. Sept. 29, 1924)

Factual and Procedural Background

The Standard Oil Company filed four separate libels in personam against the United States, the United States Shipping Board Emergency Fleet Corporation, and L. Vernon Miller (trustee in bankruptcy of the Atlantic, Gulf Pacific Steamship Corporation) seeking recovery of $31,502.87 for fuel oil and $338.33 for lubricating oil furnished to the steamships Liberator, West Haven, Henry S. Grove, and Charles H. Cramp in June, July, and August 1922. The District Court dismissed the libels, without prejudice to Standard Oil's right to file a claim as a general creditor against the bankrupt estate of the Atlantic, Gulf Pacific Steamship Corporation. Standard Oil appealed. The Fourth Circuit affirmed the dismissal.

Legal Issues Presented

Whether the United States (through the Shipping Board) was liable for supplies (fuel and lubricating oil) furnished to vessels delivered to a conditional purchaser when the conditional-sale contracts prohibited the purchaser from permitting liens on the vessels.
Whether any conduct or communications by the Shipping Board or its agents gave Standard Oil reasonable grounds to treat the United States or the vessels as liable for the supplies despite the contractual restrictions and Board procedures.

Arguments of the Parties

Appellant's (Standard Oil Company's) Arguments

Standard Oil contended that the United States was liable because the oil was furnished "on the authority of the Shipping Board." (The opinion characterizes this as counsel's contention.)
Standard Oil relied on representations by its own officers and by representatives of the conditional purchaser that the ships and the United States (as owner) would be liable for supplies, and an agent's (Chisholm's) earlier statement (January 1921) concerning deliveries of lubricating oil under a prior contract with the Shipping Board.

Appellees' (United States / Shipping Board) Arguments and Position as Presented in the Opinion

The conditional-sale contracts explicitly forbade the purchaser to permit liens or charges having priority over the title of the seller (the United States) and required steps to notify the world that the purchaser had no authority to permit liens on the vessels.
The Shipping Board issued a Fuel Department circular (Oct. 1, 1921) stating that vessels sold under partial payment plans listed with the Board were to be supplied only on the basis of cash payment in advance; the four ships in question appeared on that list.
The Board and its agents established and followed procedures (including requirements for certified checks and delivery/receipted tickets to the Board) that demonstrated the Board's intention not to have the vessels or the United States bound for supplies unless those procedures were followed; Standard Oil did not follow those procedures (no certified checks to the Board and no delivery tickets sent to the Board).
Any inquiry of the conditional purchaser or the Shipping Board would have disclosed that the conditional purchaser could not bind the vessels or the United States for the purchase price of the oil furnished.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
United States v. Carver, 260 U.S. 482, 43 S. Ct. 181, 67 L. Ed. 361	Cited in connection with the dismissal of the libels.	Listed by the court as authority supporting the District Court's dismissal.
Colonial Beach Co., Owner Claimant of the Steamer St. Johns, v. Quemahoning Coal Co., 260 U.S. 707, 43 S. Ct. 246, 67 L. Ed. 474	Cited in connection with the dismissal of the libels.	Listed by the court as authority supporting the District Court's dismissal.
Morse Dry Dock Repair Co. v. United States (C.C.A. 2d Circuit) 1 F.2d 233	Cited in connection with the dismissal of the libels.	Listed by the court as authority supporting the District Court's dismissal.
P.H. Gill Sons Forge Machine Works v. United States (C.C.A. 4th Circuit) 1 F.2d 964	That the contract provisions forbade the conditional purchaser to place liens on the vessels.	The court referenced its contemporaneous holding (opinion filed that day) to confirm that the conditional-sale provisions prevented purchasers from creating liens.
Frey Son, Inc., v. United States (C.C.A. 4th Circuit) 1 F.2d 963	Cited in connection with the dismissal of the libels.	Listed by the court as authority supporting the District Court's dismissal (opinion filed that day).

Court's Reasoning and Analysis

The court's analysis proceeded as follows:

The conditional-sale contracts under which the Shipping Board delivered the vessels to the Atlantic, Gulf Pacific Steamship Corporation contained express provisions forbidding the conditional purchaser from permitting liens on the vessels and requiring steps to notify that the purchaser had no authority to permit liens. The court treated those contract provisions as controlling and reiterated (by reference to P.H. Gill Sons) that such provisions forbade the conditional purchaser to place liens on the vessels.
The evidence established that Standard Oil's officials knew the vessels were United States property held by the conditional purchaser under sale agreements. Although a Standard Oil official requested to inspect the contract and was promised access, no contract was inspected and no further inquiry was made of the Shipping Board or the purchaser regarding the purchaser's authority to place liens.
The Shipping Board's Fuel Department issued a circular (Oct. 1, 1921) stating that vessels sold under partial payment plans listed by the Board were to be supplied only on cash payment in advance; the four vessels at issue appeared on that list. While there was no proof the circular reached Standard Oil, its issuance to agents manifested the Board's intention to give notice that oil was not to be sold on its credit to those ships.
The Board's contracts with a supplier (Midwest Refining Company) required the supplier to furnish receipted delivery tickets to the Board's Purchasing or Fuel Department; Standard Oil did not send delivery tickets or reports for the deliveries that form the basis of the libels.
Testimony from a Shipping Board official described established procedures: the purchaser or its representative requisitioned fuel; the Board's representative approved the requisition and required the purchaser to put up a certified check before ordering from the supplier. This testimony was uncontradicted and there was no denial that Standard Oil knew of these methods.
An earlier statement by a Shipping Board agent (Chisholm) about lubricating-oil deliveries related to a contract that expired October 23, 1921, and thus could not reasonably be understood to authorize deliveries in June 1922. Moreover, the Standard Oil Company did not send required statements to the Shipping Board for the lubricating oil delivered in June 1922.
Given the contract prohibitions, the Board's circular and procedures, and the absence of any action by the Board indicating waiver of the contractual restrictions, the court concluded that Standard Oil's reliance on its officers' and the conditional purchaser's belief that the United States or the vessels would be liable was insufficient. The court noted that any inquiry would have disclosed the purchaser's lack of authority to bind the vessels or the United States.
On this basis, the court found the District Judge correct in dismissing the libels.

Holding and Implications

Holding: Affirmed. The Fourth Circuit affirmed the District Court's dismissal of Standard Oil's libels.

Implications:

Direct effect on the parties: Standard Oil's libels seeking recovery from the United States and the Shipping Board for oil furnished to the listed vessels were dismissed; the dismissal was without prejudice to Standard Oil's right to file a claim as a general creditor against the bankrupt estate of the Atlantic, Gulf Pacific Steamship Corporation (as noted by the District Court).
The opinion concludes that the contractual provisions, Board circular, and Board procedures precluded treating the United States or the vessels as liable under the circumstances; the court did not state any broader doctrinal change beyond applying those authorities and facts to affirm dismissal.

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STANDARD OIL CO. v. UNITED STATES et al.

WOODS, Circuit Judge.

The Standard Oil Company, in four separate libels in personam against the United States, the United States Shipping Board Emergency Fleet Corporation and L. Vernon Miller, trustee in bankruptcy of the Atlantic, Gulf Pacific Steamship Corporation seeks to recover $31,502.87 for fuel oil and $338.33 for lubricating oil furnished the steamships Liberator, West Haven, Henry S. Grove, and Charles H. Cramp in June, July, and August, 1922. The District Judge dismissed the libels, without prejudice to the rights of the libelant to file a claim as a general creditor against the bankrupt estate of the Atlantic, Gulf Pacific Steamship Corporation.

The Shipping Board delivered the vessels mentioned to the Atlantic, Gulf Pacific Steamship Corporation under identical conditional contracts of sale dated September 24, 1920, November 5, 1920, January 19, 1921, and February 28, 1921, which contained these provisions:

"The buyer shall not suffer to be continued any lien or charge having priority to or preference over the title of the seller in the vessel, or any part thereof, but will in due course and in any event, within fifteen (15) days after the same becomes due and payable, pay or cause to be discharged or make adequate provision for the satisfaction or discharge of all lawful claims or demands which might in equity, in admiralty, or at law, or pursuant to any statute have precedence over the title of the seller as a lien or charge upon the vessel, or any part thereof, or cause the vessel to be released or discharged from any lien therefor. * * *"

The contract required the purchaser "to carry a properly certified copy of this agreement with the ship's papers, and to take such other appropriate steps designated to it by the seller from time to time as will give notice to the world that the buyer has no right, power, nor authority to suffer or permit to be imposed on or against the vessel any liens or claims which might be deemed superior to or a charge against the interest of the seller in the vessel." We have held in the P.H. Gill Sons Forge Machine Works v. United States (C.C.A. 4th Circuit) 1 F.2d 964 (opinion filed this day), that these contract provisions forbade the conditional purchaser to place liens on the vessels.

The testimony of officials of the Standard Oil Company proves that before the oil was delivered they knew the vessels were the property of the United States held by the Atlantic, Gulf Pacific Steamship Corporation under conditional sale agreements. Cashin, a credit official of the Standard Oil Company, testified that Lange, a representative of the Atlantic, Gulf Pacific Steamship Corporation, promised in response to his request to allow him to inspect the contract, but failed to do so. No further effort on the part of the libelant was made to have access to it and no inquiry was made of the Shipping Board or of the conditional purchaser as to the right of the latter to place liens for supplies on the vessels. Cashin testified that credit reports from the Dun and Bradstreet commercial agencies gave a general statement of the terms and conditions of the sale agreements. These reports were not produced, and it is impossible to tell from the indefinite testimony of the witness what they contained and whether they were received before or after the oil was furnished. It is evident from the record that the officers of the Standard Oil Company considered the vessels and the United States, as their owner, liable for supplies furnished, and they did not inquire whether the conditional purchaser had a right to bind the vessels or the owner for supplies, because they thought they were under no obligation to inquire.

Counsel for libelant contend that the United States is liable because, as they assert, the oil was furnished on the authority of the Shipping Board. In addition to the provisions of the contract of sale denying authority of the conditional purchaser to place a lien on the vessels contracted for, the Fuel Department of the Shipping Board issued a circular, dated October 1, 1921, headed as its subject, "Policy Governing Delivery of Fuel under Contracts and from Bunker Stations." In this circular the notice was given that "vessels sold under partial payment plans, where agreements have been entered into between the Corporation and the purchaser, entitling the purchaser to receive fuel under contracts and from bunker stations of the Corporation, are to be supplied only on the basis of cash payment in advance of delivery." To this circular was attached a list of "vessels authorized to secure fuel oil under cash payment plan." The Liberator, West Haven, Charles H. Cramp, and Henry S. Grove appear on the list. There is no proof that this circular reached the Standard Oil Company, but the sending of the circular to its agents proved that the Shipping Board intended to give notice that oil was not to be sold on its credit to the ships listed.

Careful examination of all the evidence oral and documentary does not disclose anything done by the Shipping Board or its agents indicating to the libelant or any one else that it intended to waive the provisions of its sale contracts that the conditional purchaser should not put a lien on the vessels. On the contrary, in its two contracts with the Midwest Refining Company for supplying fuel oil to its vessels, it laid down the conditions under which such oil should be furnished. The requirement expressed in one of these contracts was that "the seller shall promptly furnish the Purchasing Department of the buyer at Washington, D.C., semimonthly the original and one copy of the delivery ticket receipted by the chief engineer (for bunkers) or master (for cargo)." The other contract provided that the seller should furnish similar receipted delivery tickets to the Fuel Department of the Board at San Francisco. The knowledge of this requirement was brought home to the Standard Oil Company in a copy of the contract of May 25, 1920, between the Shipping Board and the Midwest Refining Company, which was attached to the Standard Oil Company's own contract with the Midwest Refining Company of July 13, 1920. No delivery tickets nor reports for the delivery of the oil forming the basis of the libels was sent by the libelant to the Shipping Board, either in Washington or San Francisco.

The following testimony was given by George M. Talbot, assistant general manager of the Shipping Board:

"Q. Explain how fuel oil was furnished to purchasers of vessels, the title of which remained in the government, but which for the time being were operated for the account of the purchaser? A. The first procedure was for the purchaser of the vessel, or his representative, to requisition from the district representative of the Emergency Fleet Corporation a certain quantity of fuel oil for a certain vessel, delivery to be made at a certain time. It was then the duty of the representative of the Corporation in that port to approve the requisition, but before placing the order with the supplier to require the purchaser of the vessel to put up a certified check to cover the amount of the delivery. As soon as the Emergency Fleet's representative received that certified check he then placed the requisition approved by himself with the supplier."

This testimony is not contradicted; nor is there a denial of the Standard Oil Company's knowledge of the methods adopted by the Shipping Board in its oil transactions. Alfred J. Turner, a representative of the libelant, testified that in January, 1921, before furnishing lubricating oil to the steamship Charles H. Cramp, Mr. Chisholm, agent of the Shipping Board in San Francisco, advised him that "these ships were being purchased from the Shipping Board, under which condition they could purchase lubricating oils in accordance with Standard Oil Company's contract with the United States Shipping Board." This communication with Chisholm related entirely to lubricating oil for which the Shipping Board had contracted with the Standard Oil Company. The contract with the Standard Oil Company expired October 23, 1921, and the statement of Chisholm in January, 1921, as to deliveries of oil at that time could not have been understood to extend to oil delivered in June, 1922, after the expiration of the contract. Besides, no statement of the lubricating oil furnished in June, 1922, was sent to the Shipping Board as required by the Standard Oil Company's contract.

The evidence shows clearly that the conditional purchasers were forbidden by their contracts to put liens for supplies on the ships, and that the libelant relied on the opinion of its own officers and that of the officers of the conditional purchaser that the ships and the Shipping Board as the owner of them would be liable for oil furnished the conditional purchaser, and that they were therefore under no obligation to inquire into the terms of the conditional sale contracts or the right of the conditional purchaser to bind the ships; that the Shipping Board did nothing to lead the libelant to believe that the Board or the ships would be liable; that any inquiry made of the Atlantic, Gulf Pacific Steamship Corporation or of the Shipping Board as to the terms of the conditional contract of sale would have disclosed that the conditional purchaser could not bind the ships or the Shipping Board for the purchase price of the oil furnished. The District Judge, therefore, was right in dismissing the libels. United States v. Carver, 260 U.S. 482, 43 S. Ct. 181, 67 L. Ed. 361; Colonial Beach Co., Owner Claimant of the Steamer St. Johns, v. Quemahoning Coal Co., 260 U.S. 707, 43 S. Ct. 246, 67 L. Ed. 474; Morse Dry Dock Repair Co. v. United States (C.C.A.2d Circuit) 1 F.2d 233; P.H. Gill Sons Forge Machine Works v. United States (C.C.A. 4th Circuit) 1 F.2d 964 (opinion filed this day); Frey Son, Inc., v. United States (C.C.A. 4th Circuit) 1 F.2d 963 (opinion filed this day).

Affirmed.

STANDARD OIL CO. v. UNITED STATES