Opinion
No. 184, Docket 20890.
March 23, 1948.
Appeal from the District Court of the United States for the Eastern District of New York.
Libel by Mercantile Ship Repair Company, Inc., against the vessel steamship Guatemala, formerly known as the steamship West York, her engines, etc., claimed by the Central Shipping Trading Corporation, for amount due for repairs and alterations, wherein Michael Larsen intervened. The New York Dock Company filed a motion for an order directing the clerk of court to pay to it out of funds in clerk's possession amount due for wharfage furnished the ship. From an order granting the motion, the claimant and the intervener appeal.
Order modified.
Mercantile Ship Repair Co., Inc., made a contract with Central Shipping and Trading Corporation, owner of the S.S. Guatemala, to repair and alter that ship. While the ship was in the possession of Mercantile, on March 13, 1946, it filed a libel in rem, claiming $170,404.40 said to be due for repairs and alterations. Pursuant to this libel, the United States Marshal, on the same day, attached the ship, which was then in the shipyard of Ira S. Bushey Repair Company. Six days later, on March 19, 1946, Mercantile, without notice to the Marshal, caused the ship to be removed to Pier 41 of the New York Dock Company. Shortly thereafter the Marshal learned of this removal. He then demanded and received a letter from Mercantile indemnifying him against any damage he might sustain because of this removal. The Marshal, at the same time, notified the owner, Central Shipping and Trading Corporation, of this removal. On July 5, 1946, the owner, Central, notified the Marshal that Mercantile had placed a crew aboard the ship and asked that they be removed. Larsen, claiming to be the holder of a mortgage on the ship, intervened in the proceeding.
New York Dock Company, knowing nothing at the time of the pending proceedings, contracted with Mercantile to berth the ship at Pier 41, beginning March 19, 1946, at the rate of $25.00 a day. The Dock Company looked solely to the credit of Mercantile for payment of these day-to-day charges. Accordingly, the Dock Company billed Mercantile for these charges until September 6, 1946, when the Dock Company learned that Mercantile had filed a petition under Chapter XI of the Bankruptcy Act and also first learned of the pending libel proceedings.
On and after September 6, 1946, the Dock Company billed the Marshal, but the Marshal returned these bills to the Dock Company. The Dock Company then forwarded the bills to the owner, which, in a letter to the Dock Company, said it recognized no liability for the wharfage charges. Neither the Marshal nor any of the parties petitioned the court, or took any other steps, to have the ship removed from the Dock Company's pier.
Before Mercantile's bankruptcy, the Dock Company received nothing in payment of its wharfage service. On or about September 12, 1946, the Dock Company filed a proof of claim in the Mercantile bankruptcy proceedings; this proof of claim, which included wharfage charges for the Guatemala up to the end of August, 1946, stated that the Dock Company had no security for its claim.
On November 22, 1946, pursuant to stipulation of the parties to the admiralty proceedings, the ship was sold, and its proceeds, $115,000, were deposited in the registry of the court. Subsequently, in some manner not disclosed in the record, the litigation was settled. Thereafter, on December 7, 1946, the Dock Company moved, in the admiralty proceedings, for an order directing the Clerk of the Court to pay it, out of the funds in his possession, $6,225, said to be due for wharfage furnished the ship from March 19, 1946, to November 22, 1946, the date of the sale. The district court directed a hearing before a Special Master at which evidence was heard. On receipt of the Special Master's report, the court, on the authority of New York Dock Co. v. S.S. Poznan, 274 U.S. 117, 47 S.Ct. 482, 484, 71 L.Ed. 955, entered an order directing that, out of the funds, there be paid the Dock Company $6,222.50 with interest, less any sums received by it on its claim filed in the Mercantile bankruptcy proceedings. From that order, Larsen and Central have appealed.
Rolnick Asofsky, of New York City, for respondent-appellant.
Ramey McKelvey, of New York City, for claimant-appellant.
Jacob F. Gottesman, of New York City, for movant-appellee.
Before L. HAND, SWAN, and FRANK, Circuit Judges.
In New York Dock Co. v. S.S. Poznan, 274 U.S. 117, 47 S.Ct. 482, 71 L.Ed. 955, the Court held, in effect, that no lien can be obtained against a ship in custodia legis; but it allowed the Dock Company a preferential claim against the proceeds of the ship for wharfage service rendered while the libel proceedings were pending, because the service was furnished as an incident of the court's administration and had benefited the parties to the proceedings. Such a payment, said the Supreme Court, defrayed an expense which the admiralty court "has permitted for the common benefit and which, in equity and good conscience, should be satisfied before the libellants may enjoy the fruits of their lien."
Consequently, there is here no room for the doctrine that a lien is waived by one who looks wholly to the credit of some person. Yet it is distinctly pertinent that the Dock Company, in its day-to-day contract with Mercantile, relied solely upon Mercantile's credit. For the Poznan decision rests on the doctrine of unjust enrichment; and we accept, as a correct formulation of one aspect of that doctrine, the following statement in Restatement of Restitution, § 110: "A person who has conferred a benefit upon another as the performance of a contract with a third person is not entitled to restitution from the other merely because of the failure of performance by the third person." That disposes of the bulk of the claim.
See, e.g., Marshall Co. v. "President Arthur," 279 U.S. 564, 49 S.Ct. 420, 73 L.Ed. 846; The City of Seattle, 2 Cir., 61 F.2d 763.
This appears from the Court's use of the phrases "common benefit," "equity and good conscience." It also appears from the Court's citation of United States v. Cornell Steamboat Co., 202 U.S. 184, 26 S.Ct. 648, 50 L.Ed. 987, a salvage case in which the Court relied on the doctrine of unjust enrichment; cf. Woodward, The Law of Quasi Contracts (1913) 323-326.
Note also that in Poznan the Court cited Fosdick v. Schall, 99 U.S. 235, 25 L.Ed. 339 (and related cases), which established the "six-months' rule" in railroad receiverships, a rule which is based upon the unjust enrichment doctrine. The "six-months' rule" has been said to create "an admiralty lien upon wheels"; see Fairman, Mr. Justice Miller and The Supreme Court (1939) 244-246; cf. Galveston H. H.R. Co. v. Cowdrey, 11 Wall. 459, 480, 482, 20 L.Ed. 199, and Farmers' Loan Trust Co. v. Kansas City, W. N.R. Co., C.C., 53 F. 182, 190. It is of interest that, just as in Poznan the Court cited the railroad receivership cases, so in St. Louis S.F.R. Co. v. Spiller, 274 U.S. 304, 310, 47 S.Ct. 635, 71 L.Ed. 1060, a railroad receivership case, the Court bracketed Fosdick v. Schall, supra, and Poznan.
After September 6, 1946, however, the Dock Company no longer relied upon Mercantile's credit. As, from that date, the Dock Company furnished a service which conferred a benefit upon those interested in the ship, it would seem that its claim for wharfage after that date comes within the ruling in Poznan. However, there is one differentiating fact. In Poznan, the Supreme Court, in disposing of an argument that the wharfage service had not been furnished "in accordance with an order made by the court and with the consent of the libellants," said: "But here the court denied a motion to remove the ship from petitioner's wharf with the consent of some of the libellants and with full knowledge of all concerned that the wharfage was then being furnished. The libellants * * * thus appear to have acquiesced in this determination. * * * It is enough if the court approves the service rendered or permits it to be rendered, and it inures to the benefit of the property or funds in its custody." In the instant case, the court, before the ship's sale, had made no order approving the service rendered or permitting it to be rendered. Nevertheless, we think that, as the ship had to be wharfed somewhere, and since the other parties knew of the wharfage, were "enriched" by it, and took no steps, after September 6, to provide wharfage elsewhere, the Dock Company is entitled to a preferred claim for the period from September 6, to November 22, 1946.
The Marshal made no effort, after September 6, 1946, to remove the ship from the Dock Company's wharf. He may thus be said to have authorized that wharfage from that date. In this connection, we note the following passage in Poznan (274 U.S. at page 121, 47 S. Ct. at page 484, 71 L.Ed. 955): "The most elementary notion of justice would seem to require that services or property furnished upon the authority of the court or its officer, acting within his authority, for the common benefit of those interested in a fund administered by the court, should be paid from the fund as an `expense of justice.'"
The order will be modified in accordance with this opinion.