Opinion · Supreme Court of the United States

Krauss Bros. Lumber v. Dimon Steamship Corp.

Krauss Bros. Lumber v. Dimon S.S. Corp., 290 U.S. 117 (1933)

Type
Opinion
Court
Supreme Court of the United States
Jurisdiction
Federal
Date
1933-11-13
Topic
general

How later courts describe this case

  • holding that a lien arises for overpayment of freight
  • affirming that, while contracts may form the basis of a maritime lien, it is “[o]nly upon the lading of the vessel or at least when she is ready to receive the cargo” that the lien arises or attaches
  • determining a lien existed for overpayment of freight by mistake where such a lien had already been recognized for “overpayments similarly made but induced by other means”
  • explaining the mutual and reciprocal nature of the obligations of ship and cargo under the contract of affreightment
  • holder of a bill of lading entitled to a lien on the vessel for mistaken overpayment of freight where the cargo was duly shipped
  • “Admiralty is not concerned with the form of the action, but with its substance”
  • "this does not mean that the right to the lien is not to be recognized and upheld, when within accepted supporting principles, merely because the circumstances ... are unusual or infrequent"
  • lien for erroneous overpayment of freight allowed in admiralty

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Cited by
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KRAUSS BROS. CO.v. DIMON S.S. CORP.,290 U.S. 117(1933)
54 S.Ct. 105
KRAUSS BROS. LUMBER CO.v. DIMON STEAMSHIP CORP.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE NINTH CIRCUIT.
No. 4.
Argued October 10, 11, 1933.
Decided November 13, 1933.
1. There is a duty on a ship, arising out of the contract of affreightment, not only to carry the cargo and deliver it safely but also to charge no more as freight than the contract allows. P. 121. 2. When excessive freight is collected at time of delivery, under circumstances such that the owner is bound to repay it, there is a maritime lien on the ship, in favor of cargo, for the amount of overpayment.Id. 3. The fact that neither party knew, at time of payment, that the freight demanded was excessive, does not affect the existence of the lien. P. 125. 4. Neither is the lien affected by the consideration that the demand for excess freight paid by mistake would be at common law for money had and received; admiralty is not concerned with the form but with the substance of the demand which is founded on the breach of the contract of affreightment. P. 124. 5. The principle that maritime liens, being secret, arestrictijurisand not to be extended by implication does not mean that the right to the lien is not to be recognized and upheld, when within accepted supporting principles, merely because the circumstances which call for its recognition are unusual or infrequent. P. 125. 6. The principle of mutuality between ship and cargo applies to their obligations under the contract of affreightment, not to the liens that result from breach of those obligations. P. 125.61 F.2d 187, reversed.
CERTIORARI,289 U.S. 716, to review the affirmance of a decree
of a District Court,53 F.2d 492, dismissing a libelin rem.
Mr. Lane Summers, with whomMessrs. W.H. HaydenandF.T.Merrittwere on the brief, for petitioner.Page 118Mr. Claude E. Wakefield, with whomMr. Cassius E. Gateswas on the brief, for respondent.

After a cargo is loaded and reciprocal rights between the ship and cargo exist, the obligation of the ship is for proper stowage, care and handling of the cargo and delivery of the same at the time and place designated in the contract of affreightment. The obligation of the cargo is to pay freight. All of this was fully accomplished in this case. It has been said that the obligation to which the ship is hypothecated extends to a "right delivery of cargo." The use of the word "obligation" does not refer to a point of time, but to the fulfillment of those things which the ship is obliged to do. This is referred to in some decisions as the "act of transportation," and when, as in this case, the act of transportation is fulfilled as to all obligations coming thereunder, no lien exists against the vessel on account of matters occurring outside the scope of such undertaking.

A test to be applied in each case is the nature of the proof necessary to sustain the libel. If the proof be that the ship or its master failed in some obligation to the cargo in respect of the act of transportation, then a lien exists for such breach. If, on the other hand, the proof be that the owner failed in some respects or, as in the case now before the court, that a third party did an act which gives rise to the claim, no lien exists. In the present case the proof at the time of trial would necessarily be that another intercostal carrier carried similar cargo at $8.50 per M feet. This is the very basis of libelant's cause of action. It has no relation to the respondent S.S. Pacific Cedar or any undertaking to which the vessel was hypothecated. The fact that the agreement for a rebate is contained in a contract of affreightment is immaterial, as a lien is not necessarily the normal result of all breaches of such contract.Page 119

The frequently stated doctrine that the ship is bound to the cargo, and the cargo to the ship, and that a maritime lien must be mutual and reciprocal, is a mere formula for arriving at the result in each case. It illustrates the fact that the undertaking of the ship to perform the act of transportation is a separate obligation. This undertaking is usually set forth in a bill of lading which defines the respective obligations of the parties. These obligations as set forth then become the act of transportation to the performance of which the vessel is hypothecated.

The right of lien, being a privilege and secret, must be connected with some visible occurrence related to the ship or cargo, or must be connected with the obligation of the ship itself in respect to the act of transportation which arises by implication of law; it is not necessarily extended to all obligations of the contract of affreightment. These liens are of strict right and are not to be extended to situations not well defined in the law. The conclusion therefore is patent that the mere fact that the provision for a rebate on contingency in the present case is contained in the contract does not give rise to a maritime lien to recover the rebate when it is not alleged that the ship wrongfully exacted the higher rate, or that the allowance of the rebate was related to the act of transportation. No facts appear from which it can be inferred that the agreement for an allowance of rebate was part of the act of transportation. If the lien is not to be extended, because it is secret and operates to the prejudice of innocent parties dealing with the vessel, there is here a case where not even the owner at the time of receiving payment is alleged to have knowledge of the facts upon which the petitioner now claims recovery; nor was there a visible occurrence relating to the ship and cargo. All parties considered the transportation performed and terminated by payment and delivery. It can not nowPage 120be said that discovery of a mistake in making overpayment can be asserted by a maritime lien. The action is for money had and received. The respondent has received money to which it is alleged it is not now entitled. And why? Because another intercostal carrier carried at a lower rate, not because the vessel failed in any respect in its obligation to the cargo. The case seems clear.
MR. JUSTICE STONE delivered the opinion of the Court.
This suit in admiralty was brought by petitioner in the District Court for Western Washington against respondent, the steamship "Pacific Cedar" and its owner, the respondent Dimon Steamship Corporation to recover an alleged overpayment of freight and to establish a lien on the vessel for the amount of the overpayment. The libel alleges a contract by petitioner with the owner, by which the latter agreed to receive for loading on the "Pacific Cedar," on or about January 18, 1930, at named Pacific Coast ports, a quantity of lumber, and to transport it to Philadelphia and New York at the rate of $10.00 per thousand feet, but with a provision that in the event "a regular intercoastal carrier moves similar cargo at a lower rate," such lower rate should be applied. The libel makes no reference to any bill of lading but sets up that the lumber was shipped and transported, and between March 1st and 20th was delivered, all under the provisions of the contract, and that at the conclusion of the voyage and while the vessel was discharging her cargo, respondents, at destination, demanded and received payment of freight at the $10.00 rate, although in January, 1930, a regular intercoastal carrier had carried a similar cargo from Seattle to Baltimore at $8.50 per thousand feet.

The lien asserted is for the difference between the freight paid and the freight earned at the agreed lower rate. Upon exceptions the District Court dismissed the libel for want of admiralty jurisdiction.53 F.2d 492.Page 121The Court of Appeals for the Ninth Circuit reversed the decree dismissing the libelin personam, but affirmed so much of it as dismissed the libelin rem.61 F.2d 187. This Court granted certiorari on petition of the libellant alone,289 U.S. 716, to resolve an alleged conflict between the decision below and that of the Court of Appeals for the Sixth Circuit inThe Oregon, 55 F. 666, 676. The only question presented here is whether the petitioner is entitled to a lien on the vessel for the overpaid freight.

While there has been a lack of unanimity in the decisions as to the precise limits of the lien in favor of the cargo, seeOsaka Shosen Kaishav.Pacific Export Lumber Co.,260 U.S. 490, the cases are agreed that the right to the lien has its source in the contract of affreightment and that the lien itself is justified as a means by which the vessel, treated as a personality or as impliedly hypothecated to secure the performance of the contract, is made answerable for nonperformance. SeeThe Freeman, 18 How. 182, 188;Vandewaterv.Mills, 19 How. 82, 90;Osaka Shosen Kaishav.PacificExport Lumber Co., supra; The Flash, 1 Abb. Adm. 67;TheRebecca, 1 Ware 187;Scottv.The Ira Chaffee, 2 F. 401. This engagement of the vessel, or its hypothecation, as distinguished from the personal obligation of the owner, does not ensue upon the mere execution of the contract for transportation. Only upon the lading of the vessel, or at least when she is ready to receive the cargo — where there is "union of ship and cargo" — does the contract become the contract of the vessel and the right to the lien attach. No lien for breach of the contract to carry results from failure of the vessel to receive and load the cargo or a part of it. SeeOsaka Shosen Kaishav.Pacific ExportLumber Co., supra.

It is not questioned here that the union of ship and cargo, once established, gives rise to the right of the vessel to a lien on the cargo for the freight money and of thePage 122cargo on the vessel for failure to carry safely and deliver rightly. The breach now alleged is only that the freight demanded on discharge of the cargo was in excess of that stipulated by the contract, and respondent insists that the liens in favor of cargo growing out of the contract of affreightment are restricted to those claims founded on breach of the obligation to carry and deliver. But the undertaking to charge the agreed freight and no more is an inseparable incident to every contract of affreightment, as essential to it and as properly a subject of admiralty jurisdiction as is the obligation of the cargo to pay freight when earned, or of the vessel to carry safely. SeeMatson Navigation Co. v.United States,284 U.S. 352,358. It is unlike an agreement to pay a commission to the broker procuring the charter party,Brownv.West Hartlepool SteamNavigation Co., 112 F. 1018, or a provision for storing cargo in the vessel at the end of the voyage,Pillsbury Flour MillsCo. v.Interlake Steamship Co.,40 F.2d 439, which, though embodied in the contract of carriage for hire, are no necessary part of it.

It is not denied, and the cases hold, that there is a lien for excessive freight knowingly exacted as a condition of delivery of the cargo,The John Francis, 184 F. 746;The Ada, 233 F. 325;The Muskegon,10 F.2d 817;Tatsuuma Kisen KabushikiKaishav.Robert Dollar Co.,31 F.2d 401; cf.The Oregon, 55 F. 666, 677; but it is argued that in that case the generating source of the right is the failure to perform the transportation contract by refusal to deliver the cargo. The fact that the breach of one term of the contract, the agreement to charge only the stipulated freight, coincides with the breach of another, to make delivery, does not obscure the fact that both terms are broken, and that the substance of the right to recover is for the freight collected in excess of that agreed upon, not damages for failure to make delivery. Nor does the fact that there is breach of both afford anyPage 123basis for saying that the breach of either term alone could not give rise to the lien. This becomes more apparent upon examination of the numerous cases in which a lien has been imposed for some breach of the freight term.1

InThe Oregon, supra, the time charterer sold the tonnage of the vessel for a single voyage at a rate in advance of that stipulated in the charter party. Her captain collected the freight at the agreed higher rate and retained it. The Court of Appeals for the Sixth Circuit, Judge Taft writing the opinion, sustained the jurisdictionin remto recover the excess on the ground that its collection was incidental to the execution of the maritime contract, and to be treated as an overpayment of freight. ThisPage 124conclusion is obviously inconsistent with the view that the affreightment lien in favor of the cargo is dependent on the failure of the vessel to carry and deliver. The right to a lien for the mistaken overpayment of freight was involved inTheOceano, 148 F. 131, where the charterer advanced charter freight to provide a fund for the vessel's disbursements, under stipulation that the advance should be deducted from the freight earned under the charter party. Upon settlement at the port of destination the libellant's agent, by mistake, deducted less than the advances made. The court, Judge Hough writing the opinion, held, treating the settlement as an overpayment of the charter freight, that the cause was one of affreightment and that a lien attached to the vessel for the amount of the overpayment.

It was argued to us, as it has been in other cases, that, as the payment for excess freight was made under mistake, the demand is upon a cause of action for money had and received, which lies only at common law and not in admiralty. The objection applies with equal force to the liens allowed for excess freight, payment of which was procured by fraud or duress, or for freight paid in advance where the voyage was abandoned after the ship was loaded.2Admiralty is not concerned with the form of the action, but with its substance. Even under the common law form of action for money had and received there could be no recovery without proof of the breach of the contract involved in demanding the payment, and the basis of recovery there, as in admiralty, is the violation of some term of the contract of affreightment, whether by failure to carry or by exaction of freight which the contract did not authorize. SeeThe Oceano, supra, 132; but cf.Israelv.Moore McCormack Co., 295 F. 919.Page 125

It seems equally obvious that lack of knowledge by the parties at the time of the payment that the freight demanded was excessive should have no bearing on the existence of the lien. There is no hint in the books that the security given by way of lien for the performance of the contract of affreightment depends upon such knowledge. The liability of the vessel for damage to cargo affords a not infrequent example of a lien which may attach, although at the time of unloading cargo there was no knowledge of the particular events which effected the breach. SeeRichv.Lambert, 12 How. 347.

We see no distinction, either in principle or with respect to the practical operation or convenience of maritime commerce, between the lien asserted here for overpayment of freight by mistake and those for overpayments similarly made but induced by other means. Here, as there, the overpayment, made as the cargo was unloaded, occurred while the union of ship and cargo continued, and the liability asserted was determined by events contemporaneous with that union. The circumstances which called the lien into being do not differ in point of notoriety from those giving rise to other affreightment liens upon the vessel. While it is true that the maritime lien is secret, hence isstricti jurisand not to be extended by implication, this does not mean that the right to the lien is not to be recognized and upheld, when within accepted supporting principles, merely because the circumstances which call for its recognition are unusual or infrequent.

The suggestion made on the argument that the lien asserted here, after the cargo is discharged, is affected by application of the often stated rule that the liens on ship and cargo are mutual and reciprocal, is without basis. It is only the obligations of ship and cargo under the contract of affreightment which are to be characterized as mutual and reciprocal, not the liens which result from thePage 126breach of those obligations. The one lien may come into existence without the other and the lien on the ship in favor of cargo, not being possessory, seeDupont de Nemours Co. v.Vance, 19 How. 162;Tatsuuma Kisen Kabushiki Kaishav.Robert DollarCo., supra, may survive the lien of ship on cargo which is terminated by unconditional delivery.34885 Bags ofLinseed, 1 Black 108.

We note, but do not discuss, the objection that the libel may be taken to allege only a voluntary overpayment of the freight without mistake. We think it may be construed to mean that the payment was made without knowledge at the time that a lower rate controlled. The court below took that to be its meaning. Certiorari was granted to review the question decided below and not the sufficiency of the pleadings to raise it.Reversed.

MR. JUSTICE McREYNOLDS, MR. JUSTICE SUTHERLAND, MR. JUSTICE BUTLER and MR. JUSTICE ROBERTS are of opinion that the challenged judgment should be affirmed.

Secret liens are not favored, they should not be extended by construction, analogy or inference, or to circumstances where there is ground for serious doubt.Osaka Shosen Kaishav.Pacific Export Lumber Co.,260 U.S. 490.Page 127
  1. Page 123 Lien for freight paid in advance but not earned under the terms of the contract of affreightment:The Harriman, 9 Wall. 161;The Panama, 18 Fed. Cas., No. 10703; cf.The A.M. Bliss, 1 Fed. Cas., No. 274;Churchv.Shelton, 5 Fed. Cas., No. 2714. (See alsoAllanwilde Transportation Corp. v.Vacuum Oil Co.,248 U.S. 377, andInternational Paper Co. v.The Gracie D.Chambers,248 U.S. 387, where the lien was denied because the freight was held to have been earned.) Lien for charges or purchase price of the cargo, collected by the master from the consignee for account of the shipper as provided in the contract of affreightment:The Hardy, 11 Fed. Cas., No. 6056;The St.Joseph, 21 Fed. Cas., No. 12230;Zollingerv.The Emma, 30 Fed. Cas., No. 18218; cf.The New Hampshire, 21 F. 924;Krohnv.The Julia, 37 F. 369. Lien in favor of the charterer for freight earned in violation of the charter party by the ship manned and officered by the owner;The Port Adelaide, 59 F. 174. Lien for freight overpaid, as dead freight for shortage of cargo, wrongfully exacted by threat of attachment of the cargo actually shipped and delivered according to the contract:The Lake Eckhart,31 F.2d 804. Lien for salvage, payment of which by the cargo was fraudulently procured by the master, who had wilfully stranded the vessel:Churchv.Shelton, supra. Lien for the excess of a deposit by the cargo owner in a general average fund, the right of recovery being founded on the master's duty, and hence the ship's, to make the general average adjustment:The Emilia S. de Perez,22 F.2d 585. ↩
  2. Page 124 See note 1,supra. ↩
  3. Page 126 The statement that liens of affreightment on ship and cargo are mutual and reciprocal is based on the frequently quoted phrase of Cleirac (597): "Le batel est oblige a la marchandise et la marchandise au batel." Judge Hough indicated inThe Saturnus, 250 F. 407, 412, that Cleirac's "clever phrase" referred to the mutual obligations flowing from the union of the personified ship and personified cargo.

    It has often been pointed out that the lien on cargo is not strictly a privilege (see Pothier, Maritime Contract, Translation by Caleb Cushing, Boston, 1821, 94-50; Hennebieq, Principes de droit Maritime, Page 127 Brussels, 1904, 316) as is the lien on the ship, but is more like the possessory lien of the land carrier and, like it, does not survive the unconditional delivery of the cargo. SeeCutlerv.Rae, 7 How. 729;4885 Bags of Linseed, 1 Black 108, 113;TheBird of Paradise, 5 Wall. 545;The Eddy, 5 Wall. 481, 494, and the full discussion inWellmanv.Morse, 76 F. 573. ↩