Brown v. The Advance

SHIPMAN, Circuit Judge. These four cases grew out of the insolvency of the United Biaies & Brazil Bteamship Company. The business of this company; its financial needs; its methods of providing, by letters of credit in New York, the money necessary to disbirn.e its vessels in Brazilian ports; its insolvency; the claims for maritime liens which sprang tip upon its failure; and the princix>les of law which this court deemed applicable io some of these claims;— were suited in the opinion rmuiliy given in ilte case of Huntington v. Proceeds of The Advance, 72 Fed. 793. The additional facts which are of importance in hoce cases are as follows: The libel-ants are the pa miera composing die banking house of Brown Bros. & Go., of Yew York City, and the Loudon banking house of Brown, Bhiploy & Co. Brown, Bhipley & Co. issued hi New York City, upon the express request, in. Yew York City, of the owner of these vessels, four letters oí credit, — ¡he first dated July 13, 1892, for £2,0(10; the second dated Hepfember 24, 1892. for £8,000; the third on Hep ¡ember 29, 1892 (but no claim in respect to this letter is made); and the four tit dated November 29, .1892. for £8,000. Each, of these let ters was issued, in whole or in part, for the purpose; of enabling the steamship company to disburse its vessels in Brazilian ports. Each letter contained upon its back the written agreement of the steamship company as follows: “All the freight moneys earned and to be earned, and the policies of insurance lhereon, are hereby pledged and hypothecated to them [Brown, Shipley & Co.] as collateral security for the payment as above promised [of the bills drawn by virtue of said credit]; and we further agree to give them any additional security they ma.y require, whenever they may see proper to demand it.” [504] Drafts were drawn under these letters of credit between November 9, 1892, and January 21, 1893. Not being payable until after 90 days’ sight, the first one was paid March 2, 1893, and the last one was paid April 24, 1893. On February 23, 1893, Brown Bros. & Co. wrote to the president of the steamship company that one of the letters of credit had been canceled, and furthermore as follows: “We also request that you deposit with us the securities called for hy the various letters of credit, amounting to-.” No other demand was made, unless the filing of the libels can be considered a demand, and no additional security was deposited or furnished by the company. On March 18, 1893, a receiver was appointed for the corporation, and subsequently all of its steamers were sold under libels filed to enforce maritime liens; These four libels© were brought upon the ground that the libelants had a maritime lien against the four named vessels, to recover from their proceeds such portion of the avails of the drafts drawn under the letters of credit as had been applied towards paying the disbursements of the respective vessels in foreign ports upon their voyages during, the latter part of 1892. The entire sums alleged to be due were between $52,000 and $53,000. The district court dismissed the libels. The question in the case is whether, upon the foregoing facts, a maritime lien existed in favor of the libelants upon the named vessels. It may now be considered as settled that the owner of these vessels had given, by express agreement made in the home port, a maritime lien upon the freights of the vessels which were to be “disbursed” in foreign ports by the necessary aid of the letters of credit, and that these letters were issued in part, at least, upon the strength of the security furnished by this maritime lien, and that the owner had the power, if it so chose, of entering into an express contract, or contract proved by the circumstances, which should place a maritime lien upon the vessels also. The libelants say that when the owner agreed to give them “any additional security they require, whenever they may see proper to demand it,” this agreement was a maritime lien upon the vessels, because such a lien was the usual security which material men had when they advanced money in a foreign port for the benefit of vessels, and because such a lien was the only additional security which the owner had in its power to give. The conclusion of the libelants, which was that an unexecuted promise to furnish whatever additional security was required created a maritime lien upon the vessels, is a non sequitur. The promise is capable of two' constructions, — one, that the owner would furnish additional security when required; the other, that it would furnish that particular additional security which should be asked for. Whichever construction is given to it, the unfulfilled promise does not create a lien upon the vessels, for such a lien is the result of a contract evidenced by the express agreement or by the conduct of the parties. An unfulfilled contract that it would furnish security of some kind cannot be turned into an executed contract for a particular maritime lien. Neither can a maritime lien upon the vessels be created out of a contract to furnish the kind of security which was asked for, for [505] the letter of February 23d was silent as to the kind of security required. An existing maritime lien upon the vessels cannot be evolved out of a general promise that the owner would furnish more security when it was asked for, without any intermediate progressive steps in the development of the lien. We agree with the district judge when he says: “The agreement ‘to give further security’ would have been as truly fulfilled by giving further personal security as by giving a further maritime lien. So indefinite an agreement does not constitute, of itself, any lien upon the vessels, nor even any equitable assignment or appropriation, such as might be recognized on a distribution of surplus moneys; nor does it extend the maritime lien beyond that specified and agreed upon at the time.” The decrees of the district court arc affirmed, with costs.