Lykes Lines Ltd LLC v. M/V BBC Sealand ( 2005 )

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
January 18, 2005
For the Fifth Circuit
___________________________ Charles R. Fulbruge III
Clerk
No. 04-20057
___________________________
LYKES LINES LIMITED;
TMM LINES LIMITED, LLC,
Plaintiffs - Appellees,
VERSUS
M/V BBC SEALAND, in rem; ET AL,
Defendants,
BBC CHARTERING & LOGISTICS GMBH & CO KG,
Defendant - Appellant.
Appeals from the United States District Court
for the Southern District of Texas
Before KING, Chief Judge, HIGGINBOTHAM and DAVIS, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
Defendant BBC Chartering & Logistics GMBH & Co. K.G. appeals the judgment of
the district court denying the lien it claimed against cargo owned by Lykes Lines Limited and
TMM Lines Limited, L.L.C. It also appeals the award of a lien against its vessel, the BBC
Sealand, in rem, for TMM/Lykes’ transshipment costs. We affirm.
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I.
BBC Chartering & Logistics GBMH & Co., K.G. (“BBC”) is the owner of the vessel
M/V BBC Sealand ( “Sealand”). Argonaut Shipping International and Pegasus Marine
Finance (“Argonaut/Pegasus”) are two companies owned by sole shareholder Cosvogiannis.1
TMM Lines Ltd., LLC and Lykes Lines Ltd. (“TMM/Lykes”) was the cargo owner. CPS
Ships is the parent of TMM/Lykes.
TMM/Lykes contracted via an agent, JBL, with Argonaut/Pegasus to transport cargo
in 89 containers from Itajai, Brazil to Puerto Cabello, Venezuela and to Houston, Texas, at
a price of $210,600. Argonaut/Pegasus chartered the Sealand from BBC to transport this and
other cargo. No contractual relationship existed between TMM/Lykes and BBC or the
Sealand.
The charter agreement between BBC and Argonaut/Pegasus contained a lien provision
which provided that the owner (BBC) would have a lien on the cargo for freight and all other
amounts due under the charter including costs of recovery.2 The charter agreement also
provided that only the vessel owner, master or owner’s agent could issue bills of lading.
Charter hire was set at $366,000 payable in a lump sum and the charter agreement stated that
the vessel would not leave a loading port until the freight was paid in full.
1
The district court pierced the veil of these companies to treat them as t e alter ego of
h
Cosvogiannis and also held that they are the same company.
2
The Owners shall have a lien on the cargo and on all sub-freights payable in respect of the
cargo, for freight, deadfreight, demurrage, claims for damages and for all other amounts due under
this charter party including costs of recovering same.
2
On December 14, 2001, the Sealand arrived in Itajai and TMM/Lykes’ cargo was
loaded. BBC advised Argonaut/Pegasus that the vessel was arriving and that it would not
sail from the load port until the freight was paid. Despite the fact that the freight was not
paid, the Sealand sailed from Itajai destined for Santos that same day. On December 18,
2001, Argonaut/Pegasus issued bills of lading without authorization from BBC for the cargo
loaded in Itajai. The bills of lading contained a lien clause in favor of the “carrier.”
“Carrier” is defined as “Pegasus and any connecting or substituted Carrier performing
transportation under the transportation agreement evidenced by this bill of lading.” On
December 19th, the Sealand arrived in Santos, Brazil, where cargo belonging to BBC was
loaded. On December, 20, 2001, BBC forwarded draft bills of lading for the TMM/Lykes’
cargo to Argonaut/Pegasus, noting that originals would come from BBC’s Houston office.
The record reflects that on either December 19th or 26th, 2001, TMM/Lykes paid the
full amount it owed in freight to Argonaut/Pegasus. CP Ships’ corporate representative
testified that freight was paid on December 19th by electronic transfer. He acknowledged
that the bills of lading issued by Argonaut/Pegasus were marked “freight prepaid” even
though on the date of issuance, December 18th, freight had not yet been paid. Receipts from
JBL for the payment are dated December 26th. From these facts BBC contends that the
payments were made December 26th. The district court did not make a finding on this point.
On January 8, 2002, the Sealand arrived offshore Puerto Cabello where TMM/Lykes’
cargo was to be discharged. As it had at various stages of the voyage, BBC demanded
payment of freight from Argonaut/Pegasus and advised that the Sealand would wait for 48
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hours and if freight was not paid, the vessel would transport the cargo to Houston, its next
port of call. The parties attempted unsuccessfully to negotiate a compromise. In e-mails
BBC acknowledged that CP Ships (TMM/Lykes’ parent) had paid Argonaut/Pegasus but that
Argonaut/Pegasus had not yet paid BBC. After 48 hours, the Sealand sailed for Houston
without discharging TMM/Lykes’ cargo.
On January 10, 2002, Argonaut/Pegasus forwarded a copy of the BBC/Argonaut
charter party to TMM/Lykes’ parent, CP Ships. The next day, BBC advised
Argonaut/Pegasus and CP Ships that unless it received all freight due, it would assert a
freight lien against the cargo once the vessel arrived in Houston. The Sealand arrived in
Houston on January 17, 2002. The cargo was discharged to BBC’s warehouse, but later
released to TMM/Lykes after posting of security. TMM/Lykes then transshipped the
Venezuela cargo from Houston to Venezuela. BBC never received payment due under the
charter party.
When the Sealand arrived in Houston, BBC filed a complaint against the cargo in rem
seeking to enforce BBC’s lien for nonpayment of freight. The claim was amended to add
an in personam claim against Argonaut/Pegasus and Cosvogiannis. TMM/Lykes filed a
complaint against the Sealand, BBC and Argonaut/Pegasus alleging breach of contract,
damage to the cargo and conversion. TMM/Lykes also arrested the Sealand asserting a
maritime lien for its claims. In a separate proceeding, BBC obtained an arbitration judgment
against Argonaut/Pegasus.
After a bench trial, the district court entered judgment in favor of BBC against
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Argonaut/Pegasus and Cosvogiannis for $407,486 and in favor of TMM/Lykes against
Argonaut/Pegasus and Cosvogiannis for $124,509. No appeal was taken from these awards.
The court also found that the Sealand committed a deviation by failing to deliver the
TMM/Lykes cargo to its intended destination, Puerto Cabello, and entered judgment for
TMM/Lykes against the Sealand for TMM/Lykes’ cost of transhipping the cargo from
Houston to Puerto Cabello. The court concluded that BBC was not entitled to a lien against
TMM/Lykes’ cargo for the vessel’s freight charges and denied relief on that claim. BBC and
the Sealand appeal.
II.
BBC argues that the district court erred by finding that BBC could not assert a
carrier’s lien for freight against TMM/Lykes’ cargo, in rem. BBC is correct that maritime
law recognizes a lien arising as a matter of law in favor of the vessel owner against the cargo
for charges including unpaid freight. Gilmore & Black, The Law of Admiralty (2d ed.), §
9-20, n. 103, quoting The Bird of Paradise, 72 U.S. (5 Wall) 545, 554 (1866); see also
Tetley, Maritime Liens and Claims (2d. ed.), 786-87; 2 Benedict on Admiralty § 45.
However, when cargo is shipped under a charter, this lien only extends to cargo that is
owned by the charterer. Id.
The cargo in this case was not owned by the charterer, Argonaut/Pegasus, but by a
third party shipper, TMM/Lykes.
When cargo shipped under a charter is owned by a third party, general
maritime law does not give the shipowner a lien against either the cargo or the
freight money. Charter parties, however, customarily provide that the owner
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shall have lien against cargo and freight and require the charterer to insert
appropriate clauses in bills of lading subjecting the bills to the lien provision
in the charter.
Gilmore & Black, The Law of Admiralty (2d ed.), § 9-20, n. 103; see also Tetley, Maritime
Liens and Claims (2d. ed.), 786-87; 2 Benedict on Admiralty § 45. The charter party
between BBC and Argonaut/Pegasus contains such provisions and provides that the vessel
owner will have a lien on the cargo for freight and all other amounts due under the charter
including costs of recovery.
The lien arising under the charter party does not arise by operation of maritime law,
as do other maritime liens. Finora Co. v. Amitie Shipping, 54 F.3d 209, 213 (4th Cir. 1995)
(citing 2 Benedict on Admiralty §45 n.5 (1994)). Rather, this lien is a creature of contract
and arises from the original charter party between the vessel owner, in this case BBC, and
the charterer, in this case, Argonaut/Pegasus. Id. To be enforceable against a third party
cargo owner, like TMM/Lykes, who is not a party to the charter party agreement, the vessel
owner’s lien must be perfected. Id.; Hornbeck Offshore Operators v. Ocean Line, 849 F.
Supp. 434, 439 (E.D. Va. 1994). To perfect its lien, the vessel owner must give actual notice
of the lien provision in the charter party to the cargo owner before the cargo owner pays its
freight to the bill of lading issuer. Otherwise the lien is discharged. Toro Shipping Corp.
v. Bacon-McMillan Veneer Mfg. Co., 364 F.2d 928 (5th Cir. 1966); Finora, 54 F.3d at 211-
12; Hornbeck, 849 F. Supp. at 439. Actual notice can be given, for example, by incorporating
the lien from the charter party in the bill of lading issued to the shipper or by providing a
copy of the charter party to the shipper. Hornbeck.
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The district court found that TMM/Lykes did not have actual notice of the lien
provision in the BBC/Argonaut charter party until January 10, 2002, when BBC sent a copy
of the agreement to TMM/Lykes. The district court did not make a finding as to when
TMM/Lykes paid Argonaut/Pegasus. Although the bills of lading dated December 18th were
marked “freight prepaid,” CP Ships’ corporate representative testified that freight was paid
on December 19th by electronic transfer. Receipts from JBL for the payment are dated
December 26th. From this evidence, we are satisfied that the payments were made no later
than December 26th. If the district court is correct that TMM/Lykes did not have actual
notice of the lien provision in the charter party until January 10th, it correctly held that BBC
could not assert a lien against the cargo.
BBC argues that TMM/Lykes had constructive notice of the lien based on the
company’s knowledge that the Sealand would be the carrying vessel and because
Cosvogiannis asked CP Ships to confirm payment to BBC in writing. These arguments fail
because none of these facts constitute actual notice of the lien provision. Even if these facts
constitute constructive notice, constructive notice is insufficient to perfect liens against third
party cargo owners. Finora, 54 F.3d at 212.
BBC’s alternative argument is that the lien provision in the Argonaut/Pegasus bill of
lading provided actual notice of the charter party lien to TMM/Lykes. The Argonaut/Pegasus
bills of lading contains a provision that the “Carrier” shall have a lien on “all goods, which
survived delivery for all freight, demurrage . . . and other charges due under this contract.”
It also defines “Carrier” as “Pegasus Marine Finance, Inc. and any connecting Carrier
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performing transportation under the transportation agreement evidenced by this bill of
lading.” The Sealand was identified as the vessel on the face of the bills of lading. BBC’s
argues that these provisions in the bill of lading coupled with TMM/Lykes’ knowledge that
the Sealand was the vessel which would be carrying their cargo constitute actual notice to
TMM/Lykes of the lien provision in the charter party in favor of BBC. We disagree.
We have found no cases supporting an argument that such incomplete information
places the cargo owner on notice of the lien provision in the charter party. The cases finding
notice generally do so when the cargo owner is notified that the vessel owner is claiming a
lien, the legal basis for the lien (the charter party agreement) and that the vessel owner
intends to enforce it by demanding payment of freights directly to it. For example in
Hornbeck at 437-38, the vessel owner’s agent notified the cargo owner that it claimed a lien
under the terms of the charter party and requested that the cargo owner pay all outstanding
freights owned to the charterer directly to the vessel owner. In Finora, a vessel owner’s
request to the subcharterer to pay subfreights directly to it was not actual notice of the lien
in favor of the vessel owner because it was based on the ground that the charterer had
assigned the subfreights. Finora at 211. The court held that the notice “should inform third-
party obligors of the existence of the lien, the legal basis for the lien, and the fact that the
lienholder intends to exercise it.” Finora at 212. Nothing in the Argonaut/Pegasus bill of
lading makes reference to a lien in favor of BBC, the legal basis for the lien (the charter party
agreement) or that BBC intended to enforce it. Finora, 54 F.3d at 212. The language of this
provision does not satisfy the requirement of “clear notice” required to impose a lien for
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unpaid charter hire on cargo owned by a party not in privity with the vessel owner and
charterer. Id. Such notice was not given to TMM/Lykes until January 10, 2002, after
TMM/Lykes had paid its freight obligation to Argonaut/Pegasus.
Accordingly, the district court did not err by finding that BBC could not assert a
carrier’s lien for freight against TMM/Lykes’ cargo, in rem, either under the general
maritime law or pursuant to the lien provision in the charter party with Argonaut/Pegasus.
III.
BBC argues next that the district court erred in finding that the Sealand ratified and
then breached the bills of lading issued by Argonaut/Pegasus, making the Sealand liable in
rem for transshipment costs incurred by TMM/Lykes.
A.
BBC argues that the district court erred by concluding that the Sealand was bound by
bills of lading issued by Argonaut/Pegasus and liable thereunder for a deviation because the
bills of lading were unauthorized and because they were issued after the Sealand sailed with
the TMM/Lykes’ cargo on board. Neither of those factors affect the Sealand’s in rem
liability for a deviation. The general rule is that -
When cargo has been stowed on board the vessel and bills of lading are issued,
the bills of lading become binding contracts on the vessel in rem upon the
sailing of the vessel with the cargo. The sailing of the vessel constitutes a
ratification of the bills of lading. . . . This action gives rise to a maritime lien
which is the basis of the in rem recovery. Even though the vessel is operating
under charter parties, the lien against the vessel is not affected.
Cactus Pipe & Supply Co. v. M/V Montmartre, 756 F.2d 1103, 1113 (5th Cir. 1985)(citations
9
omitted). The bills of lading issued in Cactus Pipe by the charterer may have been
authorized by the master of the vessel. Id. at 1106, n.1. However, even if bills of lading are
issued without the master’s authority, as in this case, the same principle applies.
Moreover, if bills of lading are not signed by the master or with his authority,
but by the charterer, the sailing of the vessel with the cargo on board, and even
the receipt of the cargo on board, binds her in rem on the bills of lading as the
sailing, as well as the receipt of the cargo on board, is held to be ratification
of the bill of lading contracts.
2A Benedict on Admiralty §35, citing The Muskegon, 10 F.2d 817 (S.D.N.Y. 1924)(“If the
voyage is begun, the vessel must carry the goods to destination on the terms agreed by the
shipper with the charterer; for when the vessel starts upon the voyage, by implication, there
is a ratification and adoption by the ship of the charterer's contract with the shipper.”) It is
presumed that the master knows that the charterer will issue bills of lading for the cargo
loaded thus binding the vessel and cargo together. Id. Accordingly, the fact that the bills of
lading issued by the charterer Argonaut/Pegasus were unauthorized by the vessel is
irrelevant. Id.
BBC’s reliance on Insurance Co. of North America v. S/S American Argosy, 732 F.2d
299 (2d Cir. 1984), a case from the Second Circuit, is misplaced. That case holds that the
doctrine of ratification of a bill of lading does not apply to a bill of lading issued by a
“nonvessel operating common carrier” (N.V.O.C.C.) without the knowledge or consent of
the owner, charterer or master of the vessel.3 In this case, the bill of lading was not issued
3
A N.V.O.C.C. is a middleman who arranges for relatively small shipments to be picked up
from shippers, consolidated and shipped via a carrier or several carriers. Argosy, 732 F.2d at 301.
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by a N.V.O.C.C., but by Argonaut/Pegasus, the charterer. In a ruling which no one appeals,
the district court found that “Argonaut, Pegasus, and Pegasus Marine S.A. are the same
company.” Accordingly, a bill of lading issued by Pegasus was issued by and with the
knowledge of the charterer, Argonaut, making this case distinguishable from the Argosy
decision.
This leaves only BBC’s contention that ratification can only occur if the bills of
lading are issued before the ship sails. According to 2A Benedict on Admiralty § 34, “the
common carrier’s liability starts upon accepting delivery of cargo for carriage” and “it is
clear that if the vessel sails before the bill of lading has been issued, the instrument which
is eventually issued is the contract covering the venture from the start.”
Based on the above, the district court did not err by binding the Sealand to the terms
of the bills of lading issued by Argonaut/Pegasus. A contract of carriage was created by the
acceptance of the cargo on board the Sealand for transport and the terms of the bill of lading,
even if not authorized by the vessel, set the terms of the agreement.
B.
BBC argues next that assuming a valid contract was formed when the Sealand ratified
the bills of lading, the district court erred in finding that the Sealand breached the contract
by failing to discharge cargo in Puerto Cabello. The district court, in its Second Amended
Final Judgment, found that when the Sealand did not discharge TMM/Lykes cargo in
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Venezuela as required by the bills of lading, but instead discharged the cargo in Houston,
Texas, this constituted a deviation and a breach of contract for which the vessel is liable for
the costs incurred by TMM/Lykes to ship the cargo from Houston to its correct destination,
Puerto Cabello. We agree.
Deviation “has come to mean any variation in the conduct of a ship in the carriage of
goods whereby the risk incident to the shipment will be increased, such as carrying the cargo
on the deck of the ship contrary to custom and without the consent of the shipper, delay in
carrying the goods, failure to deliver the goods at the port named in the bill of lading and
carrying them farther to another port, or bringing them back to the port of original shipment
and reshipping them.” C.A. Articulos Nacionales de Goma Gomaven v. M/V Aragua, 756
F.2d 1156, 1158 (5th Cir. 1985)(emphasis added). By carrying TMM/Lykes’ cargo that was
bound for Venezuela to Houston, the Sealand deviated. Only an “unreasonable” deviation
has any affect on the liability of the vessel. This court has found “a shipper can make out
a case of unreasonable deviation simply by proving that his cargo was offloaded at a place
other than the stipulated destination.” Spartus Corp. v. The S/S Yafo, 590 F.2d 1310, 1314
(5th Cir. 1979).4
BBC argues that its performance was excused by commercial impracticability because
4
In its reply brief, BBC argues that in order to make a finding of deviation, the district court
would also have to make a determination of whether the deviation was reasonable or unreasonable,
which it failed to do. Because this argument was not raised until BBC’s reply brief, we decline to
consider it. Baris v. Sulpicio Lines, 932 F.2d 1540, 1546 n. 9 (5th Cir.) ("Customarily we decline
even to consider arguments raised for the first time in a reply brief."), cert. denied 112 S. Ct. 430, 116
L. Ed. 2d 449 (1991).
12
of the failure of Argonaut/Pegasus to provide a berth, stevedores and pay freight as required
in the “free in and out” provision in the charter party. We disagree. The “free in and out”
provision “simply means that the vessel does not pay for the costs of loading, stowage or
discharge. Nitram, Inc. v. Cretan Life, 599 F.2d 1359, 1369 n. 18 (5th Cir. 1979). Those
duties were allocated to Argonaut/Pegasus under the charter party. However, any breach by
Argonaut/Pegasus of terms of the charter party, to which TMM/Lykes was not a party, can
not serve as a basis of relieving BBC’s or the Sealand’s obligations under the separate
contract with TMM/Lykes created by the Sealand’s ratification of the bills of lading.
Second, failure of Argonaut/Pegasus to provide a berth, stevedores or pay freight would not
appear to constitute commercial impracticability. Allocating those duties to
Argonaut/Pegasus does not make BBC’s duty to discharge cargo at the designated port
“possible only at excessive or unreasonable cost” or “alter[] the essential nature of the charter
party agreement” as would constitute commercial impracticability. Asphalt International,
Inc. v. Enterprise Shipping Corp., 667 F.2d 261, 266 (2d Cir. 1981). Accordingly, BBC or
the Sealand’s breach of their agreement with TMM/Lykes cannot be excused on this basis.
The district court did not err in finding that the Sealand breached the contract of
carriage by failing to discharge cargo in Puerto Cabello or in holding the Sealand liable in
rem for the transshipment costs incurred as a result of the breach.
IV.
BBC argues next that TMM/Lykes can only recover that portion of its claim of
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damages that is supported by documentary proof. It concedes that $43,886 in damages are
supported by documentary evidence. This contention is without merit. The remainder of the
expenses were established by the deposition testimony of a TMM/Lykes corporate
representative whom BBC had the opportunity to cross examine. His testimony itemized the
costs incurred by TMM/Lykes to transship the cargo to its correct destination. BBC does not
challenge any particular item as not allowable and none of the costs making up the total of
$124,509 awarded are estimates or speculative in nature. The district court did not err in
awarding damages based in part on oral testimony.
V.
BBC argues finally that the district court erred in granting TMM/Lykes’ Rule 60
Motions because those motions allowed the plaintiff to improperly relitigate the issue of
deviation. Essentially, what BBC is arguing is that by adding a finding of deviation to the
second Amended Final Judgment, the district court improperly changed the legal substance
of the judgment. This argument misreads the post judgment rulings in this case.
In its original Memorandum and Order, the district court denied TMM/Lykes’ in rem
and in personam claims against BBC and the Sealand because it concluded that
“TMM/Lykes’ deviation claim arises from its status as a third party beneficiary of the
Argonaut-BBC charter agreement” rather than from the contract of carriage it found between
TMM/Lykes and the Sealand. The district court also found that “TMM/Lykes’ breach of
contract claim fails because there is no privity of contract between BBC and TMM/Lykes,
and because there was no physical damage to the cargo.”
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TMM/Lykes filed a Rule 59(e) Motion to Alter or Amend the Judgment.
TMM/Lykes’ position in the motion was that because the district court found in its original
judgment that the Sealand ratified the bills of lading issued by Argonaut/Pegasus and was
liable, in rem, for any loss or damages to the cargo, it should have also provided for recovery
against the Sealand for the deviation. It challenged the findings that TMM/Lykes’ deviation
claim was dependent upon the Argonaut/BBC charter agreement as opposed to the contract
of carriage between TMM/Lykes and the Sealand based on the ratified bills of lading. It also
argued that the Sealand had unreasonably deviated from the contract by refusing to discharge
cargo in Venezuela. Finally, the motion argued that the court erred in concluding that no
maritime lien arises for a breach of contract of carriage when there is no physical damage or
loss to the cargo.
On November 14, the district court granted TMM/Lykes’ motion. The district court
revised the challenged finding by deleting references to the TMM/Lykes’ deviation claim
being dependent on the charter and, significantly, revised one finding to read “TMM/Lykes’s
breach of contract claim against the in rem defendant is established. The Plaintiffs sustained
$124, 509.04 in damages proximately caused by the breach and may recover against the in
rem defendant.” (These damages are TMM/Lykes’ transshipment cost to ship the Venezuela
cargo from Houston.) It repeated its prior findings that the arbitration panel had found that
Argonaut/Pegasus breached the charter, and BBC did not. A revised final judgment was not
issued.
In December, BBC filed a Motion for Reconsideration or to Alter or Amend the
15
Judgment. BBC argued that the Sealand should not be liable in rem because the failure to
discharge in Venezuela was not the fault of the vessel, that TMM/Lykes failed to supports
its damages and that if the Sealand is liable to TMM/Lykes, BBC should be indemnified by
Argonaut/Cosvogiannis. At the same time, TMM/Lykes filed a Motion to Correct Clerical
Error or Alternatively for Relief from Judgment under Rule 60. TMM/Lykes argued that the
Final Judgment did not accurately reflect the amended findings because it did not allow for
in rem recovery against the Sealand for the deviation based on the breach of the contract of
carriage evidenced by the bills of lading. The district court issued an Amended Final
Judgment that allowed TMM/Lykes to recover from BBC but again did not reflect the in rem
liability against the Sealand. BBC’s Motion was denied.
TMM/Lykes filed a second Rule 60 Motion seeking to have the in rem liability of the
Sealand added to the judgment. The district court granted the motion and issued a Second
Amended Final Judgment. This judgment reflected that TMM/Lykes could recover $124,509
against Argonaut / Pegasus / Cosvogiannis and/or the Sealand. It also included the
following, “The BBC Sealand did not discharge the TMM/Lykes cargo in Venezuela as
required in the bills of lading but instead discharged the cargo in Houston, Texas. This
constituted a deviation for which the vessel is liable for the transshipment costs in the
amount of $124,509 incurred by TMM/Lykes.”
BBC argues that this final amended judgment erroneously permitted a substantive
change to the original judgment to be effected through Rule 60. We disagree. The district
court’s grant of TMM/Lykes’ Rule 59 Motion and its revised finding that “TMM/Lykes’s
16
breach of contract claim against the in rem defendant is established” necessarily incorporated
a conclusion that the Sealand committed deviation. Deviation is the only possible source of
breach identified by any of the parties. The final change in the judgment was a clerical one
that was necessary to harmonize the judgment to the court’s ruling on TMM/Lykes’ Rule 59
Motion.
VI.
In summary, BBC chartered its vessel the Sealand to Argonaut/Pegasus which never
paid its charter hire owed to BBC. Argonaut/Pegasus arranged with TMM/Lykes for carriage
of its cargo on the Sealand. TMM/Lykes paid its freight due to Argonaut/Pegasus. BBC
attempted self help by refusing to discharge TMM/Lykes’ Venezuela bound cargo and by
claiming a lien on the cargo once the vessel reached Houston, Texas. However,
BBC/Sealand’s acceptance of and sailing with TMM/Lykes’ cargo in conjunction with the
issuance of bills of lading by its charterer Argonaut/Pegasus created a contract of carriage
between the Sealand and TMM/Lykes which was breached when the vessel failed to
discharge cargo at its proper destination. BBC/Sealand could have protected itself from
nonpayment of charter hire in several ways. It could have refused cargo in Itajai until its
charter hire was paid as set forth in the charter party or it could have perfected its lien against
the cargo by giving TMM/Lykes actual notice of the lien provision in the charter party before
TMM/Lykes paid its freight to the charterer Argonaut/Pegasus. Argonaut/Pegasus is the
wrongdoer in this transaction. But as between BBC and the Sealand and TMM/Lykes, BBC
and its vessel the Sealand were in the best position to protect themselves against
17
nonpayment. They failed to do so and the district court’s judgment in favor of TMM/Lykes
is affirmed.
AFFIRMED.
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