Dampskibsselskabet Dannebrog v. Signal Oil & Gas Co. of Cal.

Background

Signal Oil and Gas Company supplied fuel oil to two vessels that were owned by one company and chartered to another firm under time charters on a standard "Government form." The charters made the charterers responsible to provide and pay for fuel while the owners retained navigation and crew duties. The supplier sued the ships to enforce liens for fuel furnished on the charterers’ orders; lower courts sustained those liens and the case reached this Court because other circuit decisions had disagreed on the issue.

Reasoning

The Court addressed whether a supplier who delivers necessary fuel on a charterer’s order can have a maritime lien against the vessel when the charter requires the charterer to pay. Relying on the 1910 statute governing maritime liens, the Court explained that persons entrusted with the vessel’s management at the port — including those acting under a charterer’s direction — are presumed authorized to procure supplies. The statute protects suppliers unless the supplier knew or could have found, with reasonable diligence, that the charter expressly prohibited creating a lien. Because these time charters gave the charterer practical control to direct voyages and order supplies and contained no prohibition against liens, the Court held the supplier could rely on the vessel’s credit and obtain liens.

Real world impact

The decision means suppliers who furnish fuel on a charterer’s order can enforce liens against the ship when the charterer controls the ship’s employment and the charter contains no lien prohibition. Owners who want to prevent such liens must include explicit prohibitions in the charter. The ruling implements the statute’s aim to protect suppliers and clarify liability for necessary ship supplies.