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Home > Journals > Michigan Law Review > MLR > Volume 23 > Issue 5 (1925)

 

Abstract

Prior to the Lien Act of June 23, 1910, there was great confusion among the district courts over the question of the presumption of credit. The General Smith, 4 Wheaton 438, had held that though a lien was given to the furnisher of a foreign ship, the furnisher of a domestic ship got no lien unless the municipal law of the place gave him one. The states all passed various kinds of statutes giving material-men liens and these liens were enforced in admiralty. When the situation became unbearable Congress passed the Lien Act of 1910 to clarify the law. This act aimed (1) To establish the rule of presumption of credit, (2) To abolish the distinction between domestic and foreign ships, (3) To supersede all state statutes giving liens. At the present time sec. 3 of this act has been causing considerable confusion. This section provides that nothing in the Act "shall be construed to confer a lien when the furnisher knew or by the exercise of reasonable diligence could have ascertained that because of the terms of the charter party, agreement for sale of the vessel, or for any other reason, the person ordering the supplies, or other necessaries was without authority to bind the vessel therefor." The lower federal courts construed this section as being declaratory of the law as it previously existed. However the Supreme Court in U. S. v. Carver, 260 U. S. 482, adopted an interpretation of the Act that changed the law in regard to what constituted the exercise of reasonable diligence in ascertaining the authority of the person ordering the supplies. It is this change that is causing present difficulties. The effect of U. S. v. Carver can best be understood by considering (1) The basis for the lower court's interpretation of the Lien Act and the law as it was applied prior to the Carver case; (2) the change caused by the Carver case; (3) the lower courts' application of the Lien Act since the Carver case.

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