The Key City - 81 U.S. 653 (1871)
U.S. Supreme Court
The Key City, 81 U.S. 14 Wall. 653 653 (1871)
The Key City
81 U.S. (14 Wall.) 653
1. While courts of admiralty are not governed by any statute of limitations, they adopt the principle that laches or delay in the judicial enforcement of maritime liens will, under proper circumstances, constitute a valid defense.
2. No arbitrary or fixed period of time has been or will be established as an inflexible rule, but the delay which will defeat such a suit must in every case depend on the peculiar equitable circumstances of that case.
3. When an admiralty lien is to be enforced to the detriment of a purchaser for value, without notice of the lien, the defense will be held valid under shorter time, and a more rigid scrutiny of the delay than when the claimant is the party who owned the property when the lien accrued.
4. When two corporations united their vessels and other property used in navigation, and formed a new corporation, in which no money was paid by either party, and in the contract of consolidation made arrangements for the payment of the debts of one or both before any dividends should be declared in the new stock, the new corporation cannot avail itself of the doctrine applicable to such a purchaser without notice, and a lien, three years and a half old, will be enforced against one of the vessels so transferred to the new corporation.
Young shipped a quantity of wheat on the steamboat Key City, a vessel owned by a corporation called the Northwestern Packet Company, which had this and several other steamboats engaged in the navigation of the Upper Mississippi River. The cargo was lost, and so never delivered. At the time when the shipment was made and the cargo lost on the Key City, there was engaged in the same business in the same waters with the Northwestern Packet Company, a rival corporation known as the La Crosse and Minnesota Steam Packet Company.
After the loss of the wheat, these two companies united their stock in trade, their steamboats, barges, and other property, and formed a new corporation, the corporators of which were taken exclusively from those in the two old companies, and to the new corporation they gave the name of the Northwestern Union Packet Company. To this company all the property of the two other companies was transferred by appropriate instruments. Whether at the time of this union and transfer the La Crosse and Minnesota Company owed debts or not, or what became of them, did not appear. But it did appear that the Northwestern Company, the original owner of the Key City, was largely indebted, and that this was well known to all the parties. Not only was it well known, but provision was made for the payment of the debts generally of that company by the newly formed company out of a fund to come within its control. The nature of that provision was this: certificates of stock of the value of the boats, barges, and other property of the Northwestern
Company merged in the new company were issued, but on their face they recited that no dividends would be paid on such stock until the debts of the Northwestern Company should be paid out of the proportion of the net profits which the shareholders of that company would otherwise be entitled to.
In this state of things, Young, three years and a half after the wheat was lost, and his cause of action had accrued, filed a libel in admiralty against the Key City for its failure to perform its contract of affreightment. The Northwestern Union Packet Company -- that is to say the new corporation -- appeared as claimants and set up as a defense that the lien was lost by the lapse of time, to-wit, the three years and a half which had intervened between the date when the cause of action accrued and the date of the commencement of the suit, and that defense was sustained by the circuit court. The change in the ownership of the vessel during the interval was relied on as strengthening the defense.