## Facts

- The United States owned the steamship *Mount Shasta* and in May 1920 entered into a bareboat charter with the Mount Shasta Steamship Company through an agent.
- The charter party granted the owner “a lien upon all cargoes and all sub-freights for any amounts due under the charter party.”
- In July 1920, a subcharter was made to Palmer & Parker Company for a voyage carrying mahogany logs from the Gold Coast of Africa to Boston.
- The vessel arrived in Boston and delivered the cargo on February 19, 1921.
- The United States alleged substantial unpaid hire under the head charter and sought to enforce its lien against sub-freights allegedly owing and held by Palmer & Parker.
- Palmer & Parker denied liability for the freight and asserted counterclaims/setoffs exceeding the amount of the alleged sub-freight.

## Issues

1. Whether an admiralty court may exercise in rem jurisdiction over sub-freights when the alleged freight debt is contested and subject to asserted setoffs.
2. Whether a disputed, unliquidated freight claim constitutes a sufficient res for an in rem proceeding, or whether in rem jurisdiction requires a present, identifiable fund within the court’s reach when suit is filed.

## Decision

- The Supreme Court affirmed the dismissal of the libel for lack of in rem jurisdiction.
- The Court held that an in rem proceeding against sub-freight requires a present, identifiable res (a definite freight fund) within the court’s reach at the time the libel is filed.
- Where the alleged debtor in good faith denies liability and asserts setoffs that may exhaust the claimed freight, there is no seizable fund constituting a res for in rem jurisdiction.
- Justice McReynolds dissented.

## Legal Principles

- Admiralty in rem jurisdiction depends on the existence of a present, identifiable res subject to the court’s control when the action begins.
- A charter-party lien on sub-freights does not, by itself, supply a res for in rem proceedings when the supposed freight fund is not definite and is genuinely disputed.
- A contested freight debt subject to asserted offsets is generally a matter for in personam adjudication rather than in rem process.

## Conclusion

The Court sustained dismissal because in rem admiralty process cannot proceed against sub-freights where the alleged freight is not an existing, definite fund within the court’s reach and is instead a disputed debt potentially eliminated by setoff.


United States v. Freights, Etc. of the Mount Shasta, 274 U.S. 466 (1927)