486 F. 2d 462 - Everett Steamship Corporation S/a v. Liberty Navigation and Trading Co Inc

Francis L. Tetreault (argued), of Graham & James, San Francisco, Cal., for appellant.

William E. Gwatkin, III (argued), U. S. Dept. of Justice, Lillick, McHose, Wheat, Adams & Charles, James Browning, Jr., U. S. Atty., San Francisco, Cal., for appellees.

Before HAMLIN and TRASK, Circuit Judges, and SOLOMON,* District Judge.

Everett Steamship Corporation (Everett), a Panamanian corporation, filed this action against the United States (the Government) to recover on maritime liens on the SS Galicia Defender. The District Court granted summary judgment against Everett. Everett appeals.

The Government time chartered the Galicia Defender from Liberty Navigation and Trading Co., Inc. (Liberty). While under the time charter, Everett was the husbanding agent for the vessel. Between February 1, 1967, and February 2, 1968, when the vessel was in far eastern ports, Everett advanced $20,040.47 for repairs, supplies, and wages for the crew. Everett claims a maritime lien against the vessel for those amounts.

In May, 1968, the Galicia Defender, loaded with cargo for Vietnam, lay idle in the Port of San Francisco because Liberty could not pay the crew. Rather than bear the expense of unloading the cargo, the Government suspended the time charter and, on May 4, 1968, demise chartered the vessel for a round trip voyage to Vietnam.

On June 24, 1968, the Galicia Defender returned from Vietnam. It entered the Port of Oakland where it was seized in an in rem action brought by West Coast Ship Chandlers and others. The Government declared the Galicia Defender off-hire and the vessel was sold to pay maritime liens. Everett intervened. It recovered only $1,935.00 because other liens had higher priority.

Five weeks before the seizure in the in rem action and when the Galicia Defender was outside the territorial waters of the United States on her way to Vietnam, Everett filed this action. The complaint alleged that the United States, as demise charterer, was owner pro hac vice, 46 U.S.C. Sec. 186, and that Everett was unable to libel the vessel in rem because of 46 U.S.C. Sec. 741. The complaint claimed a maritime lien on the Galicia Defender and asserted that the lien was enforceable against the Government by a libel in personam under the Suits in Admiralty Act, 46 U.S.C. Sec. 742.

In its answer the Government alleged that the court lacked jurisdiction because the vessel was outside the territorial waters of the district and asserted that 46 U.S.C. Sec. 742 did not apply because no action could have been maintained if the vessel had been privately operated. The Government also stated that the vessel was on its way to Vietnam and would be redelivered to its owner upon its return to the United States.

The District Court dismissed the complaint with leave to amend in an order dated May 28, 1970. Everett then filed an amended complaint in which it also claimed damages against the Government for the loss of priority of its lien because 46 U.S.C. Sec. 741 prevented it from libeling the vessel in rem. On October 6, 1970, the court granted the Government's motion for summary judgment. The court held that Everett's inability to libel the Galicia Defender was because of the vessel's absence from the jurisdiction and not because of any immunity under Section 741. The court also ruled that the arrest and sale of the ship did not violate Section 741.

The Suits in Admiralty Act (the Act) prohibits maritime lienholders from seizing vessels in in rem actions if the vessels are owned or operated by the United States. 46 U.S.C. Sec. 741. As a substitute for recovering against the vessel, the Act allows lienholders to enforce their liens through in personam actions against the Government. 46 U.S.C. Sec. 742. The Act reserves to the United States the benefits of all exemptions and limitations of liability accorded by law to owners, charterers, operators, or agents of vessels. 46 U.S.C. Sec. 746. The Act also seeks to protect government vessels from seizure in foreign ports by giving the Secretary of State discretion to intervene in foreign proceedings. 46 U.S.C. Sec. 747.

As a demise charterer the Government was liable only in rem for debts incurred on the credit of the vessel before the demise charter. When Everett filed its complaint on May 17, 1968, the District Court had no in rem jurisdiction since the vessel was outside the waters of the United States. Blamberg Bros. v. United States, 260 U.S. 452, 43 S.Ct. 179, 67 L.Ed. 346 (1923).

Everett argues that the District Court had jurisdiction over an in personam action under Section 742 to enforce an in rem liability even though the vessel libeled was not within the territorial waters of the United States. Everett contends that Section 742 transformed its in rem rights into an in personam cause of action.

There is no merit in this contention. In all of the cases Everett cites to support this contention, the Government had in personam liability under the common law or the law of admiralty. No case held that an in rem action was made in personam by Section 742 for the purposes of jurisdiction.

In Eastern Transportation Company v. United States, 272 U.S. 675, 47 S.Ct. 289, 71 L.Ed. 472 (1926), the Government breached its statutory duty to mark the wreck of a government-owned merchant vessel that sank in a navigable channel. Plaintiff's barge collided with the sunken wreck and sank. The trial court held that the sunken vessel did not provide a res which would support an in rem action. The Supreme Court reversed. It held that the breach of the duty to place a marker on the wreck created a direct cause of action in tort against the Government for which plaintiff could maintain an in personam action. When the Government had in personam liability, Section 742 did not require that damages be limited to the value of the vessel under in rem principles.

In Hoiness v. United States, 335 U.S. 297, 69 S.Ct. 70, 93 L.Ed. 16 (1948), a seaman was injured aboard a merchant vessel owned by the United States. The complaint did not allege that the plaintiff was a resident of the district in which the action was brought or that the vessel was within the district when the complaint was filed. The District Court dismissed for lack of jurisdiction. The Supreme Court reversed and held that the provision in Section 742 that the plaintiff be a resident of the district or that the vessel be located within the district related to venue and not jurisdiction.

The broad holding in Hoiness must be read in connection with the facts of the case which show in personam liability. The defect there was not jurisdictional because the Government had in personam liability for injuries suffered on government-operated merchant vessels. The opinion did not cite Blamberg or discuss jurisdictional requirements when the Government had in rem liability only.

Everett contends that even if the court did not have jurisdiction when the complaint was filed, it acquired jurisdiction when the Galicia Defender returned to United States waters. Everett cites Warren v. United States, 179 F.2d 919 (2d Cir., 1949), rev'd on other grounds, 340 U.S. 523, 71 S.Ct. 432, 95 L.Ed. 503 (1951), and Carroll v. United States, 133 F.2d 690 (2d Cir. 1943). Both Warren and Carroll were cases in which the Government was liable in personam, not in rem, and Warren's holding was limited to venue, not jurisdiction.

Even if the court did acquire jurisdiction, Everett would not be entitled to any relief. The Government would be liable only for the value of the vessel, just as a private demise charterer in an in rem action. See The Minnesota, 20 F.2d 926, 928 (E.D.La.1927). Even before its first complaint was dismissed, Everett had already received all the relief to which it was entitled because it had received its pro rata share of the value of the vessel, based on the priority of its lien.

Everett claims that the United States is liable in damages for the loss in value of its maritime lien. It asserts that during the period that the Galicia Defender was under the time charter, as well as when it was under the demise charter, the vessel was immune from arrest by virtue of Section 741. Everett argues that it was impractical for political and economic reasons to libel the vessel in Vietnam or in any other foreign port and that the Government prevented it from arresting the vessel before the higher priority liens accrued.

In the District Court Everett admitted that it had no legal authority to support this "novel approach". There was nothing to prevent Everett from bringing this action under Section 742 many months earlier when the Galicia Defender was in a port of the United States or from seizing it in a foreign port. The Government is not responsible for the loss in value of Everett's lien caused by its own delay in failing to pursue the remedies allowed by law.

Everett also contends that the Government did not have the right to release the Galicia Defender to its creditors because vessels operated by the United States are immune from in rem execution under Section 741. It relies on Hudson Trading Company v. United States (THE ABERFOIL), 28 F.2d 744 (3rd Cir. 1928).

Section 746 reserves to the United States the benefit of all exemptions and all limitations of liability accorded by law to owners, charterers, operators, or agents of vessels. In our opinion Section 746 qualifies Section 741 and allows the Government to permit judicial seizure of merchant vessels chartered by the Government when necessary to enable it to limit its liability according to law. See 46 U.S.C. Sec. 185. The Court in THE ABERFOIL did not consider the interrelation of these two sections.

To the extent that the majority opinion in THE ABERFOIL holds that the Government could not release the vessel to the lienors and could not waive its immunity under Section 741, we think that the majority opinion is incorrect and choose not to follow it.

Section 742 does not give a lienholder greater rights against the Government than it would have against a private charterer. See McMahon v. Pan American World Airways, Inc., 297 F.2d 268, 269 (5th Cir. 1962); see also State of Maine v. United States, 134 F.2d 574, 575 (1st Cir. 1943), cert. denied, 319 U.S. 772, 63 S.Ct. 1437, 87 L.Ed. 1720 (1943), cited in Allen v. United States, 338 F.2d 160, 162 (9th Cir. 1964), cert. denied, 380 U.S. 961, 85 S.Ct. 1104, 14 L.Ed.2d 152 (1965). Everett was unable to libel the vessel because she was on the high seas, not because it was owned by the United States: Everett would have been equally unable to seize the vessel had it been privately owned. Everett recovered in the in rem action the full amount to which it would have been entitled as a lienholder against a privately operated vessel. It is entitled to no more.

Affirmed.

I respectfully dissent.

The majority reasons that the district court had no jurisdiction to grant relief to Everett because the Galicia Defender was outside the territorial waters of the United States when the original complaint was filed. That complaint alleged that the vessel would be within the geographical jurisdiction of the court during the pendency of the action.

On June 17, 1968, the United States filed an answer in which it admitted that the vessel was expected within the jurisdiction on or about June 26, 1968. It denied that there was any process pending for her arrest at the instance of Everett.1 It also alleged as a separate defense that the court lacked jurisdiction because the vessel was outside the waters of the district.

That defense was not called to the attention of the trial court until August 12, 1969, by a motion for judgment on the pleadings. In the meantime, however, on June 24, 1968, the Galicia Defender entered the territorial waters of the district and proceeded to San Francisco where she arrived at 1918 hours Pacific Daylight Saving Time on June 24, 1968. At the time the motion for judgment on the pleadings was heard on September 12, 1969, the defect that the vessel was outside the jurisdiction had been cured. Indeed, the trial court's order did not even mention this defense of lack of jurisdiction but denied relief for failure of the complaint to allege a cause of action upon which relief could be granted. It allowed Everett twenty days within which to file an amended complaint.2

The order granting summary judgment from which the instant appeal was taken was addressed to that amended complaint. It was filed June 17, 1970. Again, it alleged the existence of facts which would support its claim of a maritime lien,3 the time and demise charters to the United States which prevented Everett from seizing or arresting the Galicia Defender and its reliance therefore upon the Suits in Admiralty Act, 46 U.S.C. Secs. 741, 742 for in personam relief.4 The majority does not consider the problem. It is content with the explanation that section 742 does not give the lienholder "greater rights against the Government than it would have against a private charterer." Since Everett recovered a pro rata share of the proceeds from the in rem proceeding in which it intervened against the ship, the majority say that it is entitled to no more.

But the very purpose of the Act is to permit not only a recovery in rem, but one in personam as well, when the claim is within the framework of the statute. Section 743 provides in part:

"If the libelant so elects in his libel, the suit may proceed in accordance with the principles of libels in rem wherever it shall appear that had the vessel or cargo been privately owned and possessed a libel in rem might have been maintained. Election so to proceed shall not preclude the libelant in any proper case from seeking relief in personam in the same suit. . . ."5

The majority argue that the limitation of liability provision of the Act, 46 U.S.C. Sec. 746, precludes recovery by Everett of any sums in excess of its pro rata share of the total amount of liens against the vessel in the in rem proceeding. They cite McMahon v. Pan American World Airways, Inc., 297 F.2d 268 (5th Cir. 1962). It does not so hold. Nor do any of the cases cited by the Government. What they do hold is that

"The extent of his damages is measured by the value of the vessel at the time his libel is filed, when she could be seized, if privately owned." Hudson Trading Co. v. United States (The Aberfoil), 28 F.2d 744, 747 (3rd Cir. 1928).

Even this quoted liability in rem is placed in question by Eastern Transportation Company v. United States, 272 U.S. 675, 47 S.Ct. 289, 71 L.Ed. 472 (1927), where the offending vessel was a complete wreck, yet in personam liability was sustained without limitation.

Here it is plain that Everett elected to and did proceed in rem; it is also clear that it continued to insist on its in personam remedy against both the United States and against Liberty, the owner under its appointment as husbanding agent. It is entitled to try its case.

I would remand to the trial court for further proceedings consistent with the views expressed herein.