The Gloria

• Citation: 286 F. 188
• Parties: THE GLORIA. THE THEKLA. THE F. J. LUCKENBACH. KINGDOM OF NORWAY v. FEDERAL SUGAR REFINING CO.
• Decision Date: 15 January 1923
• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

286 F. 188

THE GLORIA. THE THEKLA. THE F. J. LUCKENBACH. KINGDOM OF NORWAY v. FEDERAL SUGAR REFINING CO.

United States District Court, S.D. New York.

January 15, 1923

Case I:

Haight Sandford & Smith, of New York City (Herbert K. Stockton, of New York City, of counsel), for the Gloria and Aktiebolaget Urania.

William Hayward, U.S. Atty., of New York City (Horace M. Gray, Sp Asst. U.S. Atty. in Admiralty, of New York City, of counsel) for United States, special claimant of the Freedom.

James W. Ryan and Bigham, Englar & Jones, all of New York City amici curiae.

Case II:

William Hayward, U.S. Atty., of New York City (John Hunter, of New York City, of counsel), for libelants.

Haight, Smith, Griffin & Deming, of New York City, for libelants Samuelsen and others.

Cas III:

Haight, Smith, Griffin & Deming, of New York (Herbert K. Stockton, of New York City, of counsel), for plaintiff.

Ernest A. Bigelow, of New York City, for defendant.

MACK Circuit Judge.

These three cases involve the question of the existence and extent of the right of cross-libel and counterclaim in legal proceedings instituted by or on behalf of a sovereign state.

Case I. The proceedings herein arose from a collision on May 5, 1919, between the Norwegian steamship Gloria and the United States steamship Freedom. The Freedom was the former German steamship Wittekind, which was seized by the United States under the joint resolution of Congress, approved by the President March 12, 1917, and under the executive order of the President, issued pursuant thereto, dated June 30, 1917. At the time of the collision the Freedom was manned by a crew of the United States Navy and was being used solely in the transportation of troops. ^[1] On May 8, 1919, a libel was filed by the United States against the steamship Gloria for damages, alleged to amount to $35,000, and process of arrest was issued. On May 21, 1919, Aktiebolaget Urania filed a claim to the Gloria, and subsequently filed a cross-libel against the Freedom for damages alleged to amount to $75,000. On June 27, 1919, the United States filed a suggestion of want of jurisdiction; whereupon the claimant of the Gloria moved that all proceedings under the libel filed by the United States be stayed until the United States should give security, as was alleged to be required by admiralty rule 53 (267 F. xx) to answer the cross-libel. On July 17, 1919, the suggestion of the government and the motion of the claimant came on to be heard by this court, and Judge Learned Hand ordered that the libel and cross-libel be consolidated into one suit, that the government's motion for the dismissal of the cross-libel be denied, and that under rule 53 proceedings under the original libel be stayed until the government should furnish security to answer the cross-libel. It should be noted that Judge Hand expressly held that, although the Freedom was immune from arrest while in the possession of the United States, the cross-libel would none the less be entertained. 267 F. 929. The United States thereafter filed a stipulation for value in the sum of $75,000, executed by the Emergency Fleet Corporation. On October 27, 1920, the government obtained an order canceling this stipulation and substituting in lieu thereof the provisions of the Suits in Admiralty Act of March 9, 1920 (41 Stat. 525). On May 12, 1922, the United States filed a further suggestion of lack of jurisdiction, calling the court's attention to the decision handed down by the Supreme Court on January 3, 1922, in the case of the The Western Maid, 257 U.S. 419, 42 Sup.Ct. 159, 66 L.Ed. 299, and praying that the cross-libel be dismissed. This motion is now to be decided

Case II. This case now comes before the court on a motion for a final decree on the cross-libel, pursuant to the report of the commissioner appointed by the court, in an interlocutory decree to assess the damages sustained by the bark Thekla in collision with the steamship F. J. Luckenbach on February 13, 1918. The steamship F. J. Luckenbach was at the time of the collision owned by the Luckenbach Steamship Company, but was under the so-called bare boat form of requisition charter to the United States, and was manned and operated by naval officers and crew and engaged in the transport service, carrying supplies for the United States Army. The Luckenbach Steamship Company filed a libel against the Thekla on May 13, 1918. The owners of the Thekla thereupon filed a cross-libel against the F. J. Luckenbach, and moved under rule 53 for an order staying proceedings upon the original libel until security for the cross-libel was given. The motion was heard before Judge Hough, who entered an order staying the proceedings until security in the amount of $130,000 to answer the cross-libel should be given. Accordingly a stipulation for value in that amount was executed by the Emergency Fleet Corporation. In May, 1919, on motion of the United States attorney, the United States was made a party libelant in the cause. Answers were filed to the libel and cross-libel, and the cause proceeded to trial before me. The collision was found to be due solely to the fault of the F. J. Luckenbach. The original libel was therefore dismissed. In respect to the cross-libel, after argument, the court held that the United States had submitted fully to the jurisdiction of the court by filing or causing to be filed the bond required to prevent a stay of all proceedings in the libel suit, to which it had been admitted as a colibelant, and that the cross-libel must be sustained. A reference was ordered to assess the damages. 267 F. 929. The case, as stated, is now before the court on motion for final decree on the cross-libel for damages assessed on the reference. Case II appears, therefore, to involve the identical question as case I.

Case III. Case III is somewhat different from cases I and II. Case III is a suit at law by the plaintiff, the kingdom of Norway, a sovereign state, for money had and received in the alleged sum of $165,000, on the ground that the defendant has been unjustly enriched by the receipt of money which equitably is alleged to belong to the plaintiff. The complaint may be briefly summarized: The kingdom of Norway had, through its Food Commission, contracted with the defendant, the Federal Sugar Refining Company, to purchase 4,500 tons of refined sugar at $6.60 per hundredweight. Although the plaintiff was in great need of sugar to feed its people, it was prevented from receiving sugar under its contract, by reason of the embargo placed on the export of sugar by the United States government. On account of this embargo it was agreed between the plaintiff and the defendant that the time for the performance of their contract should be extended, and that the price should equal that fixed by the government for the market at the time delivery was actually made. It is alleged that the United States Sugar Equalization Board, Inc., a corporation organized and controlled by the Food Administration of the United States, which owned and held all the capital stock thereof, procured the government of the United States to refuse to license the export of sugar under the plaintiff's contract with the defendant, and that in the meantime the market price as fixed by the government rose to $8.12 per hundredweight. The United States Sugar Equalization Board is alleged to have taken advantage of the necessities of the plaintiff, and to have sold the plaintiff 4,500 tons of refined sugar at $11 per hundredweight, an extortionate price, $2.88 per hundredweight above the price fixed by the government. It is stated that the defendant herein, the Federal Sugar Refining Company, brought suit against the United States Sugar Equalization Board for tortious interference with its contract with the kingdom of Norway, and that on demurrer it was held by this court (Federal Sugar Refining Co. v. U.S. Sugar Equalization Board, 268 F. 575) that the complaint stated a good cause of action. Before trial a settlement was effected, and the kingdom of Norway contends that $165,000 collected by the defendant from the Equalization Board represented the money unjustly exacted from the plaintiff by the Equalization Board when it took advantage of the plaintiff's necessities to extort an unfair and improper price for its sugar. It is maintained that the defendant in fact did not suffer the loss or damage for which the compensation was paid, and that the sum of $165,000 collected from the Equalization Board is money had and received to the use of the plaintiff, to which money the plaintiff is equitably entitled.

The defendant has filed a counterclaim, setting up that the plaintiff, the kingdom of Norway, has, without legal excuse failed to perform its contract for the purchase of 4,500 tons of sugar, whereby the defendant sustained damage in the sum of $219,000, for which judgment is asked. The case is now before the court on the motion of the plaintiff, the kingdom of Norway, to restrict the answer and counterclaim to such matters and to such amount as may properly be pleaded as a set-off to the plaintiff's cause of action. Although counsel for the defendant has contended that under section 266 of the New York Civil Practice Act, printed in the footnote, ^[2] he is not limited, even in filing a counterclaim against a friendly sovereign state, to a cause of action arising out of the contract or transaction as set forth in the complaint as the foundation of the plaintiff's claim or connected with the subject of the action, still it would seem clear that, if it were necessary that the counterclaim arise out of the same transaction as the original complaint, under a fair and liberal construction of the act, this counterclaim could be regarded as so...