Black Diamond Corporation v. Robert Stewart Sons United States v. Robert Stewart Sons

• Citation: 336 U.S. 386,93 L.Ed. 754,69 S.Ct. 622
• Decision Date: 14 March 1949
• Docket Number: Nos. 121 and 130,s. 121 and 130
• Parties: BLACK DIAMOND S. S. CORPORATION v. ROBERT STEWART & SONS, Limited, et al. UNITED STATES v. ROBERT STEWART & SONS, Limited, et al
• Court: United States Supreme Court

336 U.S. 386

69 S.Ct. 622

93 L.Ed. 754

BLACK DIAMOND S. S. CORPORATION

v ROBERT STEWART & SONS, Limited, et al.

UNITED STATES

v. ROBERT STEWART & SONS, Limited, et al.

Nos. 121 and 130.

Argued Jan. 3, 4, 1949.

Decided March 14, 1949.

Judgment Amended June 13, 1949.

See 69 S.Ct. 1490.

Mr. John W. Crandall, of New York City, for Black Diamond S. S. corp.

Mr. Philip Elman, of Washington, D.C., for the United States.

[Argument of Counsel from page 387 intentionally omitted] Mr. W. G. Symmers, of New York City, for respondents.

Mr. Justice FRANKFURTER delivered the opinion of the Court.

We brought these cases here because they call for determination of important issues in the administration of admiralty law. 335 U.S. 809, 69 S.Ct. 40. They bring for review a decree of the Court of Appeals for the Second Circuit affirming the dismissal of a petition for limited liability brought in the United States District Court for the Eastern District of New York by the United States, as owner and the Black Diamond Steamship Corporation as bareboat charterer of the S. S. Norwalk Victory. 167 F.2d 308.

The facts controlling our decision are riefly these. On April 28, 1947, the Norwalk Victory, while proceeding down the Schelde River in the territorial waters of Belgium, collided with the British steamer Merganser. The Merganser sank with all her cargo; her chief steward was killed; in backing away from the Merganser the Norwalk Victory struck and damaged the bank of the Schelde. Soon after the collision the owners of the Merganser brought suit against Black Diamond in the High Court of Justice of England claiming damages in the amount of $1,000,000. That is the only proceeding which has been brought abroad. On October 14, 1947, the owners of the cargo lost in the sinking of the Merganser brought suit in the Eastern District of New York; aggregate claims thus far filed total nearly $1,000,000.

In their petition for limitation of liability, brought under R.S. § 4285, as amended, 49 Stat. 1480, 46 U.S.C. s 185, 46 U.S.C.A. § 185,¹ the United States and Black Diamond allege the possibility that in addition to the suit in the High Court of Justice and the suits by the cargo owners in New York, there may be suits in the courts of the United States by other cargo owners, by the personal representative of the Merganser's chief steward, and by the Belgian Government for damages to the bank of the Schelde and for the cost of removing the wreck of the Merganser from the river. These claims, they say, would exceed the value of the Norwalk Victory, which is about $1,000,000. But the petitioners, despite the provisions of R.S. § 4283, as amended, 49 Stat. 1479, 46 U.S.C. § 183, 46 U.S.C.A. § 183,² do not rec- ognize the value of their ship as the limit of their liability. They insist, rather, that their liability is limited by the International Convention for the Unification of Certain Rules relating to the Limitation of the Liability of Owners of Seagoing Vessels, signed at Brussels on August 25, 1924.³ The Convention was ratified by Belgium on June 2, 1930, and took effect on June 2, 1931; it is alleged, therefore, to have been part of the territorial law of Belgium at the time of this collision in Belgian waters. On the basis of this Convention, the petitioners assert their maximum liability to be $325,028.79.

Accordingly, Black Diamond accompanied its petition for limitation of liability with a bond in the amount of $325,028.79. The United States, standing upon 28 U.S.C. § 2408, 28 U.S.C.A. § 2408,⁴ and § 3 of the Suits in Admiralty Act, 41 Stat. 526, as amended, 46 U.S.C. § 743, 46 U.S.C.A. § 743, ⁵ filed no bond. The District Court, holding that the privilege of limiting liability relates 'not to the substantive rights giving rise to the liability, but to the remedy, and that is governed by the law of the forum,' dismissed the petition of the ground that Black Diamond had not complied with R.S s 4285 by filing a bond in the amount of the value of the ship $1,000,000. The standing of the United States (which was not separately represented at that stage of the proceeding) was not considered.

Upon appeal, the petitioners were found to be in 'a dilemma from which they cannot escape.' 2 Cir., 167 F.2d at page 309. Reading the petition as alleging that the Belgian limitation attached to the claimants' substantive right to recover, and treating that allegation as proved for purposes of determining the sufficiency of the petition, the Court accepted arguendo the sum of $325,000 as 'the limit of all their (petitioners') liabilities.' Id. But though the Court of Appeals looked to the lex loci delicti for the substantive limit of liability, its next step was taken on the assumption that the conditions under which a petition praying for the injunction of other proceedings and a forum concursus may be filed are matte § of procedure governed by the lex fori. It is a condition imposed by the lex fori, the court's reasoning continued, that a petition for limitation of liability is not available to a shipowner unless the aggregate of known and probable claims against him is greater than the value of his ship. As establishing this proposition, the court cited The Aquitania, 2 Cir., 20 F.2d 457; Curtis Bay Towing Co. v. Tug Kevin Moran, Inc., 2 Cir., 159 F.2d 273; and The George W. Fields, D.C.S.D.N.Y., 237 F. 403. And it held these cases applicable on the ground that the maximum liability imposed by Belgian law was less than the value of the Norwalk Victory.

But the lower court found it unnecessary to pass finally on the question whether the Belgian limitation was in fact controlling because, if it were not, petitioners would be impaled on the other horn of the dilemma: if the substantive law of the forum rather than that of Belgium applied, the limit of liability, by R.S. § 4283, would be the value of the vessel. Since the procedural law of the forum, moreover, requires the posting of a bond in the amount of potential liability, and since the bond proposed by petitioners was for less than a third of that amount, upon this hypothesis also they were disentitled to proceed. The Court of Appeals accordingly affirmed the dismissal of the petition.

If the Court of Appeals' reliance upon The Aquitania, Curtis Bay Towing Co. v. Tug Kevin Moran, and The George W. Fields, supra, was, as we are convinced, under the circumstances misplaced, we escape its dilemma without wanting in respect for the wisdom of that most experienced of admiralty courts. Those cases, it is true, hold that where the aggregate claims against a shipowner can by no possibility exceed the value of his ship, a proceeding under R.S. § 4285 will not lie. But the value of the ship was relevant in those cases only because under the law of the United States, which was assumed to be applicable, that was the limit of the owner's liability. Since the total amount of all potential claims in each case was only a fraction of that limit, the fund available for their satisfaction was more than ample. There was no reason, therefore, for permitting the petitioners to invoke a forum concursus. But where, as here, the total amount of potential claims exceeds the fund available for their satisfaction, whether that fund be measured by the law of Belgium or of the United States, there exists just such a situation as R.S. § 4285 was designed to meet.

'Unless some proceeding of this kind were adopted which should bring all the parties interested into one litigation, and all the claimants into concourse for a pro rata distribution of the common fund, it is manifest that in most cases the benefits of the act could never be realized. Cases might occur, it is true, in which the shipowners could avail themselves of those benefits, by way of defense alone, as where both ship and freight are totally lost, so that the owners are relieved from all liability whatever. But even in that case, in the absence of a remedy by which they could obtain a decree of exemption as to all claimants, they would be liable to a diversity of suits, brought, perhaps, in different states, after long periods of time, when the witnesses have been dispersed, and issuing in contrary results before different tribunals; while in the ordinary cases, where a limited liability to some extent exists, but to an amount less than the aggregate claims for damages, so as to require a concourse of claimants and a pro rata distribution, the prosecution of separate suits, if allowed to proceed, would result in a subversion of the whole object and scheme of the statute.' Providence & N.Y.S.S. Co. v. Hill Mfg. Co., 109 U.S. 578, 594—595, 3 S.Ct. 379, 389, 390, 27 L.Ed. 1038.

Indeed, if the total amount recoverable is fixed by Belgian law, the need for the issuance of a motion under Admiralty Rule 51, 28 U.S.C.A., the injunction of other suits, and a forum concursus is obviously greater than it is under the higher substantive limitation of our own law. Thus one of the horns of petitioners' dilemma disappears; we must, accordingly, reverse the judgment below and remand the cases for further proceedings.

Since the cases are going back, it is necessary to confront the other horn of the dilemma. In that branch of its reasoning, the Court of Appeals assumed that the posting of too small a bond would require the dismissal of the petition. The court's attention apparently was not directed to the status of the Government, which, by the plain import of 28 U.S.C. § 2408, 28 U.S.C.A. § 2408,⁶ and 41 Stat. 526, as amended, 46 U.S.C. § 743, 46 U.S.C.A. § 743, ⁷ relieves it of the duty to post a bond in order to be entitled to proceed under R.S. § 4285. And perhaps it is well to add, in passing, that, in view of the six-month limitation⁸ on proceeding under that statute, remand to the District Court in order to give Black Diamond an opportunity to file a larger bond would have been a better course, since the defect was not jurisdictional, than affirmance...