Industrial Equipment & Marine Serv., Inc. v. M/V MR. GUS

• Decision Date: 23 August 1971
• Docket Number: Civ. A. No. 70-C-93.
• Parties: INDUSTRIAL EQUIPMENT AND MARINE SERVICES, INC. v. M/V MR. GUS, her Engines, Machinery, Nets, Tackle, and Apparel, in rem, and Perry F. Smith, Jr., her owner, in personam v. INTERNATIONAL HARVESTER COMPANY.
• Court: U.S. District Court — Southern District of Texas

333 F. Supp. 578

INDUSTRIAL EQUIPMENT AND MARINE SERVICES, INC. v. M/V MR. GUS, her Engines, Machinery, Nets, Tackle, and Apparel, in rem, and Perry F. Smith, Jr., her owner, in personam v. INTERNATIONAL HARVESTER COMPANY.

Civ. A. No. 70-C-93.

United States District Court, S. D. Texas, Corpus Christi Division.

August 23, 1971.

Wm. L. Ellis, Aransas, Pass, Tex., for Industrial Equipment and Marine Services, Inc.

Douglas Tinker, Corpus Christi, Tex., for Mr. Gus, etc. and Mr. Perry F. Smith, Jr.,

James P. Ryan, Corpus Christi, Tex., for International Harvester Company.

MEMORANDUM AND ORDER

OWEN D. COX, District Judge.

Industrial Equipment and Marine Services, Inc., has sued here to enforce, in rem, a preferred ship mortgage dated August 15, 1967, against M/V MR. GUS. It was properly brought in admiralty under Rule 9(h). Detroit Trust Co. v. The Thomas Barlum, 293 U.S. 21, 55 S.Ct. 31, 79 L.Ed. 176. The indebtedness secured by such vessel was evidenced by a promissory note of even date with said mortgage and executed by Defendant Smith in the face amount of $70,000.00. The petition alleges default in the payment of such indebtedness and that all requirements necessary to make the mortgage preferred and a first lien had been complied with and there is no controversy about this.

The promissory note and the preferred ship mortgage had been assigned by Plaintiff to C.I.T. Corporation immediately after execution and delivery, and, on March 10, 1970, said note and mortgage were reassigned to this Plaintiff. As of the date of the reassignment, the balance due on said note and mortgage, principal and interest, was the sum of $32,527.14; said indebtedness continuing to bear interest at the rate of $9.05 per day. In addition, Plaintiff sues for reimbursement of insurance premiums advanced in the amount of $728.02, and for attorney's fees as provided for in the note and mortgage.

Plaintiff also sued Perry F. Smith, Jr., in personam, for any deficiency that remains due the Plaintiff after applying the proceeds of the sale of the vessel to its judgment against the motor vessel MR. GUS. A monition was issued out of this Court against MR. GUS, etc., and thereafter various creditors of the vessel filed their claims. The sale of the vessel for a consideration of $27,500.00 was confirmed.

The answer filed by the Defendant Smith did not allege any defense to the Plaintiff's suit. There was, however, under the same cover, a pleading designated as a "setoff and counterclaim," alleging that Defendant Smith purchased the vessel from Plaintiff and it was not fit for general use in fishing the waters of the Gulf Coast; that, because of such unfitness, the express and implied warranties made to Defendant Smith by the Plaintiff in connection with the sale of the vessel were breached; and that Defendant Smith's inability to fish and earn money and pay off the note resulted in his damage in the amount of $50,000.00. Defendant Smith also prays this cause be "set for trial before a jury," which this Court considers to be a jury demand. If there is still a distinction between a "setoff" and other counterclaims, the claim of Defendant Smith, not being liquidated or capable of liquidation, does not constitute a set off. Marks v. Spitz, 4 F.R.D. 348 (1945).

Here it is important to note that the allegations of such counterclaim present the first indication that Defendant Smith bought the vessel from the Plaintiff. The Plaintiff's cause of action is not based on allegations concerning the sale of the vessel, and its complaint does not refer to it.

Industrial Equipment answered the counterclaim of Defendant Smith and at the same time filed a pleading designated as a third-party complaint against Third Party Defendant International Harvester Company. Although Plaintiff did not object in any way to the counterclaim of Defendant Smith, it is necessary for the Court to consider whether it constitutes a proper pleading as a prelude to any discussion concerning the motion of the Third Party Defendant to strike Plaintiff's second amended third-party complaint.

Assuming there can be a non-maritime compulsory counterclaim in an admiralty case, the status of the counterclaim under Rule 13, Federal Rules of Civil Procedure, whether it is compulsory, depends on the pleadings in this case; that is, whether the counterclaim is compulsory must depend on its relation to the subject matter of the claim sued upon by Plaintiff, as alleged in its complaint. Lawhorn v. Atlantic Refining Company, 5 Cir., 299 F.2d 353, 356 (1962).

The counterclaim appears from the pleadings of Defendant Smith to arise out of a transaction involving the sale of the M/V MR. GUS by Plaintiff to Defendant Smith. The damages sustained by Defendant Smith resulted, as alleged in his counterclaim, from the breach by Industrial Equipment of implied and express warranties as to the fitness of the vessel. The controversy over the breach or lack of breach of warranties by Plaintiff is not maritime in nature and the counterclaim does not state a cause of action within the admiralty jurisdiction of this Court. Grand Banks Fishing Co., Inc., v. Styron, 114 F.Supp. 1 (1953). This alone appears to be a reason for concluding the counterclaim cannot be compulsory. Moreover, even if the admiralty court might otherwise have pendent jurisdiction, we conclude the counterclaim is not a part of the transaction or occurrence arising out of the subject matter of Plaintiff's suit.

The Court recognizes that it may meet with some resistance to this conclusion. In the case of United Fruit Co. v. Standard Fruit and Steamship Co., U.S.D.C., Mass., 282 F.Supp. 338, on page 339, the Court quotes Professor Moore as saying, "Courts should give the phrase `transaction...