BDG Int'l, Inc. v. Bowers

• Decision Date: 11 April 2013
• Docket Number: No. 11CA1581,11CA1581
• Citation: 303 P.3d 140
• Parties: BDG INTERNATIONAL, INC., Plaintiff–Appellee, v. Robert J. BOWERS and Auxiliary Graphic Equipment, Inc., Defendants–Appellants.
• Court: Colorado Court of Appeals

303 P.3d 140

BDG INTERNATIONAL, INC., Plaintiff–Appellee,

v.Robert J. BOWERS and Auxiliary Graphic Equipment, Inc., Defendants–Appellants.

No. 11CA1581

Colorado Court of Appeals,

Div. I.

Announced April 11, 2013

El Paso County District Court No. 10CV1704, Honorable Timothy Schutz, Judge

Machol & Johannes, LLC, Jacques A. Machol, III, Denver, Colorado, for Plaintiff–Appellee

Law Office of Professor Thomas D. Russell, Ph.D., LLC, Thomas D. Russell, Denver, Colorado, for Defendants–Appellants

Opinion by JUDGE TAUBMAN

¶ 1 Defendants, Robert J. Bowers and Auxiliary Graphic Equipment, Inc. (AGE), appeal the judgment entered after a bench trial in favor of plaintiff, BDG International, Inc. (BDG). We affirm.

I. Background

¶ 2 AGE purchased printing presses from a seller in Australia for a client located in Colorado. AGE contracted with Fortner Graphic Solutions, Inc. (Fortner) to dismantle the printing presses and transport them to Colorado. Fortner then subcontracted with BDG and other firms to perform its contractual duties. BDG was responsible for trans-oceanic shipping, and another company was responsible for packing and inland transportation to the client's site in Colorado.

¶ 3 Fortner failed to pay all costs for inland and ocean freight for the dismantling and shipping of the presses. As a consequence, a third party asserted a lien against the presses for packing and inland transportation and assigned its lien rights to BDG. BDG also asserted a lien under Illinois law and a general lien based on the terms of service in its contract with Fortner.

¶ 4 To obtain release of the liens, defendants executed a Cargo Release Guarantee and Extension of Credit. Bowers also executed a Personal Guarantee.

¶ 5 BDG brought this action after defendants failed to make payment as required by these agreements. BDG sought the principal amount due under the agreements, interest, and collection costs of forty percent that it had agreed to pay a third party to obtain payment on the agreements.

¶ 6 Defendants filed a third-party claim against Fortner seeking a judgment against it for any and all damages assessed against them, including interest and attorney fees. Defendants had previously filed a lawsuit in Missouri against Fortner that sought similar relief and had obtained a judgment that included the freight charges.

¶ 7 Following a trial to the court, the court entered a judgment in favor of BDG and against defendants, jointly and severally, in the principal amount of $141,000, plus prejudgment interest of $16,787.11, collection costs of $56,400, and post judgment interest at the rate of eight percent.

II. Jurisdiction Under Maritime Law

¶ 8 Defendants contend that the trial court lacked subject matter jurisdiction over this case because it involved admiralty or maritime law and that exclusive jurisdiction resided with the federal courts. We disagree.

A. Subject Matter Jurisdiction

¶ 9 Subject matter jurisdiction concerns a court's authority to deal with the class of cases in which it renders judgment. Horton v. Suthers, 43 P.3d 611, 615 (Colo.2002). A challenge to a court's subject matter jurisdiction is not waivable, and may be raised for the first time on appeal. Kirbens v. Martinez, 742 P.2d 330, 334 n.8 (Colo.1987). Resolution of this issue is one of law, and our review is de novo. SeePeople v. Valdez, 68 P.3d 484, 485 (Colo.App.2002).

¶ 10 Whether a state court can hear an admiralty case raises an issue of subject matter jurisdiction. See1 Thomas J. Schoenbaum, Admiralty & Maritime Law § 3–2, at 115 (5th ed.2011). Thus, even though the issue has been raised for the first time on appeal, we must address whether the trial court had subject matter jurisdiction to consider this case. SeeKirbens, 742 P.2d at 334 n.8; Matheson v. City of Hoquiam,170 Wash.App. 811, 287 P.3d 619, 623–24 (2012) (addressing whether trial court had subject matter jurisdiction in case where issue of admiralty jurisdiction was raised for first time on appeal); see alsoJarvis & Sons, Inc. v. Int'l Marine Underwriters, 768 N.W.2d 365, 369–70 (Minn.Ct.App.2009) (sua sponte addressing whether case fell within federal admiralty jurisdiction).

B. Jurisdiction Proper in the District Court

¶ 11 The United States Constitution's Admiralty Clause provides that the federal “judicial [p]ower shall extend ... to all [c]ases of admiralty and maritime [j]urisdiction.” U.S. Const. art. III, § 2, cl. 1. Federal law grants the federal district courts “original jurisdiction, exclusive of the courts of the States, of ... [a]ny civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled.” 28 U.S.C. § 1333(1) (emphasis added).

¶ 12 The grant of original jurisdiction to the federal district courts in admiralty and maritime civil cases is exclusive only as to those maritime causes of action begun and carried on as proceedings in rem against a ship or its cargo. SeeMadruga v. Superior Court, 346 U.S. 556, 560, 74 S.Ct. 298, 98 L.Ed. 290 (1954); see alsoRed Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 123–24, 44 S.Ct. 274, 68 L.Ed. 582 (1924). Accordingly, the state courts do not have jurisdiction over in rem proceedings involving admiralty or maritime causes of action. SeeLewis v. Lewis & Clark Marine, Inc., 531 U.S. 438, 452, 121 S.Ct. 993, 148 L.Ed.2d 931 (2001); G. Gilmore & Charles L. Black, Jr., The Law of Admiralty § 1–13, at 38 (2d ed.1975).

¶ 13 The “saving to suitors” clause reserves to the state courts the right of a common law remedy where the common law is competent to give it. See1 Admiralty & Maritime Law § 4–4, at 238; The Law of Admiralty § 1–13, at 37. This clause has been interpreted to provide that if a proceeding is in personam and no remedy is sought against the ship itself, the case is not within the exclusive jurisdiction of the federal courts, and state courts administering common law remedies have concurrent jurisdiction under the saving to suitors clause. SeeRounds v. Cloverport Foundry & Mach. Co., 237 U.S. 303, 308–09, 35 S.Ct. 596, 59 L.Ed. 966 (1915); In re Chimenti, 79 F.3d 534, 537 (6th Cir.1996); 1 Admiralty & Maritime Law § 4–4, at 238 (“[s]ince the common law is competent in all cases where the suit is in personam, a plaintiff in such causes may elect either to proceed in admiralty or to bring an ordinary civil action, either at law in state court or in a federal district court” (footnote omitted)). The saving to suitors clause “allows state courts to entertain in personam maritime causes of action,” subject to the condition that any remedy provided be consistent with federal maritime standards. Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207, 222–23, 106 S.Ct. 2485, 91 L.Ed.2d 174 (1986); Madruga, 346 U.S. at 560–61, 74 S.Ct. 298; see alsoStainless Steel & Metal Mfg. Corp. v. Sacal V.I., Inc., 452 F.Supp. 1073, 1076 (D. Puerto Rico 1978) (“a suitor who holds an in personam claim, which might be enforced by an action in personam in admiralty, may also bring suit, at his election, in the common law courts, that is, by ordinary civil action in the state courts”).

¶ 14 Defendants, citing Deval Denizcilik Ve Ticaret A.S. v. Agenzia TripcovichS.R.L., 513 F.Supp.2d 6 (S.D.N.Y.2007), argue that the agreements at issue here involved maritime contracts, and thus the dispute here must be resolved in the federal courts. In Deval, which involved circumstances similar to this case, the federal district court found that a guarantee issued by a bank to free cargo from the threat of a maritime lien was a maritime contract and that admiralty jurisdiction was proper.

¶ 15 The Deval court, however, did not address whether the federal courts had exclusive jurisdiction or whether a state court would have concurrent jurisdiction under the saving to suitors clause. See,e.g.,Thornes v. Socony Vacuum Oil Co., 37 F.Supp. 616, 616 (S.D.N.Y.1940) (noting that in New York “an action in personam arising out of a maritime contract could be prosecuted in the state courts”); Light v. Schmidt,84 Mich.App. 51, 269 N.W.2d 304, 306–07 (1978) (holding that maritime contract fell within saving to suitors clause and that jurisdiction was proper in the state court); Jarvis & Sons, 768 N.W.2d at 369–70 (concluding that state jurisdiction was proper under the saving to suitors clause because action was brought in personam).

¶ 16 Thus, although Deval supports defendants' position that the agreements here are maritime in nature, we do not find the decision to be persuasive on the issue of exclusivity of federal jurisdiction.

¶ 17 Defendants also argue that based on the decision in Logistics Management, Inc. v. One (1) Pyramid Tent Arena, 86 F.3d 908, 914 (9th Cir.1996), BDG was a non-vessel operating common carrier (NVOCC) ¹ and could assert an in rem maritime lien for unpaid freight against the cargo it was responsible for transporting. Thus, because the underlying agreements here are founded upon in rem obligations and rights, they argue that this action is also in rem in nature and subject matter jurisdiction lies exclusively with the federal courts. However, we find Logistics distinguishable because the NVOCC in that case asserted an action in rem against the cargo rather than, as here, an action in personam to obtain payment under a set of agreements.

¶ 18 Additionally, the mere fact that BDG could have asserted a maritime lien does not automatically confer the same status to the agreements at issue here. SeeGreat E. Shipping Co. v. Binani Cement Ltd., 655 F.Supp.2d 395, 398 (S.D.N.Y.2009) (noting that courts will not look to the subject matter of the original contract to find a maritime connection). A particular agreement or transaction may give rise to both personal liability and a maritime lien. See The Law of Admiralty § 1–12, at 36. Furthermore, each agreement or transaction must be reviewed separately to determine its status. See1 Admiralty & Maritime Law § 3–10, at 183–84,...