Central Hudson Gas & Elec. Corp. v. Empresa Naviera Santa S.A.

• Decision Date: 17 May 1995
• Docket Number: D,No. 513,513
• Citation: 56 F.3d 359
• Court: U.S. Court of Appeals — Second Circuit
• Parties: CENTRAL HUDSON GAS & ELECTRIC CORPORATION, Plaintiff-Appellee, v. EMPRESA NAVIERA SANTA S.A., Defendant-Appellant. ocket 94-7477.

Page 359

56 F.3d 359

1996 A.M.C. 163

CENTRAL HUDSON GAS & ELECTRIC CORPORATION, Plaintiff-Appellee, v. EMPRESA NAVIERA SANTA S.A., Defendant-Appellant.

No. 513, Docket 94-7477.

United States Court of Appeals Second Circuit.

Argued Dec. 16, 1994.

Decided May 17, 1995.

Richard A. Corwin, New York City (Lynne A. Borchers, Walker & Corsa, New York City, of counsel), for appellant.

Mark C. Flavin, New York City (James H. Hohenstein, Timothy J. McDonnell, Haight, Gardner, Poor & Havens, New York City, of counsel), for appellee.

Before: FEINBERG, MESKILL and JACOBS, Circuit Judges.

MESKILL, Circuit Judge:

This appeal involves the interplay of the doctrines of res judicata and collateral estoppel within the confines of admiralty jurisdiction. Empresa Naviera Santa S.A. (Empresa) appeals the decision of the United States District Court for the Southern District of New York, Broderick, J., entering summary judgment against Empresa in personam following a judgment in rem against a vessel chartered by Empresa. As we find that res judicata does not bar the claims asserted, and that Empresa is collaterally estopped from contesting the district court's prior determinations, we affirm.

BACKGROUND

This case arose on January 16, 1988 when the M/V LUNAMAR II (the Vessel), a motor tanker flying the Panamanian flag, dragged an anchor on a voyage up the Hudson River, thereby damaging an electrical cable pipeline owned by Central Hudson Gas & Electric Corporation (Central Hudson). Central Hudson filed suit against the Vessel in rem and Seiriki One (Panama) S.A. (Seiriki), the Vessel's registered owner, three days later (the in rem action). On January 21, 1988 the Vessel's underwriters delivered a $3 million letter of undertaking to Central Hudson to avoid the arrest of the Vessel. The letter, moreover, constituted only an estimate of the damage to the cable pipeline, given that the portion of the river where the accident occurred was frozen and a more accurate estimate could not be obtained immediately.

Although the Vessel's crew had stated that they were employed by Empresa, a foreign corporation operating the Vessel as bareboat charterparty, the letter of undertaking was executed on behalf of Seiriki as registered owner and did not expressly include any charterparties. Central Hudson thereafter sought to determine the party or parties in control of the Vessel by filing an interrogatory during discovery requesting the names of all of its charterparties. The defendants in the in rem action did not respond to this interrogatory, even after having been ordered to do so by a magistrate judge on May 2, 1989. On July 3, 1990, however, shortly before trial of the in rem action, Seiriki and Empresa filed restricted appearances as the Vessel's registered owner and owner "pro hac vice," respectively, pursuant to Rule E(8) of the Supplemental Rules for Certain Admiralty and Maritime Claims of the Federal Rules of Civil Procedure (Supplemental Rules). In filing the restricted appearance Empresa confirmed its relationship to the Vessel for the first time.

A bench trial of the in rem action then commenced on July 31, 1990. Seiriki and Empresa participated in the defense of the Vessel in their representative capacities. On October 3, 1990, following the conclusion of the trial but prior to the entry of the district court's decision, Central Hudson filed a quasi in rem action in Louisiana to attach the SANTA ROSA de LIMA (SANTA ROSA), another ship operated by Empresa. Additionally on that date Central Hudson filed an in personam suit against Empresa in the Southern District of New York. Both actions alleged that Empresa was personally liable for the damage to the cable pipeline. The two actions were consolidated in the Southern District before Judge Broderick and were placed in abeyance pending his decision in the in rem action. The district court issued its findings in the in rem action on April 7, 1992, dismissing the in personam claim against Seiriki for lack of service and finding the Vessel liable on the in rem claim. On September 9, 1992 the court entered judgment in the amount of $4,477,584.15, constituting approximately $3.37 million in damages and $1.1 million in prejudgment interest, together with costs. We affirmed that decision. See Central Hudson Gas & Elec. Corp. v. M/V LUNAMAR II, 797 F.Supp. 1244 (S.D.N.Y.1992) (LUNAMAR II ), aff'd mem., 993 F.2d 1534 (2d Cir.1993). The judgment was only partially satisfied through the $3 million letter of undertaking, and an amount of $1,486,134.44 remained unsatisfied.

Judge Broderick then activated the consolidated in personam and quasi in rem cases. Empresa moved to dismiss both cases and to vacate the attachment of the SANTA ROSA, arguing that under the doctrine of res judicata the in rem judgment against the Vessel barred the subsequent lawsuits. Central Hudson cross-moved for summary judgment, arguing that Empresa was collaterally estopped from relitigating the issues of liability and damages. Judge Broderick denied Empresa's motions and entered summary judgment in favor of Central Hudson, concluding that the consolidated action was, in essence, simply composed of lawsuits filed to collect on the unpaid portion of the in rem judgment. Judge Broderick also rejected Empresa's argument that Central Hudson could not pursue both in rem and in personam claims for the same injury. The district court then awarded prejudgment interest of $364,761.39 on the $1,486,134.44 remaining unpaid from the in rem judgment, and entered

judgment against Empresa for the total of $1,850,895.83. Empresa now appeals.

DISCUSSION

The well established standard for reviewing a grant of summary judgment requires us to draw all inferences in favor of the non-moving party. See Sure-Snap Corp. v. State Street Bank and Trust Co., 948 F.2d 869, 872 (2d Cir.1991). Reviewing de novo the question whether any genuine issues of material fact exist, we affirm only when it is clear no reasonable trier of fact could find in favor of appellant. See H.L. Hayden Co. v. Siemens Medical Sys., 879 F.2d 1005, 1011 (2d Cir.1989).

I. Jurisdiction

Empresa initially contends that in the prior action the district court possessed jurisdiction only to the extent of the value of the res or the amount of any bond substituted therefor, and thus lacked jurisdiction to enter a judgment in excess of the value of the $3 million letter of undertaking. Indeed, Empresa points to the rule that "an in rem action is an action against the arrested res itself and any judgment is thus limited to the value thereof or the value of the bond or stipulation substituted for the res to obtain its release." 7A James Wm. Moore, Moore's Federal Practice p E.16 at E-779 (2d ed. 1995) (footnote omitted; emphasis added).

While this rule generally governs in rem actions, it is axiomatic that a district court sitting in admiralty exercises "powers akin to those of a court of equity." The MINNETONKA, 146 F. 509, 515 (2d Cir.), cert. denied, 203 U.S. 589, 27 S.Ct. 777, 51 L.Ed. 330 (1906). By virtue of those powers, a court possesses jurisdiction to enter judgment in excess of the value of an arrested res. Indeed, as we explained in MINNETONKA, "[a] court of admiralty ... should not be hampered in its efforts to reach ... substantial justice." Id.; see also Mosher v. Tate, 182 F.2d 475, 479 (9th Cir.1950) ("[W]e think that under all of the circumstances of this case and in order to achieve substantial justice the trial court has power to enter a personal decree against appellees without any additional service of process or supplemental libel."); The FAIRISLE, 76 F.Supp. 27, 32 (D.Md.1947) (holding "no principle of admiralty law ... prohibits this Court from rendering a decree against claimant for the total amount of the award," even where award exceeds amount of bond posted as security), aff'd sub nom. Waterman S.S. Corp. v. Dean, 171 F.2d 408 (4th Cir.1948); see generally 7A Moore's Federal Practice p E.16 at E-780 ("[I]n some instances the owner or claimant who procures the release of the res or who enters a restricted appearance to defend the res may be held personally accountable for damages in excess of the value of the arrested res or the substitute bond or stipulation provided to obtain its release."). ¹ We find, under the circumstances of this case, that the district court properly exercised its authority as an admiralty court to enter a judgment in excess of the value of the letter of undertaking.

In essence, Empresa's argument rests on a confusion between damages and liability. The district court's decision in LUNAMAR II determined that the damage to Central Hudson's cable pipeline was caused by the Vessel, and calculated the value of this damage at $4,477,584.15. This factual finding became final when we affirmed that judgment. See In re PCH Assocs., 949 F.2d 585, 593 (2d Cir.1991) (where district court determined issue in earlier case and where appellate court did not disapprove, it was law of the case). Thus, the amount of Central Hudson's damages is not at issue here.

The question, rather, is whether Central Hudson can collect on the unrecovered portion of the in rem judgment from Empresa in this in personam action. Central Hudson cannot, of course, simply execute on the in rem judgment against a defendant not yet found to be liable. See Cooper v. Reynolds, 77 U.S. (10 Wall.) 308, 318, 19 L.Ed. 931 (1870) ("[T]he judgment of the court, though in form a personal judgment against the defendant, has no effect beyond the property attached in that suit. No general execution can be issued for any balance unpaid after the attached property is exhausted."). Therefore, Empresa must be found liable in personam before it can be held responsible for the uncollected portion of the in rem judgment. This requirement, however, is legally distinct from the issue of whether the district court possessed the authority to enter judgment in excess of the value of...