Criscuolo v. Atlas Imperial Diesel Engine Co., 7627.

Decision Date15 June 1936
Docket NumberNo. 7627.,7627.
PartiesCRISCUOLO et ux. v. ATLAS IMPERIAL DIESEL ENGINE CO. et al.
CourtU.S. Court of Appeals — Ninth Circuit

H. W. Hutton, of San Francisco, Cal., for appellants.

Thomas A. Thacher, Harrison A. Jones, and W. Kevin Casey, all of San Francisco, Cal., for appellees.

Before WILBUR, DENMAN, and MATHEWS, Circuit Judges.

DENMAN, Circuit Judge.

This is an appeal from a decree in equity. Appellants' bill alleges they are owners and payees of a promissory note from a former owner of the oil screw General Pershing, secured by a mortgage of the vessel made before launching and recorded in the recorder's office in Monterey county, where the vessel was under construction. The bill sought to impose a trust upon the funds received by the appellee Atlas Imperial Diesel Engine Company from a sale of the vessel made in an admiralty proceeding in rem commenced and litigated in the same District Court, on the ground, first, that the decree and sale were void for want of jurisdiction in rem, and, second, that if the decree is valid, fraud was committed on appellants in its procurement.

The libel was filed on the claim of a repairman for $83.90 against the oil screw General Pershing. Monition was issued, the vessel seized by the marshal, a purported publication of a notice of the seizure and of the monition was given, and thus jurisdiction sought to be obtained. Proclamation was made and the owner did not appear. But one party appeared, the Atlas Company, claiming to have a nonmaritime mortgage on the vessel. The owner and all other claimants were defaulted. A decree was made in favor of the libelant for its claim of $83.90 and it was declared a lien upon the vessel. Prior to the entry of the default, the Atlas Company petitioned to share in the proceeds of any sale of the vessel by virtue of its claimed nonmaritime mortgage securing a promissory note alleged to be unpaid and amounting, with interest, to $7,194.14 on the day of the entry of the default.

The evidence shows that the maritime claimant for $83.90 and the nonmaritime mortgage claimant, which could not file a libel itself, U. S. v. Rizzo, 297 U.S. 530, 56 S.Ct. 580, 80 L.Ed. 844, made common cause and had the same proctors throughout the prosecution of the libel. This proceeding, if successful, enabled the Atlas Company to litigate its $7,194.14 mortgage claim in the United States court in admiralty, which otherwise it would have been obliged to litigate in equity in the state court, both the parties to the note and mortgage being citizens of the state of California. Likewise, it subjected other nonmaritime mortgages to admiralty, with its mere seizure and limited publication and absence of personal service in obtaining jurisdiction of the res.

The decree, after finding the amount due upon the mortgage note to the Atlas Company, ordered a sale of the vessel. The marshal gave a purported notice of sale and his return shows that the vessel was sold for $3,000.

The appellants claim that jurisdiction in rem was never acquired for adjudication of the maritime lien claimed for $83.90 against the owner or against any person who would be affected by an adjudication of the maritime liens on the vessel or for the adjudication of claims of the nonmaritime liens against the proceeds of the sale in the registry. Obviously, if this claim of failure to acquire jurisdiction in rem is well founded the decree in the admiralty proceeding is void. All of the admiralty proceeding that remains as valid and alive is the pending libel of the supplier on his maritime lien. While the marshal may or may not be empowered to regain possession of the res, he no longer holds it in the custody of the court.

If the appellants' contention that the proceedings after the filing of the libel are invalid and the decree is void is correct, it is apparent that appellants have not been prejudiced. At all times since the admiralty court lost possession they have been free to bring their suit to foreclose their lien in a proper tribunal in a proceeding in equity.

Our analysis of the facts agrees with appellants' contention that the court never acquired jurisdiction in rem to take any action whatsoever in the determination of the liens on the ship or claims against the funds in the registry. It is, therefore, unnecessary for us to consider appellants' further contention that if the decree and sale be valid, the Atlas Company should hold the funds received from the sale impressed with a trust obligation to appellants arising out of alleged fraud committed by the Atlas Company in the process of the maritime litigation.

Appellants' claim of failure to acquire jurisdiction in the admiralty proceeding is based upon the facts pleaded in the answer of the Atlas Company. After pleading in detail all of the steps in attempting to acquire jurisdiction in rem, the Atlas Company's answer alleges: "* * * that reference is hereby made to the records, papers and pleadings on file in said admiralty cause for a more detailed description and account of the proceedings therein."

The last clause impleaded the "records, papers and pleadings" in the admiralty cause pending in the same District Court and hence that court could consider them in determining the tendered issue of fact. Aspen Mining & Smelting Co. v. Billings, 150 U.S. 31, 38, 14 S.Ct. 4, 37 L.Ed. 986; National Fire Ins. Co. v. Thompson, 281 U.S. 331, 336, 50 S.Ct. 288, 74 L.Ed. 881. These records, papers, and documents so made a part of the pleadings were not incorporated in the transcript on appeal and this court has required their production by an order which is, in effect, in diminution of the record. To fail so to do would have one pleading before the trial court and another on appeal.

Concerning these proceedings in the admiralty case, the appellants assign and specify error as follows:

"* * * in not finding and deciding that such proceedings as were taken in such proceeding were unlawful and void, * * *

"The Court erred in finding and deciding that all procedure and other steps required by law or the Admiralty Rules to be taken therein were duly taken and that all notices required by law or the Admiralty Rules to be given or published were duly given and published. * * *

"The Court erred in finding and deciding that plaintiffs either unreasonably or without adequate cause, and/or to the prejudice of the defendants, failed to appear, or to assert or file their claim, or to contest that of libelant T. F. Russell, or that of intervening libelant, Atlas Imperial Diesel Engine Co., or to oppose the sale of the vessel `General Pershing' or the alleged or claimed confirmation of such sale or to take any steps whatsoever in the admiralty proceeding aforesaid, and erred in finding and deciding that no adequate or legal or equitable excuse for said or any failure to do so has been shown herein. * * *

"The Court erred in not finding and deciding that the violations of the admiralty rules relating to the sale of property in an admiralty proceeding herein did not deprive the plaintiffs of their legal rights under their mortgage.

"The Court erred in not finding and deciding that plaintiffs were deprived of their rights to intervene against the proceeds of the sale of the vessel `General Pershing' by the violation of the Rules in Admiralty relating to sales.

"The Court erred in not finding and deciding that the notice required by law on the seizure of a vessel in an admiralty proceeding herein was not given."

To obtain jurisdiction to proceed to a decree in rem in admiralty, there are two essential requirements. First, the vessel must come into the possession of the court by seizure under adequate warrant of arrest. The Berkeley (D.C.) 58 F. 920. This gives jurisdiction of the subject-matter of the libel and over the res. Before the court has power to make a decree depriving the owner or any lienor not appearing of his interest in the res, a second step must be taken. This second requirement is the public notice of such seizure and the pendency of the action as required by the rules of the Supreme Court and of the District Court in which the libel is filed. The giving of notice is as essential to the power to proceed to decree affecting the non-appearing owner or a lienor as is the seizure. Bailey v. Sundberg (C.C.A. 2) 49 F. 583, certiorari denied 154 U.S. 494, 14 S.Ct. 1142, 38 L.Ed. 1078; The Harrogate (C.C.A.2) 112 F. 1019, certiorari denied 184 U.S. 698, 22 S.Ct. 937, 46 L.Ed. 764.

In both these cases the Circuit Court of Appeals determined that proceedings in prior libels in rem adjudicated nothing against nonappearing parties having rights in rem against the seized vessel, because no public notice of the seizure was given as required by the rules of court. The prior proceeding in rem in the Sundberg Case, supra, was a libel against the steamship Newport by the owners of the schooner Shaw for damages resulting from a collision between the two vessels.

"Process was issued on that day, in the usual form, to the marshal of the court, requiring him to attach the steam-ship and to give due notice to all persons having anything to say, why she should not be condemned and sold, to appear in the district court on the 13th day of May then next, and interpose their claims and make their allegations. The process was executed by the marshal only so far as to attach the steam-ship. He did not publish or otherwise give any notice, and there was no proclamation or default on the return-day. Prior to the return-day of the process the owner of the steam-ship appeared and filed an answer. No other person appeared." Bailey v. Sundberg, supra, 49 F. 583, 584.

The court proceeded to decree and dismissed the libel holding the steamship without fault. Subsequently the owners of the cargo on the schooner Shaw sued Sundberg, the master of the Newport, for his negligence in causing the collision. The owners of the Shaw also joined in...

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