In re Chinese Maritime Trust, Ltd.

• Decision Date: 30 April 1973
• Docket Number: Docket 72-1968.,No. 747,747
• Citation: 478 F.2d 1357
• Parties: Complaint of CHINESE MARITIME TRUST, LTD., Plaintiff-Appellant, as Owner of the STEAMSHIP SIAN YUNG, for Exoneration from or Limitation of Liability. REPUBLIC OF VIETNAM and Tong Cuoc Tiep Te (General Supply Agency) and Union Textile Corp., et al., Cargo Claimants, v. PANAMA CANAL COMPANY, Appellee.
• Court: U.S. Court of Appeals — Second Circuit

478 F.2d 1357 (1973)

Complaint of CHINESE MARITIME TRUST, LTD., Plaintiff-Appellant, as Owner of the STEAMSHIP SIAN YUNG, for Exoneration from or Limitation of Liability REPUBLIC OF VIETNAM and Tong Cuoc Tiep Te (General Supply Agency) and Union Textile Corp., et al., Cargo Claimants, v. PANAMA CANAL COMPANY, Appellee.

No. 747, Docket 72-1968.

United States Court of Appeals, Second Circuit.

Argued April 23, 1973.

Decided April 30, 1973.

David C. Wood, New York City, (Daniel K. Read, Hill, Betts & Nash, New York City, of counsel), for plaintiff-appellant.

Philip A. Berns, Atty., Admiralty and Shipping Section, Dept. of Justice (Harlington Wood, Jr., Asst. Atty. Gen., Whitney North Seymour, Jr., U. S. Atty., S. D. New York, Gilbert S. Fleischer, Atty. in Charge, and Warren A. Schneider, Atty., Admiralty and Shipping Section, New York, Dept. of Justice, New York City, of counsel), for Panama Canal Co.

Before BREITENSTEIN,^* KAUFMAN and MANSFIELD, Circuit Judges.

MANSFIELD, Circuit Judge:

On December 6, 1970, the S.S. Sian Yung, owned by Chinese Maritime Trust Ltd., sank in the Panama Canal. Since the sunken hull obstructed travel by vessels in this heavily traversed navigable waterway, removal efforts were commenced by the Panama Canal Company ("Canal Co."), an agency of the United States, after the latter had been advised by the owner that it had abandoned the vessel to its insurance underwriter and that the underwriter did not intend to undertake removal of the vessel. Meanwhile the owner, faced with cargo claims of at least $1.6 million and a claim by the Canal Co. for wreck removal expenses, which were then estimated at $800,000 by the owner and later at $2 million by the Canal Co., commenced a proceeding in the Southern District of New York for limitation of the owner's liability to its interest in the vessel and her then pending freight, pursuant to the Shipowners' Limited Liability Act, 46 U.S.C. §§ 183-185, 188 ("Limitation Act"), and Rule F of the Admiralty Rules. An ad interim stipulation of value for the wreck and its pending freight in the amount of $16,246.57 was approved, and the usual monition and restraining order enjoining the commencement of other proceedings in any jurisdiction for damages resulting from the casualty pending a determination in the limitation proceeding were given.

From an order of the district court declaring that the Canal Co.'s claim for wreck removal costs¹ is not subject to limitation or the restraining order, the owner appeals. Subject to the conditions noted below, we affirm, substantially for the reasons stated in Judge Motley's opinion, 361 F.Supp. 1175 (S.D. N.Y.1972).

The Limitation Act was enacted in 1851 as a measure designed to promote investment in American shipping in competition for world trade. It permits a shipowner to limit his liability to the amount of his interest in a ship and her pending freight "for any loss, damage, or injury by collision, or for any act, matter, or thing, loss, damage, or forfeiture, done, occasioned, or incurred without the privity or knowledge of such owner or owners. . . ." 46 U.S.C. § 183(a). The Act must be construed, however, in the light of subsequently-enacted legislation and regulations designed to insure that our country's navigable waterways will be kept free of obstructions. Section 15 of the Rivers and Harbors Act of 1899, 33 U.S.C. § 409, sometimes called the Wreck Removal Act, for instance, provides that

"whenever a vessel, raft, or other craft is wrecked and sunk in a navigable channel, accidentally or otherwise, . . . it shall be the duty of the owner of such sunken craft to commence the immediate removal of the same, and prosecute such removal diligently, and failure to do so shall be considered as an abandonment of such craft, and subject the same to removal by the United States as provided for in sections 411 to 416, 418, and 502 of this title."

In Wyandotte Transportation Co. v. United States, 389 U.S. 191, 205, 88 S. Ct. 379, 19 L.Ed.2d 407 (1967), the Supreme Court, holding that where a ship was negligently sunk in navigable waters and thereafter abandoned, the Government could recover wreck removal costs from the shipowner, indicated that the recovery would not be subject to limitation under the Limitation Act, since the owner would have had "privity or knowledge" within 46 U.S.C. § 183(a). Speaking for a unanimous court, Justice Fortas noted that "the duty imposed by and the remedy provided in the final clause of § 15 are not prescribed only for owners of negligently sunk vessels. Those provisions apply `whenever a vessel . . . is wrecked and sunk in a navigable channel, accidentally or otherwise. . . .' . . . We believe the sections noted by petitioners are intended to protect the United States against liability for removing a sunken vessel if it chooses to do so." (Emphasis supplied). 389 U.S. at 206-207, 88 S.Ct. at 388.²

Pursuant to the Canal Zone Code, ch. 81, Shipping and Navigation § 1331 (which authorizes the President to prescribe regulations governing the passage and control of vessels through the Panama Canal) and 3 U.S.C. § 301, in turn, President Johnson, by Executive Order 11305, delegated to the Secretary of the Army the power to adopt regulations pertaining to the removal of wrecked vessels from the Canal. Thereafter Title 35, ch. 1, of the Code of Federal Regulations was adopted, which provides in § 117.5 that when a vessel becomes an obstruction in the Panama Canal the Canal authorities may remove it without awaiting permission of the owner and that unless the Canal Co. is subsequently found responsible for the accident or condition necessitating the removal of the wreck, the necessary expenses incurred by it shall be a proper charge against the owner.³

Thus, although responsibility for expenses incurred in removing a wreck from the Panama Canal may ultimately be laid at the door of the negligent party or parties, the immediate obligation to remove the obstruction has been imposed, both by statute and by regulation, upon the shipowner, regardless whether the sinking was caused by his negligence.⁴ Confronted with this duty the owner cannot contend that its failure to remove the vessel and the consequent expense of removal incurred by the Canal Co. is "without its privity or knowledge," which is a condition precedent to its invocation of the Limitation Act. To hold otherwise would be to permit the owner, by limiting its liability to the value of the sunken hull, to thwart the strong public policy in favor of creating an incentive on the part of the owner promptly to remove its obstructing ship from navigable waterways.⁵ See Wyandotte Transportation Co. v. United States, 398 U.S. 191, 88 S.Ct. 379, 19 L.Ed.2d 407 (1967); In re Pacific Far East Line, Inc., 314 F.Supp. 1339, 1349 (N.D.Cal.1970). We therefore hold that the Canal Co.'s claim is not limitable. Accordingly it may be the subject of an in personam suit by the Canal Co. against the shipowner. In so holding we intimate no view as to the merits of the Canal Co.'s claim or the defenses or counterclaims that may be asserted by the owner against it.

More troublesome is the owner's contention that, regardless whether the Canal Co.'s claim is not limitable, all claims arising out of the sinking of the Sian Yung should as a matter of equity be prosecuted solely in the pending limitation proceeding rather than become the subject of litigation in other districts, with possible multiple trials of the same issues and duplicative proliferation, waste and inconvenience for all concerned. In support of this position the owner relies principally upon Justice Frankfurter's espousal in Maryland Casualty Co. v. Cushing, 347 U.S. 409, 415, 74 S. Ct. 608, 98 L.Ed. 806 (1954), of the limitation proceeding as providing the "benefit of a concursus" in which all claims would be disposed of in one action.

Although the "concursus" theory has not been looked upon with favor by this circuit, at least in cases where the fund may be adequate to satisfy all claims, see In re Lake Tankers Corp., 232 F.2d 573, reaffirmed en banc, 235 F.2d 783 (2d Cir. 1956), affd. sub nom. Lake Tankers Corp. v. Henn, 354 U.S. 147, 77 S.Ct. 1269, 1 L.Ed.2d 1246 (1957); Petition of Trinidad Corp., 229 F.2d 423, 428 (2d Cir. 1955); Petition of Texas Co., 213 F.2d 479 (2d Cir.), cert. denied, 348 U.S. 829, 75 S.Ct. 52, 99 L.Ed. 653 (1954); Gilmore & Black, The Law of Admiralty § 10-41 at 728-32 (1957), it is unquestionably...