Royal Interocean Lines v. Panama Canal Co.

• Decision Date: 14 May 1981
• Docket Number: Civ. No. 79-0316-B.
• Citation: 514 F. Supp. 472
• Parties: ROYAL INTEROCEAN LINES, as owner of the M/V Straat Hong Kong, Plaintiff, v. PANAMA CANAL COMPANY and M/V Oriental Commander, her engines, boilers, tackle, etc., Defendant.
• Court: U.S. District Court — Panama Canal Zone

514 F. Supp. 472

ROYAL INTEROCEAN LINES, as owner of the M/V Straat Hong Kong, Plaintiff, v. PANAMA CANAL COMPANY and M/V Oriental Commander, her engines, boilers, tackle, etc., Defendant.

Civ. No. 79-0316-B.

United States District Court, D. Canal Zone, Balboa Division.

May 14, 1981.

David de C. Robles, DeCastro & Robles, Panama, Republic of Panama, for plaintiff.

Frank J. Violanti, U. S. Atty., D. Canal Zone, Balboa, Panama, William H. Beatty, Asst. U. S. Atty., Miami, Fla., for defendant.

JOHN R. BROWN, Circuit Judge.^*

This matter came on trial before the Court. All material facts are stipulated by the parties. The only question of law presented to the Court is whether, under the circumstances of this case certain sections of the Canal Zone Code operate to raise the doctrine of sovereign immunity to thereby bar recovery of certain damages by Plaintiff, the owner of the M/V STRAAT HONG KONG, against Defendant, the Panama Canal Company. The Court finds that it does not.

(i) Stipulated Facts

On June 7, 1977 Plaintiff's vessel, STRAAT HONG KONG, came into the Panama Canal from its anchorage in the Pacific Basin and collided with the M/V ORIENTAL COMMANDER, which was just leaving the Canal, causing damage to both vessels. At the time of the collision, both vessels were being conned by Panama Canal pilots. Soon after the collision, ORIENTAL COMMANDER dropped off its pilot and proceeded on to sea, even though she was informed that if she wanted to take any action for recovery of damages against the Government or against the Panama Canal Company she would have to remain for investigation by the Board of Local Investigators. STRAAT HONG KONG made its transit and, unlike ORIENTAL COMMANDER, anchored and remained for the BLI investigation.

A BLI investigation of the collision was conducted at which both the pilot of STRAAT HONG KONG and the pilot of ORIENTAL COMMANDER testified. Save for the fact that crew members of ORIENTAL COMMANDER did not testify the circumstances of the collision were thoroughly investigated. As a result of the investigation it was determined that neither the vessels nor crews, of either STRAAT HONG KONG or ORIENTAL COMMANDER, were responsible in any particular for the collision. The sole cause of the collision was found to be the fault of the pilot of STRAAT HONG KONG for navigating the vessel into the Canal at an excessive speed.

Subsequent to the BLI investigation, STRAAT HONG KONG became subject to an in rem action brought in England by the owners of ORIENTAL COMMANDER. This action was ultimately settled for $42,000, consistent with the traditional maritime rule that a vessel is liable in rem for the fault of its compulsory pilot.

The present action was initiated by Royal Interocean Lines, as owner of STRAAT HONG KONG, against the Panama Canal Company seeking recovery for damages sustained by STRAAT HONG KONG in the collision and further recovery for sums paid in settlement of the claim by ORIENTAL COMMANDER against STRAAT HONG KONG. The Canal Company has offered to settle the STRAAT HONG KONG vessel damage claim for $52,736.80. The Canal Company declines, however, to reimburse STRAAT HONG KONG for sums paid in settlement of the claim asserted by ORIENTAL COMMANDER, arguing that under the circumstances of this case, STRAAT HONG KONG is not entitled to these damages.

At this point, very little is disputed by the parties. The Canal Company agrees, consistent with the BLI investigation findings, that it is liable to the owner for the damages which STRAAT HONG KONG itself sustained in the collision. The Canal Company further expressly agrees that the settlement was prudent and that the $42,000 paid by STRAAT HONG KONG to ORIENTAL COMMANDER is fair and reasonable. As made clear in the colloquy between Court and all Counsel the effect of the position of the Canal Company is that it agrees that it is 100% liable to M/V STRAAT HONG KONG for all legally recoverable damages which includes specifically her own damages of $52,736.80 and the amount of $42,000 paid by her to ORIENTAL COMMANDER if, but only if, the Court rules that such amount is legally recoverable from the Canal Company. Thus the only issue facing the Court is whether under the circumstances of this case the owner of STRAAT HONG KONG is barred, as a matter of law, from obtaining recovery from the Canal Company for sums paid in settlement of the claim asserted by ORIENTAL COMMANDER against STRAAT HONG KONG.

(ii) Conclusions Of Law

With respect to STRAAT HONG KONG's claim for the amount paid in settlement, the Canal Company seeks to don the armor of sovereign immunity. Immunity in this case, the Company contends, arises from C.Z.Code Tit. 2, § 297 which provides:

Notwithstanding any other law, a claim may not be considered under this sub-chapter, or an action for damages lie thereon, unless, prior to the departure from Canal Zone waters of the vessel involved:

(1) the investigation by the competent authorities of the accident or injury giving rise to the claim has been completed; and

(2) the basis for the claim has been laid before the Panama Canal Company. 76A Stat. 25.

Although the Court concedes some difficulty in grasping the true purport of the Canal Company's argument, it appears to run as follows: Because ORIENTAL COMMANDER refused to remain for the BLI investigation, it thereby failed to comply with § 297. Accordingly, pursuant to § 297, the Canal Company became absolved from any liability for damages which might be asserted in a subsequent direct action by ORIENTAL COMMANDER against the Canal Company. Furthermore, and of particular significance to the present controversy, the Canal Company thereby became absolved from any liability for damages which might be asserted in a subsequent "indirect" action by ORIENTAL COMMANDER—here the action by STRAAT HONG KONG against the Canal Company to recover sums paid in settlement of the claim asserted by ORIENTAL COMMANDER against STRAAT HONG KONG.

At the outset the Court emphasizes that the damages sought by the owners of STRAAT HONG KONG, both for vessel damage and settlement payments, arose directly out of the negligence of the Canal Company pilot in conning STRAAT HONG KONG, they represent losses actually sustained by the shipowner as a direct result of the collision. There is no doubt that recovery of such damages against the Canal Company is specifically authorized by C.Z. Code, Tit. 2, § 293 which provides in pertinent part:

In determining the amount of the award of damages for injuries to a vessel for which the Panama Canal Company is determined to be liable, there may be included:

(1) actual or estimated cost of repairs;

* * * * * *

(4) other expenses which are definitely and accurately shown to have been incurred necessarily and by reason of the accident or injuries.

To the extent there was ever any question, Gulf Oil Corporation v. Panama Canal Company (Gulfspray I), 407 F.2d 24, 29-30 (5th Cir. 1969) settled conclusively that with the creation of the Panama Canal Company, which gave the Canal Company the authority to "sue and be sued in its corporate name," 2 C.Z.C. § 65(a)(3), and §§ 291, 292, 293 et seq., Congress waived in sweeping fashion the barrier of sovereign immunity. The Canal Company was to function as a business entity and be exposed to the usual incidents of business operation—including the traditional liability of being sued for its wrongs. This sweeping waiver of liability, the Court found, was not intended to be blithely withdrawn by a restrictive application of § 297. Id. at 32.

The findings of Gulfspray I were more recently echoed by the Fifth Circuit in Svendborg v. Panama Canal Company, 612 F.2d 968, 1980 A.M.C. 2852 (5th Cir. 1980) in which the Court, citing Gulf Oil, stated: "§ 297 should not be construed to undercut the sweeping waiver of sovereign immunity present in the Code which effectively imposes traditional liabilities on the Company." Id. at 970. In Svendborg the Court rejected the Canal Company's argument that Plaintiff shipowner's failure to submit an administrative claim to the Canal Company was fatal to its claim. In so doing, the Court refused to follow a District Court case which held that presentation of an administrative claim was a jurisdictional prerequisite to filing suit against the Canal Company. See, Empresa Hondurena de Vapores, S. A. v. Panama Canal Co., 414 F.Supp. 363, 1976 A.M.C. 1619 (D.C.Z.1976). Said the Court: "Because strict construction of the waiver of sovereign immunity as to the Company was expressly rejected by this Court in Gulf Oil, we decline to adopt the reasoning of Empresa Hondurena." Id. at n.2.

Bearing in mind these judicial admonitions against ready withdrawal of the waiver of sovereign immunity, the Court concludes that sovereign immunity imposes no barrier to the claims asserted by Plaintiff shipowner in the instant case. The Court finds that STRAAT HONG KONG faithfully complied in all material respects with the two requirements of § 297.

As for subsection (1) of § 297 (the investigation requirement) subsequent to the collision STRAAT HONG KONG remained in the Canal for the express purpose of participating in the BLI investigation. A thorough investigation was in fact conducted at which testimony was heard from the two individuals with the best first-hand knowledge of the facts surrounding the collision—the Canal Company pilots of both STRAAT HONG KONG and ORIENTAL COMMANDER. The Canal Company was given full opportunity to participate in the investigation in an adversarial capacity. The Court is...