Smith-Johnson Steamship Corporation v. United States

• Decision Date: 02 July 1964
• Docket Number: No. 1755.,1755.
• Citation: 231 F. Supp. 184
• Parties: SMITH-JOHNSON STEAMSHIP CORPORATION, Libelant-Cross-Respondent, v. UNITED STATES of America, Respondent-Cross-Libelant.
• Court: U.S. District Court — District of Delaware

231 F. Supp. 184

SMITH-JOHNSON STEAMSHIP CORPORATION, Libelant-Cross-Respondent, v. UNITED STATES of America, Respondent-Cross-Libelant.

No. 1755.

United States District Court D. Delaware.

July 2, 1964.

S. Samuel Arsht, Morris, Nichols, Arsht & Tunnell, Wilmington, Del., Arthur M. Becker, Becker & Greenwald, Washington, D. C., for cross-respondent, Smith-Johnson Steamship Corp., Robert Lichtman, Washington, D. C., of counsel.

William J. Wier, Jr., Asst. U. S. Atty., Wilmington, Del., for cross-libelant.

LAYTON, District Judge.

This case arises from exceptions and exceptive allegations filed by the cross-respondent, Smith-Johnson Steamship Corp. (hereinafter Smith) in opposition to a cross-libel filed by the United States.

On November 3, 1954, Smith, then a Delaware corporation, voluntarily dissolved itself pursuant to 8 Del.Code, § 275. On November 16, 1956, Smith libelled the United States in this court to recover certain payments it had made under an allegedly invalid profit-sharing formula in a contract of charter hire with the United States. That suit is still pending.

On June 4, 1963, although fully aware of the suit in this court, the United States filed a separate libel against Smith-Johnson in the Southern District of New York for amounts claimed to be due the United States from the same transaction as was involved in the suit earlier instituted in this court by Smith. Smith filed exceptions and exceptive allegations alleging that the court lacked jurisdiction because Smith did not exist as a body corporate, did not do business in the Southern District of New York, and had authorized no one to receive service of process there. On November 8, 1963, these exceptions and exceptive allegations were sustained in all respects and the libel was dismissed. On November 1, 1963, the United States filed the cross-libel now at issue here.

The original libel was based upon a contract whereby Smith agreed to charter vessels from the United States at a basic rate of $1,295,025.93 plus additional charter hire based upon a profit-sharing formula. Smith's libel alleges that Smith made a preliminary payment of additional charter hire under the contractual formula in the amount of $613,395.52 but that under the underlying statute its liability for additional charter hire could not exceed $381,621.51 because of the different profit-sharing formula in the statute, and that, therefore, the United States owes Smith-Johnson the difference between these two amounts, $231,773.81. The government's cross-libel contains three alternative causes of action:

(1) The underlying statute provides that rates of charter hire shall not be less than the prevailing world market. The contract called for $1,911,088.97 ($1,295,025.93 basic charter rate plus $616,063.04 profit-sharing). The world rate was $4,202,449.79. Smith-Johnson paid $1,908,421.25 ($1,295,025.93 basic rate plus $613,395.52 additional charter hire) and thus owes the government the difference between the latter two amounts ($2,294,028.54).

(2) The contract called for additional charter hire of $616,063.04. Smith-Johnson paid $613,395.52 and thus owes $2,667.72 more.

(3) If the profit-sharing arrangement in the contract was illegal, Smith-Johnson is liable for an amount in excess of or at least equal to the amount specified in the contract, $616,063.04, on the basis of a quantum valebat for the fair and reasonable value of the use of the ships.

This cross-libel is in all respects identical with the libel dismissed in New York except that it is a cross-libel and not a libel.

The exceptions and exceptive allegations now before me rest upon three grounds: (1) Smith lacks capacity to be sued as a body corporate. (2) The service of the cross-libel was invalid because Smith had no one authorized to receive service of process. (3) The dismissal in New York is res judicata.

8 Del.Code, § 278 purports to set forth the circumstances in which a dissolved Delaware corporation may sue or be sued. It provides:

"All corporations, whether they expire by their own limitation or are otherwise dissolved, shall nevertheless be continued, for the term of three years from such expiration or dissolution, bodies corporate for the purpose of prosecuting and defending suits by or against them, and of enabling them gradually to settle and close their business, to dispose of and convey their property, and to divide their capital stock, but not for the purpose of continuing the business for which the corporation shall have been established. With respect to any action, suit, or proceeding begun or commenced by or against the corporation prior to the expiration or dissolution and with respect to any action, suit or proceeding begun or commenced by or against the corporation within three years after the date of the expiration or dissolution, the corporation shall, only for the purpose of such actions, suits or proceedings so begun or commenced, be continued bodies corporate beyond the three-year period and until any judgments, orders, or decrees therein shall be

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