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Petition of Moran Transp. Corp. v. Mellino's Adm'x. Moran No. 96 .


decided: November 21, 1950.


Author: Frank

Before L. HAND, Chief Judge, and SWAN and FRANK, Circuit Judges.

FRANK, Circuit Judge.

In Petition of Red Star Barge Line, Inc., 2 Cir., 160 F.2d 436,*fn1 we interpreted Langnes v. Green, 282 U.S. 531, 51 S. Ct. 243, 75 L. Ed. 520,*fn2 and Ex parte Green, 286 U.S. 437, 52 S. Ct. 602, 76 L. Ed. 1212, to mean that, in a one-claim case, the claimant must be granted permission to prosecute the claim in a state court without conceding the right to limit, provided the claimant conceded the "right to litigate that issue in the federal court," and waived "any claim of res judicata relevant to the issue of limited liability and based on any judgment she may obtain in the state court action." [160 F.2d 438.] In so holding, we relied on the concluding paragraph in Ex parte Green, 286 U.S. at 440, 52 S. Ct. at page 603, 76 L. Ed. 1212: "The district court, however, gave Green until a time fixed to withdraw, in the state court, the issue as to the right to limited liability, in which event the restraining order was not to issue. That court, upon being seasonably advised of the proceeding here and of our disposition of it, will, no doubt, grant further reasonable time to allow Green to elect whether to withdraw the admiralty issue which he has raised in the state court; and the denial of the motion is made without prejudice to such action."

As shown by the district court's opinion, reported in 75 F.Supp. 392, the order of January 20, 1948, modifying the original restraining order of October 16, 1947, was in accord with Red Star Barge Line. In that case, however, there was but a single claim. Moran contends that, upon the filing of Todd's claim, the January 20, 1948, order should have been changed to restore the original order restraining appellee, because, with the filing of the Todd claim, the Red Star Barge Line case ceased to apply, since now there were two claims aggregating a sum in excess of the stipulated value of $31,055. We agree with the district judge that the Red Star Barge Line rule continued to be applicable because appellee filed the priority consent, i.e., that Todd's claim, which would surely be for less than $31,055, should be paid in full out of the fund before anything should be paid on any judgment obtained in appellee's state court suit.

Before Todd filed its claim, Moran had faced litigation with appellee in the state court and - if she there recovered more than the stipulated value of the scow - litigation in the district court as to Moran's right to limitation. In the light of appellee's priority consent, the filing of the Todd claim added but one more item of litigation, i.e., with Todd as to the validity and amount of its claim.*fn3 Moran argues that this added item of litigation creates a "multiplicity of suits," and that therefore the district court was obliged to restrain appellee and compel her to litigate her claim in the admiralty, without a jury.

We think this argument rests on a misconception of the rights conferred by the statute. The statutory purpose is to exempt the investor from loss in excess of the value of the investment in the vessel and freight.*fn4 Where that value is obviously greater than all claims, no matter how many, the statute does not permit limitation. See Curtis Bay Towing Co. v. Tug Kevin Moran, 2 Cir., 159 F.2d 273. This goes to show that the purpose of limitation proceedings is not to prevent a multiplicity of suits but, in an equitable fashion, to provide a marshalling of assets - the distribution pro rata of an inadequate fund among claimants, none of whom can be paid in full. See The Aquitania, D.C., 14 F.2d 456, 458, affirmed, 2 Cir., 20 F.2d 457; Curtis Bay Towing Co. v. Tug Kevin Moran, 2 Cir., 159 F.2d 273, 276. Indeed, the very language of the statute bears this out: 46 U.S.C.A. ยง 184 says that, when loss is suffered by several persons, "and the whole value of the vessel, and her freight for the voyage, is not sufficient to make compensation to each of them, they shall receive compensation * * * in proportion to their respective losses", and that the limitation proceedings are "for the purpose of apportioning the sum * * * among the parties entitled thereto."*fn5

But here, since Todd's claim is bound to be paid in full, the fund is inadequate solely with respect to the single claim of appellee. Practically, then, the situation is the equivalent of that in Red Star Barge Line. In the circumstances, it would be inequitable,*fn6 and an abuse of discretion, to invoke the statute to deprive appellee of trial by jury or to compel her to liquidate the face amount of her claim in a forum she did not choose.*fn7 It is suggested that the federal court should have exclusive jurisdiction because a limitation proceeding resembles a creditor's bill proceeding. But nothing in the nature of an equity suit to marshal assets requires that the amounts of the claims (as distinguished from the distribution of the assets among the claimants) be adjudicated in that suit; see Riehle v. Margolies, 279 U.S. 218, 49 S. Ct. 310, 73 L. Ed. 669.


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