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LUCKENBACH S.S. CO. v. COAST MFG. & SUPPLY CO.

May 13, 1960

LUCKENBACH STEAMSHIP COMPANY, Inc., Cross-Libelant,
v.
COAST MANUFACTURING & SUPPLY COMPANY, Cross-Respondent



The opinion of the court was delivered by: BARTELS

Motion by cross-respondent to dismiss the cross-libel on the grounds that in admiralty the Court lacks jurisdiction in personam over cross-respondent, and that it lacks jurisdiction over the subject matter of the original libel and of the cross-libel, and hence the cross-libel must be dismissed.

On December 3, 1956, a fire occurred at the Brooklyn pier of cross-libelant Luckenbach Steamship Company, Inc. (hereinafter referred to as 'Luckenbach') which was followed by an explosion destroying the pier and the goods stored thereon and causing serious loss of life, personal injuries and other property damage. As a result numerous suits have been commenced against Luckenbach to recover damages of approximately $ 50,000,000. Luckenbach claims that the explosion was caused by a shipment of safety fuses consigned to and insured by cross-respondent Coast Manufacturing & Supply Company (hereinafter referred to as 'Coast') which was upon the pier at the time the fire started, without full disclosure by Coast to Luckenbach of its explosive nature.

 The original libel in this case is based upon loss of a shipment of '1950 cartons of Cordeau Detonant Fuse (Safety Fuse)' delivered to Luckenbach at its Brooklyn pier on November 28, 1956, for transportation to California where it was to be delivered to Coast, the consignee. A dock receipt was issued for the shipment incorporating the terms of the bill of lading required to be issued by Luckenbach under that receipt. The bill of lading contains the usual clauses of carriage and specifically provides in paragraph 6 thereof that the goods covered by the bill of lading 'while on the wharf or in warehouse awaiting shipment, transshipment or delivery shall be at owner's risk of loss or damage by fire, flood, earthquake, or other casualties, * * * not happening through the fault or negligence of the carrier.'

 On April 18, 1958, a libel (Docket No. Ad. 20672) was filed in this Court by Bigham, Englar, Jones & Houston (hereinafter referred to as 'Bigham, Englar') as proctors for Coast and other libelants to recover for loss of their respective shipments of cargo, aggregating approximately $ 4,000,000, and including the claim of Coast for the loss of the above shipment.

 On March 6, 1959, Luckenbach filed a cross-libel to secure indemnity against Coast for $ 50,000,000, by making service on Bigham, Englar based upon clause 14 of the bill of lading *fn1" and an obligation implied under general maritime law. The $ 50,000,000 demanded is comprised of: (i) $ 37,000,000 representing damages covered in numerous suits now pending in this Court against the cross-libelant for loss of life and personal injuries, (ii) $ 5,000,000 representing damages covered in numerous suits now pending in this Court against the cross-libelant for loss or damage to cargo and other property, and (iii) $ 6,000,000 representing damages covered in numerous suits now pending in the courts of the State of New York against the cross-libelant for loss or damage to cargo and other property as well as for personal injuries. An examination of the cross-libel reveals that the damages claimed are far above those permitted by clause 14 of the bill of lading. *fn2"

 The cross-libel herein was filed under a new docket number (Ad. 20750) rather than the docket number assigned to the original suit. This was required by the Clerk of this Court pursuant to standard practice. Coast makes a point of this difference upon the theory that the cross-libel is, in effect, not a cross-libel but a new suit, requiring personal service on Coast and thus one over which this Court has no jurisdiction. The Court believes this contention is without merit.

 Coast is a Delaware corporation with its principal office and place of business in California and is apparently not subject to suit in New York. Luckenbach is also a Delaware corporation. On January 15, 1957 and December 15, 1957, Coast received payment for its loss from Fireman's Fund Insurance Company (hereinafter referred to as 'Fireman's Fund') under two loan receipts which empowered Fireman's Fund to press its claim against Luckenbach in Coast's name. *fn3" Fireman's Fund is also the underwriter for cross-libelant Luckenbach and acting in defense of Luckenbach in connection with many suits now pending against it. Bigham, Englar, after receiving service of the cross-libel, declined to represent Coast in defense thereof upon the ground, according to Coast, of a conflict of interest and upon the additional ground, according to Luckenbach, that insurance on the cargo would not include coverage of liability to third persons for damage caused by the cargo.

 When Coast learned of the cross-libel it demanded that Fireman's Fund drop the New York action, which it refused to do. Coast, appearing specially herein through other attorneys, now moves to set aside the service of the cross-libel or, if service is sustained, to dismiss that libel for lack of jurisdiction. In its brief it also claims that the Admiralty Court lacks jurisdiction of the original libel.

 I

 Propriety of Service

 Coast appears specially by other attorneys and contests the propriety of service of the cross-libel upon the ground that service thereof on Bigham, Englar did not subject the respondent to the in personam jurisdiction of this Court. The basis for this assertion is that Bigham, Englar represents Fireman's Fund which was the underwriter of both Coast and Luckenbach and that Fireman's Fund was the real party in interest and that this conflicting interest was unknown to Coast at the time the libel was served. It is now well settled that under a loan receipt transaction the insured is the real party in interest and that under such circumstances Coast was the proper party to bring the suit. *fn4" In fact, in Hartford Fire Insurance Company v. Commercial Union Assurance Co., Ltd., D.C.S.D.N.Y.1955, 131 F.Supp. 751, the underwriter was held to be an improper party to maintain an action under a loan receipt transaction. The Court finds it has jurisdiction over Coast as a libelant and, under Rule 16 of Admiralty Rules of this Court, service of the cross-libel was properly made on Bigham, Englar as its proctors. *fn5" If the libel has been filed without authority or jurisdiction been obtained by reason of fraud or failure to disclose an adverse interest as suggested by Coast, the remedy under the present facts is not a motion to set aside the service but a separate proceeding to invalidate the representation *fn6" and to enjoin this proceeding in the interim. The first branch of Coast's motion must accordingly be denied.

 II

 Jurisdiction Over Original Libel

 The controversy involved the alleged liability of Luckenbach in contract for failure to deliver a shipment to Coast and, in turn, the alleged liability of Coast in contract for damages to the vessel's entire cargo arising from failure to notify Luckenbach of the explosive nature of the shipment, joined with the alleged indemnity liability of Coast in tort for damages to person and property including property other than the cargo. Coast claims that the cross-libel of Luckenbach against Coast should be dismissed for lack of jurisdiction over the subject matter and that its exceptions to the cross-libel should be sustained. In its brief Coast also claims that its original libel against Luckenbach should be dismissed. This presents a troublesome question difficult of resolution. Whether or not this Court has jurisdiction over the subject matter of the original libel depends upon the nature of the contract. If the contract relates to the use of a ship or to commerce on navigable waters, it is a maritime contract and is clearly within the admiralty jurisdiction of this Court. *fn7" A contract for ocean transportation of cargo such as set forth in the bill of lading herein, is a classical example of a maritime contract. It is well established that a maritime contract carries with it all of its incidents, even though non-maritime, and as such will be subjected to admiralty jurisdiction unless such non-maritime incidents are separable. *fn8" Thus, if the contract is both maritime and non-maritime and is divisible so that the maritime obligations may be determined ...


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