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MONARCH INDUS. CORP. v. AMERICAN MOTORISTS INS. CO

October 16, 1967

MONARCH INDUSTRIAL CORPORATION, Plaintiff,
v.
AMERICAN MOTORISTS INSURANCE COMPANY, A/S J. Ludwig Mowinckels Rederi, Defendants. AMERICAN MOTORISTS INSURANCE COMPANY, Third-Party Plaintiff, v. A/S J. LUDWIG MOWINCKELS REDERI, Third-Party Defendant



The opinion of the court was delivered by: MOTLEY

MOTLEY, District Judge.

 This is an action for damages incurred when a cargo of about 210 tons of steel shipped from Buenos Aires, Argentina, to New York, New York, arrived in a seriously damaged condition in late December 1959.

 Plaintiff, Monarch Industrial Corporation (hereinafter Monarch) was the purchaser of the cargo. A New York business corporation, Monarch was engaged in exporting and importing steel and steel products in 1959-60.

 Defendant, American Motorists Insurance Company (hereinafter American) is an insurance company organized under the laws of the State of Illinois, is licensed to and is doing business in the State of New York. As a part of its business, American writes ocean marine cargo insurance. American insured the cargo purchased by Monarch against all risks of damage to the steel resulting from any external cause during the voyage.

 Monarch commenced this action on October 24, 1961, in the Supreme Court, State of New York, County of New York. The only defendant named in the action was American. Monarch sought to recover under the insurance policy the difference between the value of the steel in its damaged condition on arrival in New York, $16,133.50, and the insured value, $54,600.00, the difference being $38,466.50. The steel had been delivered to Monarch in the damaged condition on January 4, 1960.

 On November 14, 1961, American removed the action to this court on the ground of diversity of citizenship and requisite jurisdictional amount. Two days after removal, American served a third-party complaint on the ocean carrier, A/S J. Ludwig Mowinckels Rederi (hereinafter Mowinckels). This complaint alleged that if Monarch recovers against American, Mowinckels would be liable over for said damage to American "who will have been subrogated" to Monarchs rights against Mowinckels.

 Mowinckles is a Norwegian corporation, a common carrier by water, owning and operating the S. S. Salta, doing business in the State of New York and having agents, Cosmopolitan Shipping Co., Inc., in the City of New York.

 On December 15, 1961, Mowinckles appeared in this action. On June 14, 1962, Monarch was permitted by order of this court to file and serve an amended complaint setting forth its claim under the policy against American and a separate claim against Mowinckles. This claim against Mowinckles alleged that it received on board the S. S. Salta the steel for which it issued a clean "on board" bill of lading dated November 27, 1959. The amended complaint further alleged that the bill of lading was to have effect in accordance with the provisions of the Carriage of Goods by Sea Act of the United States (hereinafter COGSA). 46 U.S.C. §§ 1300-1315. Paragraph 18 of the bill of lading incorporated therein the one year statute of limitations on bringing suit against the carrier which is provided for by the COGSA. 46 U.S.C. § 1303(6).

 The order of this court allowing the amended complaint expressly reversed decision on its legal sufficiency and time-liness. *fn1"

 In its answer to the third-party complaint and the amended complaint, Mowinckles asserts as a defense the statute of limitations contained in the COGSA.

 Mowinckles also challenges the jurisdiction of this court over Monarch's direct claim against it in admiralty since this is a removed case and state courts do not have admiralty or maritime jurisdiction.

 Mowinckles opposes a second pending motion to amend the complaint made by Monarch just prior to trial. Monarch asks leave to amend the complaint by a statement identifying its claim as an admiralty claim within the admiralty jurisdiction of this court as provided by Rule 9(h), Fed.R.Civ.P. Such an amendment, Monarch claims, would enable it to take advantage of admiralty third-party practice. Rule 14(c), Fed.R.Civ.P. Monarch further claims that such an amendment would relate back to the time of the commencement of action against American.

 Both American and Mowinckles denied liability for damage to the steel. The case went to trial without a jury on December 12, 1966. At the commencement of the trial, upon agreement of the parties and consent of the court, the trial was bifurcated, the question of liability being tried first. Rule 42(b), Fed.R.Civ.P. The court also reserved ruling on the defense of the statute of limitations and amendments to the complaint until after the trial on the issue of liability.

 This court now holds:

 1. This court has jurisdiction of this removed action brought by Monarch against American and the third-party action commenced in this court by American against Mowinckles.

 2. Time for American to bring suit against Mowinckles was extended by Mowinckles and suit was timely filed by American against Mowinckles within the extension period.

 3. The extension of time granted American by Mowinckles for bringing suit did not inure to the benefit of Monarch. Consequently, Monarch's direct claim against Mowinckles is barred by the applicable statute of limitations. The amended complaint must be dismissed for failure to state a claim upon which relief may be granted.

 4. Even if Monarch could have taken advantage of the extension of time, the statute of limitations bars the relating back of the amendment to the time of filing suit since the amendment seeks to change the party against whom the claim, arising out of the same transaction, is pressed. Rule 15(c), Fed.R.Civ.P.

 5. An amendment to identify a claim in admiralty, Rule 9(h), Fed.R.Civ.P., is governed by the principles applicable to amendments under Rule 15. Consequently, Monarch's pending motion to amend fails to hurdle the statute of limitations bar. Granting the amendment would also be futile for the reason that American in its third-party complaint has not demanded judgment against Mowinckles in favor of Monarch as American was permitted to do by the provisions of Rule 14(c). The motion for leave to amend the complaint to identify a claim in admiralty must be denied.

 6. Monarch failed to prove by a preponderance of the credible evidence: 1) pre-existing good condition of the steel; 2) that any demonstrable damage to the steel resulted from external causes during the ocean voyage; 3) that any damage to the steel upon discharge from the vessel in New York was more than superficial and could be segregated from the pre-existing damage. Therefore, American is not liable under the policy of insurance to pay the loss sustained by Monarch. Monarch's action against American must be dismissed.

 7. Alternatively, the court holds that if the complaint could have been amended, Monarch could not prevail on the merits. The same proof was offered for both claims.

 8. Since American has sustained no loss for which it is entitled to indemnification over against Mowinckles, the third-party action by American against Mowinckles must also be dismissed.

 The following constitutes the court's findings of fact and conclusions of law in support of the foregoing holdings.

 Jurisdiction on Removal

 Jurisdiction of this court on removal of Monarch's claim against American from the state court is civil. See Wilburn Boat Co. v. Fireman's Insurance Co., 348 U.S. 310, 311, 313, 75 S. Ct. 368, 99 L. Ed. 337 (1955). A mandatory prerequisite to the right of removal is that the state court have jurisdiction of a pending civil action of which this court has concurrent original jurisdiction. 28 U.S.C. § 1441; A. J. Curtis & Co. v. D. W. Falls, Inc., 305 F.2d 811, 814 (3rd Cir. 1962). The rule is well settled: "The jurisdiction of the federal court on removal is, in a limited sense, a derivative jurisdiction. If the state court lacks jurisdiction of the subject-matter or of the parties, the federal court acquires none, although it might in a like suit originally brought there have had jurisdiction." Freeman v. Bee Machine Co., 319 U.S. 448, 449, 63 S. Ct. 1146, 87 L. Ed. 1509 (1943); State of Minnesota v. United States, 305 U.S. 382, 389, 59 S. Ct. 292, 83 L. Ed. 235 (1939); Lambert Run Coal Co. v. Baltimore & Ohio R.R. Co., 258 U.S. 377, 382, 42 S. Ct. 349, 66 L. Ed. 671 (1922); Devlin v. Flying Tiger Lines, Inc., 220 F. Supp. 924, 928 (S.D.N.Y.1963); Electronic Race Patrol, Inc. v. Nat'l Trailer Convoy, Inc., 191 F. Supp. 364 (S.D.N.Y.1961).

 Defects in the jurisdiction of the state court as respects subject matter or parties is "not cured by removal but could thereafter be challenged in the federal court." Freeman v. Bee Machine Co., supra, at 451, 63 S. Ct. at 1148; General Investment Co. v. Lake Shore & Michigan ...


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