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EMPIRE STEVEDORING CO. v. OCEANIC ADJUSTERS

September 2, 1970

EMPIRE STEVEDORING CO., Ltd., Plaintiff,
v.
OCEANIC ADJUSTERS, LTD., Arthur L. Liman, as Successor Trustee Under Chapter X of the Bankruptcy Act of A.H. Bull Steamship Co., as owner of the STEAMSHIP BEATRICE, Defendants


Pollack, District Judge.


The opinion of the court was delivered by: POLLACK

POLLACK, District Judge.

The parties have cross-moved for summary judgment. These motions present a novel and important question going to the interaction of the Bankruptcy Act with the maritime doctrine of general average. The question here resolved is whether a stevedore hired to aid a stricken ship is entitled to an equitable claim against the contributions made by cargo interests for general average purposes where the shipowner has become bankrupt. The general average adjuster appointed to hold the general average funds has not as yet distributed the funds received. We hold that the stevedore has no lien on the general average fund nor is it held in trust for it.

 I.

 The following facts are undisputed:

 On October 22, 1962, the S.S. BEATRICE, laden with cargo loaded at various Great Lakes ports, was steaming up the St. Lawrence Seaway when she surged in the wake of a passing steamer, struck a bridge abutment and sustained damage to her propeller. The vessel arrived at Montreal two days later and divers subsequently reported that the damage was serious. To save the venture the interested parties determined to make immediate repairs. The vessel had to be lightened to be placed on drydock for the required work. Plaintiff was engaged and handled the unloading of part of the vessel's cargo; subsequent to the completion of repairs, plaintiff also reloaded the cargo previously discharged.

 A general average situation was declared by the master of the BEATRICE on behalf of Bull, and defendant Oceanic was designated as the adjuster. Oceanic then obtained the usual security from cargo interests (with the exception of sovereign governments, which were not obligated to give security) so the vessel could continue its voyage. On November 6, 1962, the BEATRICE steamed out of Montreal and she completed her voyage in due course.

 Shortly after the incident, on March 19, 1963, Bull filed in this Court a petition under Chapter XI of the Bankruptcy Act, 11 U.S.C. § 721. This proceeding was superseded on May 21, 1963, by the filing of a reorganization petition under Chapter X, 11 U.S.C. § 527. Plaintiff filed a proof of claim in the latter proceeding on August 27, 1963, asserting that Bull owed it the sum of $56,495.58 (Canadian Dollars) for stevedoring services rendered to the BEATRICE in October and November, 1962. Plaintiff asserted in its bankruptcy claim that it held as security for the debt, a maritime lien against the S.S. BEATRICE, her engines, boilers, etc.

 On February 20, 1963, the BEATRICE was attached by the U.S. Marshal at Baltimore, Maryland pursuant to a libel in rem filed in the District Court of Maryland by a bank holder of a mortgage covering the ship. Numerous other libels were thereafter filed against the ship by other claimants. Although libeled on February 20, 1963, the BEATRICE was not sold by the Marshal until February 25, 1964, the delay being partly due to the pendency of the Chapter X proceedings in New York involving Bull, the owner of the ship.

 The sale of the BEATRICE in the Maryland admiralty foreclosure proceedings yielded a price of $170,000. Costs of preservation and sale reduced these proceeds to a net of $96,073.17. However, this amount was augmented by $39,109.91 which was derived from an additional item, raising the total fund in the Maryland District Court up to $151,500.

 The plaintiff filed a libel for its maritime lien on the vessel in the Baltimore proceedings but failed thereafter to process its claim. The Maryland District Court entered an order in the foreclosure proceedings on December 2, 1964 which directed all claimants before it to object to the validity of the mortgage on the vessel or to assert priority over it, by January 11, 1965. The order further provided that for failure to comply with its directions, the libel of any claimant should be deemed dismissed without prejudice and such claimant should not be entitled to notice of further proceedings in the suit. The plaintiff failed to comply with this order and its claim to a lien was accordingly dismissed. The maritime lien claimants, who complied with the order, participated in the distribution of the proceeds of the sale of the vessel under a settlement formula arrived among them.

 On March 22, 1968, this Court terminated the Chapter XI and Chapter X proceedings and adjudicated Bull and seven consolidated debtors bankrupts. On May 6, 1968, defendant Liman qualified as trustee in bankruptcy for the eight.

 On October 31, 1968, plaintiff sought to collect on its claim by commencing action in this Court, 68 Civ. 1295, against the United States seeking direct recovery of general average contributions due from the government as a shipper of goods on the BEATRICE.

 Subsequently, on February 12, 1969, Oceanic issued a statement of general average regarding the 1962 BEATRICE incident. The statement was premised, according to Oceanic, on a provision contained in all the relevant bills of lading which made general average "payable in accordance with the York-Antwerp Rule 1950 and as to matters not therein provided for in accordance with the laws and customs of the port of New York." Inter alia, the statement concluded that Empire's stevedoring services were properly chargeable to the general average and that a sum of $52,477.74 (the American Dollar equivalent computed by Oceanic of $56,495.58 in Canadian Dollars) for these services remained unpaid.

 Shortly thereafter, on February 28, 1969, Empire again invoked the assistance of this Court, this time moving to intervene in a pending action, 64 Ad. 1124, which had been commenced by defendant Liman's predecessors, the Chapter X trustees, against the United States to recover general average contributions due the owner of the BEATRICE from the government. On May 5, 1969, Judge Bonsal dismissed Empire's complaint in 68 Civ. 1295 and denied the motion to intervene in 64 Ad. 1124. The complaint was dismissed as timebarred by the two-year statute of limitations under the Suits in Admiralty Act, 46 U.S.C. § 745. The motion to intervene was denied on the grounds that a direct action against the government was time-barred and ...


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