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IN RE TA CHI NAVIGATION CORP.S.A.

May 20, 1976

Complaint of TA CHI NAVIGATION (PANAMA) CORP.S.A., as owner of the S/S EURYPYLUS for exoneration from or limitation of liability. CAROLINA FLORAL IMPORT, INC., et al., Plaintiffs,
v.
M.V. EURYPYLUS, her engines, boilers, etc., et al., Defendants


Tenney, District Judge.


The opinion of the court was delivered by: TENNEY

MEMORANDUM

TENNEY, District Judge.

 In accordance with the order entered herein on February 4, 1976, in Carolina Floral Import Inc., et al. v. M. V. EURYPYLUS, etc., 75 Civ. 5768, the attorneys for petitioner Ta Chi Navigation (Panama) Corp. S.A., as owner of the M.V. EURYPYLUS, for exoneration from or limitation of liability, and for cargo claimants, have agreed to submit the following question for determination in the above-captioned limitation proceeding (75 Civ. 5994):

 
1. Whether the United States Limitation of Liability Act, Sections 4283, 4284, 4285 and 4289 of the Revised Statutes of the United States (46 U.S.C.A. §§ 183-185, 188) or the law of the Republic of Panama, applies to the limitation proceeding and governs the items comprising the limitation fund herein.
 
(A) If the Court decides that United States law applies, irrespective of whether Panamanian law is substantive or procedural, then the Limitation Fund shall be fixed according to United States Limitation of Liability Act (46 U.S.C.A. § 183).
 
(B) If the Court determines that Panamanian law could apply, if substantive, then counsel have agreed to obtain pertinent testimony in Panama for later submission to the Court regarding the nature of a shipowner's exoneration from or the limitation of liability provided for in the Commercial Code of the Republic of Panama.

 A brief statement of assumed facts may prove helpful before embarking on what, until now, were believed to be charted waters.

 On or about October 25, 1975, there was received on board M.V. EURYPYLUS at the port of Kobe, Japan, various shipments which together with other cargo received on board at Hong Kong and Taiwan were destined for discharge and delivery at Cristobal C.Z., San Juan, Puerto Rico, and at various ports on the Gulf and east coasts of the United States, including Charleston, Philadelphia, Baltimore and New York. Thereafter, the vessel departed from Kobe with some 7,767 tons of general cargo shipped under 322 bills of lading. M.V. EURYPYLUS was owned by Ta Chi Navigation (Panama) Corp. S.A. (hereinafter "Ta Chi Navigation"). *fn1" The bills of lading were issued by Ta Peng Lines (or by Ta Peng Steamship Co., Ltd.). Both corporations conduct business in New York City through an agent, Transnational Maritime, Inc., 25 Broadway, New York City.

 On November 10, 1975 the vessel sustained serious damage as the result of an explosion and fire in her engine room, the fire spreading rapidly to the after three cargo holds. After unsuccessfully attempting to control the fire, the crew abandoned the vessel then lying some 700 miles south of Los Angeles and on the high seas. Thereafter the vessel was delivered to Los Angeles, California, by salvors.

 On November 17, 1975, the first claim for failure to deliver cargo was filed in this Court as an admiralty or maritime claim within the meaning of Rule 9(h) of the Federal Rules of Civil Procedure. An amended and supplemental complaint was filed in that action on January 22, 1976 adding more than 50 additional cargo claimants as party plaintiffs, consisting for the most part of United States corporations. Also added as party plaintiffs were numerous underwriters who "by virtue of policies of insurance issued by them to shippers or consignees or some of the cargo-plaintiffs hereinbefore identified, are obligated to pay plaintiffs the amount of their losses pursuant to the terms and conditions of said policies of insurance and the underwriter-plaintiffs have already issued salvage guarantees for the discharged cargoes insured under said policies." (Amended and Supplemental Complaint, 75 Civ. 5768, Para. SIXTH).

 Following the filing, on November 17, 1975, of the initial claim against the shipowner Ta Chi Navigation, the shipowner commenced the subject limitation proceeding by filing a complaint seeking exoneration from or limitation of liability pursuant to the United States Limitation of Liability Act, 46 U.S.C. §§ 183-185, 188. A dispute having arisen as to the law to be applied in determining "the amount or value of the interest of [the] owner in the vessel", this Court, on February 4, 1976, ordered Ta Chi Navigation in 75 Civ. 5768, the pending suit by the cargo claimants, to post surety in the pending limitation proceeding, 75 Civ. 5994, in the sum of $268,246.30, that being the value of M.V. EURYPYLUS after the casualty, plus her pending freight on the voyage concerned, less salvage liens arising from the casualty, but without prejudice to plaintiffs' right to demand additional security in the limitation proceeding in the event: (1) that the Court determine that the salvage liens or any part thereof should be added to the present limitation funds, thereby increasing same to a sum not exceeding $624,246.30, pursuant to 46 U.S.C. § 183; *fn2" and/or (2) that the limitation fund is determined to be governed by some law other than as provided for by the said United States Limitation of Liability Act. In connection with the determination of the governing law as to the limitation fund, plaintiff cargo-claimants assert that the rights of the parties are governed and controlled by the law of the flag of M.V. EURYPYLUS, i.e., the laws of the Republic of Panama and, we assume, specifically by Sections 1078, 1079 and 1093 of the Commercial Code of the Republic of Panama. Petition of Chadade Steamship Co. (Yarmouth Castle), 266 F. Supp. 517 (S.D.Fla. 1967) (hereinafter " Chadade "). Cargo claimants' attraction to Chadade is due to the holding therein that under similar circumstances Panamanian law was applicable in determining the "amount or interest of the owner in the vessel," and that under such law the court in Chadade determined that hull insurance, and protection and indemnity insurance, up to the amount necessary to cover the value of the claims pleaded or the face value of such insurance, whichever sum was smaller, was to be included in determining the owner's interest.

 No claim is made by any of the parties hereto that hull or liability insurance is includable under 46 U.S.C. § 183, except insofar as the claim is made inferentially that in a proceeding under Section 183 the value of the res to be surrendered or for which surety may be given shall in the instant case be determined by the Panamanian definition of that res, which definition states that "the indemnization of the insurance is part of the patrimony of the vessel." Article 1078 of the Commercial Code of the Republic of Panama, quoted in Chadade, supra, 266 F. Supp. at 521. Indeed, under our law such insurance must be excluded. The City of Norwich, 118 U.S. 468, 6 S. Ct. 1150, 30 L. Ed. 134 (1886); Pettus v. Jones & Laughlin Steel Corporation, 322 F. Supp. 1078, 1080-81 (W.D.Pa.1971); In re Pacific Inland Navigation Company, 263 F. Supp. 915, 919 (D.Hawaii 1967); In re Sheridan's Petition, 226 F. Supp. 136, 140 (S.D.N.Y.1964); Gilmore and Black, The Law of Admiralty, 907-908 (2d ed. 1975). See also Maryland Casualty Co. v. Cushing, 347 U.S. 409, 419, 74 S. Ct. 608, 613, 98 L. Ed. 806, 816 (1954).

 DISCUSSION

 Section 183 is the very heart of the Limitation Act and subsection (a), containing the general provision, has been virtually unchanged since the Act was initially ...


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