UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
November 17, 1976
EAST ASIATIC COMPANY, LTD., Plaintiff,
INDOMAR, LTD., Defendant, v. The SUBFREIGHTS OF the M/V AURORA II
Tenney, District Judge.
The opinion of the court was delivered by: TENNEY
TENNEY, District Judge.
Indomar, Ltd. ("Indomar"), a Bahamian corporation, moves pursuant to Rule 60(b)(1) of the Federal Rules of Civil Procedure ("Rules") for an order correcting and amending a default judgment entered against it as defendant in an admiralty proceeding. The original action arose in connection with an alleged breach of a charter party between Indomar and East Asiatic Co., Ltd. ("East Asiatic"), the plaintiffs in the prior action and the current opponents to the motion to amend. Indomar defaulted, and judgment was had against it for $1,149,577.77, the entire amount claimed in East Asiatic's complaint, plus costs. Indomar moves to reduce that figure to $16,883.76, asserting that the lesser sum represents the maximum liability exposed to the Court's jurisdiction in the original proceedings. East Asiatic contends that the Court properly possessed jurisdiction to award the sum contained in the judgment and pleads that it be permitted to stand. For the reasons stated below, Indomar's motion to correct and amend the judgment is granted.
East Asiatic began its action against Indomar by process of maritime attachment levied against $16,883.76 of defendant's assets located within the Southern District of New York. Since the unification of admiralty and civil procedure, see Order of Supreme Court of United States, 383 U.S. 1031 (1966), maritime attachment procedure has been governed by Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims of the Federal Rules of Civil Procedure ("Supplemental Rules").
Maritime attachment is, however, a traditional remedy whose "origin is to be found in the remotest history, as well of the civil as of the common law." Manro v. Almeida, 23 U.S. (10 Wheat.) 473, 490, 6 L. Ed. 369 (1825). The remedy has "a dual purpose: (1) to obtain jurisdiction of the respondent in personam through his property and (2) to assure satisfaction of any decree in libelant's favor." Seawind Compania, S.A. v. Crescent Line, Inc., 320 F.2d 580 (2d Cir. 1963) (" Seawind "); see Swift & Company Packers v. Compania Colombiana Del Caribe, S.A., 339 U.S. 684, 70 S. Ct. 861, 94 L. Ed. 1206 (1950); Chilean Line Inc. v. United States, 344 F.2d 757, 760 (2d Cir. 1965); 2 E. Benedict, Admiralty, § 288 (6th ed. A. Knauth 1940) ("Benedict"). The historic rule, which is followed in this Circuit, is that "[the] two purposes may not be separated . . . for security cannot be obtained except as an adjunct to obtaining jurisdiction." Seawind, supra, 320 F.2d at 582; 2 Benedict, supra, § 288.
East Asiatic overlooks this rule, however, and in substance contends that use of the maritime attachment process under Supplemental Rule B does not preclude the simultaneous assertion of pure in personam jurisdiction over defendant. Thus, East Asiatic alleges that this Court had in personam jurisdiction
over Indomar not only by virtue of the maritime attachment but also through compliance with the standard requirements for in personam jurisdiction, i.e., that Indomar had sufficient contacts with the forum and that substituted service of process was made in accordance with Rule 4. Making this assertion, however, East Asiatic misapprehends the nature of maritime attachment and the relationship of Supplemental Rule B to the main body of the Federal Rules of Civil Procedure. Unification of admiralty and civil procedure has not abrogated the traditional jurisdictional function of maritime attachment, and compliance with Supplemental Rule B does not constitute service of process under Rule 4.
In admiralty, as in civil law, the court's direct in personam jurisdiction over defendant depends upon the latter's contacts with the forum and the correct service of process. Ivanhoe Trading Co. v. M/S Bornholm, 160 F. Supp. 900 (S.D.N.Y.1957); Arpad Szabo v. Smedvig Tankrederi A.S., 95 F. Supp. 519 (S.D.N.Y.1951); Belgian Mission for Economic Cooperation v. Zarati Steamship Co., Ltd., 90 F. Supp. 741 (S.D.N.Y.1950). Maritime attachment, on the other hand, is available to the plaintiff only when the defendant is not "found" within the district. Supplemental Rule B(1). To determine whether defendant is "found" within the district "a two-pronged inquiry [is made]: first, whether [defendant] can be found within the district in terms of jurisdiction, and second, if so, whether it can be found for service of process." United States v. Cia. Naviera Continental S.A., 178 F. Supp. 561, 563 (S.D.N.Y.1959); see Chilean Line Inc. v. United States, 344 F.2d 757, 760 (2d Cir. 1965); Seawind, supra, 320 F.2d at 582. If either inquiry produces a negative answer, attachment is permitted.
This two-pronged test results in a small group of cases where, in theory, plaintiff could acquire in personam jurisdiction either by traditional means or through maritime attachment. 2 Benedict, supra, § 288; 7A Moore's Federal Practice P B.03. For example, a defendant having an agent in the district and doing business within the state -- but not within the district -- would be subject either to maritime attachment jurisdiction or to pure in personam jurisdiction. However, there is no case cited to this Court wherein both methods of acquiring in personam jurisdiction were simultaneously employed. Nor can there logically be such a case, for such a holding would reduce maritime attachment to nothing more than a security lien. This cannot be done, for "[it] is crystal clear that the historical purpose of the writ of foreign attachment is to compel the respondent's appearance. Although an incidental purpose thereof is to supply the libelant with security, this objective can only be obtained as an adjunct to jurisdiction." D/S A/S Flint v. Sabre Shipping Corp., 228 F. Supp. 384, 388 (E.D.N.Y. 1964), aff'd sub nom. Det Bergenske Dampskibsselskab v. Sabre Shipping Corp., 341 F.2d 50 (2d Cir. 1965) (" Flint v. Sabre ").
Unification of admiralty and civil procedure has done nothing to distort this basic principle, although East Asiatic apparently interprets the Notes of Advisory Committee on Supplemental Rule B ("Advisory Notes") as permitting the simultaneous acquisition of in personam jurisdiction by conventional process and by maritime attachment. This Court does not agree. The text in question reads as follows:
"A change in the context of the practice is brought about by Rule 4(f), which will enable summons to be served throughout the state instead of, as heretofore, only within the district. The Advisory Committee considered whether the rule on attachment and garnishment should be correspondingly changed to permit those remedies only when the defendant cannot be found within the state and concluded that the remedy should not be so limited.
"The effect is to enlarge the class of cases in which the plaintiff may proceed by attachment or garnishment although jurisdiction of the person may be independently obtained. This is possible at the present time where, for example, a corporate defendant has appointed an agent within the district to accept service of process but is not carrying on activities there sufficient to subject it to jurisdiction . . . or where, though the foreign corporation's activities in the district are sufficient to subject it personally to the jurisdiction, there is in the district no officer on whom process can be served." (Citations omitted).
The enlargement of which the Advisory Notes speak refers to a situation which prevailed prior to the unification of admiralty and civil procedure in 1966. At that time an admiralty defendant doing sufficient business in the district but subject to service only beyond its borders, although within the state, could be subjected to the in personam jurisdiction of the court solely through process of maritime attachment. This class of defendants is now amenable to traditional in personam jurisdiction through the statewide service permitted by Rule 4(f). However, the Advisory Notes make it plain that these defendants remain vulnerable to attachment, and thus a plaintiff may proceed against them either by Rule 4(f) process or by maritime attachment. At the same time, Supplemental Rule B continues to permit attachment by a plaintiff proceeding against a foreign corporation which, although "present" in the district through its activities, can be reached for service only through extraterritorial process under Rule 4(e) or 4(i). In other words, the Advisory Notes recognize that attachment continues to be an option in certain cases where pure in personam jurisdiction might be alternatively achieved over the same defendants. But plaintiff cannot compel the defendant's appearance through Rule 4 and, at the same time, attach its property through Supplemental Rule B. Compelling defendant's appearance through extra-district process obviates the need to compel that appearance through maritime attachment. This Court cannot conclude that in widening a class of cases in which plaintiff may choose his approach, the Advisory Committee intended to undermine the venerable jurisdictional rationale of maritime attachment.
Moreover, even if it is assumed that use of maritime attachment does not preclude the simultaneous use of Rule 4 process to achieve pure in personam jurisdiction over the defendant, East Asiatic has not accomplished service upon Indomar as mandated by Rule 4. East Asiatic argues that in complying with the notice provisions of Supplemental Rule B(2) it satisfied the service requirements of Rule 4 and cites the various references to Rule 4 in Supplemental Rule B to support its contention that Supplemental Rule B is "a statute of the United States . . . [which] provides for service of a summons . . . upon a party not an inhabitant of or found within the state in which the district court is held," as provided for in Rule 4. Plaintiff overlooks the fact that Supplemental Rule B in no way concerns service of process, which, indeed, is not required to effect maritime attachment under Supplemental Rule B. The Rule is by its own terms a form of process, and its operation confers jurisdiction on the court. Supplemental Rule B does not even direct that notice be given to defendant until such time as default judgment is to be entered. And notice is then given purely on the ground of "fairness," since "none is required by the principles of due process." Advisory Notes, Subdivision (2). The method of communicating this default notice is governed internally by Supplemental Rule B(2).
Although East Asiatic did comply with Supplemental Rule B(2) in notifying Indomar before default was entered, this notification was no more than that necessary to permit execution thereafter on the property attached, and bears no significance with respect to service of process under Rule 4. Nor may East Asiatic state that it has conformed to any of the other provisions of Rule 4. It has not complied with the Rule 4(e) alternative which permits service as provided by "any statute or rule of the court of the state in which the district court is held." It has not satisfied the requirements of New York Business Corporation Law § 307 (McKinney Supp.1975), which, in conjunction with New York CPLR § 302 (McKinney Supp.1975), permits service upon a non-domiciliary corporation transacting business within the state if service is made upon the Secretary of State. Finally, East Asiatic has not met any of the terms of Rule 4(i) relating to service in a foreign country, and it is not proceeding against an instate defendant within the contemplation of Rule 4(d)(3) and Rule 4(f).
Having determined that East Asiatic had but one base of in personam jurisdiction against Indomar, i.e., that which it acquired through maritime attachment, it remains only to determine the effect of a default judgment in these circumstances. Although the jurisdiction achieved through maritime attachment is denominated in personam, it is clear that, absent an appearance by defendant, the judgment had is in the nature of quasi in rem. Indeed, the term "quasi in rem" is used in the title of Supplemental Rule E, which concerns actions commenced by maritime attachment. See Supplemental Rule E. The United States Court of Appeals for the Second Circuit has referred to Supplemental Rule B(1) as "a quasi in rem proceeding." Maryland Tuna Corp. v. MS Benares, 429 F.2d 307, 311 (2d Cir. 1970); see Societe Commerciale de Transports Transatlantiques (S.C.T.T.) v. S.S. "African Mercury ", 366 F. Supp. 1347 (S.D.N.Y.1973).
Although attachment may issue against property held for the defendant in the district up to the amount sued for, see Supplemental Rule B(1), "execution in proceedings commenced by maritime in personam attachments in which defendant has not been personally served or appeared cannot exceed the value of the attached property." 7A Moore's Federal Practice P B.03 n.6 (2d ed. 1972); see 2 Benedict, supra, § 288. The same proposition is well established outside admiralty. In Cooper v. Reynolds, 10 Wall. 308, 77 U.S. 308, 19 L. Ed. 931 (1870), the Supreme Court discussed the limits of a judgment based on jurisdiction over the res rather than over the persona. "[The] judgment of the court, though in form a personal judgment against the defendant, has no effect beyond the property attached in that suit. No general execution can be issued for any balance unpaid after the attached property is exhausted." Id. at 318-19, 19 L. Ed. 931; see Freeman v. Alderson, 119 U.S. 185, 7 S. Ct. 165, 30 L. Ed. 372 (1886); Pennoyer v. Neff, 95 U.S. 714, 24 L. Ed. 565 (1878). The judgment in such a case is not entitled to full faith and credit in another district. See Sherman v. Kirshman, 369 F.2d 886, 889 (2d Cir. 1966).
Although it is possible that East Asiatic could have achieved pure in personam jurisdiction over Indomar in this Court through the defendant's contacts with the forum and receipt of perfected service, it elected to proceed by means of a Supplemental Rule B attachment, which then represented the sole basis of the Court's jurisdiction over Indomar. Since Indomar did not appear to perfect the Court's in personam jurisdiction, see Atkins v. Fibre Disintegrating Co., 85 U.S. (18 Wall.) 272, 21 L. Ed. 841 (1873),
East Asiatic's recovery is limited according to the principles of quasi in rem jurisdiction. In order to avoid possible harassment of the defendant through improper registration of an unenforceable judgment in another district, see 28 U.S.C. § 1963,
the judgment against Indomar must be reduced to $16,883.76, the extent of the property subjected to the process of maritime attachment.
Submit amended judgment in conformity herewith.