Black Diamond Corporation v. Robert Stewart & Sons/Opinion of the Court

by Felix Frankfurter

United States Supreme Court

336 U.S. 386

Black Diamond Corporation  v.  Robert Stewart & Sons

 Argued: Jan. 3, 4, 1949. --- Decided: March 14, 1949

We brought these cases here because they call for determination of important issues in the administration of admiralty law. 335 U.S. 809, 69 S.Ct. 40. They bring for review a decree of the Court of Appeals for the Second Circuit affirming the dismissal of a petition for limited liability brought in the United States District Court for the Eastern District of New York by the United States, as owner and the Black Diamond Steamship Corporation as bareboat charterer of the S. S. Norwalk Victory. 167 F.2d 308.

The facts controlling our decision are riefly these. On April 28, 1947, the Norwalk Victory, while proceeding down the Schelde River in the territorial waters of Belgium, collided with the British steamer Merganser. The Merganser sank with all her cargo; her chief steward was killed; in backing away from the Merganser the Norwalk Victory struck and damaged the bank of the Schelde. Soon after the collision the owners of the Merganser brought suit against Black Diamond in the High Court of Justice of England claiming damages in the amount of $1,000,000. That is the only proceeding which has been brought abroad. On October 14, 1947, the owners of the cargo lost in the sinking of the Merganser brought suit in the Eastern District of New York; aggregate claims thus far filed total nearly $1,000,000.

In their petition for limitation of liability, brought under R.S. § 4285, as amended, 49 Stat. 1480, 46 U.S.C. s 185, 46 U.S.C.A. § 185, ^[1] the United States and Black Diamond allege the possibility that in addition to the suit in the High Court of Justice and the suits by the cargo owners in New York, there may be suits in the courts of the United States by other cargo owners, by the personal representative of the Merganser's chief steward, and by the Belgian Government for damages to the bank of the Schelde and for the cost of removing the wreck of the Merganser from the river. These claims, they say, would exceed the value of the Norwalk Victory, which is about $1,000,000. But the petitioners, despite the provisions of R.S. § 4283, as amended, 49 Stat. 1479, 46 U.S.C. § 183, 46 U.S.C.A. § 183, ^[2] do not recognize the value of their ship as the limit of their liability. They insist, rather, that their liability is limited by the International Convention for the Unification of Certain Rules relating to the Limitation of the Liability of Owners of Seagoing Vessels, signed at Brussels on August 25, 1924. ^[3] The Convention was ratified by Belgium on June 2, 1930, and took effect on June 2, 1931; it is alleged, therefore, to have been part of the territorial law of Belgium at the time of this collision in Belgian waters. On the basis of this Convention, the petitioners assert their maximum liability to be $325,028.79.

Accordingly, Black Diamond accompanied its petition for limitation of liability with a bond in the amount of $325,028.79. The United States, standing upon 28 U.S.C. § 2408, 28 U.S.C.A. § 2408, ^[4] and § 3 of the Suits in Admiralty Act, 41 Stat. 526, as amended, 46 U.S.C. § 743, 46 U.S.C.A. § 743, ^[5] filed no bond. The District Court, holding that the privilege of limiting liability relates 'not to the substantive rights giving rise to the liability, but to the remedy, and that is governed by the law of the forum,' dismissed the petition of the ground that Black Diamond had not complied with R.S. s 4285 by filing a bond in the amount of the value of the ship $1,000,000. The standing of the United States (which was not separately represented at that stage of the proceeding) was not considered.

Upon appeal, the petitioners were found to be in 'a dilemma from which they cannot escape.' 2 Cir., 167 F.2d at page 309. Reading the petition as alleging that the Belgian limitation attached to the claimants' substantive right to recover, and treating that allegation as proved for purposes of determining the sufficiency of the petition, the Court accepted arguendo the sum of $325,000 as 'the limit of all their (petitioners') liabilities.' Id. But though the Court of Appeals looked to the lex loci delicti for the substantive limit of liability, its next step was taken on the assumption that the conditions under which a petition praying for the injunction of other proceedings and a forum concursus may be filed are matte § of procedure governed by the lex fori. It is a condition imposed by the lex fori, the court's reasoning continued, that a petition for limitation of liability is not available to a shipowner unless the aggregate of known and probable claims against him is greater than the value of his ship. As establishing this proposition, the court cited The Aquitania, 2 Cir., 20 F.2d 457; Curtis Bay Towing Co. v. Tug Kevin Moran, Inc., 2 Cir., 159 F.2d 273; and The George W. Fields, D.C.S.D.N.Y., 237 F. 403. And it held these cases applicable on the ground that the maximum liability imposed by Belgian law was less than the value of the Norwalk Victory.

But the lower court found it unnecessary to pass finally on the question whether the Belgian limitation was in fact controlling because, if it were not, petitioners would be impaled on the other horn of the dilemma: if the substantive law of the forum rather than that of Belgium applied, the limit of liability, by R.S. § 4283, would be the value of the vessel. Since the procedural law of the forum, moreover, requires the posting of a bond in the amount of potential liability, and since the bond proposed by petitioners was for less than a third of that amount, upon this hypothesis also they were disentitled to proceed. The Court of Appeals accordingly affirmed the dismissal of the petition.

If the Court of Appeals' reliance upon The Aquitania, Curtis Bay Towing Co. v. Tug Kevin Moran, and The George W. Fields, supra, was, as we are convinced, under the circumstances misplaced, we escape its dilemma without wanting in respect for the wisdom of that most experienced of admiralty courts. Those cases, it is true, hold that where the aggregate claims against a shipowner can by no possibility exceed the value of his ship, a proceeding under R.S. § 4285 will not lie. But the value of the ship was relevant in those cases only because under the law of the United States, which was assumed to be applicable, that was the limit of the owner's liability. Since the total amount of all potential claims in each case was only a fraction of that limit, the fund available for their satisfaction was more than ample. There was no reason, therefore, for permitting the petitioners to invoke a forum concursus. But where, as here, the total amount of potential claims exceeds the fund available for their satisfaction, whether that fund be measured by the law of Belgium or of the United States, there exists just such a situation as R.S. § 4285 was designed to meet.

'Unless some proceeding of this kind were adopted which should bring all the parties interested into one litigation, and all the claimants into concourse for a pro rata distribution of the common fund, it is manifest that in most cases the benefits of the act could never be realized. Cases might occur, it is true, in which the shipowners could avail themselves of those benefits, by way of defense alone, as where both ship and freight are totally lost, so that the owners are relieved from all liability whatever. But even in that case, in the absence of a remedy by which they could obtain a decree of exemption as to all claimants, they would be liable to a diversity of suits, brought, perhaps, in different states, after long periods of time, when the witnesses have been dispersed, and issuing in contrary results before different tribunals; while in the ordinary cases, where a limited liability to some extent exists, but to an amount less than the aggregate claims for damages, so as to require a concourse of claimants and a pro rata distribution, the prosecution of separate suits, if allowed to proceed, would result in a subversion of the whole object and scheme of the statute.' Providence & N.Y.S.S.C.o. v. Hill Mfg. Co., 109 U.S. 578, 594-595, 3 S.Ct. 379, 389, 390, 27 L.Ed. 1038.

Indeed, if the total amount recoverable is fixed by Belgian law, the need for the issuance of a motion under Admiralty Rule 51, 28 U.S.C.A., the injunction of other suits, and a forum concursus is obviously greater than it is under the higher substantive limitation of our own law. Thus one of the horns of petitioners' dilemma disappears; we must, accordingly, reverse the judgment below and remand the cases for further proceedings.

Since the cases are going back, it is necessary to confront the other horn of the dilemma. In that branch of its reasoning, the Court of Appeals assumed that the posting of too small a bond would require the dismissal of the petition. The court's attention apparently was not directed to the status of the Government, which, by the plain import of 28 U.S.C. § 2408, 28 U.S.C.A. § 2408, ^[6] and 41 Stat. 526, as amended, 46 U.S.C. § 743, 46 U.S.C.A. § 743, ^[7] relieves it of the duty to post a bond in order to be entitled to proceed under R.S. § 4285. And perhaps it is well to add, in passing, that, in view of the six-month limitation ^[8] on proceeding under that statute, remand to the District Court in order to give Black Diamond an opportunity to file a larger bond would have been a better course, since the defect was not jurisdictional, than affirmance of dismissal of the petition. See Langnes v. Green, 282 U.S. 531, 541-542, 51 S.Ct. 243, 247, 75 L.Ed. 520; Curtis Bay Towing Co. v. Tug Kevin Moran, Inc. 2 Cir., 159 F.2d 273, 276; cf. Bigler v. Waller, 12 Wall. 142, 149, 20 L.Ed. 260; Davis v. Wakelee, 156 U.S. 680, 15 S.Ct. 555, 39 L.Ed. 578. We add this observation because, under the circumstances, affirmance could only have had the effect of depriving the petitioners altogether of the privilege of a limitation proceeding, no matter what the amount of the bond they were willing to post. It threw them back upon the dubious advantage of limitation of liability as a partial defense to successive suits in admiralty in which the recoveries, though separately less than the applicable limit, might in the aggregate far exceed it. And such would be the effect were we also to affirm the judgment.

Having decided that the case must be remanded because the petition was improperly dismissed, we turn to the question whether there are any circumstances under which the Belgian limitation would be enforceable by our courts. On this point we agree with the Court of Appeals-and disagree with the District Court-that if, indeed, the Belgian limitation attaches to the right, then nothing in The Titanic, 233 U.S. 718, 34 S.Ct. 754, 58 L.Ed. 1171, stands in the way of observing that limitation. The Court in that case was dealing with 'a liability assumed already to exist on other grounds.' Id., 233 U.S. at page 733, 34 S.Ct. at page 756. But if it is the law of Belgium that the wrong creates no greater liability than that recognized by the Convention of 1924, we cannot, without more, regard our own statutes as expanding the right to recover. Any other conclusion would disregard the settled principle that, in the absence of some overriding domestic policy translated into law, the right to recover for a tort depends upon and is measured by the law of the place where the tort occurred. Smith v. Condry, 1 How. 28, 33, 11 L.Ed. 35; Slater v. Mexican National R. Co., 194 U.S. 120, 24 S.Ct. 581, 48 L.Ed. 900; Cuba R. Co. v. Crosby, 222 U.S. 473, 32 S.Ct. 132, 56 L.Ed. 274, 38 L.R.A., N.S., 40; Western Union Telegraph Co. v. Brown, 234 U.S. 542, 34 S.Ct. 955, 58 L.Ed. 1457.

If, on the other hand, the Convention merely provides procedural machinery by which claim otherwise created are brought into concourse and scaled down to their proportionate share of a limited fund, we would respect the equally well settled principle that the forum is not governed by foreign rules of procedure. See Pritchard v. Norton, 106 U.S. 124, 1 S.Ct. 102, 27 L.Ed. 104; Davis v. Mills, 194 U.S. 451, 24 S.Ct. 692, 48 L.Ed. 1067. We leave open the choice between these opposing hypotheses. Nor do we mean to imply that these apparently clear-cut alternatives are exhaustive. A limi which attaches not do an individual's right of recovery but to the aggregate claims arising from a given tort can be said to be 'attached to the right' only in a special sense of that phrase, and a rule which operates to cut down the amount recoverable by a claimant cannot be fitted within any but a very broad definition of the term 'procedure.' Whether there are in fact considerations of domestic policy which deserve to be measured against application of the lex loci delicti and whether such considerations are as significant where the foreign limitation is lower than our own as where it is higher-these too are questions not now before us in view of the fact that the case is here merely on exceptions to the petition for limitation of liability.

Since Belgian law may be enforceable by our courts, that law, having been pleaded, must be established. It is true that this Court has on several occasions held international rules which had passed into the 'general maritime law' to be subject to judicial notice. The Scotia, 14 Wall. 170, 20 L.Ed. 822; The Belgenland, 114 U.S. 355, 370, 5 S.Ct. 860, 867, 29 L.Ed. 152; Richelieu & Ontario Nav. Co. v. Boston Marine Ins. Co., 136 U.S. 408, 422, 10 S.Ct. 934, 937, 34 L.Ed. 398; The New York, 175 U.S. 187, 20 S.Ct. 67, 44 L.Ed. 126. But where less widely recognized rules of foreign maritime law have been involved, the Court has adhered to the general principle that foreign law is to be proved as a fact. Liverpool & G. W. Steam Co. v. Phenix Ins. Co., 129 U.S. 397, 9 S.Ct. 469, 32 L.Ed. 788; see Talbot v. Seeman, 1 Cranch 1, 38, 2 L.Ed. 15; The Scotia, 14 Wall. 170, 188, 20 L.Ed. 822. See also the decisions of the lower federal courts cited in 3 Benedict on Admiralty 11, n. 36 (6th ed., Knauth, 1940). Although we would no doubt be free to notice the terms of the Limitation Convention itself even though they were not set forth among the allegations of the petition, their legal significance does not appear on the surface. 'Many doubts are left unresolved by the documents before us.' Slater v. Mexican National R. Co., supra, 194 U.S. at page 130, 24 S.Ct. at page 584, 48 L.Ed. 900. Respondents, indeed, in their effort to show that the Convention lays down purely 'procedural' requirements, rely upon 'personal consultations with three active maritime lawyers of Antwerp' which are no part of the record before us. 'Substance' and 'procedure,' moreover, are not legal concepts of invariant content, see Guaranty Trust Co. of New York v. York, 326 U.S. 99, 109, 65 S.Ct. 1464, 1469, 89 L.Ed. 2079, 160 A.L.R. 1231, and on the basis of what is before us we are precluded from choosing one of these categories rather than the other.

It is important to add, moreover, that the question of what law governs the substantive limit of liability should be determined upon remand in advance of the proof of individual claims. A proceeding to limit liability is ipso facto a proceeding to limit recovery, and the amount of the applicable limit, like the value of the vessel and freight, is a question affecting the magnitude of the res from which recovery is sought. It is a question, therefore, which lies at the threshold of all claims, is equally relevant to all, and should accordingly be disposed of before any.

One last point remains to be considered-the amount of the bond to be required of Black Diamond upon remand of No. 121. A literal reading of the procedural requirements of R.S. § 4285 would compel the posting of a bond in 'a sum equal to the amount or value of the interest of such owner in the vessel and freight,' in this instance about $1,000,000. But we think that this provision, as part of a total legislative scheme, should be read in the light of the substantive limitation imposed by R.S. § 4283, for it is obvious that the words 'amount or value of the interest of such owner' in § 4285 were carried over from and are relevant solely to the identical language of § 4283 laying down the limit which recovery against the owner shall not * * * exceed.' The whole tenor of R.S. § 4285-the option of depositing cash or 'approved security,' the discretion granted the court to require additional deposits if 'necessary to carry out the provisions of section 4283,' and the alternative of transferring the vessel and freight to a trustee-is one of concern with protecting the assets from which the claimants' satisfaction must ultimately come.

If, therefore Belgian law rather than R.S. § 4283 should be found to govern the substantive limit of liability, no purpose would be served, so far as proceedings in the District Court are concerned, by demanding security in excess of that limit. But the choice of law presents a knotty problem, and we cannot overlook the contingencies of appellate review. If the District Court should find Belgian law controlling, it might, under our interpretation of § 4285, exact a bond of only $325,000. If, however, a contrary view should ultimately prevail, the requisite amount of the bond would have been $1,000,000. The District Court, therefore, should provide for that contingency by requiring Black Diamond to post a bond for the value of the ship and freight, not because § 4285 demands it, but as an exercise of its power to preserve the status quo pending appeal. See Scripps-Howard Radio, Inc., v. Federal Communications Comm., 316 U.S. 4, 9-10, 62 S.Ct. 875, 879 880, 86 L.Ed. 1229.

So, for proceedings not inconsistent with this opinion, the case is

Reversed and remanded.

Mr. Justice JACKSON, dissenting.

Notes

1. 'Sec. 4285. The vessel owner, within six months after a claimant shall have given to or filed with such owner written notice of claim, may petition a district court of the United States of competent jurisdiction for limitation of liability within the provisions of this chapter, as amended, and the owner (a) shall deposit with the court, for the benefit of claimants, a sum equal to the amount or value of the interest of such owner in the vessel and freight, or approved security therefor, and in addition such sums, or approved security therefor, as the court may from time to time tax as necessary to carry out the provisions of section 4283, as amended, or (b) at his option shall transfer, for the benefit of claimants, to a trustee to be appointed by the court his interest in the vessel and freight, together with such sums, or approved security therefor, as the court may from time to time fix as necessary to carry out the provisions of section 4283, as amended. Upon compliance with the requirements of this section all claims and proceedings against the owner with respect to the matter in question shall cease.'
2. 'Sec. 4283. (a) The liability of the owner of any vessel, whether American or foreign, for any embezzlement, loss, or destruction by any person of any property, goods, or merchandise shipped or put on board of such vessel, or for any loss, damage, or injury by collision, or for any act, matter, or thing, loss, damage, or forfeiture, done, occasioned, or incurred, without the privity or knowledge of such owner or owners, shall not, except in the cases provided for in subsection (b) of this section, exceed the amount or value of the interest of such owner in such vessel, and her freight then pending.'
3. The pertinent parts of the Convention, p blished in U.S. Dept. of State Treaty Information Bull, No. 20, p. 13 (1931), are:
4. '§ 2408. Security not required of United States.
5. '§ 743. Procedure in cases of libel in personam
6. See footnote 4 ante.
7. See footnote 5 ante.
8. See footnote 1 ante.