Court Opinion

ID: 9458905
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:05:04.957226+00
Date Added: 2024-06-11T17:35:56.222478
License: Public Domain

ADAMS, Circuit Judge
(concurring and dissenting).
Reconciling the extensive jurisdiction of an admiralty court with the even broader jurisdiction of a reorganization court, is the task confronting the Court in this appeal. The majority, focusing on the Admiralty proceedings, holds that the Reorganization Court was without jurisdiction to issue the order herein appealed from. I respectfully disagree, for I believe that an examination of the history and purposes of admiralty and bankruptcy jurisdiction reveals that the two are compatible in this case.
I
To understand how this seeming conflict arose, the course of two district court proceedings must be traced. The Admiralty Court action was the result of the ramming and damaging, on March 3, 1966, of a railroad drawbridge which spanned the Raritan River in New Jersey, by the Steamship Santa Isabel, owned by the Grace Line.
On April 12, 1966, the Grace Line filed, pursuant to 46 U.S.C. § 183, a petition for exoneration from, or limitation of, liability in the United States District Court for the Southern District of New York.1 The owner of the dam*866aged bridge, the New York and Long Branch Railroad Company (Long Branch) answered Grace’s petition. The Long Branch is owned in equal shares by the Pennsylvania Railroad (PRR)2 and the Central Railroad of New Jersey (Central),3 which jointly use its 39.6 mile right-of-way. A single claim was filed by the three railroads in Admiralty Court, alleging the following damages: Long Branch, $900,000. for repair of the drawbridge and the cost of substituted bus service; Central, $500,000. for consequential damages; and PRR, $300,000. for consequential damages. Thus, the Admiralty Court faced a case involving typical questions of a maritime tort, negligence, damages, and the extent of the shipowner’s liability. The Admiralty Court did not address the problem of the division of the proceeds among the claimant railroads.
On March 23, 1967, the Central filed a petition for reorganization under the Railroad Reorganization Act, 11 U.S.C. § 205, in the District Court of New Jersey. Prior to this filing, the following events had transpired relative to the bridge accident: The PRR and the Central operated over the rails of the Long Branch pursuant to a 999 year lease agreement. This lease agreement required the PRR and the Central to advance to Long Branch, in equal amounts, funds necessary to meet emergencies. The Central, approaching a dire cash shortage, asked the PRR to advance Central’s share to Long Branch as well as its own, or in effect, to lay out the entire cost of repairing the bridge. The PRR agreed to do so,4 and by doing so became a creditor of the Central. When the Central filed its petition in bankruptcy, it listed as a liability the advance that had been made by the PRR to the Long Branch on behalf of the Central. Central had, as a potentially realizable asset, its claim against Grace for consequential damages. Further, under certain circumstances, Central arguably, could have had a claim to one-half of the recovery for the damage to the bridge. This second asset represented the recovery contemplated by the Long Branch, one-half of which might be expected to flow through to the Central as the 50% owner of the Long Branch. The assets and liabilities of a debtor are the primary concern of a reorganization court.
Late in 1968, a settlement of the admiralty claim was proposed. The agreement, inter alia, restricted the liability of Grace to $1,150,000.5 The limitation portion of the agreement clearly was responsive to the admiralty-related questions, and the presently-appealed-from order of the Reorganization Court did not disturb this aspect of the agreement. The agreement went on, however, to include a “formula for distribution of the Grace Line settlement,” apportioning the proceeds between the PRR and the Central.
The formula did not present an issue arising directly from the the maritime accident, but rather a problem of realization of assets and payment of liabilities, a matter directly and traditionally within the province of a reorganization court. The proposed formula divided the fund to be awarded between the PRR, which was to receive $834,251.02, and the Central, which was to receive $205,748.98. Significantly, none of the money was allocated to the Long Branch.
*867The trustees of the Central, in order to join in the proposed settlement, had to submit the proposal to the Reorganization Court for approval. The Reorganization Court approved the trustees’ participation in the settlement of the maritime question but refused to allow the “formula” to be accepted. Instead, the Reorganization Court instructed the Central to agree only if there were a reallocation of the proceeds.
Appellants, trustees of the Penn Central (successor in interest to PRR), contend, and the majority holds, that in defining an allocation to which the Central could agree, the Reorganization Court impermissibly encroached upon the jurisdiction of the Admiralty Court. Looking to the questions presented to each Court, the special nature of each Court and the purposes of the jurisdiction granted these Courts, I must dissent from that portion of the majority’s opinion which holds that the Reorganization Court had no jurisdiction to determine the allocation of the amount which the Admiralty Court held was sufficient to discharge Grace from all liability.
II
The majority maintains that the jurisdiction of the Admiralty Court extends to determining how much the tort-feasor must pay to limit liability and the division of the available funds among the claimants. Under normal circumstances this would be a proper role for an admiralty court. However, when essentially only one claim is made, and that claim is to be divided among several parties, at least one of which is undergoing court-supervised reorganization, normal circumstances are not present. This is because the reorganization court, too, has a broad mandate to supervise the actions of the debtor.
Thus, the dilemma is posed, two congressional mandates in apparent conflict. One horn of this dilemma is the congressional directive that a reorganization court is to have “exclusive jurisdiction of the debtor and its property wherever located.” The other is Rule F(8) of the Supplemental Rules,6 F.R.Civ.P. This Rule provides that conflicting claims among claimants are to be resolved in the admiralty proceedings:
“Objections to Claims: Distribution of Fund. Any interested party may question or controvert any claim without filing an objection thereto. Upon determination of liability the fund deposited or secured, or the proceeds of the vessel and pending freight, shall be divided pro rata, subject to all relevant provisions of law, among the several claimants in proportion to the amounts of their respective claims, duly proved, saving, however, to all parties any priority to which they may be legally entitled.”
Our' task then, as so often the case with the judiciary, is to reconcile two concepts, in order to permit each to serve its purpose. To discharge this responsibility it is the duty of the Court to interpret the statutes- and rules pursuant thereto harmoniously, following each Congressional directive to the greatest extent possible, not disposing of the seeming conflict by resort to a mechanical rule but by ascertaining the policies underlying each enactment. The United States Supreme Court, in Boys Markets, Inc. v. Retail Clerk’s Union, Local 770, 398 U.S. 235, 90 S.Ct. 1583, 26 L.Ed.2d 199 (1970) faced the problem of making congruent two seemingly contradicting statutes. Mr. Justice Brennan, speaking for the Court, stated the approach to be followed:
“Statutory interpretation requires more than concentration upon isolated words; rather, consideration must be given to the total corpus of pertinent law and the policies that inspired ostensibly inconsistent provisions.” 398 U.S. at 250, 90 S.Ct. at 1592.
Examining the purposes of each statute here, I believe that such a symbiosis is possible.
*868The majority has stated, “once an Admiralty Court acquired jurisdiction in a limitation of liability proceeding, its jurisdiction is exclusive of all other forums, where the amount of the claims exceeds the value of the vessel and its freight.” Examination of the cases on which the majority principally relies to support this proposition reveals a factual background common to all, underlying and underscoring the purposes and utility of a limitation of liability proceeding and the jurisdiction of the admiralty court granted by Rule F(8).
The factual pattern of an archetypal limitation of liability proceeding is a steamship collision or fire, killing or injuring passengers and crew, destroying baggage and cargo.
The major purpose of this 1851 Congressional program permitting limitation of liability was to assist the American maritime industry:
“[T]he great object of the statute was to encourage shipbuilding and to induce the investment of money in this branch of industry by limiting the venture of those who build the ships to the loss of the ship itself or her freight then pending.” Hartford Accident & Indemnity Co. v. Southern Pacific Co., 273 U.S. 207, 214, 47 S.Ct. 357, 358, 71 L.Ed. 612 (1927).
Thus, the statute and rule are for the benefit of the shipowner, in the present case Grace Line. Any impact the statute might have on the claimants, PRR and Central, is secondary.
To effectuate the Congressional scheme it was required that all those suffering a loss because of the maritime accident present their individual claims in a central forum, the admiralty court. That court was then to adjudicate the classic maritime tort questions of negligence, damages, the extent of the fund available to be apportioned among the successful claimants and, unless unusual circumstances pertain, the proper apportionment. Such a single proceeding is clearly necessary for the limitation of liability. It avoids a multiplicity of suits with potentially inconsistent findings ; it prevents awards being made without an appreciation of the extent of other claims; it is economical of the litigants’ and the court’s time.
The eases cited and quoted by the majority raise only procedural variations from the common fact pattern, thus confirming that the central concern is to secure consistency in the decision of the maritime issues arising from a single accident.
Providence & New York Steamship Co. v. Hill Manufacturing Co., 109 U.S. 578, 3 S.Ct. 379, 617, 27 L.Ed. 1038 (1883), arose when the steamer Oceanus, a coastal freighter, burned m New York harbor, destroying the cargo of many different manufacturers. Hill, one of those manufacturers, sought to have the question of negligence and damages tried in a Massachusetts state court. In this context the United States Supreme Court held that Hill’s claim could be adjudicated only in the limitation of liability proceeding.
The explosion of the oil barge Bolikow was the operative incident in Hartford Accident & Indemnity Co. v. Southern Pacific Co., 273 U.S. 207, 47 S.Ct. 357, 71 L.Ed. 612 (1927). That explosion damaged the Southern Pacific’s steamer El Occidente as well as killing and injuring crewmen. Though the actual issue before the Supreme Court was the status of the limitation proceeding after a finding of privity,7 the only issues before the admiralty court were typical maritime tort questions.
In Maryland Casualty Co. v. Cushing, 347 U.S. 409, 74 S.Ct. 608, 98 L.Ed. 806 (1954), five seamen were killed when *869the towboat Jane Smith struck a pier and capsized. Although the shipowners had begun a limitation of liability proceeding, representatives of the five seamen, attempting to avail themselves of the Louisiana direct action statute, sued the boat’s insurer in state court. Justice Frankfurter, announcing the judgment of the Court, in an opinion joined by three other Justices, stated that the seamen could not proceed in state court. He found that a multiplicity of suits based on the same facts, raising the same maritime questions, would be contrary to the Congressional scheme.8
The present case is very different from those cited by the majority. Here the problem is not one of a potential multiplicity of suits; there is but one claim made by the three railroads. Nor is the problem before the Reorganization Court one necessarily involved in the resolution of the maritime dispute. The purposes of the admiralty court’s jurisdiction, to allow a single forum to resolve common questions in a multiple-claimant situation, is not thwarted by the action of the Reorganization Court. Though under usual circumstances, resolution of the dispute over the proceeds among the three railroads might well be done in the admiralty court, the purposes and the broad mandate of the Reorganization Court require that, under the special facts here, such Court determine these inter sese claims.
Ill
The broad jurisdiction of the admiralty court is not directed fundamentally towards enabling that court to resolve a conflict among inter-related claimants. However, a reorganization court is charged with sorting out just such complex intercorporate problems.
The purpose undergirding Chapter X of the Bankruptcy Act, 11 U.S.C. § 501 et seq., the Corporate Reorganization Statute, and § 77, the Railroad Reorganization Act, 11 U.S.C. § 205, is to have a court carry out an efficient and equitable adjustment, making the debtor sound, yet respecting to the greatest extent possible the right of creditors. See 6 Collier on Bankruptcy ¶ 0.01, p. 2 (14th ed.). To secure this goal Congress has vested extensive power in reorganization courts, granting them “exclusive jurisdiction of the debtor and its property wherever located.” 11 U.S.C. §§ 205(a), 511.
This Court, in carrying out the Congressional design, has stated that such grant of power is to be broadly interpreted.
“Bankruptcy proceedings are inherently proceedings in equity. Reorganization proceedings under the Bankruptcy Act are ‘special’ proceedings which seek only to bring about a reorganization. The tendency of judicial interpretation of the Act has been in the direction of progressive liberalization in respect of the operation of the bankruptcy power so as to meet the challenge of present day economic and business conditions.” In re International Power Securities Corp., 170 F.2d 399, 402 (3d Cir. 1948).
Concepts of property, title and the like are to be treated flexibly to achieve the purpose of the Act. In the Matter of Imperial “400” National, Inc., 429 F.2d 671, 677 (3d Cir. 1970).9
*870Both International Power Securities and Imperial “400" involved Chapter X proceedings, normal corporate reorganizations. As has been recently pointed out by this Court, in a railroad reorganization the public interest in the survival of the enterprise is greater, thus requiring that the railroad reorganization statute be even more liberally construed. In the Matter of the Penn Central Transportation Company, 453 F.2d 520 (3d Cir.) cert. denied, Central Penn National Bank v. Trustees of Property of Penn Central Transp. Co., 408 U.S. 923, 92 S.Ct. 2493, 33 L.Ed.2d 334 (1972).
The broad grant of jurisdiction to reorganization courts, expansively interpreted, gives them power to administer the property of the debtor, be it in the actual possession of the debtor railroad, in the physical possession of another not held by the possessor under a substantial claim of right, or property that by its nature cannot be physically possessed by another. In re Lehigh Valley R. Co., 458 F.2d 1041, 1043 (3d Cir. 1972).
A pending lawsuit instituted by a debtor before entering reorganization is property encompassed by this definition. In Meyer v. Fleming, 327 U.S. 161, 66 S.Ct. 382, 90 L.Ed. 595 (1946), the Supreme Court, dealing with a more complex problem10 than the present one, stated the following rule for reorganization proceedings:
“Litigation instituted by a creditor may not be defeated merely by reason of the fact that he has become a bankrupt. Thatcher v. Rockwell, 105 U.S. 467, 469-470 [26 L.Ed. 949], Title to the claim vests, of course, in the bankruptcy trustee. He is in position to take control of the litigation.” 327 U.S. at 165, 66 S.Ct. at 385.
There can be no doubt that the claim in the Admiralty Court filed by the Central is its property and is controlled by its trustees who are responsible to the Reorganization Court. A compromise of the admiralty claim is a disposition of the debtor’s property and the supervision and adjudication of such property is directly within the purposes served by the Reorganization Court’s broad jurisdiction.
In Imperial “400,” supra, this Court affirmed the action of a reorganization court enjoining further proceedings in another bankruptcy action involving an enterprise in which Imperial was a 50% partner. Upholding the injunction this Court stated:
“A prime consideration in determining whether a court may interfere with another proceeding which will affect the reorganization of the debt- or, is the general policy of the reorganization statute: ‘that the entire administration of an estate should be centralized in a single reorganization court.’ Duggan v. Sansberry, 327 U. S. 499, 511, 66 S.Ct. 657, 90 L.Ed. 809 (1946). See also In re Cuyahoga Finance Co., 136 F.2d 18, 21 (6th Cir. 1943). It is true, . . . that ‘Congress did not give the bankruptcy court exclusive jurisdiction over all controversies that in some way affect the debtor’s estate.’ Callaway v. Benton, 336 U.S. 132, 142 [69 S.Ct. 435, 93 *871L.Ed. 553] (1949); In re South Jersey Land Corp., 361 F.2d 610 (3d Cir. 1966). But, a ‘reorganization court can and should enjoin the prosecution of any suit which would take from it the decision of any question which it has the duty to decide in connection with the reorganization or which would hamper it in any way in exercising the power imposed upon it by Chapter X.’ First National Bank in Houston, Texas v. Lake, 199 F.2d 524, 528 (4th Cir.), cert. denied, 344 U.S. 914 [73 S.Ct. 337, 97 L.Ed. 705] (1952).” 429 F.2d at 677.
Based on these principles it is clear that the Reorganization Court did not err in issuing directions to the Central trustees regarding the sum in the registry of the Admiralty Court.
The Congressional purpose in granting extensive jurisdiction to an admiralty court is in no way served by the majority’s conclusion that an admiralty court must, alone, resolve the controversy among the claimants. Yet, removing Central’s claim from the supervision of the Reorganization Court would defeat the purpose of that Court’s broad jurisdiction.11 For this reason, the seeming conflict of jurisdiction should be resolved — at least on the basis of the facts here — in favor of the Reorganization Court.12
Although, as they acknowledge, the majority’s discussion of the PRR’s entitlement to a distribution of the funds generated by Grace’s proffer of settlement is dicta, nevertheless the conclusion they reach concerning the distribution of the funds would appear to have much merit.
Therefore, I would reverse and remand for proceedings consistent with such analysis.

. Venue in limitation of liability proceedings is as follows:
“The complaint shall be filed in any district in which the vessel has been attached or arrested to answer for any claim with respect to which the plaintiff seeks to limit liability; or, if the vessel has not been attached or arrested, then in any district in which the owner has been sued with respect to any sucli claim. When the vessel has not been attached or arrested to answer the matters aforesaid, and suit has not been commenced against the owner, the proceedings may be had in the district in which the vessel may be, but if the vessel is not within any district and no suit has been commenced in any district, then the complaint may be filed in any district.” Supplementary Rule F(9), F.R.Civ.P.
Under these provisions, any number of district courts might have become the forum in which the claim involved here could be adjudicated. For example, had the Santa Isalel been outbound on a voyage and able to continue to its next port, possibly Seattle, the reasoning of the majority might conceivably suggest that the United States ' District Court for the *866Western District of Washington might bo the appropriate forum to adjudicate tile dispute among the three railroads. Then that Court would have to examine the reorganization program of at least two trustees to resolve their dispute.

. The PRR has gone through several metamorphoses since the accident and appears in the present case as Trustees of the property of the Penn Central Transportation Company.

. As will be discussed infra, the Central is undergoing reorganization pursuant to § 77b of the Bankruptcy Act, 11 U.S.C. § 205, and it is here appearing by its trustees.

. There is considerable contention over the status to be accorded this agreement.

. It was stipulated by all parties that a counsel fee of $110,000 was to be paid from these proceeds.

. The Supplemental Rules, guiding the procedure in Admiralty, replaced the General Admiralty Rules in 1966.

. For an owner or charterer of a ship to avail himself of the benefits of limited liability, the owner or charterer must show that the accident occurred without his privity or knowledge. 46 U.S.C.A. §§ 183 & 185.

. The majority cites Pershing Auto Rentals, Inc. v. Gaffney, 279 F.2d 546 (5th Cir. 1960), stating that it holds that, “The exclusive jurisdiction of an admiralty court in a multiple-claims-inadequate-fund limitation proceeding is of such dimension that an Admiralty Court cannot grant permission to a claimant to establish his claim in another tribunal.” This statement itself indicates the misapprehension of the role of an admiralty court for in the Central's case there is no question of establishing a claim in another court. The claim has been established in Admiralty. The Reorganization Court is addressing the question of the right to the proceeds of that claim.

. In a printer's error the Federal Reporter 2d Series report dropped several lines of *870the opinion, 429 F.2d at 677, n. 8. The full paragraph .should correctly rend:
“In order to effectuate the purpose of Chapter X proceedings — ‘to render the authority and control of the reorganization tribunal paramount and all-embracing to the extent required to achieve the ends contemplated by Chapter X; and to exclude any interference by the acts of others or by proceedings in other courts where such activities or proceedings tend to hinder the i>rogress of reorganization’ [6 Collier on Bankruptcy Á 3.03, p. 424 (14th Ed.)] — this Court 1ms indicated that traditional concepts of property, title and separate entities may have to give way. In re Pittsburgh Rys. Co., 3 Cir., 155 F.2d 477 at 485; New York Trust Company v. Greenwood Lake R.v. Co., 3 Cir., 156 F.2d 701, at 704.
Slip opinion at 9.

. Meyer v. Fleming, supra, dealt with the possession of the right to continue or terminate a derivative suit after the corporation, in whose name the suit had been brought, filed for reorganization.

. This result does not in any way encroach upon the primary functions of the Admiralty Court to decide the question of negligence, and to delimit the shipowner’s liability. Certainly the shipowner, in this type situation, with the maritime questions resolved, would have no interest in the priorities to be assigned to those asserting claims.

. It might be claimed that there is an advantage to the majority’s approach in that it creates a degree of certainty. But certainty in such matters may well be an illusion. The complexities facing the judiciary in the dynamic world of court-supervised reorganization cannot be solved by unreal simplicities of law.