Ponce Federal Bank v. The Vessel "Lady Abb

• Court: Court of Appeals for the First Circuit
• Decided: November 25, 1992
• Docket: 92-1413
• Status: Published

Opinion

USCA1 Opinion

November 25, 1992

                            UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT

                                 ____________________

        No. 92-1413

                             PONCE FEDERAL BANK, F.S.B.,

                                 Plaintiff, Appellee,

                                          v.

                           THE VESSEL "LADY ABBY", ET AL.,

                                Defendants, Appellees.
                                 ____________________

                             CRISTOBAL BURGOS RODRIGUEZ,

                                Defendant, Appellant.
                                 ____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF PUERTO RICO

[Hon. Juan M. Perez-Gimenez, U.S. District Judge]
                                               ___________________

                                 ____________________

                                        Before

                                 Breyer, Chief Judge,
                                         ___________
                            Aldrich, Senior Circuit Judge,
                                     ____________________
                              and Boudin, Circuit Judge.
                                          _____________

                                 ____________________

            Eli B. Arroyo with whom Miguel E. Miranda-Gutierrez and  Figueroa-
            _____________           ___________________________      _________
        Morales & Chaves-Caraballo Law Offices were on brief for appellant.
        ______________________________________
            Francisco A.  Besosa with  whom Miguel  J. Rodriguez-Marxuach  and
            ____________________            __________________________________
        Goldman Antonetti  Ferraiuoli & Axtmayer  were on brief  for appellee,
        ________________________________________
        Ponce Federal Bank, F.S.B.

                                 ____________________

____________________

BREYER, Chief Judge.   Ponce Federal  Bank brought
                               ___________

             an in rem action in admiralty to foreclose its mortgage on a
                ______

             ship, the "Lady Abby."  It added an in personam claim, under
                                                 ___________

             the law of  Puerto Rico, for  a deficiency judgment  against

             the Lady Abby's current possessor, Cristobal Burgos.  Burgos

             had  bought the ship from the borrowers; he had promised the

             borrowers he would  keep up the  mortgage payments; and,  he

             had  failed  to  do so.    The  district  court granted  the

             deficiency  judgment.    Burgos  appeals.    We  affirm  the

             district court.

                                          I

                                     Jurisdiction
                                     ____________

                       Burgos argues that the district court did not have

             jurisdiction to enter a judgment against him.  He points out

             that the Bank originally  brought an admiralty claim against

             the ship,  not  against him.    He adds  that  there was  no

             diversity jurisdiction, 28 U.S.C.   1332, and that the claim

             against  him did  not arise  under federal  law.   28 U.S.C.

               1331.  A special "ship mortgage"  statute seems to provide

             jurisdiction for a mortgagee to obtain a deficiency judgment

             from a  borrower, but it  says nothing about one  who buys a
                     ________

             ship from  a borrower.  See  46 U.S.C.   951,  amended by 46
                                     ___                    __________

             U.S.C.    31325(b)(2).   Where then,  he asks,  did Congress

authorize  the  admiralty court's  exercise  of jurisdiction

             over him?  See, e.g., The Mayor v. Cooper, 73 U.S. (6 Wall.)
                        ___ _____  _________    ______

             247,  252  (1868) ("[T]wo  things  are  necessary to  create

             jurisdiction . . .  .  The Constitution must have  given the

             court the capacity  to take it, and an  act of Congress must

             have supplied it.").

                       The  answer  to  this  question  has  four  parts.

             First,   Congress  has   granted  federal   district  courts

             "original jurisdiction" over 1) any "civil case of admiralty

             or maritime jurisdiction," 28 U.S.C.    1333; and 2) "suits"

             or  "civil  action[s]"    brought to  enforce  a  "preferred

             mortgage  . .  . lien"  (i.e., a  ship mortgage  lien) on  a

             mortgaged vessel.   46 U.S.C.   951,  amended by 46 U.S.C.  
                                                   __________

             31325. 

                       Second,    courts    have    traditionally    read

             jurisdictional statutes of this kind (at least in admiralty)

             as granting admiralty courts "pendent party" jurisdiction, a

             jurisdiction that  permits the  court hearing  the admiralty

             claim  to  hear another,  closely  related  claim against  a

             person not otherwise  a party in the case.   See, e.g., Roco
                                                          ___  ____  ____

             Carriers, Ltd. v. M/V Nurnberg  Express, 899 F.2d 1292, 1295
             ______________    _____________________

             (2d Cir. 1990) (citing cases).  

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                                          3

Third, a non-federal  claim against such  a person

             is sufficiently  related to permit the  assertion of pendent

             party jurisdiction if

                       the   state   law   claim  against   the
                       additional party arises  out of a common
                       nucleus  of  operative  facts  with  the
                       admiralty  claim  and the  resolution of
                       the  factually  connected  claims  in  a
                       single  proceeding   would  further  the
                       interests    of    conserving   judicial
                       resources and fairness to the parties.

             Id.
             ___

                       Fourth, the claim is so  related here.  The Bank's

             mortgage-foreclosure  admiralty claims  and its  Puerto Rico

             law  mortgage-deficiency claims involve a "common nucleus of

             operative  facts."   A  "single proceeding"  to decide  both

             seems  eminently  fair.    And,  the  consolidation  of  the

             proceedings  in  the  admiralty   court  helps  to  conserve

             judicial  resources, for  otherwise the  Bank would  have to

             bring separate legal actions in  federal and local courts to

             collect  the money due.  See 46  U.S.C.   951, amended by 46
                                      ___                   __________

             U.S.C.      31325(c)   (giving  federal   courts   exclusive
                                                                _________

             jurisdiction over ship-mortgage foreclosure claims).  

                       The upshot is that this case falls well within the

             bounds of  relevant legal authority permitting  an admiralty

             court to  assert "pendent  party" jurisdiction.   See, e.g.,
                                                               ___  ____

             Brown v. Trustees of Boston University, 891 F.2d 337, 355-56
             _____    _____________________________

                                         -4-
                                          4

(1st  Cir.  1989),  cert.   denied,  496  U.S.  937  (1990);
                                 ______________

             Rodriguez v. Comas, 888 F.2d 899, 903-05 (1st Cir. 1989). 
             _________    _____

                       The  appellant's  single  significant argument  is

             that we must  ignore this authority  because of the  Supreme

             Court's fairly  recent decision in Finley  v. United States,
                                                ______     _____________

             490  U.S.  545 (1989).   The  Supreme  Court, in  that case,

             cautioned against reading jurisdictional statutes broadly to

             confer "pendent party" jurisdiction.  See id. at 547-48.  It
                                                   ___ ___

             considered  a federal  tort claim  statute that  granted the

             federal courts  "exclusive jurisdiction of civil  actions on

             claims against  the United  States."  28  U.S.C.    1346(b).

             And, it held that  this statute did not authorize  a federal
                                                 ___

             court,  hearing a  federal  law accident  claim against  the

             United  States, also to hear a state law tort claim, arising

             out of the same accident, but against a person not otherwise

             a  party in the federal case.   See Finley, 490 U.S. at 555-
                                             ___ ______

             56.   Congress yet more  recently has passed  a statute that

             overturns Finley.  28 U.S.C.   1367.  But, that statute does
                       ______

             not directly apply to this, post-Finley, pre-statute, case.
                                              ______

                       We do  not agree, however, that  Finley requires a
                                                        ______

             different  result  in  this   case.    Other  circuits  have

             distinguished  between Finley's statutory context (a statute
                                    ______

             that waived sovereign immunity) and  jurisdictional statutes

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                                          5

related  to admiralty.  See Roco Carriers, 899 F.2d at 1295-
                                     ___ _____________

             97; Loeber v. Bay Tankers, Inc., 924 F.2d 1340, 1345-47 (5th
                 ______    _________________

             Cir. 1991) (following  Roco); see also Antilles  Ins. Co. v.
                                    ____   ___ ____ __________________

             M/V  Abitibi  Concord, 755  F.  Supp. 42,  45  (D.P.R. 1991)
             _____________________

             (same);  cf.   Rodriguez  v.  Comas,  888   F.2d  at  905-06
                      ___   _________      _____

             (distinguishing Finley from a Section 1983 case).  They have
                             ______

             pointed  out  that, traditionally,  courts  have interpreted

             waivers of sovereign immunity narrowly;  yet, traditionally,

             they   have  also   interpreted   assertions  of   admiralty

             jurisdiction more  broadly (given  needs for  uniformity and

             expedition,  and  broad  statutory language,  such  as  that

             granting jurisdiction over any admiralty "civil case").  See
                                                                      ___

             Roco Carriers,  899 F.2d  at  1295-97; Loeber,  924 F.2d  at
             _____________                          ______

             1345-47; see also Antilles, 755 F.  Supp. at 45.  And,  they
                      ___ ____ ________

             have concluded  that, despite  Finley, and even  without the
                                            ______

             new statute, in admiralty  pendent party jurisdiction  still

             lives in very much the same form as we have applied it here.

             See  Roco Carriers, 899 F.2d at 1295-97; Loeber, 924 F.2d at
             ___  _____________                       ______

             1346-47; see also Antilles, 755 F. Supp. at 45.  
                      ___ ____ ________

                       In  our   view,   it  would   make   "no   sense,"

             particularly in  light of  these recent  cases, "to  give an

             expansive reading to Finley to reach a result that  Congress
                                  ______

             has deliberately repudiated for  future cases."  13B Charles

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                                          6

A.  Wright,  Arthur R.  Miller &  Edward H.  Cooper, Federal
                                                                  _______

             Practice  and   Procedure     3567.2  at   31  (1992  Supp.)
             _________________________

             (referring  to 28 U.S.C.    1367).  We  therefore follow the

             precedent of other circuits and hold that the district court

             lawfully asserted "pendent party" jurisdiction in this case.

                                          II

                                 The Deficiency Claim
                                 ____________________

                       In  his contract  buying  the Lady  Abby from  its

             prior owners,  Burgos promised  "immediately [to] carry  out

             the payment of  the (3)  due monthly  installments that  are

             owed  to the Ponce Federal Bank," and to "assume the pending

             balance of  the referred account."   Burgos argues, however,

             that he made this promise to the ship's sellers, not  to the

             Bank, and that he was never "substituted" for the sellers as

             the debtor to the initial promissory note.  

                       Whether  or  not  the  sale  contract  achieved  a

             technical "substitution," relieving the sellers of liability

             to  the Bank, is irrelevant  to whether Burgos  is liable to

             the  Bank.   Puerto  Rico's  contract  law, recognizing  the

             claims of third-party beneficiaries, provides:

                       should   the    contract   contain   any
                       stipulation in favor of a  third person,
                       he may demand its  fulfillment, provided
                       he has given notice of his acceptance to
                       the person bound before it may have been
                       revoked.

                                         -7-
                                          7

31  L.P.R.A.    3374.   The  contract  before us  contains a

             "stipulation in favor  of a third person," namely  the Bank.

             By  bringing  this lawsuit,  the  Bank  has "demand[ed]  its

             fulfillment."   And, the filing of the  complaint, and later

             proceedings,  would  seem adequate  "notice  of"  the Bank's

             "acceptance."     See   A.L.  Arsuaga,   Inc.  v.   La  Hood
                               ___   _____________________       ________

             Constructors,   Inc.,  90   P.R.R.   101,   107-08   (1964).
             ____________________

             Consequently, the court's judgment of liability is lawful.

                                         III

                              The Borrowers' Cross-Claim
                              __________________________

                       We  turn to a final appellate claim resting upon a

             matter that,  in order to  simplify the discussion,  we have

             not yet  mentioned.  The Bank brought  its deficiency claims

             not  only against  Burgos,  but also  against the  borrowers

             themselves.    See 46  U.S.C.    951,  amended by  46 U.S.C.
                            ___                     __________

               31325(b)(2).  The borrowers asserted a cross-claim against

             Burgos.    And,  the   district  court,  agreeing  with  the

             borrowers, ordered Burgos to reimburse the borrowers for any

             deficiency  payment  they might  make to  the Bank.   Burgos

             appeals  this judgment, too.   He argues that  the court did

             not have the legal  power to permit the borrowers  to assert

             that claim against Burgos.

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                                          8

Both  the  borrowers  and  Burgos,  however,  were

             properly made  parties  in this  case.   A  federal  statute

             specifically  permitted  the  Bank  to  make  the  borrowers

             parties in the case,  46 U.S.C.   951, amended by  46 U.S.C.
                                                    __________

               31325(b)(2); and,  for the  reasons set  out in  Section I

             above, Burgos, too,  was a  proper party.   Fed. R. Civ.  P.

             13(g) permits one party to an action to assert a cross-claim

             against another party as long as the cross-claim arises "out

             of the  transaction or occurrence that is the subject matter

             . .  . of the  original action."  The  Bank's original claim

             against  the "Lady Abby" rests on a mortgage; and the Bank's

             and  the borrowers'  claims against  Burgos arise  out of  a

             contract  in which  Burgos agreed to  make payments  on that

             mortgage.  These claims are closely related, satisfying Rule

             13(g), as well  as the "pendent"  jurisdiction requirements.

             See 6 Wright, Miller & Kane, supra,   1433 at 253-57.
             ___                          _____

                       The judgment of the district court is

                       Affirmed.
                       ________

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