USCA1 Opinion
November 25, 1992
UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
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No. 92-1413
PONCE FEDERAL BANK, F.S.B.,
Plaintiff, Appellee,
v.
THE VESSEL "LADY ABBY", ET AL.,
Defendants, Appellees.
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CRISTOBAL BURGOS RODRIGUEZ,
Defendant, Appellant.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Juan M. Perez-Gimenez, U.S. District Judge]
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Before
Breyer, Chief Judge,
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Aldrich, Senior Circuit Judge,
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and Boudin, Circuit Judge.
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Eli B. Arroyo with whom Miguel E. Miranda-Gutierrez and Figueroa-
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Morales & Chaves-Caraballo Law Offices were on brief for appellant.
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Francisco A. Besosa with whom Miguel J. Rodriguez-Marxuach and
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Goldman Antonetti Ferraiuoli & Axtmayer were on brief for appellee,
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Ponce Federal Bank, F.S.B.
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BREYER, Chief Judge. Ponce Federal Bank brought
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an in rem action in admiralty to foreclose its mortgage on a
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ship, the "Lady Abby." It added an in personam claim, under
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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
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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
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ship from a borrower. See 46 U.S.C. 951, amended by 46
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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.)
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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.
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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
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Carriers, Ltd. v. M/V Nurnberg Express, 899 F.2d 1292, 1295
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(2d Cir. 1990) (citing cases).
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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.
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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
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U.S.C. 31325(c) (giving federal courts exclusive
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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.,
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Brown v. Trustees of Boston University, 891 F.2d 337, 355-56
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(1st Cir. 1989), cert. denied, 496 U.S. 937 (1990);
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Rodriguez v. Comas, 888 F.2d 899, 903-05 (1st Cir. 1989).
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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,
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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
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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
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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-
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56. Congress yet more recently has passed a statute that
overturns Finley. 28 U.S.C. 1367. But, that statute does
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not directly apply to this, post-Finley, pre-statute, case.
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We do not agree, however, that Finley requires a
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different result in this case. Other circuits have
distinguished between Finley's statutory context (a statute
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that waived sovereign immunity) and jurisdictional statutes
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related to admiralty. See Roco Carriers, 899 F.2d at 1295-
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97; Loeber v. Bay Tankers, Inc., 924 F.2d 1340, 1345-47 (5th
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Cir. 1991) (following Roco); see also Antilles Ins. Co. v.
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M/V Abitibi Concord, 755 F. Supp. 42, 45 (D.P.R. 1991)
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(same); cf. Rodriguez v. Comas, 888 F.2d at 905-06
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(distinguishing Finley from a Section 1983 case). They have
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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
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Roco Carriers, 899 F.2d at 1295-97; Loeber, 924 F.2d at
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1345-47; see also Antilles, 755 F. Supp. at 45. And, they
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have concluded that, despite Finley, and even without the
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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
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1346-47; see also Antilles, 755 F. Supp. at 45.
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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
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has deliberately repudiated for future cases." 13B Charles
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A. Wright, Arthur R. Miller & Edward H. Cooper, Federal
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Practice and Procedure 3567.2 at 31 (1992 Supp.)
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(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
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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.
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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
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Constructors, Inc., 90 P.R.R. 101, 107-08 (1964).
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Consequently, the court's judgment of liability is lawful.
III
The Borrowers' Cross-Claim
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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.
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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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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.
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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.
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The judgment of the district court is
Affirmed.
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