The opinion of the court was delivered by: ALFRED M. WOLIN
This is an insurance coverage case.
It involves the interpretation of the wreck removal provision of a marine insurance policy. The critical inquiry is whether the wreck removal was compulsory by law. Subsumed within that inquiry are a panoply of Mexican laws whose interpretation impact on the application of this policy provision. In a prior opinion, the Court held, after a bench trial, that the removal was not compulsory by law. Grupo Protexa, S.A. v. All American Marine Slip, 753 F. Supp. 1217, 1236 (D.N.J. 1990). On appeal, the United States Court of Appeals for the Third Circuit rejected the analytical framework of the court and adopted the rationale set forth in Seaboard Shipping Corp. v. Jocharanne Tug Boat Corp., 461 F.2d 500 (2d Cir. 1972). In Seaboard Shipping, the Court held that "'compulsory removal' is a term of art referring to a situation in which a hull . . . pursuant to government order . . . must be removed from navigable waters." Id. Likewise, the Third Circuit has stated that removal is "compulsory by law" if it is directed by governmental order. Grupo Protexa, S.A. v. All American Marine Slip, 954 F.2d 130, 138 (3d Cir. 1992) ("Grupo I").
To determine whether the removal in this case was compulsory by law, the Court must examine a document authored by the Port Captain for Cuidad del Carmen on December 17, 1985. While this writing is generically referred to as the Port Captain's Order, the parties vehemently disagree as to its status. Grupo Protexa, S.A. (Grupo) contends that it is an order that required immediate removal of the wreck. All American Marine Slip (AAMS) submits that the document amounted to nothing more than a notice to post a bond. AAMS advances several reasons why the writing is not an order and further asserts that, even if the Court were to construe it as an order, it is not a valid order in accord with statutory and constitutional precepts of the Republic of Mexico.
In the Court's original opinion, it did not decide whether the Port Captain's order was in fact a valid order of removal. Rather, the Court assumed, without deciding, that the Port Captain's removal order was valid. Grupo, 753 F. Supp. at 1228. Because the Court adopted the Fifth Circuit's cost-benefit analysis, it did not view a direct government order as an alternative basis to provide insurance coverage under the phrase "compulsory by law. " See Progress Marine, Inc. v. Foremost Insurance Co., 642 F.2d 816 (5th Cir.), cert. denied, 454 U.S. 860, 102 S. Ct. 315, 70 L. Ed. 2d 158 (1981); Continental Oil Co. v. Bonanza Corp., 706 F.2d 1365 (5th Cir. 1983). However, because the Third Circuit now interprets "compulsory by law" to include wreck removal by direct government order, the Court must determine if the Port Captain's order in this case was a valid removal order. Grupo I, 954 F.2d at 138. If the Port Captain's order was valid, then Protexa was entitled to recover under the policy provision in question. Id.
While it may seem that the Court of Appeals' mandate requires little more than a rereading of the Port Captain's order, such is not the case. The Third Circuit noted, "The meaning of the Port Captain's order under Mexican law cannot be determined solely on a literal reading of the English translation. . . ." Grupo I, 954 F.2d at 138. In the following analysis, the Court relies upon the relevant testimony of the witnesses, their interpretation of the Port Captain's order and their interpretation of the Mexican Constitution and the relevant statutes that regulate Mexico's coastal and international waters. Moreover, the Court incorporates by reference its prior findings of fact as set forth in Grupo, 753 F. Supp. 1217. Because the physical contours of this remand proceeding are markedly different from the first hearing, any factual discrepancy will be controlled by this Opinion.
Overarching the validity of the Port Captain's order is whether the Port Captain, as a representative of the Mexican government, possesses the authority to order a private citizen to raise and remove a wreck beyond Mexico's territorial sea without specific statutory authority enabling him to do so. Because Protexa was a private citizen when its vessel, the Huichol II (Huichol), sank and the sinking occurred outside of Mexico's territorial waters, this inquiry is especially appropriate.
Given that the Republic of Mexico models its Constitution after that of the United States, the due process inquiry is as relevant under the Mexican Constitution as it would be under the United States Constitution.
The answer to the inquiry centers on the interplay between Mexico's exercise of its sovereign power in relation to the due process rights of its citizens. If the sovereign's exercise of power is unbridled or authorized by law, then the Port Captain's order is valid. If the Port Captain's order is in fact unauthorized by law or is proscribed in the constitutional sense, then the order is invalid.
A. The Port Captain's Order
On December 17, 1985, the Port Captain of Cuidad del Carmen issued a written order. Its English translation was received in evidence as Exhibit 8. Because it still represents the ignition that sparks the engine of this litigation, the Court reproduces its text at length:
SUBSECRETARIAT OF OPERATION
DIRECTORATE GENERAL OF MERCHANT MARINE.
OFFICE OF THE CAPTAIN OF THE PORT
OFFICIAL COMMUNICATION CP-3312-23-3350
RE: This is a communication concerning salvage of the vessel 'HUICHOL' of your Company
Cuidad del Carmen, State of Campeche
CAPTAIN CARLOS H. MERINO GARCIA DE ALBA
CHIEF OF MARINE OPERATIONS OF THE COMPANY
This Maritime Authority is pleased to resolve after analysis of the procedures conducted by it in connection with the sinking of National Motor Vessel ("Buque Motor de Posicionamiento Dinamico Nacional") named "HUICHOL" having the following characteristics: 499.83 gross tons, 151.57 net tonnage, registered in this Port under number 2623 and owned by your Company, (to) refer the following procedures to Higher Authority (in order) to request Expert Opinions from technical personnel and reports as to the causes that occasioned the sinking of said Vessel at the following coordinates marked by radar: Latitude 19degree and Longitude 91degree 58.5' W., and therefore, based on the Sole Article published in the Official Newspaper ("Diario Oficial") of the Federal Government dated March 28 of this year and on Articles numbers 86 of the Law of Navigation and Maritime Commerce ("Ley de Navegacion y Comercio Maritimo") and 262 and 263 of the Law of General Means of Communication ("Ley de Vias Generales de Comunicacion"), requests that such Company "CONDUX" S.A. de C.V., deposit the sum of Pesos $ 10,000,000.00 (Ten Million Pesos and 00/100, Mexican Currency) to guarantee the cleaning up of the area and the salvaging of said Vessel, in addition to guaranteeing any damage or loss that may arise in the course of the salvage operations, hereby stating by way of clarification that such sum may be furnished by a Bond or Deposit of Guaranty ("Billete de Deposito") furnished by an Insurance Company to the name of the Treasury of the Federal Government and for availability to the General Directorate of the Merchant Marine, a term of 25 days from the date of notification of this resolution hereby being granted as provided in the above cited Article 86.
CAP.ALT. I.G. MIGUEL A. REBOLLEDO GUIOT
(Seal of the United Mexican States)
(Seal of the Directorate General of Merchant Marine
Office of the Captain of the Port
Cuidad del Carmen, State of Campeche)
Copies: To the DIRECTOR GENERAL OF MERCHANT MARINE.-
For the information of Higher Authority. -
Jose Maria Ibarran No. 47.-
In the body of this document reference is made to Article 86 of the Law of Navigation and Maritime Commerce and Articles 262 and 263 of the Law of General Means of Communication. The Law of Navigation and Maritime Commerce was enacted in 1963, while the Law of General Means of Communication was enacted in 1941. Because witnesses differed over the meaning of these statutes, other portions thereof will be referenced.
B. The Law of Navigation and Maritime Commerce (1963)
If a ship runs aground or sinks in a port, in an area considered as such in terms of the last paragraph of Article 33, or in a general waterway of communication, in a manner that constitutes a navigational obstacle or that affects navigation, it shall be removed within the period set forth by the Navy Department, by the owner, the ship owner, or by anyone with a legal interest in the ship; all of whom are severally liable for the fulfillment of this obligation. If the ship is not removed within the established period, the Department will make a cost evaluation which will serve as the basis to make, the claim of the corresponding rescue cost pursuant to the administrative execution proceedings established in the Federal Tax Code, and the Navy Department shall proceed by itself, or with the intervention of a third party, to carry out the necessary works to effect the removal.
Questions which may arise over the interpretation of . . . what pertains to general means of communication by water . . . shall be decided by the provisions of: a) This Law and other laws on communications by water and their regulations; as well as by the international treaties duly ratified by Mexico; 6) The Law on General Means of Communication . . . .
3. Article 9, Paragraph III
The general means of communication by water are the territorial seas and the other waters of federal jurisdiction, when they can be used for navigation. They include the works and installations which constitute the maritime or fluvial terminals and the areas necessary for providing port and maritime services.
The locations of shorelines and of banks of rivers, lakes and estuaries that have not been declared ports, or that are under construction, will be considered ports for the application of the provisions of this Law with respect to vigilance, police and maritime accidents.
C. The Law of General Means of Communication (1940)
In the event that of shipwreck, fire, collision, running aground, or of any other accident outside a port which affects the cargo, the crew or any other persons aboard, the captain shall proceed to conduct an investigation recording the events in the navigation diary, or binnacle substituting it, with an obligation to inform the maritime authorities upon arrival to port. If the accident occurs in the port, notice will of course be given to the maritime authorities, which will proceed to conduct the corresponding investigation informing the Communications Department as soon as possible. The latter may, if it is deemed appropriate, appoint two experts who will give an opinion on the cause of the accident and on any parties presumed responsible. Once the investigation is terminated the results thereof shall be turned over to the Federal District Attorney within the term of five days.
In the event of shipwreck within port, or in the vicinity [vicinity] [proximity] thereof provided it affects the port, the owner or any interested company shall proceed to remove the wreck within the period set forth by the Harbormaster's office; provided, however, that the provisions of Article 47 hereof will apply in the event that there is a refusal to carry out the necessary works.
I. The territorial waters, in the extent and terms established by law and by international law;
II. The floatable and navigable rivers as well as the floatable and navigable tributaries, provided they are in any of the following cases:
a) Whenever they terminate in the sea, or in a lake, lagoon, or a stream of the kind referred to in the following section;
b) Whenever they serve totally or partially as a geographic border for the national territory, or between two or more states;
c) Whenever they cross from one state to another;
d) Whenever they cross the border of another country.
III. Floatable or navigable lakes, lagoons, and streams, provided they comply with any of the ...