North Pacific Steamship Company, Plaintiff-appellant, v. Pyramid Bulkcarriers, Inc., Etc., Defendant-appellee, 515 F.2d 426 (5th Cir. 1975)

On June 10, 1971, North Pacific Steamship Company (North Pacific) brought suit against the original defendant herein, Pyramid Bulkcarriers, Inc. (Pyramid), to recover the unpaid charter hire due from Pyramid on two of North Pacific's ships. North Pacific won a final judgment for $842,350.67 together with legal interest and court costs against Pyramid on May 18, 1973. A credit of $113,260.00 was entered on the judgment from the proceeds of a bond originally issued for the release of certain sub-freights of Pyramid that were seized at the outset of the proceeding, and another credit of $4,280.82 was realized from a garnishment against Pyramid. However, additional procedures to effect payment were futile.

On February 21, 1974, North Pacific filed a verified motion in district court against various parties four corporations not named theretofore, Pyramid Ventures, Group, Inc.; Pyramid Bulkhandling, Inc.; Creole Lines, Ltd.; and Hellenic, Inc.; as well as two individuals, Donald C. Scafidi and Peter V. Guarisco seeking an order to show cause why they should not be included as judgment debtors in the earlier judgment and be held liable "jointly, severally and in solido" with Pyramid. The motion alleged the following:

Based on the facts revealed by the testimony of Donald C. Scafidi, taken pursuant to the judgment debtor rule procedure, it is clear that Pyramid Bulkcarriers, Inc. existed as a phantom corporation and was merely an instrumentality of Pyramid Ventures Group, Inc. and Donald C. Scafidi and Peter V. Guarisco. It is furthermore demonstrated that Pyramid Bulkcarriers, Inc. did not maintain the separate identity of a corporate entity due to the manner of its operation and control by Pyramid Ventures Group, Inc. and that an inequitable result would follow plaintiff would be unable to recover the judgment awarded him by the Court unless Pyramid Ventures Group, Inc., its related corporations, Donald Scafidi and Peter Guarisco are made additional judgment debtors herein.

In regular course, an Order to Show Cause was issued by the district court and served. The appellees timely moved to set it aside on the grounds that the proceeding was not provided for under any known rule of law or found in any statute or in the Federal Rules of Civil Procedure. After hearing and argument, the district court recalled the Show Cause Order and set it aside. This appeal followed.¹ 

North Pacific relies on several admiralty cases in which an "alter ego" or "piercing the corporate veil" theory was employed to disregard a corporate fiction and hold the true principal liable. See, e. g., Swift & Co. Packers v. Compania Colombiana Del Caribe, 339 U.S. 684, 689 n. 4, 70 S. Ct. 861, 94 L. Ed. 1206 (1950); Ariate Compania Naviera, S.A. v. Commonwealth Tankship Owners, Ltd., 310 F. Supp. 416, 419 (S.D.N.Y. 1970). North Pacific argues that a federal court sitting in admiralty has "jurisdiction" to grant the relief sought in this case not only in the exercise of its equitable powers, but also pursuant to Fed. R. Civ. P. 60(b) (granting relief from the operation of a judgment) and Fed. R. Civ. P. 69(a) (procedures in aid of judgment or execution). Cf. Sirloin Room, Inc. v. American Employers Insurance Co., 360 F.2d 160 (5th Cir. 1966) as modified, 270 F. Supp. 566 (E.D. La. 1967) (garnishment proceeding).

None of the cases on which appellant relies have applied the alter ego doctrine through the mechanism of a show cause order, and we find no decision, rule, or statute which would authorize a plaintiff to shift the burden of proof to third parties not even named in the original suit. We hold that the district court properly set aside the Show Order Cause as improper procedure. In so holding we express no opinion on the merits of appellant's substantive claims. As the appellees themselves concede:

Under proper circumstances and procedures, it might be that North Pacific could plead and prove one or more of the defendants to be the alter ego of Pyramid Bulkcarriers, Inc. (or vice versa), or it might be shown that the judgment debtor's corporate veil should be pierced.

The judgment is, therefore, affirmed.