Insurers Own Sunken Treasures, Supreme Court Rules : Judiciary: Sea explorers, however, will be entitled to a substantial salvage award to compensate for the recovery operation.

The Supreme Court dealt a defeat Monday to explorers for sunken treasure by rejecting the “finders, keepers” principle in a case involving the most famous shipwreck from the days of the California Gold Rush.

In September, 1857, the SS Central America, a luxurious sidewheel steamer, was loaded with several tons of gold bars and coins from California destined for New York City when it sank off the South Carolina coast in a heavy gale.

At least 425 persons drowned and the gold treasure was lost under 8,000 feet of water.

Now, however, with the Supreme Court’s action, the estimated $1 billion worth of treasure belongs to the British and American companies that insured it 135 years ago, not to the explorers who found the wreck five years ago.

The outcome is not a total loss for the discoverers, however. The appeals court had ruled that they are entitled to a substantial salvage award to compensate for the recovery operation. Officials of Columbus-America said that could amount to 50% of the treasure.

The high court Monday let stand a decision of a federal appeals court in Virginia, which ruled that the original owners of sunken treasure retain their rights to it, even if it has been lost for a century or more.

That ruling stunned explorers and treasure hunters, who said that it would destroy their burgeoning industry. Without the right to claim ownership, they said, explorers will not undertake costly expeditions to recover lost treasure.

In a separate action, the high court also upheld a ruling giving the United States ownership of the ship’s bell recovered in 1935 from a Confederate raider, the CSS Alabama, sunk off the French coast in 1864.

The Alabama had sunk at least 62 Union ships when it was attacked and destroyed by the USS Kearsage off Cherbourg. In 1979, an antique dealer from New Jersey purchased the ship’s brass bell in England, but the United States government laid claim to it three years ago.

The lower courts, and now the Supreme Court, agreed that the U.S. government retains title to all Confederate property.

The court actions involving the two shipwrecks reaffirm the legal principle that ownership rights are not forfeited simply when the property is lost at sea.

“We are pleased that the rights of the underwriters were upheld,” said Marilyn L. Lytle, a New York lawyer who represented the insurers who laid claim to the treasure from the SS Central America. “That is in line with traditional admiralty law.”

A low-key but high-tech group of explorers, the Columbus-America Discovery Group, located the Central America 160 miles off the coast in 1987. Using an undersea robot named Nemo, they were able to photograph the site and bring gold bars to the surface.

But when the word of discovery reached New York, 39 insurance companies claimed ownership rights. They cited, among other things, newspaper accounts from 1857 indicating that their firms had paid claims for the lost gold.

The dispute was tried before U.S. District Judge Richard Kellam in Norfolk, Va., in 1990. He concluded that the insurance firms had legally abandoned their property, noting that they had not sought to recover the treasure nor kept records documenting their ownership. Because the treasure was abandoned, its finders could keep it, he said.

But the U.S. 4th Circuit Court of Appeals in Richmond reversed the decision on a 2-1 vote last year, ruling that, unless original owners of sunken treasure have taken affirmative steps to abandon it, they retain ownership.

The explorers appealed to the Supreme Court in January, contending that “long-lost shipwrecks” are legally abandoned and therefore, belong to their finder. Their appeal was joined by ocean scientists, marine technologists and treasure hunters.

But without comment or dissent, justices dismissed the appeal in the case (Columbus-America Discovery vs. Atlantic Mutual Insurance, 92-1189).

The case will be sent back to Kellam to divide up the goods between the competing claimants.

In the second case (Steinmetz vs. U.S., 92-859), a federal judge had ordered the ship’s bell from the CSS Alabama to be turned over to U.S. marshals but recommended that the New Jersey antique dealer be compensated for his loss.

In other actions, the court:

--Refused to hear a challenge to a California law restricting voter eligibility in communities attempting to incorporate into cities (Sacramento County Supervisors vs. Local Agency Commission, 92-1313). Under the law, only people living in the affected area are allowed to vote in the incorporation election. The Sacramento supervisors had argued that the law violated the rights of other county residents, but the state Supreme Court had rejected that claim.

--Refused to hear a claim by a former prisoner and a San Francisco newspaper that a court should rule on his First Amendment claim (Chronicle vs. Rison, 92-1061). In the past, the justices have said that prisoner’s free-speech rights can be limited by prison authorities. But Dannie Martin, an inmate at the federal prison in Lompoc and an occasional columnist for the San Francisco Chronicle, sought to challenge the rule. However, a federal appeals court dismissed the challenge as moot because Martin had been released.

--Agreed to decide whether persons whose property is about to be seized by federal agents are entitled to a full hearing (U.S. vs. Good, 92-1130). In recent years, federal agents have moved aggressively to seize property used by drug dealers, but the justices have voiced some concern about how these forfeitures are carried out. The court will rule in the case on whether agents can seize property with a warrant issued by a magistrate or whether the owner is entitled to a full hearing before a judge.