Hartford Accident Indemnity Company of Hartford v. Southern Pacific Company/Opinion of the Court

The National Oil Transport Company, the owner of wooden oil tank barge Bolikow, filed a libel in the United States District Court for the Southern District of Texas against the Southern Pacific Company, alleging that the Bolikow, made fast to a dock in the harbor of the city of Galveston, was laden with a cargo of crude oil, from which a large part had been discharged; that an explosion took place in one of her tanks, causing fire; that the El Occidente, a steamer of the Southern Pacific Company, was injured by the fire; that the value of the barge after the explosion and fire was $250, and her pending freight at the time did not exceed $11,076.85; that the damage to the Occidente was due, not to the Bolikow, but to her own negligent management and the lack of power of the tug which attempted to take her to a safe place; that the claims of the owners of the Occidente were in excess of $484,000, and there were claims by persons on the barge for death and injuries from the fire, amounting to $50,000 in one case and $15,000 in another. The owner contested his liability and that of its barge, Bolikow, to any extent whatever, but, in case its liability was established, claimed and sought the benefit of the statutory limitation of its liability. Rev. St. §§ 4283, 4284, and 4285 (Comp. St. §§ 8021, 8022, 8023).

Pursuant to the court's order, the National Oil Transport Company, as principal, and the Hartford Accident & Indemnity Company, as surety, executed an ad interim stipulation that the former, as principal, and the latter, as surety, undertook in the sum of $11,326.85, with interest, that the transport company would file a bond or stipulation for the limitation of its liability as owner of the barge Bolikow, executed in due form of law for the value of the transport company's interest in the barge and her pending freight, with 6 per cent. interest thereon from December 23, 1920, within 10 days after such values were determined by appropriate proceedings in the court, and an order fixing such value was entered therein, and that, pending the filing of the formal stipulation, the ad interim undertaking should stand as security for all claims in the proceeding.

The court then made an order directing the issuing of a monition to claimants against the vessel and her owner, growing out of the explosion, and an injunction. Without further action as to fixing the value of the barge or its pending freight, the claimants came in, the cause proceeded to a final decree, after a report by a commissioner, the petition for limitation of liability was denied, the claims in whole or in part were allowed, and the decree proceeded:

'And it further appearing to the court that neither the     petitioner nor its stipulator nor any other party or      interest, has moved for or caused any reappraisal or      appraisal of the petitioner's interest in said barge and her      pending freight, or either of them, or caused any order to be      entered by the court fixing such value, except as was done by      the approval and filing of said ad interim stipulation as      aforesaid, and the issuance and publication of a monition      thereon as aforesaid, and it further appearing to the court      that no bond for value other than said ad interim stipulation      has been filed herein by the petitioner, and it appearing      from the evidence introduced on the trial hereof, and the      court here and now finding that the value of the petitioner's      interest in said barge at the termination of her voyage is      $250, and that the value of the petitioner's interest in the pending freight of said barge at the termination of said      voyage is $11,076.85, and that the total value of said      petitioner's interest in said barge and her pending freight      at the termination of her said voyage is $11,326.85: It is      therefore ordered and decreed that, unless this decree be      satisfied or an appeal be taken therefrom within the time      limited by law and the rules and practice of this court, the      stipulator for value will cause the said petitioner to pay      into court the sum of $11,326.85, the amount of the value of      the petitioner's interest in the said barge and pending      freight at the termination of her said voyage, with 6 per      cent. interest from December 23, 1920, to be applied in     payment of the costs of court, the remainder to be pro rated      among the respective claimant respondents in proportion to      the amounts of the decrees entered in their favor herein, or      show cause why execution should not issue therefor, against      goods, chattels, and lands of the stipulator for value.'

The Hartford Indemnity Company, the stipulator, appealed from this decree, which the Circuit Court of Appeals of the Fifth Circuit affirmed. 3 F.(2d) 923. We brought the case here by certiorari. 267 U.S. 590, 45 S.C.t. 462, 69 L. Ed. 802.

The contention of the petitioner is that it could become liable only in the event limitation of liability was granted, and, as that relief was denied, the stipulation ceased to be effective; that upon a denial of a limitation of liability there ceased to be a res in court, that the proceeding was no longer one in rem, and that suits for the claims against the shipowner must be conducted in a court having jurisdiction on other grounds.

It is surprising that no case has ever arisen in which the question here mooted has been directly decided, though the effect of a decision refusing limitation has been the subject of discussion in The Titanic (D. C.) 204 F 295, and in The Virginia (D. C.) 266 F. 437, 439. See also, Dowdell v. U.S. District Court (C. C. A.) 139 F. 444; In re Jeremiah Smith & Sons (C. C. A.) 193 F. 395; The Santa Rosa (D. C.) 249 F. 160.

The history and proper construction of the Limitation of Liability Act of 1851 (9 Stat. 635), now embodied in Revised Statutes, §§ 4282 to 4287 (Comp. St. §§ 8020-8025), are shown in a series of cases in this court, the chief of which is Norwich Co. v. Wright, 13 Wall. 104, 20 L. Ed. 585. Further consideration to this subject was given by the court in The Benefactor, 103 U.S. 239, 26 L. Ed. 351; in Providence & New York Steamship Co. v. Hill Manufacturing Co., 109 U.S. 578, 3 S.C.t. 379, 27 L. Ed. 1038; in The City of Norwich, 118 U.S. 468, 503, 6 S.C.t. 1150, 30 L. Ed. 134; in The Scotland, 118 U.S. 507, 6 S.C.t. 1174, 30 L. Ed. 153; in Butler v. Boston & Savannah Steamship Co., 130 U.S. 527, 9 S.C.t. 612, 32 L. Ed. 1017; and in Re Morrison, 147 U.S. 14, 34, 13 S.C.t. 246, 37 L. Ed. 60; in The Albert Dumois, 177 U.S. 240, 20 S.C.t. 595, 44 L. Ed. 751; in The Hamilton, 207 U.S. 398, 28 S.C.t. 133, 52 L. Ed. 264; and in La Bourgogne, 210 U.S. 95, 28 S.C.t. 664, 52 L. Ed. 973.

These decisions establish, first, that the great object of the statute was to encourage shipbuilding and to induce the investment of money in this branch of industry by limiting the venture of those who build the ships to the loss of the ship itself or her freight then pending, in cases of damage or wrong happening, without the privity, or knowledge of the shipowner, and by the fault or neglect of the master or other persons on board; that the origin of this proceeding for limitation of liability is to be found in the general maritime law differing from the English maritime law; and that such a proceeding is entirely within the constitutional grant of power to Congress to establish courts of admiralty and maritime jurisdiction (Norwich v. Wright, 13 Wall. 104, 20 L. Ed. 585); that to effect the purpose of the statute, admiralty rules Nos. 54, 55, 56, and 57 were adopted, by which the owner may institute a proceeding in a United States District Court in admiralty against one claiming damages for the loss, in which he may, deny any liability for himself or his vessel, but may ask that, if the vessel is found at fault, his liability as owner shall be limited to the value of the vessel as appraised after the occurrence of the loss and the pending freight for the voyage; that these damages shall include damages to goods on board; second, damages by collision to other vessels and their chargoes; and, third, any other damage or forfeiture done or incurred; that all others having similar claims against the vessel and the owner may be brought into concourse in the proceeding by monition, and enjoined from suing the owner and vessel on such claims in any other court; that the proceeding is equitable in its nature, and is to be likened to a bill to enjoin multiplicity of suit (Providence Steamship Co. v. Hill Manufacturing Co., 109 U.S. 578, 3 S.C.t. 379, 27 L. Ed. 1038); that by stipulation after appraisement the vessel and freight may be released, and the stipulation be substituted therefor; that on reference to a commissioner and the coming in of his report, it shall be determined, first, whether the owner and his vessel are liable at all; second, whether the owner may avoid all liability except that of the vessel and pending freight; third, what the amount of the just claims are; and, fourth, how the fund in court should be divided between the claimants. The cases show that the court may enter judgment in personam against the owner as well as judgment in rem against the res, or the substituted fund (City of Norwich, 118 U.S. 468, 503, 6 S.C.t. 1150, 30 L. Ed. 134); that the fund is to be distributed to all established claims to share in the fund to which admiralty does not deny existence, whether they be liens in admiralty or not (The Hamilton, 207 U.S. 398, 406, 28 S.C.t. 133, 52 L. Ed. 264); and that they may include damages from a collision, from personal injuries (Butler v. Boston Steamship Co., 130 U.S. 527, S.C.t. 612, 32 L. Ed. 1017), or for wrongful death if arising under a law of Congress, a state of the Union, or a foreign state, which is applicable to the owner and the vessel (The Bourgogne, 210 U.S. 95, 138, 28 S.C.t. 664, 52 L. Ed. 973).

It is quite evident from these cases that this court has by its rules and decisions given the statute a very broad and equitable construction for the purpose of carrying out its purpose, and for facilitating a settlement of the whole controversy over such losses as are comprehended within it, and that all the ease with which rights can be adjusted in equity is intended to be given to the proceeding. It is the administration of equity in an admiralty court. Dowdell v. United States District Judge (C. C. A.) 139 F. 444, 445. The proceeding partakes in a way of the features of a bill to enjoin the multipicity of suits, a bill in the nature of an interpleader, and a creditor's bill. It looks to a complete and just disposition of a many-cornered controversy, and is applicable to proceedings in rem against the ship, as well as to proceedings in personam against the owner; the limitation extending to the owner's property as well as to his person. The City of Norwich, 118 U.S. 468, 503, 6 S.C.t. 1150, 30 L. Ed. 134.

With this general view of the statute, we come to the contention of the petitioner in this case. He says that owner only brings the suit to limit his liability, if it exists, to the vessel and the freight for the voyage. If he fails in his purpose, and does not establish the limitation, no progress can be made in behalf of the defendant or the claimants in the collection of what has been found due them, and, because he has lost that feature of his suit against them, the case must be dismissed. This is said to follow, even though it is apparent that, by virtue of the owner's suit and the injunction he secured, he has delayed and prevented his creditors from resorting to any other forum to vindicate their rights against him. In this view the defendant and the claimants thus may not thereafter share in the fund or res, the deposit of which, for the benefit of the defendants and the claimants, was the principal ground and the indispensable condition of the proceeding. The parties, it is argued, must thereafter be remitted to a commonlaw or equity court of the state to secure their rights, unless diverse citizenship or the admiralty character of their claims entitles them to resort to, or remain in, a federal court.

Surely the admiralty court, in view of the large powers intended to be given it in such a proceeding, is not so help less as this. So to hold would be to hold that, unless the petitioner wins, the court does not have power to administer justice. There is nothing in the statute nor in the rules that requires so feeble a conclusion. The jurisdiction of the admiralty court attaches in rem and in personam by reason of the custody of the res put by the petitioner into its hands. The court of admiralty, in working out its jurisdiction, acquires the right to marshal all claims, whether of strictly admiralty origin or not, and to give effect to them by the apportionment of the res and by judgment in personam against the owners, so far as the court may decree. It would be most inequitable if parties and claimants brought in against their will, and prevented from establishing their claims in other courts, should be unable to perfect a remedy in this proceeding promptly, and should be delayed, until after the possible insolvency of the petitioner, to seek a complete remedy in another court, solely because the owner cannot make his case of personal immunity. Bene dict's Admiralty (5th Ed.) 488. If Congress has constitutional power to gather into the admiralty court all claimants against the vessel and its owner, whether their claims are strictly in admiralty or not, as this court has clearly held, it necessarily follows, as incidental to that power, that it may furnish a complete remedy for the satisfaction of those claims by distribution of the res, and by judgments in personam for deficiencies against the owner, if not released by virtue of the statute.

Such a conclusion is quite in accord with the rules governing equity procedure, in general conformity with which this limitation of liability statute has been construed and enforced. Where a court of equity has obtained jurisdiction over some portion of a controversy, it may, and will in general, proceed to decide the whole issues and award complete relief, even where the rights of parties are strictly legal, and the final remedy granted is of the kind which might be conferred by a court of law. Pomeroy's Equity Jurisdiction (4th Ed.) §§ 181 and 231; United States v. Union Pacific Railway Company, 160 U.S. 1, 52, 16 S.C.t. 190, 40 L. Ed. 319. See, also, equity rule 10, amended May 4, 1925, 268 U.S. 709, appendix. Of course, this equitable rule enlarging the chancellor's jurisdiction, in order completely to dispose of the cause before him, does not usually apply in an admiralty suit. Grant v. Poillon, 20 How. (U.S.) 162, 15 L. Ed. 871; Turner v. Beacham, Taney, 583, Fed. Cas. No. 14,252; The Pennsylvania (C. C. A.) 154 F. 9; The Ada (C. C. A.) 250 F. 194. But this limitation of liability proceeding differs from the ordinary admiralty suit, in that, by reason of the statute and rules, the court of admiralty has power (Providence Steamship Co. v. Hill Manufacturing Co., 109 U.S. 578, 3 S.C.t. 379, 27 L. Ed. 1038) to do what is exceptional in a court of admiralty-to grant an injunction, and by such injunction bring litigants, who do not have claims which are strictly admiralty claims, into the admiralty court (Benedict on Admiralty (5th Ed.) § 70, note 97). There necessarily inheres, therefore, in the character of the limitation of liability proceeding in reference to such nonadmiralty claims, the jurisdiction to fulfill the obligation to do equitable justice to such claimants by furnishing them a complete remedy.

The indemnity company seeks in this review to avoid its liability under an ad interim stipulation having a provision that such stipulation, if not changed to a formal stipulation, shall stand as security for all claims in the limitation proceeding. The stipulation is a substitute for the vessel itself and the freight, which was released by reason thereof. The effect of such a stipulation in admiralty is set forth by Mr. Justice Story in The Palmyra, 12 Wheat. 10, 6 L. Ed. 531, where he says:

'Whenever a stipulation is taken in an admiralty suit, for     the property subjected to legal process and condemnation, the      stipulation is deemed a mere substitute for the thing itself,      and the stipulators liable to the exercise of all those authorities on the part of the court, which it      could properly exercise, if the thing itself were still in      its custody. This is the known course of the admiralty. It is     quite a different question whether the court will, in      particular cases, exercise its authority, where sureties on      the stipulation may be affected injuriously; that is a      subject addressed to its sound discretion.'

In The Oregon, 158 U.S. 186, 209, 15 S.C.t. 804, 814 (39 L. Ed. 943), after reference to The Palmyra and an examination of the English authorities, it was held that the use of bail as a substitute for the property itself is confined to 'all points fairly in adjudication before the court.' In that case a stipulator for the release of a vessel libeled for a collision was held not to be responsible to interveners in the suit, intervening after the release of the vessel, in the absence of express agreement to that effect. In reversing the court below, this court said, through Mr. Justice Brown:

'We think the court must have confounded a stipulation given     to answer a particular libel with a stipulation for the      appraised value of the vessel, under the limited liability      act, which, by general admiralty rule 54, is given for      payment of such value into court whenever the same shall be      ordered, and in such case the court issues a monition against      all persons claiming damages against the vessel, to appear      and make due proof of their respective claims. And by rule     55, after such claims are proven and reported, 'the moneys      paid, or secured to be paid into court as aforesaid, or the      proceeds of said ship or vessel and freight *  *  * shall be      divided pro rata amongst the several claimants, in proportion      to the amount of their respective claims.' By rule 57, if the      ship has been already libeled and sold, the proceeds shall      represent the same for the purpose of these rules. In all the     case cited, in which it has been said that the stipulation is      a substitute for the thing itself, the remark has been made      either with reference to the particular suit in which the      stipulation is given, or with reference to a stipulation for      the appraised value of the vessel, where the stipulation stands as security for any claim      which may be filed against her up to the amount of the      stipulation.'

It is quite evident from this that the stipulation under rule 54 et seq., is to be treated as a substitute for the vessel itself for all claims that may normally arise out of the character of litigation carried on under such rules. That litigation as we have seen may properly be carried to a complete settlement of all claims, without regard to whether the prayer for limitation of liability is denied or not. The stipulator must, therefore, pay in full on his undertaking to enable the court to pay the costs and make the pro rata distribution.

Judgment affirmed.