Black Diamond Corporation v. Robert Stewart & Sons/Dissent Rutledge

by Wiley Blount Rutledge

United States Supreme Court

336 U.S. 386

Black Diamond Corporation  v.  Robert Stewart & Sons

 Argued: Jan. 3, 4, 1949. --- Decided: March 14, 1949

Mr. Justice RUTLEDGE, dissenting.

I agree with Mr. Justice JACKSON that, when Congress gave shipowners the privilege of limiting their liability and conditioned that privilege, in the alternative, upon turning over the vessel and freight for the benefit of claimants or depositing with the court cash or approved security of equivalent value, it meant exactly what it wrote into the statute concerning the amount of the security to be given.

Nothing in the statute's wording, purpose, or legislative history is cited or exists to justify rewriting 'a sum equal to the amount or value of the interest of such owner in the vessel and freight,' ^[1] so as to make that wording read 'a sum equal to one-third the value of the interest of such owner when that amount possibly but by no means certainly will be the limit of his substantive liability after the claims against him are finally determined.'

The most appealing argument put forward to support this statutory distortion is petitioners' wholly specious plea of resulting 'injustice' if the judicial revision is not made. The plea is founded altogether upon petitioners' assumption that their view of the extent of their aggregate possible liability will prevail, when the time comes for deciding that question.

Petitioners' view is that the lex loci delicti governs both the existence and the extent of their liability in this case. That law is the law of Belgium, because the collision here involved took place in Belgian waters. Mo eover, since Belgium ratified the Brussels Convention of August 25, 1924, ^[2] that Convention is claimed to be controlling of the resulting substantive liability. This, because the aggregate limit the Convention prescribes comes to only some $325,000 in this case and that limit, so it is argued, attaches to the right of recovery as part of the right, not merely as a matter of remedy. See Slater v. Mexican National R. Co., 194 U.S. 120, 24 S.Ct. 581, 48 L.Ed. 900; Cf. Smith v. Condry, 1 How. 28, 33, 11 L.Ed. 35; Cuba R. Co. v. Crosby, 222 U.S. 473, 32 S.Ct. 132, 56 L.Ed. 274, 38 L.R.A.,N.S., 40; American Banana Co. v. United Fruit Co., 213 U.S. 347, 29 S.Ct. 511, 53 L.Ed. 826, 16 Ann.Cas. 1047.

Hence, it is urged petitioner Black Diamond satisfied the requirements of Rev.Stat. § 4285, as amended, for limitation of liability, when it deposited an approved bond for $325,000, rather than one in the amount of $1,000,000, the value of the owner's interest in the vessel and freight, as § 4285 in terms requires. The conclusion is grounded on the 'injustice' which petitioners say would result if one substantively liable for only $325,000 were required to post bond in three times that amount in order to have the advantage of limitation. This, it is said, would mean forcing such an owner to pay bond premiums three times larger than necessary to discharge all his liabilities, an 'injustice' it is argued Congress cannot have contemplated notwithstanding its clear and unambiguous language.

Even if petitioners' assumption concerning their ultimate liability should turn out to be true, the statutory command is clear and unequivocal: Turn over the ship and the freight or their value as the price of limitation. In this command Congress was concerned not at all with the extent of aggregate claims or liabilities. It was concerned only with affording the owner a chance to limit his liabilities, but at the same time allowing this privilege only on precise and fixed conditions for giving security to his creditors in the amount specified. This was unrelated to the amount of the liabilities in the aggregate, whether above or below the maximum fixed by the statute. ^[3]

That Congress intended the same maximum and the same security for claimants, regardless of the alternative mode chosen for giving the security, is shown by the very alternatives themselves. They are equivalents. There was no intent to permit less security to be given when the owner elects to give the statutory substitutes than when he turns over the ship. Correlatively there was no intention to give him the limitation for less cost or on more advantageous terms in the one case than in the other. The provision for substituting money or security for the ship had no purpose or function to correlate the bond required with the amount of the ultimate aggregate substantive liabilities which seldom can be known in advance of their final determination. The alternative mode's purpose was only to permit the owner to release the ship and continue it in active business use, provided he substituted its equivalent in value, not some lesser sum, for it.

It is quite true that the statute was enacted for shipowners' benefit and for encouragement of the industry, by enabling owners to limit their liability. But in doing this and thereby cutting down the rights of claimants to recovery, Congress was not unmindful of the latter. For satisfying their unrestricted claims it substituted a fund instead of the owner's general and unlimited liability. That fund was the vessel's value or its equivalent. Nor was this a subordinate feature of the scheme of limitation. It was the very heart of that scheme, and, in my opinion, was intended to create a general and uniform policy for application in American courts. In cutting down claimants' rights of recovery to the fund prescribed, Congress was not giving the owner the additional right to cut further the security provided for their payment, by either assuming or pleading that his ultimate aggregate liabilities would be below that fund.

This brings us to the final consideration, which is that there is no injustice whatever here, there is only an imagined one, in requiring Black Diamond to deposit in court cash or security in the full amount of $1,000,000 required by the statute's terms. The aggregate of petitioners' liabilities has not been determined, nor can it be until the further and probably extended proceedings for that purpose have been concluded. Meanwhile, it must remain uncertain, as it has during all the litigation to this date, whether petitioners' or respondent's view on that matter ultimately will prevail. In other words, it is now as likely that petitioners' liabilities eventually will be found to be $1,000,000 as it is that they will be fixed according to petitioners' view of the Belgian law and ours. Indeed, the Court's opinion sets forth considerations casting grave doubt on whether petitioners' theory of the substantive limitation can prevail.

In this state of affairs petitioners actually are asking us to gamble with them, and against respondent and other claimants, on the ultimate computation of petitioners' aggregate liabilities. And in this petitioners are asking us to put upon the claimants the risk that petitioners will turn out to be right. That risk, under the statute's policy, should be the other way. Likewise, under the policy, the cost of that risk is put upon petitioner Black Diamond. In reducing claimants' rights of recovery to the value of the ship or its equivalent, Congress did not mean that the claimants should take the risk of not having that value available to satisfy their claims if the aggregate should eventually be held to be the amount of the specified fund. Nor did it mean that they should have that value for security if the ship were turned over for their benefit, but should bear either the loss or the risk if the shipowner elected to substitute cash or other security, with the court's approval, in a smaller amount in order to keep his vessel running.

In the event petitioners turn out to be wrong and, as seems likely in that event, valid claims should amount to $1,000,000 or more, under the view petitioners would have us take, the claimants would have certain security to apply on what is due them for only $325,000. Petitioner Black Diamond then either will have limited its liability to that amount, to the claimants' loss and contrary to the statute's provision; or, if the District Court should then see fit to apply the authority given it to require further security tocarry out the purposes of § 4283, as amended, ^[4] it will have cast the burden of Black Diamond's solvency on the claimants for the probably extended period of litigation necessary to complete the final determination of petitioners' substantive liabilities.

I do not think the statute meant the claimants to bear either such a loss or such a risk. Its policy is to exchange limitation for security. The security specified is not contingent or to be supplied in the future. It is a present exchange, immediately effective, to give the shipowner immunity to liability beyond the fund exacted and, at the same time, to relieve claimants of any risk that the fund will not be available if their valid claims eventually equal or exceed it. To allow security in less than the statutory amount to be given, o the change that valid claims may turn out to be less than the fund, vitiates that clear statutory object and command. The only purpose of requiring the approved substituted security to be deposited in court is to assure that claimants will not bear the risk of loss of the fund pending the final determination of their claims.

Petitioners' claim of 'injustice' is therefore without substance. Black Diamond seeks to shift to its creditors the risk which the language and policy of the statute place on it. The statute does not permit security contingent upon the outcome of the adjudication of claims or to be given in the future. The security is to be given concurrently with the privilege of limitation and is to stand in the court's control and at the statutory amount until the claims are finally adjudicated. Black Diamond seeks to have the statutory limitation without paying the statutory price. If that were allowed, the injustice would fall upon the claimants, not upon Black Diamond.

No case has been cited which holds that the statutory limitation can be obtained by giving security in less than the statutory amount. Nor need we now express opinion upon the problem considered in cases like The Aquitania, 2 Cir., 20 F.2d 457, and Curtis Bay Towing Co. v. Tug Kevin Moran, Inc., 2 Cir., 159 F.2d 273. ^[5]

In my view petitioner Black Diamond has not complied with the statute. Strictly therefore it is not entitled to the statutory limitation. But because the question is novel, the time for instituting another limitation proceeding has passed, and filing of security now in accordance with the statute's command would better serve its objects than dismissing the cause, I would reverse the judgment and remand the cause to the District Court to permit the filing of the statutory security, if Black Diamond can and promptly will comply with that requirement. This is for the reason that the statute, § 4285, requires security to be given by turning over the ship or its value in order to secure the limitation of liability, not merely as a matter of judicial discretion to preserve the status quo pending appeal from determination of the issues concerning whether the Belgian substantive limitation applies. The statutory security, if given, should remain in force until all claims have been filed and finally adjudicated.

Notes

1. Rev.Stat. § 4285, as amended, 49 Stat. 1480, 46 U.S.C. § 185, 46 U.S.C.A. § 185. The full text of the section is quoted in note 1 of the majority opinion.
2. International Convention for the Unification of Certain Rules Relating to the Limitation of the Liability of Owners of Seagoing Vessels, signed at Brussels on August 25, 1924. See note 2 of the majority opinion.
3. But cf. the cases cited in the text infra at note 5.
4. Whether the ship is turned over for the creditor's benefit or other acceptable security is substituted, § 4285, as amended, authorizes the court to require 'in addition such sums, or approved security therefor, as the court may from time to time fix as necessary to carry out the provisions of' § 4283, as amended. 46 U.S.C. § 185, 46 U.S.C.A. § 185.
5. Holding, as the Court of Appeals said in this case, that the limitation proceeding is not available where the aggregate of known and probable claims is less than the value of the ship.