Source: https://supreme.justia.com/cases/federal/us/317/406/
Timestamp: 2019-04-26 15:54:46+00:00

Document:
1. Revised Statutes § 4283 -- the limitation of liability provision -- should be administered liberally. P. 317 U. S. 411.
2. An individual owner of a vessel who selects competent men to store and inspect it, and who is not on notice as to the existence of any defect in it, cannot, upon the theory that the "privity" and "knowledge" of his negligent agents are imputable to him, be denied the benefit of the limitation of liability under R.S. § 4283 as respects damage resulting from fire caused by an explosion on board during the period of storage. P. 317 U. S. 412.
resulting from fire aboard a vessel owned by one of the respondents.
Petitioners instituted a suit in Admiralty in the federal District Court to recover damages for the destruction of vessels owned by them as a result of a fire which occurred in June, 1935, while the vessels were afloat at Pilkington's storage basin at Fort Lauderdale, Florida. The fire was caused by an explosion of gasoline fumes in the engine room of the yacht Seminole, registered in the name of Seminole Boat Co. and owned by it. Prior to 1929, the Seminole was owned by respondent Phipps and his brother. At that time they transferred the yacht to the Seminole Boat Co., a Delaware corporation, all of the stock of which was issued to the two brothers. At the time of the fire, respondent Phipps still owned half of the shares of stock, the other half having been acquired by his sister. Neither she nor Phipps was an officer or director of the company.
of the Seminole Boat Co. It held that the corporation was not a sham or a fraud, but adequate to insulate Phipps as a stockholder from liability for this tort. It went on to hold that, even if the corporation be disregarded, Phipps was without "privity, or knowledge" of the events which caused the fire, and hence could limit his liability to the value of his interest in the yacht. 39 F.Supp. 142. The Circuit Court of Appeals affirmed. 128 F.2d 702. The case is here on a petition for a writ of certiorari which we granted because of an asserted conflict on the point of limitation of liability under § 4283 between the decision below and In re New York Dock Co., 61 F.2d 777, and In re Great Lakes Transit Corp., 81 F.2d 441.
The sole questions raised by the petition relate to the liability of Phipps. Petitioners renew here their contention that the corporate existence of the Seminole Boat Co. should be disregarded, and that it should be treated as a mere dummy, or sham. We need not recite the facts on which that argument rests, nor express an opinion on it. For, even if we assume, without deciding, that the contention is a valid one, and that Phipps should be treated as owner of the yacht for the purposes of this litigation, we nevertheless conclude that the courts below were correct in allowing the limitation of liability under § 4283.
"the crew left her gasoline valves closed, her electric switches open, her gas tanks registering empty, and her bilges clean and free of gasoline or gasoline vapor,"
were delegated may be attributed to him for purposes of § 4283.
Petitioners press several lines of cases on us. We are not concerned here, however, with the question of limitation of liability where the loss was occasioned by the unseaworthiness of the vessel. The limitations acts have long been held not to apply where the liability of the owner rests on his personal contract. Pendleton v. Benner Line, 246 U. S. 353; Luckenbach v. McCahan Sugar Co., 248 U. S. 139; Capitol Transportation Co. v. Cambria Steel Co., 249 U. S. 334. As stated by Chief Justice Hughes in American Car & Foundry Co. v. Brassert, 289 U. S. 261, 289 U. S. 264, "For his own fault, neglect, and contracts, the owner remains liable." And that exception extends to an implied, as well as to an express, warranty of seaworthiness. Cullen Fuel Co., Inc. v. Hedger, Inc., 290 U. S. 82. But, whatever limit there may be to that exception (id., p. 290 U. S. 89; cf. Earle & Stoddart, Inc. v. Ellerman's Wilson Line, Ltd., 287 U. S. 420, arising under the fire statute), those cases are no authority for imputing to the individual owner the neglect of another so as to establish on his part privity within the meaning of the statute.
liability. Hence the search in those cases to see where, in the managerial hierarchy, the fault lay.
"to achieve its purpose to encourage investments in shipbuilding and to afford an opportunity for the determination of claims against the vessel and its owner."
that Phipps should be barred from limiting his liability. One who selects competent men to store and inspect a vessel and who is not on notice as to the existence of any defect in it cannot be denied the benefit of the limitation as respects a loss incurred by an explosion during the period of storage unless "privity" or "knowledge" are to become empty words. If § 4283 does not give protection to the individual owner in these circumstances, it is difficult to imagine when it would.
"The liability of the owner of any vessel, for any embezzlement, loss, or destruction, by any person, of any property, goods, or merchandise, shipped or put on board of such vessel, or for any loss, damage, or injury by collision, or for any act, matter, or thing, loss, damage, or forfeiture, done, occasioned, or incurred without the privity, or knowledge of such owner or owners shall in no case exceed the amount or value of the interest of such owner in such vessel, and her freight then pending."
No question has been raised here as respects the amendments to the section made by the Act of August 29, 1935, 49 Stat. 960, or by the Act of June 5, 1936, 49 Stat. 1479.

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