Court Opinion

ID: 6916967
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:45:14.196959+00
Date Added: 2024-06-11T16:06:41.130782
License: Public Domain

On Petitions for Rehearing
Before STEPHENS, Chief Judge, and DENMAN and POPE, Circuit Judges.
POPE, Circuit Judge.
Following our decision in this case on May 31, 1957, all of the parties filed petitions for rehearing. The petition of States Steamship Company is denied. Upon consideration of the petitions of the United States and of Atlantic Mutual Insurance Company, Pacific National Fire Insurance Company and The Dominion of Canada, that portion of our former opinion which affirmed the decree limiting liability is withdrawn and this opinion is substituted therefor. The remainder of our former opinion, rejecting the appeal of States Steamship Company, stands.
The details of the sinking of the S. S. Pennsylvania, out of which these proceedings grew, are stated in our former opinion. As there disclosed the vessel sailed on January 5, 1952, on what was designated her Voyage 6, from the Port *464of Seattle for the Port of Yokohama. She sank during a storm in the Gulf of Alaska, with a total loss of the vessel and all of her crew. The appeals here are by States Steamship Company, owner and operator of the vessel, from the portion of the interlocutory decree denying exoneration, and by the other named parties, cargo claimants, from that part of the decree granting limitation of liability.
A further study of the record here presented convinces us not only that the findings of the court below are insufficient to support a decree limiting liability, but that States Steamship Company failed to sustain its burden of proof to warrant a limitation of liability. It clearly shows that the unseaworthiness which the court found to be the cause of the loss, and due to the owner’s lack of due diligence, was with the privity or knowledge of its managerial employees.
First note the findings themselves: In Finding III it is said that “The sole and proximate cause of the sinking of the Pennsylvania” was “her own unseaworthiness.” This is followed by Finding IV listing the contributory factors responsible for the sinking. Finding V named the factors of unseaworthiness existing at the inception of the voyage as follows:
“That the foregoing faults, failures, breakdowns and defects set forth in the preceding Finding IV, together with the crack sensitiveness of the vessel to extreme cold weather by reason of a former 22-foot crack in her deck occurring on her previous Voyage V, which crack was fully repaired, were factors of unseaworthiness culminating from the unseaworthy condition of the vessel at the inception of her voyage which prevented her from meeting the expected and to be anticipated weather conditions and proximately caused her sinking, with the total loss of the vessel, with all of her crew and personnel aboard and all of her cargo.”
Then follows Finding VI which is the significant one here and which is as follows:
“That the evidence is insufficient to show that petitioner used the due diligence required by law to make the vessel seaworthy at the inception of her voyage, and the Court finds that the petitioner did not use the due diligence required by law to make the vessel seaworthy and to entitle it to exoneration from liability.”
Finding VII is as follows:
“That the evidence is sufficient to show that the unseaworthy condition of the vessel at the inception of her voyage was without the privity or knowledge of petitioner, and the Court finds that the unseawor-thy condition of the vessel at the inception of her voyage was not with the privity and knowledge of the petitioner.”
Before there could be a finding or conclusion such as Finding VII there would have to be a finding based on evidence that the negligence which the court found existed was that of a non-supervisory agent such as a master or an operating engineer.
For application here is the Limitation of Liability Act, which provides in § 183(a) of Title 46 U.S.C.A.: “The liability of the owner of any vessel, * * * for any * * * loss * * * of any property, goods, or merchandise shipped or put on board of such vessel * * * without the privity or knowledge of such owner or owners, shall not * * * exceed the amount or value of the interest of such owner in such vessel, and her freight then pending.” As indicated in Coryell v. Phipps, 317 U.S. 406, 409, 63 S.Ct. 291, 293, 87 L.Ed. 363, the burden of proof in such cases “is on those who seek the benefit” of the section. As there stated, and hereafter noted, “liability may not be limited under the statute where the negligence is that of an executive officer, manager or superintendent whose scope of authority in-*465eludes supervision over the phase of the business out of which the loss or injury occurred.”
The reason there is no basis for the limitation here is that the only persons whose negligence could have operated to bring about the unseaworthy condition, the only persons to whom the lack of due diligence could possibly be charged, were persons who were managing officers of the corporation. The court not only did not find that the failure to exercise due diligence was that of minor or subordinate employees, but the court could not have made such a finding.
The only persons who were on the scene and had anything to do with these factors of unseaworthiness were managerial employees. The phase of the business out of which the loss or injury occurred included the “factors of unseaworthiness” which the trial court in its Finding V, supra, found caused the sinking of the Pennsylvania. We are of the opinion now, as we decided before, that there was ample evidence supporting that finding. One of those factors was “the crack sensitiveness of the vessel to extreme cold weather by reason of a former 22 foot crack in her deck occurring on her previous Voyage V.”
To illustrate how the only possible proof of lack of due diligence which the court has found related to acts or neglects chargeable to supervisory personnel only we first consider this crack sensitiveness of the vessel to extreme cold weather, and the evidence relating to it.
Lester A. Vallet was throughout the period of time here involved port engineer of the company. As he put it: “I am in charge of the maintenance and repair of all the vessels.” During the month or two preceding the loss of the Pennsylvania (and at the time she was cleared for sailing on her fatal trip), Vallet was also performing the additional duties of the marine superintendent who was away at the time. Vallet was the officer charged with an extensive investigation of the vessel in December, 1950, shortly before the petitioning company purchased her from the Maritime Administration. He was assisted in this by Mr. Brenneke, who was assistant port engineer. Vallet drew up the specifications for certain alterations in the vessel which were made after it was purchased. It was the practice of Vallet to board a returning vessel on arrival and to examine it for damages that had occurred on the voyage.1 On the fifth voyage of the Pennsylvania the 22 foot crack in the ship’s deck, which is referred to in Finding V, occurred while the vessel was out at sea enroute from San Francisco to Yokohama. The master was asked to return to the closest and safest port and the vessel turned around and went to Portland. There the American Bureau of Shipping and the Coast Guard were called in to inspect the damage and Vallet was in attendance to inspect the survey. After the survey Vallet prepared the specifications for the repair of the crack in the deck to meet the survey’s recommendations.2 It was during this inspection that Vallet noticed an indication of a crack in the deck on the port side. He concluded that this crack was in a location similar to that on the starboard side where the long crack had originated and this portion of the plate was cut out and a circular insert plate installed instead.
*466When the repairs mentioned were completed and the vessel was about ready to sail, Vallet carried out an inspection and thereupon discovered there was a difficulty with the steering mechanism. (See footnote 2, supra.) Vallet himself undertook to correct this. The vessel sailed from Portland and completed her voyage 5 and at the end of that voyage Mr. Bren-neke met the ship at Seattle and examined it there. It was from here that it left on voyage 6. The date of sailing was January 5. Vallet testified on deposition as follows: “After the vessel cracked on Voyage 5 and she came back did you make any particular detailed inspection of the hull to see if there were other cracks anywhere on the port side? A. Mr. Brenneke was instructed to examine the ship very carefully at the time the vessel came back in Seattle and was placed on the dry dock.”
All these facts lead to the conclusion that Vallet and Brenneke, both of them managerial employees or officers, between them handled every phase of the business having to do with the crack sensitiveness of the vessel and the condition of the vessel at the time she broke land on her scheduled No. 6 trip. As Vallet testified, “I was in charge of the Marine Department which in addition to the maintenance and repair of the vessel, also is charged with the obtaining of personnel and the officers for the ships and maintaining the discipline on the vessels and also supplying and storing the ships.” 3 Brenneke was his No. 1 assistant, and as Vallet testified with respect to Brenneke dispatching the vessel from Seattle, “Mr. Brenneke is fully qualified and he knows the procedure to follow.” There is no suggestion, much less any testimony, that any person other than these two men had anything to do with the phase of the crack sensitiveness of the boat which was one of the causes of loss. These two executives were the sole actors.
It cannot be said that the crack on the port side and the taking of water in the No. 1 hold were not imputable to the knowledge or privity of Vallet, for the trial court has not only found that these “factors of unseaworthiness culminating from the unseaworthy condition of the vessel at the inception of her voyage caused her sinking”, but it has found that “petitioner did not use the due diligence required by law to make the vessel seaworthy.” This language necessarily refers to Vallet. For the reasons set forth in McAllister v. United States, 348 U.S. 19, 75 S.Ct. 6, 99 L.Ed. 20, we cannot go beyond that finding. And that finding, in that plain meaning, is supported by an abundance of evidence.
This brings us to the evidence relating to the crack sensitiveness. Vallet knew a great deal about crack sensitiveness. Not only did he have actual knowledge of the subject but there was available to him and to any one who exercised ordinary care in his position an abundance of information to demonstrate what the court has found, namely, that there was a crack sensitiveness in the vessel by reason of a former crack which made the ship unseaworthy under conditions of extreme cold weather.
Within the meaning of the section of the statute limiting liability, “knowledge means not only personal cognizance but also the means of knowledge —of which the owner or his superintendent is bound to avail himself — of contemplated loss or condition likely to produce or contribute to loss, unless appropriate means are adopted to prevent it.” The Cleveco, 6 Cir., 154 F.2d 605, 613. The burden is upon the owner seeking limitation of liability “to prove lack of knowledge or of the means of knowledge on his part or that of his marine superintendent that his vessel was unseaworthy.” Id. “The measure in such cases is not what the owner knows, but what he is charged with finding out.” Great Atlantic and Pacific Tea Co. v. Brasileiro, 2 Cir., 159 F.2d 661, 665.
*467The finding that the vessel had a crack sensitiveness in extreme cold weather is based in part upon the findings made in 1946 of a board of investigation convened by order of the Secretary of the Navy to inquire into “The Design and Methods of Construction of Welded Steel Merchant Vessels.” Among those findings was one that “The highest incidence of fracture occurs under the combination of low temperature and heavy seas.” Vallet testified that he knew that report and had read it over at various times. He stated that he agreed with the finding quoted. The same report dealt with the tendency of a ship to have repeated casualties involving cracks and steel failures, and concludes: “The indication is that after a ship has had a casualty, it is somewhat more liable to a casualty than before the first.” 4 Vallet also knew and testified that this 22 foot crack during the No. 5 voyage “was a No. 1 casualty”. As explained in the investigative report referred to above, a Class 1 casualty “is a casualty involving at least a Class 1 fracture”; and a Class 1 fracture “is a fracture which has weakened the main hull structure so that the vessel is. lost or is in a dangerous condition.”
Not only was Vallet chargeable with knowledge when the Pennsylvania was dispatched on the No. 6 voyage on January 5, 1952, that she was a ship which had previously suffered a Class 1 fracture, that a ship which has had such a casualty was more liable to a repetition of fracture than before the first, but he had read and must have known the finding of the 1946 report that the highest incidence of fractures occurs when the combination of low temperature and heavy seas prevails. He and Brenneke knew that the ship was setting out in what was perhaps the coldest month of the year, and that most of the skippers would choose to take the Great Circle route to the Orient, for which the vessel was bound. He knew that on this Great. Circle route violent storms, low temperatures and mountainous seas were to be anticipated at that time of the year, particularly in the Gulf of Alaska. When the Class 1 fracture occurred on the preceding voyage the air and sea temperatures were much less severe than those *468to be anticipated at the start of the voyage No. 6. A witness from the Bureau of Standards testified at the trial with respect to a sample plate taken from the Pennsylvania: “Would this plate here be sensitive in weather 30 to 40 degrees? A.- It would.” Vallet must have known as much. It is altogether possible that the captain did not know, as his superiors did, of the danger of operating a welded ship which had previously suffered a Class 1 fracture through an area where he was likely to encounter extreme cold and high seas. But the likely operation of the desire on the part of the captain to take the shorter Great Circle route made the more imperative the obligation of the owner to advise the captain of the advisability of avoiding operating a crack sensitive ship in these areas, and to direct that the ship be taken to her destination in Japan by a route through warmer waters where the likelihood of severe storms would have been less.
For this reason this case cannot be distinguished from The Silver Palm, 9 Cir., 94 F.2d 776, in which this court approved the district court’s denial of limitation where a collision was caused by a condition of the ship’s motors which required an extraordinarily long time for reversing in an emergency when the vessel was going at high speed ahead. The court found that the captain did not know of this peculiarity of the engines. The petitioner did not acquaint the captain of these reversing characteristics of the engine. This court said (at page 779): “The likely operation of the desire on the part of the captain to reach and depart from his various ports in accordance with the scheduled plan of operation made the more imperative the obligation of the owner and operator to advise Capt. Cox of the fact that, if he were running the vessel in a fog at a speed in excess of 5 knots, his vessel, unlike those otherwise driven, would have a very long period between the stopping of his motors and effective reversing.”
The situation here is like that present in Spencer Kellogg & Sons Co. v. Hicks, 285 U.S. 502, 510, 52 S.Ct. 450, 76 L.Ed. 903. In that case Spencer Kellogg manufactured linseed oil. It owned and operated the “Linseed King” a launch used to ferry employees across the river from New Jersey to New York. One Stover was works manager of the company. The “Linseed King” was unfit to run through ice and Stover knew it and when there was a likelihood of ice, trips were to be made only in broad daylight. Before the day in question, one of Stover's subordinates had observed ice in the river. Said the court (285 U.S. at pages 510, 512, 52 S.Ct. at page 452): “Before allowing the ferriage operation he (Sto-ver) was under obligation to assure himself by inquiries or by personal inspection that the Linseed King should not incur the hazard of colliding, as she did, with ice floes in the river * * *. The conditions on the morning in question could have been ascertained by Stover, if he had used reasonable diligence, and we think the evidence is adequate to support the finding that the negligence which caused the disaster was with his, and therefore with the owner’s, privity or knowledge.” Paraphrasing this language, it seems plain that before allowing the start of voyage 6 Vallet was under obligation to assure himself by inquiries or otherwise that the Pennsylvania should not incur the hazard of proceeding by the Great Circle route in the coldest and stormiest month of the year where she was certain to encounter temperatures which she could not stand. These hazards could have been ascertained by Vallet if he had used reasonable diligence; and the court below has found that reasonable diligence was not exercised. The court also found in Finding V that the weather referred to was “the expected and to be anticipated weather conditions.”
Much is made by the petitioning company of the fact that from time to time inspections and surveys were made of the ship by the Coast Guard and the Bureau of Shipping, and that the inspectors had turned up with a clean bill of health. An examination of the actual facts of the *469case will show, however, that in respect "to such inspections the very reasons given in the Silver Palm, supra, for denying the limitation of liability apply here in connection with the modes of inspection adopted. When the vessel was at Portland for repair of the 22 foot crack in November, 1951, the vessel was not in dry dock and only a portion of the cargo was removed so as to permit repair and inspection of the immediate area of the crack. The vessel then went to the Orient and back and was dry docked at Seattle by representatives of the American Bureau of Shipping and the ■Coast Guard.
Vallet did not examine the vessel personally in Seattle but Brenneke was there. He made a visual inspection of the underwater body which he testified was done in the customary manner. He found no wasted or suspicious seams or broken paint or cracks or indents from which a crack might originate. He had a probe but had no hammer. While the vessel was in dry dock representatives of the American Bureau of Shipping and of the Coast Guard made a dry dock inspection; but as Commander Hamilton testified, when he made his inspection, he had received no special information about this vessel. His report showed, and he testified, that there was not a complete investigation made of the structure of the vessel to determine if repairs or replacements were necessary because some portions of the internal structure were not accessible for examination.
Marine Surveyor Wilson who then inspected the ship for the American Bureau of Shipping testified that he received no special information concerning the vessel prior to his survey and he knew nothing outstanding against it. The record warranted the court’s evident conclusion that an inspection of a vessel known to have a history of crack sensitiveness and particularly a history of a Class 1 fracture, should be much more careful and elaborate than this vessel ever had. The company itself was •chargeable with knowledge of the pending inspection and yet it failed through Vallet or Brenneke or any other person to inform the inspectors of these special conditions attending the ship. In the words used in the Silver Palm, supra, all these circumstances “made the more imperative the obligation of the owner and operator to advise” of the special circumstances calling for a special inspection and a more thorough one than had been given.
Vallet met the vessel when she put in at Portland following the fracture on trip 5 and Brenneke at Seattle met her in December, 1951, when she returned after that trip and inspection occurred as above stated. It was a matter of common knowledge that the structure should have been inspected from within and below, particularly in the vicinity of the pad-eyes where cracks were apt to start. Vallet testified that at the time he made the specifications for repairs of the 22 foot crack he also ordered repair of “fracture plate No. 3 hatch; cut out crack plate in the way of the No. 3 hatch port side aft and install insert plate.” He explained that he ordered this because from an underneath inspection he saw an indication of a slight crack in the way of a pad-eye which had been removed. It was a very small crack but at a point on the port side similar to the place where the large fracture had occurred on the starboard side.
Notwithstanding Vallet’s knowledge of the importance of inspection of the hull under pad-eyes and from the inside, there was never possible a thorough inspection of this character after the 22 foot crack on voyage 5 and before the vessel left on voyage 6 because the ship was never unloaded and those portions of the vessel requiring such inspection was never made accessible.
Our former opinion, speaking of Val-let’s knowledge of the condition of the vessel, said: “The previous crack in her deck plates had been completely repaired.” This language discloses that we failed then to note the facts to which the court’s finding as to the vessel’s unseaworthiness related. The crack sensitiveness referred to in the findings had *470nothing to do with the question of whether the old crack was or was not repaired. The crack sensitiveness alluded to is “the crack sensitiveness of the vessel to extreme cold weather.” In short, the technical evidence made available in these reports means that the record of the earlier crack or Class 1 fracture, is significant in respect to the crack sensitiveness in other portions of the vessel.
The more one studies the history of the Pennsylvania, the more he is driven to the discovery of additional facts which enforce the correctness of the trial court’s finding that the petitioner did not exercise due diligence. The ship was equipped and built with some deep tanks, and there was adequate evidence to show that these deep tanks were so constructed as to aid and enforce the rigidity of the ship. When the petitioning company bought the ship from the Maritime Administration it was advised through Vallet not to interfere with these deep tanks. Vallet nevertheless proceeded to cut hatches in them. Prior to that time the Pennsylvania had never developed a major fracture. Thereafter she proceeded to develop the Class 1 fracture on her fifth voyage.
Another circumstance that may have prompted the trial court to find that the petitioner company did not use due diligence to make the vessel seaworthy at the inception of her voyage, was the manner in which Vallet apparently took little or no interest in the metallurgical tests of the ship’s steel following the voyage 5 crack. Vallet was asked whether he or the company caused any test of the hull plate or deck plate to be made. His first answer, not responsive, was: “It was not necessary.” Being pressed for a more specific answer, he said that the American Bureau of Shipping and the Coast Guard had requested a specimen of the steel removed in the way of the crack for testing purposes; that he himself never made any request for such testing. He was asked “You did not consider it was necessary to have a metallurgist look 'at the steel and the crack that occurred on Voyage 5?” to which he answered: “That was taken care of by the United States Coast Guard and American Bureau of Shipping,” adding that they were better qualified than any other metallurgist. The witness did not know, however, whether these organizations did or did not conduct tests and he received no report of any test.
That exposes a situation to which is applicable our language in The Silver Palm, supra, where we said (94 F.2d at page 780): “In proceedings for limitation the owner may not escape liability by giving the managerial functions to an employed person acting as its agent, whether the person be corporate or otherwise.” Nor can the company escape responsibility for taking due precaution reasonably required by the apparent dangers by a mere reliance upon an assumption that the Coast Guard and the American Bureau of Shipping have taken care of these matters.
In view of the court’s own finding, which is not open to challenge, that the-petitioner did not use due diligence as-required by law to make the vessel seaworthy, what we have here said serves-to disclose that that finding was abundantly supported by the evidence, and it-also discloses that this lack of due diligence necessarily attached to the petitioner and not to any subordinate employees of petitioner. All this makes it unnecessary to discuss the other factors of unseaworthiness set forth in the trial court’s findings.
We hold that it was error to enter a decree limiting the liability of States Steamship Company and that portion of the interlocutory decree awarding such limitation of liability is reversed and the cause is remanded to the district court for further proceedings consistent with this opinion.

. “A. Whenever a ship returns from a voyage, either myself or one of my assistants boards the vessel on arrival and discusses the general condition of the vessel with the Master, chief engineer, and we obtain a list of repairs which are requested by the vessel. Q. Voyage repairs, you mean? A. Voyage repairs, and examine any other damages that have occurred on the voyage.”

. It was at this time that repairs were ordered for a “fracture plate No. 3 hatch” and for “emergency steering gear.” The failure of the steering systems was another factor of unseaworthiness referred to in Finding IV which need not be discussed here in view of the evidence as to the factor of crack sensitiveness, although the evidence as to the factor of unseaworthiness by reason of the faulty steering gear would show Vallet’s connection with it also.

. This testimony referred to his total duties during the period just previous to the departure of the vessel, the trip No. 6, when he was acting as marine superintendent.

. This whole report which had not only been read by Vallet but which must have been required reading for all persons in the shipping industry having to do with ship maintenance, was sufficient to alert any reader to the necessity of care and caution in the handling of welded steel ships such as the Pennsylvania. It points out that welding was a relatively new process in the building of ships — a process which was still in the course of intensive study by the shipping industry generally because of the marked tendency of ships so constructed to develop fractures, to a degree unknown in respect to riveted ships. It points out that while the welding processes had great advantages with respect to speed of construction, and had served to make the wartime accelerated ship building possible, yet among the disadvantages of such construction wore the bewildering phenomena with respect to fractures. In short, it would appear from a reading of this and other available studies on the subject, that a maintenance executive in the shipping industry in the exercise of due diligence should be as concerned about the problems of likelihood of fracture or of crack sensitiveness in this type of vessel as were the experts who compiled these studies.
Vallet testified that this 1946 report was followed by a second report and then by a third report by a ship structure committee convened by the Secretary of the Treasury and whose report dated November, 1953, was also an exhibit in the case below. The latter report contains descriptions and photographs of a similar crack which developed on the “Joplin Victory” at the time when the States Steamship Company was operating her. It develops at great length the proposition mentioned in the preceding report that low temperatures have an important bearing on the brittleness and tendency to fracture of steel components of these welded structures which it terms a basic concept in this field. It says under the heading of “Fundamental Investigations” : “As has already been mentioned, the ability of a welded structure, such as a ship, to deform and thereby to absorb energy is considered a measure of its serviceability. The realization that, as temperature is lowered, the structure can suddenly lose ductility (at the transition temperature) becomes particularly important.”