1. The words of the Acts of Congress limiting the liability of
shipowners to the value of the vessel and pending freight, and of
part owners to their proportional share, must be taken in a broad
and popular sense in order not to defeat the policy of the acts to
encourage investment in shipping. P.
279 U. S.
62.
2. Therefore, where the title to the vessel is in a corporation
whose stockholders are by state law made proportionately liable for
obligations of the corporation, the stockholder may limit liability
as "part owners." P.
279 U. S.
62.
3. The individual liability assumed under Art. XII, § 3, of the
California Constitution and § 322 of the Civil Code by becoming a
stockholder of a California ship-owning corporation, though
voluntary and contractual, is to be construed as subject to the
limited liability acts of Congress. P.
279 U. S. 63.
2 F.2d 21 affirmed.
Certiorari, 278 U.S. 589, to a decree of the circuit court of
appeals reversing an order of the district court in a proceeding to
limit liability for personal injuries suffered by the present
petitioner while serving aboard ship at sea. The reversed order
refused a stay of actions in state and federal courts which the
petitioner had brought against the respondents to enforce their
liability under the state law as stockholders of the corporation
owning the ship.
Page 279 U. S. 61
MR. JUSTICE HOLMES delivered the opinion of the Court.
The petitioner suffered a severe injury on the high seas while
employed as an engineer on the tugboat
Henrietta,
Page 279 U. S. 62
belonging to A. Paladini, Incorporated, a corporation of the
State of California. He sued the corporation and also the
respondents, the stockholders of the same, seeking to hold the
latter liable under the Constitution of the state, Article XII, §
3, and the Civil Code, § 322, which provide that each stockholder
shall be individually and personally liable for such proportion of
all its debts and liabilities contracted during the time he was a
stockholder as the amount of stock owned by him bears to the whole
of the subscribed capital stock. The respondents took proceedings
in the district court of the United States to limit their liability
under the Acts of Congress, and the limitation was established by
the Circuit Court of Appeals for the Ninth Circuit under R.S. §
4283 (Code, Title 46, § 183), and the Act of June 26, 1884, c. 121,
§ 18, 23 Stat. 57 (Code, Title 46, § 189), 26 F.2d 21. These
statutes, it will be remembered, provide for the limitation of the
liability of shipowners to the value of the vessel and pending
freight, and of part owners to their proportional share. The
argument of the present petitioner is that the stockholders of A.
Paladini, Inc., were not the owners of the
Henrietta, and
that their liability under the law of California was an independent
one voluntarily assumed by contract, with which the Acts of
Congress do not interfere.
The circuit court of appeals disposed of the case after a
thorough discussion. It is unnecessary to do more than to make a
short statement of the points. The purpose of the Act of Congress
was "to encourage investment by exempting the investor from loss in
excess of the fund he is willing to risk in the enterprise," 26
F.2d 24;
Richardson v. Harmon, 222 U. S.
96,
222 U. S. 103;
Hartford Accident & Indemnity Co. v. Southern Pacific
Co., 273 U. S. 207,
273 U. S. 214.
For this purpose, no rational distinction can be taken between
several persons owning shares in a vessel directly and making the
same division by putting the title in a corporation and
distributing the corporate stock. The
Page 279 U. S. 63
policy of the statutes must extend equally to both. In common
speech, the stockholders would be called owners, recognizing that
their pecuniary interest did not differ substantially from those
who held shares in the ship. We are of opinion that the words of
the acts must be taken in a broad and popular sense in order not to
defeat the manifest intent. This is not to ignore the distinction
between a corporation and its members, a distinction that cannot be
overlooked even in extreme cases,
Behn, Meyer & Co. v.
Miller, 266 U. S. 457,
266 U. S. 472,
but to interpret an untechnical word in the liberal way in which we
believe it to have been used -- as has been done in other cases.
International Stevedoring Co. v. Haverty, 272 U. S.
50.
The other branch of the petitioner's argument seems to us a
perversion of the California law. The effect of that law, so far as
it goes, is to destroy the operation of a charter as a nonconductor
between the persons injured by a breach of corporate duty and the
members of the corporation, who, but for the charter, would be
liable. As suggested in
Flash v. Conn, 109 U.
S. 371, it leaves the members to a certain extent in the
position of copartners. But that is the liability that the Acts of
Congress mean to limit. Having no doubt of the comprehensive
purpose of Congress, we should not be ingenious to construe the
California statute in such a way as to raise questions whether it
could be allowed to interfere with the uniformity which has been
declared a dominant requirement for admiralty law.
Decree affirmed.
