Paladini v. Flink

Decision Date14 May 1928
Docket NumberNo. 5281.,5281.
Citation26 F.2d 21
PartiesPALADINI et al. v. FLINK.
CourtU.S. Court of Appeals — Ninth Circuit

Ira S. Lillick, of San Francisco, Cal. (J. Arthur Olson, of San Francisco, Cal., of counsel), for appellants.

Ford, Johnson & Bourquin, of San Francisco, Cal., for appellee.

William Denman and Andros, Hengstler & Dorr, all of San Francisco, Cal., amici curiæ.

Before GILBERT, RUDKIN, and DIETRICH, Circuit Judges.

DIETRICH, Circuit Judge.

The appellants constitute all the stockholders of A. Paladini, Incorporated, the owner of the tugboat Henrietta. Claiming that on March 9, 1923, he was injured while employed in a maritime service on the vessel, the appellee brought separate actions against the corporation and its stockholders, in the state court and also the federal District Court, in California, to recover damages. Thereupon, while these actions were pending, appellants filed in the court below their petition for limitation of liability, in which proceeding, following an appraisement of the vessel, an order was made for the issuance of monition against all persons claiming damages, etc., and restraining the further prosecution of the law actions brought by Flink against the petitioners. Thereafter, upon special appearance by Flink, the court granted his motion to vacate the stay order, from which ruling the petitioners appeal.

As fairly stated in appellants' brief, the sole question involved is "whether the stockholders of a California corporation, which is the legal owner of a vessel, are entitled to limit their liability in an action commenced against them arising out of a claim for personal injuries sustained by a person on board the vessel." Under section 3 of article 12 of the California Constitution, each stockholder of a corporation is "individually and personally liable for such proportion of all its debts and liabilities contracted or incurred, during the time he was a stockholder, as the amount of stock or shares owned by him bears to the whole of the subscribed capital stock, or shares of the corporation." The operation and effect of this provision have had frequent consideration in the courts, and it seems to be well settled that under it stockholders are not merely sureties for the corporation, but their liability is direct and primary. Mokelumne Hill Co. v. Woodbury, 14 Cal. 265; Trindale v. Atwater Canning Co. (Cal. App.) 128 P. 756; Dolbear v. Foreign Mines Dev. Co. (C. C. A.) 196 F. 646; Buttner v. Adams (C. C. A.) 236 F. 105. Stockholders of foreign corporations doing business in California would seem to have the same status (Cal. Civ. Code, § 322; Provident Gold M. Co. v. Haynes, 173 Cal. 44, 159 P. 155), but presently the consideration is not highly material. And, under the view we have taken upon another branch of the case, we do not deem it necessary to discuss whether or not, in the light of recent decisions of the Supreme Court, it is competent for a state to extend the rule into the realm of maritime law, as perhaps was held in Buttner v. Adams, supra.

The principal provisions of the federal statutes invoked by appellants are: "The liability of the owner of any vessel * * * 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," R. S. U. S. § 4283 (46 USCA § 183; Comp. St. § 8021); and "the individual liability of a shipowner, shall be limited to the proportion of any or all debts and liabilities that his individual share of the vessel bears to the whole; and the aggregate liabilities of all the owners of a vessel on account of the same shall not exceed the value of such vessels and freight pending, * * *" 23 Stat. 57 (46 USCA § 189; Comp. St. § 8028).

The federal statutes are admittedly dominant, and to these provisions, in case of repugnancy, state Constitutions and laws must yield. The question, therefore, is of the meaning and scope of the federal statutes. That they were enacted to put this country upon the same footing with other countries, and thus to encourage the building of ships and participation in the foreign carrying trade, is well known. "The rule of limited liability of owners of vessels is an ancient one, * * *" and "should be applied having regard to the purposes it is intended to subserve and the reasons on which it rests." Evansville & Bowling Green Packet Co. v. Chero Cola B. Co., 271 U. S. 21, 46 S. Ct. 379, 70 L. Ed. 805; Hartford Accident & Indemnity Co. v. Southern Pacific Co., 273 U. S. 207, 47 S. Ct. 357, 71 L. Ed. 612, decision United States Supreme Court February 21, 1927. In the latter case, after referring to several of its own decisions, the court said: "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," etc. See, also, Oregon R. R. & Nav. Co. v. Balfour (C. C. A.) 90 F. 295; People's Nav. Co. v. Toxey (C. C. A.) 269 F. 793; The Princess Sofia (D. C.) 278 F. 180; The 84-H (C. C. A.) 296 F. 427; The...

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2 cases
  • Churchill v. F/V Fjord, 86-4178
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • 14 Septiembre 1988
    ...of insurance payments by vessel owners to state fund conflicts with Congressional policy of limiting liability of owners); Paladini v. Fink, 26 F.2d 21 (9th Cir.1928), aff'd, 279 U.S. 59, 49 S.Ct. 255, 73 L.Ed.2d 613 (1929) (provision of California Constitution permitting liability of stock......
  • Bordelon v. State, 7683B
    • United States
    • Court of Appeal of Louisiana — District of US
    • 28 Marzo 1952
1 books & journal articles
  • What Do Stockholders Own? The Rise of the Trading Price Paradigm in Corporate Law.
    • United States
    • The Journal of Corporation Law Vol. 47 No. 2, January 2022
    • 1 Enero 2022
    ...n.1 (Del. 1979) ("The stockholders are the equitable owners of the property and assets of the corporation..."); see also Paladini v. Flink, 26 F.2d 21, 23 (9th Cir. 1928), aff'd, 279 U.S. 59 (1929) ("[T]echnically speaking, stockholders are not owners; but, in a broad popular sense, and for......

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