Gulf Oil Corporation, Appellant, v. Panama Canal Company, Appellee, 407 F.2d 24 (5th Cir. 1969)

The problem here is the old, old one of sovereign immunity. Here the only new wrinkle, Mike Hooks, Inc. v. Pena, 5 Cir., 1963, 313 F.2d 696, 697, 1963 A.M. C. 355, 356, is that it has to be towed in stern-first since the governmental corporation invoking this ancient and generally discredited trapping of the King-can-do-no-wrong era is given express statutory power to sue and be sued. Of course it has to have some theory to overcome such an explicit waiver. In a sort of what-the-right-hand-giveth the left-hand-taketh-away approach, it finds this in a statutory provision requiring a specific notice of claim as a condition of suit. But strained theorizing is not confined to the pursued. The pursuer likewise finds it attractive, so much so that one of its arguments takes the frank form that the judiciary can disregard explicit statutory language on the ground, not that Congress did not enact it, but rather in doing so, Congress did not know what it was doing.

What brings all this about is just another case, like thousands before, where rudder damage subsequently manifesting itself is related back to an earlier claimed touching of bank or bottom. The victim was the S/S GULFSPRAY, the culprit the Panama Canal Company whose compulsory pilot was conning the vessel.

In more austere terms, what brings this about is the failure of the damage claimant shipowner to comply literally with § 297 of Title 2 of the Canal Zone Code¹  which is an integral part of a precise structure creating civil liabilities and prescribing procedural remedies.²  Section 297 requires notice of the claim prior to the departure of the vessel from the Canal Zone. The shipowner did not give such notice or make such claim, but not because it was ignorant of, or ignored the requirements, but rather because such notice-claim could not be given since the damage was not identified in nature and cause until after the ship had left the Canal Zone. On the Panama Canal Company's motion to dismiss, the shipowner suffered a second grounding when the Judge — in one of those situations where the decision is bound to be right because it is so wrong³  — expressing distress at the law's harshness, dismissed the suit for failure to comply with § 297 (note 1, supra).

With factual particularity unknown to notice pleaders as libels transform into complaints and proctors with their esoteric traditions metamorphose into unadorned attorneys,⁴  the claim which was credited by the motion to dismiss with but slight paraphrasing went like this. The S/S GULFSPRAY, a steel tank vessel departed Southwest Pass, Mississippi River for the Panama Canal. Her draft was 33' 2" forward and 33' 8" aft. No difficulty was experienced with the steering gear and GULFSPRAY required no more than 10 deg. rudder in either direction, 10 deg. being the maximum rudder obtainable on automatic steering. Approaching the Panama Canal Zone, the steering was shifted to manual and remained under manual control until after completion of the Panama Canal transit. On arrival at the Atlantic side at 0600 on April 2, 1966, GULFSPRAY was accepted for transit of the canal. Two Panama Canal pilots boarded her and took charge of her navigation. During the transit of the canal and while in the channel of the Pacific side, GULFSPRAY's rudder responded normally to the orders of the Panama Canal pilots. After clearing Miraflores Locks at 1810, GULFSPRAY continued south in the Pacific side channel at bare steer-ageway to allow a vessel in Balboa Harbor to clear before GULFSPRAY entered. When the vessel cleared, GULFSPRAY's rudder was ordered hard left and her swing into Balboa Harbor commenced. At 1836½ her engines were ordered full astern and remained so for about three minutes, during which time GULFSPRAY stopped dead in the water and moved in an astern direction toward the west bank of the channel while she was angled across the channel, forcing her rudder, which was still in a hard left position, against the bank outside the designated channel line. Nothing was heard or felt by GULFSPRAY's officers or crew to indicate the rudder had come into contact with the bank. With the assistance of a tug, the vessel was then moved to an anchorage to wait for a berth at the bunkering dock. While at anchor, the steering was checked and found to be operating normally. At 2100, GULFSPRAY, with the assistance of two tugs, was moved from the anchorage to the bunkering dock and at 0400 on April 3, 1966, on completion of bunkering, her steering gear was again checked and found to be operating normally and she sailed from the dock assisted by two tugs and with a Panama Canal pilot in charge of her navigation. After the tugs were discharged in the Pacific side entrance channel it was observed that the vessel required 15 to 20 deg. right rudder to maintain the channel course, which was attributed to a strong cross current in the channel. At about 0500 the Panama Canal pilot was discharged and at 0512 departure was taken. The vessel continued to carry 15 to 20 deg. right rudder to maintain her course and GULFSPRAY's master and chief engineer made various tests and inspections to determine the cause of the excessive right rudder including shifting the steering to automatic gyro pilot whereupon the vessel started into a left turn. When no damage or irregularity was found with the steering gear inside the vessel's hull, it was concluded that the rudder was damaged. At 0850 the vessel's course was reversed and at 1305 she was anchored off the Pacific side entrance channel awaiting instructions and clearance to enter the harbor. GULFSPRAY arrived at the bunkering dock at 0700, April 4, 1966, and at 0900 a Panama Canal Company diver determined that the rudder was twisted 22 inches from the centerline of the vessel when the rudder indicators were in the centerline position. At all times between 0500 April 3, 1966, and 1305 April 3, 1966, GULFSPRAY was safely afloat and sustained no damage to her rudder or steering gear.

Then followed precise allegations showing both an awareness of § 297 (note 1 supra) and the physical inability of complying with it, but at the same time, an effort to fulfill its spirit. The complaint went on. The Panama Canal Company was immediately notified of the damage and a request for an investigation was made before GULFSPRAY proceeded on her voyage. The Supervising Inspector of the Board of Local Inspectors denied the request for an investigation, and the claim against the Panama Canal Company for damages made before the vessel sailed at 0142 on April 5, 1966, was rejected. The ship proceeded on to San Pedro, California, where the vessel drydocked for survey and repairs. Panama Canal Company was invited to attend the survey and inspect the vessel, but did not attend.

The Canal Company's basic response is the common knee-jerk reflex which seems so surprising in the face of strong congressional expressions on all fronts subjecting corporate agencies to suit. This is the plea that waiver of sovereign immunity must be strictly, severely construed. On that premise it can then argue that the sweeping provisions imposing civil liabilities on the Canal Company and prescribing equally effective remedies (see note 2 supra) plus a general power to sue and be sued⁵  are withdrawn by the notice-claim requirement of § 297.

But this approach is outmoded. In the structure of the Suits in Admiralty Act, 46 U.S.C.A. § 741 et seq., the Public Vessels Act, 46 U.S.C.A. § 781 et seq., and the Federal Tort Claims Act, 28 U.S.C.A. § 1346(b) which expose the government in all of its sovereign glory to almost unlimited liabilities comparable to private parties, the approach is to construe the waiver sensibly, naturally, which means most of the time, literally. Although repeated expressions do not daunt the sovereign's representatives in dragging out the old markers of this ancient shibboleth, they are plain enough to read and heed. " [W]aivers by Congress of governmental immunity from suit should be liberally construed in the case of federal instrumentalities * * *. R.F.C. v. J. G. Menihan Corp., 1941, 312 U.S. 81, 84, 61 S. Ct. 485, 487, 85 L. Ed. 595, 598. " [W]e think Congressional adoption of broad statutory language authorizing suit was deliberate and is not to be thwarted by an unduly restrictive interpretation." Canadian Aviator, Ltd. v. United States, 1944, 324 U.S. 215, 222, 65 S. Ct. 639, 643, 89 L. Ed. 901, 907. There is to be no niggardly construction for "when Congress authorized federal instrumentalities of the type here involved to `sue and be sued', it used those words in their usual and ordinary sense." F.H.A. v. Burr, 1940, 309 U.S. 242, 246, 60 S. Ct. 488, 491, 84 L. Ed. 724, 729. This is especially true of corporate instrumentalities. "In spawning these corporations during the past two decades, Congress has uniformly included amenability to law. Congress has provided for not less than forty of such corporations discharging governmental functions, and without exception the authority to-sue-and-be-sued was included." It is "Congress' * * * emphatic practice not to confer sovereign immunity upon these government corporations." Keifer & Keifer v. R.F.C., 1938, 306 U.S. 381, 390, 393, 59 S. Ct. 516, 518, 520, 83 L. Ed. 784, 789, 791. And it is well summed up in Menihan, supra. "In the Keifer case * * * recognizing that Congress may endow a governmental corporation with the government's immunity, we found the question to be `Has it done so?' That is, immunity in the case of a governmental agency is not presumed. We sought evidence that Congress had intended that its creature, considering the purpose and scope of its powers, should have the immunity which the sovereign itself enjoyed, and we noted the practice of Congress as an indication `of the present climate of opinion' which had brought governmental immunity from suit into disfavor. Accordingly, being unable to find that Congress had intended immunity from suit we denied it." 312 U.S. at 84, 61 S. Ct. at 486, 85 L.Ed at 597. And without a doubt, the transmutations by the United States, of the political and business direction of the Canal Zone eliminate any doubt that Congress, by severely divorcing political activities from those of physical-business operations, meant to launch the new Panama Canal Company as one exposed to the usual incidents of such business operation. It started in 1948 with the substitution of a federally chartered Panama Railroad Company for the former New York Corporation although operational lines remained much the same. With growing problems over setting toll rates and fairly attributing a fair portion of costs to Canal operations, including health and public welfare, all business activities, including the conduct of all Canal transit facilities were placed upon the corporation, now renamed the Panama Canal Company, with remaining civil governmental activities put on the renamed Canal Zone Government.⁶  The physical operation of all facilities of the Canal, including the transiting of vessels was to be business — big business and all business.⁷ 

We therefore are of the clear view that by § 297 Congress did not mean to withdraw its sweeping waiver, amplified as it was with substantive and procedural principles effectively imposing traditional liabilities on the Canal Company. But before determining what the role of § 297 is we think it best to dispose of the shipowner's novel contention of congressional ignorance which, if successful, would eliminate all problems of construction and application.

No matter how beguiling the structure of the argument, it should come as no shock that we disclaim a power to expunge legislation because of claimed congressional unawareness of what it was doing. But this offers no trouble here.

The contention is the bald one that the provisions enacted along with § 297 were represented to be merely a desirable codification of existing law and were "technical or clarifying in character and do not change in the slightest degree the substance of the [earlier] proposed legislation". S.Rep. No. 2531, 81st Cong., 2d Sess., 1950, U.S.Code Cong. Service at 3926. Indeed, they were so much so that to secure early passage of the major objectives of the Act it was recommended that these "non controversial" provisions proposed by the Canal authorities be deleted for the time being.⁸  But for some reason wholly undisclosed, and probably now unascertainable, what was to be deleted was left in as the bill was finally enacted. This leads the shipowner to assert three things. First, all were told that these provisions were merely codifications with nothing new added. Second, since they were something new and now of claimed significance, Congress passed them under a serious misapprehension. Third, as a consequence, the enactment must be disregarded.

The quick answer to this is that in words that even those who ran could read, the proponents of these provisions were correct in allowing them to be characterized as "not new", "codifications", etc. The error, if it really was one, was in treating their antecedents as "statutes" which they really were in all practical respects since they were to replace Presidential Regulations now made obsolete by the Congressional decision to transfer all transit operations from the government to the renamed Canal Company.⁹ 

We conclude, therefore, that § 297 has vitality and says what it means. What does it mean? We are equally of the view that Congress did not couch this in the restrictive quasi-judicial terms of a withdrawal of sovereign immunity in other respects so generously waived. We do not think Congress to be so incongruous. It does not wish to add to the difficulties which seem irrepressible as the citizen pursues these instrumentalities.

This is more than mere words, for classifying § 297 as a withdrawal of immunity, as the Canal Company would have us do, would have awesome overtones approaching jurisdiction. Everything therefore points in the direction of a congressional policy to continue the former regulatory practice (see note 9 supra) which assured notice of an occurrence and the assertion of a claim before the vessel departed the Zone. This afforded opportunity for meaningful investigation. As such it is a requirement to be construed and applied in the light of its purpose and a realistic ability to comply with it.

It makes no sense at all to ascribe to a generous Congress the waiver of immunity which, to be effectually exploited, has to be preceded by a formal notice which could not physically have been given. Where the occurrence is such that a prudent person would have known of the likelihood of damage which, in like prudence, was fairly attributable to the Panama Canal Company's employees prior to the vessel's departure, the notice must be given and the claim made. Conversely, when prudence does not charge the damage claimant with such knowledge and opportunity prior to departure it is not fatal to the claim or later suit. In such situations the spirit of the requirements is satisfied if the notice-claim is given as soon as reasonably possible.

On the allegations the shipowner did all it could. Indeed its efforts by returning to the canal, giving formal notice, requesting the investigation by the inspectors, all within a very few hours of first departure, gave the Panama Canal Company everything a literal compliance would have afforded. A reasonable interpretation produces a reasonable result. An unreasonable interpretation produces a harsh absurdity. We put ourselves on the side of reason and if, with like reason, the shipowner brings itself within these principles, there is no more obstacle to the Panama Canal Company's carrying the burden of tort liability here, than there is to it carrying the burden, as it concededly does, for tortious damage caused by one of its vessels to a longshoreman on a New York pier. De Scala v. Panama Canal Co., S.D.N.Y., 1963, 222 F. Supp. 931, 1964 A.M.C. 482.

Reversed and remanded.