8. The Federal Statutes.—
The original law was enacted in 1851 (Rev. St. §§ 4284-4286; Comp. St. 1916, 8020-8027); that provided an absolute protection against loss by fire unless caused by the design or neglect of the owner, and in case of practically all losses which might occur without the "privity or knowledge" of the owner, his liability was limited to the value of his interest in the ship and freight pending; provision was made for a general average of creditors and transfer to a trustee; in 1872 the Supreme Court promulgated rules of practice under which its benefits might be more efficiently applied by the admiralty courts. It was held that these statutes were enacted to restore the old doctrine of the maritime law, to encourage shipbuilding and the employment of ships in commerce, and for the public benefit. Hence they must be liberally construed in favor of shipowners. In a series of great decisions, commencing about 1870, the Supreme Court held the law constitutional; that foreign shipowners were entitled to its benefits; that the valuation of the owner's interest might be made as of the termination of the voyage or immediately after the disaster so that if the loss is total the liability is practically nil; that insurance was no part of the owner's interest in the ship or freight and need not be surrendered; and that the protection of the act extended to underwriters to whom the ship had been abandoned.
The original law had been passed with much difficulty and its language, as the result of compromise and concession, was subjected to much criticism as uncertain and ambiguous. The shipping interests of the country continued to decline and among the reasons assigned were the responsibility and liabilities left open or undefined by the law. About 1880, in connection with a vigorous attempt to revive the merchant marine, the entire subject received full consideration by Congress. The Act of June 26, 1884, was subsequently passed, and, expressly repealing all laws in conflict therewith, declared in a few words that "the individual liability of a shipowner shall be limited to the proportion of any and 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 extend the value of such vessel and freight pending." An amendment seeking to insert the condition that such debts must have been incurred without the owner's privity or knowledge was deliberately rejected. The courts, however, have declined to enforce the law according to its terms and held that Congress really intended to insert the condition as to privity or knowledge in spite of the omission of the words and the rejection of the amendment which sought to insert them. The result is that the owner is still liable without limit for all obligations which arise out of matters of contract, according to the rules of the common law and in many instances of negligence on the part of his employees the same result seems to follow. His liability can not be limited where "privity or knowledge" is imputable to him and no accurate definition of these terms is yet available.
Under the present law, the voyage is the unit in respect to which limitation may be granted. Probably the shipowner may claim the benefit of the law at any time before he pays a final judgment in favor of the damage creditors, but he must account for the value of the ship as it was at the termination of the voyage on which the liability was created. The courts will not permit him to continuously operate the ship at the expense of her creditors and then finally abandon her to them loaded with the liens of many voyages. The rule is only a practical one and in special cases may work injustice to shipowners, as where ships make a continuous number of short trips between contiguous points. Part-owners are only liable according to the proportion of their shares, and the personal fault or privity of one does not necessarily implicate the others. It is not necessary that they should join in the same proceeding. The exemption is several and may be claimed by each without reference to the others.