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CORDERO v. PANAMA CANAL CO.

January 21, 1959

Raul CORDERO, Plaintiff,
v.
PANAMA CANAL COMPANY, Defendant



The opinion of the court was delivered by: BICKS

The issue presented on this motion is whether the Federal Employees Compensation Act, 5 U.S.C.A. § 751 et seq. *fn1" affords the sole and exclusive remedy to plaintiff against his employer the defendant, Panama Canal Company, for injuries sustained in the course of his employment as a member of the crew of the S. S. Ancon, a vessel owned and operated by it. The defendant's argument in the main is that it is an agency or instrumentality of the United States and as such enjoys sovereign immunity except to the extent waived by the F.E.C.A.

The relevant section of the Compensation Act, 5 U.S.C.A. § 757(b), which was added by a 1949 amendment, is set out in the margin. *fn2" The legislative history of this section indicates that the sentence reading 'Provided, However, That this subsection shall not apply to a master or a member of the crew of any vessel' was inserted to secure to seamen the rights they had prior to the enactment of the section and that it was not intended to enlarge or restrict their previously established rights. 95 Cong.Rec. 13609. Johansen v. United States, 1951, 343 U.S. 427, 72 S. Ct. 849, 96 L. Ed. 1051. We inquire, therefore, into the pre-1949 rights of plaintiff and necessarily also into whether the Panama Canal Company was then subject to suit under the Jones Act and general maritime law, 46 U.S.C.A. § 688.

 The Panama Canal Company is the oldest wholly owned United States Government corporation, and the only such entity which was originally organized as a private corporation. Its predecessor, Panama Railroad Company, was chartered by the State of New York on April 7, 1849. It continued under private ownership and control until 1881, when the original French Canal Company acquired ownership of most of the outstanding capital stock. In 1904 the United States purchased these shares; in 1905 it acquired the remaining outstanding shares and became the sole stockholder. *fn3" Among other ventures, the company set up a shipping line, the Panama Line, which now owns and operates three passenger-cargo ships running between the United States and the Canal Zone.

 In 1945, the Government Corporation Control Act, 31 U.S.C.A. §§ 841-871 (1954) was passed. The purpose thereof was 'to provide annual scrutiny and current financial control by the Congress of the financial transactions and operations of the Government corporations * * * It provides the means for effective control by the Congress over the Government corporations through a systematic procedure for consideration and action on their contemplated programs.' *fn4" The act provides that no wholly owned Government corporation created under the laws of any state shall continue as an agency or instrumentality of the United States after June 30, 1948, and that dissolution or liquidation thereof be undertaken prior to such date. Before the terminal date the corporation might be reincorporated by Act of Congress with authority to take over the assets and assume the liabilities of its predecessor corporation. 31 U.S.C.A. § 869(b), (1954). By express provision, the Panama Railroad Company fell within the purview of the Act. 31 U.S.C.A. § 846.

 Consonant with the provisions of the statute Congress created a 'body corporate' to be known as the Panama Railroad Company, and vested it with authority to take over the assets and assume the liabilities of the New York corporation as of July 1, 1948. To effectuate the foregoing and to accomplish the dissolution of the New York Company, the two entities were authorized to take all steps which the sole stockholder, the United States Government, deemed necessary. 62 Stat. 1075 (1948). *fn5"

 For many years prior to the federal reincorporation of the company it had operated the steamship line and other enterprises, 'all of a purely commercial character essential to the operation of the Canal,' *fn6" and unlike other corporations within the purview of the Government Corporations Control Act, its business was carried on profitably; up to 1948 it had actually paid cash dividends into the Treasury of the United States totalling $ 22,494,905. *fn7" Complete details of the financial and operating results of the New York Company were always presented in a printed annual report. After 1945 the accounts of the Company were audited by the General Accounting Office. *fn8" These audited annual reports must have communicated the intelligence that claims of seamen, whether settled or reduced to judgment, had, from time to time, been paid.

 At an early date in the New York Company's history seamen employed aboard its vessels were held to be entitled to the benefits of the Jones Act, notwithstanding that the United States was the sole stockholder thereof. Panama R. Co. v. Minnix, 5 Cir., 1922, 282 F. 47; Gardner v. Panama R. Co., 1951, 342 U.S. 29, 31, 72 S. Ct. 12, 96 L. Ed. 31. See also United States v. Strang, 1920, 254 U.S. 491, 493, 41 S. Ct. 165, 65 L. Ed. 368; Sloan Shipyards Corp. v. United States Shipping Board Emergency Fleet Corp., 1921, 258 U.S. 549, 42 S. Ct. 386, 66 L. Ed. 762. The Government does not question the validity of these holdings and indeed until but very recently recognized their applicability to seamen situated as is plaintiff here. Surely the mere change in status of the United States as sole stockholder of a New York corporation to that of sole stockholder of a federally created body corporate, possessed of the same bundle of assets and subject to the same liabilities, did not alter the rights of seamen employed aboard the S. S. Ancon. The legislative history of the congressional acts pursuant to which the reincorporation was effected does not support the view that Congress intended to work a change which would deprive these seamen of their then well-established substantive rights under the Jones Act and General Maritime Law.

 In hearings before the Senate subcommittee on the proposed bill providing for reincorporation Bernard F. Burdick, Chief of Office and General Purchasing Officer, the Panama Canal, testified before the Committee in part as follows:

 'The powers essential to the successful management of large business enterprises, such as those of the Company, can be most readily conferred through use of the corporation, which also provides the most suitable method for application of the principles of business efficiency developed in the private field.'

 'A corporation normally possesses the unrestricted right to sue and be sued. It is felt that a business corporation of the Government should be subject, equally with other business enterprise, to liability to suit, and that it should have the right, whether in the position of plaintiff or defendant, to enter into desirable settlements.' (Hearings p. 11.)

 The Secretary of the Army transmitted to the Committee an explanatory statement made by the President of the Panama Railroad Company in which he said in part:

 'A business enterprise needs to possess a large measure of freedom and elasticity in its purchasing as well as its other operations, if the best financial results are to be obtained, * * * In the matter of recruiting and promoting personnel the form offers relatively greater freedom.' (Hearings p. 16).

 It is abundantly clear that the purpose of the Congress in federally reincorporating the company was not to alter its essential nature or function but merely to comply with the Government Corporations Control Act. The Senate report on the 1948 bill states as much:

 'The broad purposes of the bill * * * are to fulfill, through incorporation of the Panama Railroad Company by act of Congress this requirement of the Government Corporations Control Act, and to provide a charter appropriate and adequate for the efficient ...


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