The Washington-Southern Navigation Company, the charterer of two steamers of the Baltimore & Philadelphia Steamboat Company, filed, in the Eastern District of Pennsylvania, a libel in personam against the owner to recover the sum of $120,000 for breach of the charter party. The usual bond for costs was given. No attachment or seizure of the property of the respondent was made or sought. The owner traversed the essential averments of the libel and also filed a cross-libel in which it sought damages in the sum of $43,443.25. There was no attachment or seizure of person or property under the cross-libel. The essential allegations of the cross-libel were in turn denied by the charterer. Thereafter the owner moved that the charterer be required to give security to respond in damages on the counterclaim. The trial court ordered it to do so, provided the owner first gave security to pay the charterer's claim. 271 Fed. 540. This the owner did of his own motion and without compulsion. The charterer did not give the security ordered. Thereupon the trial court entered a decree staying all proceedings until its order should be obeyed.
The motion and order were based on rule 50 of the new Admiralty Rules, promulgated December 6, 1920 (254 U.S. 24, appendix, 40 Sup. Ct. xix), which amends former rule 53 (210 U.S. 53, 29 Sup. Ct. xiv), by adding thereto the words italicized, so that it now reads:
Rule 50: 'Whenever a cross-libel if filed upon any counterclaim arising out of the same contract or cause of action for which the original libel was filed, and the respondent or claimant in the original suit shall have given security to respond in damages, the respondent in the cross-libel shall give security in the usual amount and form to respond in damages to the claims set forth in said cross-libel, unless the court, for cause shown, shall otherwise direct; and all proceedings on the original libel shall be stayed, until such security be given unless the court otherwise directs.'
The charterer appealed to the Circuit Court of Appeals. That court, under section 239 of the Judicial Code (Comp. St. § 1216), asks instruction whether this rule empowers the District Court to stay proceedings in the original suit until the original libelant shall have given security to respond to the counterclaim, in a case where the original libel was in personam and the original respondent (the cross-libelant) has given the security voluntarily; that is, of his own motion and without compulsion.
The owner insists that the terms of rule 50 are so clear that there is no room for a construction different from that given to it by the District Court. But to ascertain the true meaning of the rule, the operation and effect of the construction urged must be considered. Under that given, a libelant may be automatically barred from prosecuting his suit, merely because he is unable or unwilling to give security to satisfy the claim made in the cross-libel. For, although no security is asked of the original respondent, he may, by voluntarily giving security, effect a stay of all proceedings against himself, 'unless the court, for cause shown,' directs otherwise. Thus construed, rule 50 would abrogate the right to proceed in admiralty, and substitute therefor either a conditional right to prosecute the suit, provided libelant gives security to satisfy the counterclaim, or a permission to do so, provided the court, in its discretion, for cause shown, grants leave. Moreover, the circumstances under which alone this loss of the right to sue would occur are whimsical. The original libelant could proceed without giving the security, if the respondent, instead of filing a cross-libel, brought an independent cross-suit. Likewise, if the person who feels himself aggrieved, instead of exercising diligence in prosecuting his claim, exercises self-restraint, and allows the other party to the controversy to commence the hostilities, he may, without giving the security, exercise the right to prosecute his cause of action, either by a cross-libel or by an independent cross-action. An intention to introduce a practice so capricious is not to be lightly imputed.