U.S. Supreme Court UNITED STATES SHIPPING BOARD EMERGENCY FLEET CORP. v. WESTERN U., 275 U.S. 415 (1928)

[Page 275 U.S. 415, 420]

portance to the United States of securing both priority and the lower rate for official messages sent by it, is the same whoever the addressee. Messages sent by the government, but not on official business exclusively, have been paid for by the private person interested; and the payment has been made at the commercial rate. [Footnote 1]

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has operated directly, and has been interested in the operation of, vessels owned by the United States. Some of these government vessels have been operated in competition with American vessels privately owned. But in operating vessels, as in making sales, the Shipping Board and the Fleet Corporation were required by the Merchant Marine Act to proceed with a view to aiding in the development of an adequate merchant marine to serve, among other things, 'as a naval or military auxiliary in time of war or national emergency, ultimately to be owned and operated privately by citizens of the United States.' Section 1 (46 USCA 861; Comp. St. 8416 1/4). These services of the Fleet Corporation were obviously of a public nature. It has never done any business, or conducted any operation, except on behalf of the United States.

First. It is argued that the government rate should be denied because the Fleet Corporation is a private corporation. In form, it is such. But all of its $50,000,000 capital stock was subscribed and paid for by the Shipping Board on behalf of the United States. All has been so held by it ever since. The United States alone has had a financial interest in its capital stock. The United States alone has contributed the additional money needed from time to time for the conduct of its business. The Fleet Corporation has, of course, received from others moneys in payment for property sold, as charter hire, for shipping services, or in settlement of claims. But, as the business of the Fleet Corporation has been conducted continuously at a large loss, the sums so received did not supply capital. They served merely to reduce, to that extent, the amount of the deficit being incurred and, hence, the amount of the additional money which the United States was required to contribute. [Footnote 2] Payment by the

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business. But it had no actual capital. Long before June 1, 1922, the $50, 000,000 which the United States supplied in payment of the capital stock, had been sunk in the business. [Footnote 3] By, and pursuant to, Merchant Marine Act, 1920, the title to most of the property used by the Fleet Corporation was transferred to the Shipping Board or to the United States. All moneys other than amounts needed for current operation are required to be covered into the Treasury of the United States. The Fleet Corporation has had no means of paying either the large outstanding claims against it or of paying the deficits continuously being incurred, other than the moneys supplied by the United States through the annual appropriations. It is, of course, immaterial that the charge upon the public treasury is an indirect one; and the fact that the Fleet Corporation receives some gross income from shipping services is also without legal significance. Many departments receive fees, or some other form of compensation, for services rendered to private persons. See 14 Ops. Attys. Gen. 278.

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banks, in which there are private interests, are not departments of the government. They are private corporations in which the government has an interest. Compare Bank of the United States v. Planters' Bank, 9 Wheat. 904, 907. The Fleet Corporation is entitled to the government rate, not because it is an instrumentality of the government, but because it is a department of the United States within the meaning of the Post Roads Act. In respect to messages sent, on the government's business, no distinction can properly be made between those of the Shipping Board and those of the Fleet Corporation.

Reversed. Footnotes

Footnote 1 Thus, a Treasury Regulation, adopted April 2, 1918, provides: '(10) Government telegraph rates, established conformably to law, are intended to apply to official government business exclusively, and no private individual, association, company, or corporation should in any way be benefited thereby. In cases where it becomes necessary to use the telegraph on any business in the special interest of any private person or persons, in which the government has no interest, the party for whom the service is performed will be required to pay for the messages both ways at commercial rates.' T. D. 37588.

Footnote 2 For the fiscal year ending June 30, 1921, the Shipping Board reported a total excess of outgo over income (exclusive of appropriations) of $188,291,441.05. Annual Report of United States Shipping Board, 1921, p. 321. For the year ending June 30, 1922, the Board's excess was $56,374,951. 22; that of the Fleet Corporation, $81,547,600.86. Annual Report 1922, p. 238. In the year ending June 30, 1923, the excess for the Shipping Board and all its subsidiaries was $15,231,630.30; that for the Fleet Corporation, taken alone, $41,682,514.86. Annual Report, 1923, p. 168.

Footnote 3 The total receipts from appropriations and allotments to June 30, 1921, were $3,310,170,576.98. The net assets then on hand (after deducting current and capital liabilities, reserves for depreciation, etc.) were $1, 929,847,381.84. Thus, the loss to date, as estimated by the Shipping Board, was $1,380,323,195.14. Annual Report of United States Shipping Board, 1921, pp. 309-321. By June 30, 1923, the total appropriated and allotted had grown to $3,491,912,648.01, while the Shipping Board's estimate of the net worth of the assets belonging to it and its subsidiaries had shrunk to $ 292,405,200.17 showing a loss of $3,199,507,447.84. Annual Report, 1923, pp. 192-196. The estimates for June 30, 1927, show a net worth of $290,461, 593.91, making a net loss of $3,271,021,167.61 on the total appropriations ($3,561,482,761.52) to that date. Annual Report, 1927, pp. 121-124.