Sloan Shipyards Corp. v. U.S. Fleet Corp., 258 U.S. 549 (1922)

U.S. Supreme Court

Sloan Shipyards Corp. v. U.S. Fleet Corp., 258 U.S. 549 (1922) Sloan Shipyards Corporation v. United States

Shipping Board Emergency Fleet Corporation

Nos. 308, 376, 526

Argued March 15, 16, 1922

Decided May 1, 1922

258 U.S. 549

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

1. The Emergency Fleet Corporation, as originally created, had the powers of corporations under the laws of the District of Columbia, where it was incorporated, and was liable to be sued, there and

Page 258 U. S. 550

elsewhere, upon its contracts and for its torts notwithstanding the fact that it was a federal agency and that its stock was taken entirely by the United States. P. 258 U. S. 565.

2. The extensive increase of the powers of this corporation made by later acts and by delegation from the President of large powers granted him by Congress did not render the corporation in all cases immune to private suit. P. 258 U. S. 566.

3. A bill alleged that the Fleet Corporation, having contracted, May 18, 1917, with a shipbuilding company for the construction of vessels, on December l, 1917, unlawfully took possession of the property of the company and its subsidiaries and compelled it to make another contract, which the bill sought to set aside, praying also for restoration of the properties, an accounting under the earlier contract and other relief.

Held:

(a) That the bill stated a cause of action against the Fleet Corporation, cognizable by a district court, since

(b) It could not be assumed from the allegations that the taking was in pursuance of powers which had been delegated to the Fleet Corporation by the President, directly or through the Shipping Board, when the taking occurred, or that it was within the ratification of past acts of the Fleet Corporation made by the Executive Order of December 3, 1918; and, consequently,

(c) It did not appear that the special remedies of payment by and suit against the United States in the Court of Claims, for plants taken by the President, were applicable to the case. P. 258 U. S. 567.

4. The Fleet Corporation is liable to be sued for its unlawful acts, even if a remedy also exists by suit against the United States. P. 258 U. S. 567.

5. The general immunity of the United States to actions for torts does not extend to those who act in its name. P. 258 U. S. 568.

6. The provision in the general incorporation law of the District of Columbia (Code D.C. § 607) that corporations formed under it may sue and be sued in the District does not mean that they may not be sued elsewhere. P. 258 U. S. 568.

7. A contract made by the Fleet Corporation "representing the United States of America" is the contract of the Corporation, and subject to be set aside in a suit against it if wrongfully brought about. P. 258 U. S. 568.

8. Transfer of the property of the Fleet Corporation to the Shipping Board by the Act of June 5, 1920, c. 250, § 4, 41 Stat. 988, did not affect the jurisdiction to entertain the present suits. P. 258 U. S. 568.

Page 258 U. S. 551

9. A suit against the Fleet Corporation is removable from a state to a federal court. P. 258 U. S. 569.

10. The Fleet Corporation held suable in a state court for breach of a contract executed by it February 1, 1919, as a corporation of the District of Columbia "representing the United States of America" in which certain necessities and rights of the United States were recognized, but in which the Corporation was recognized throughout as the immediate party contracting. P. 258 U. S. 569.

11. A claim in bankruptcy made by the Fleet Corporation in its own name as an instrument of the government is not entitled to preference as a claim of the United States. P. 258 U. S. 570.

268 F. 624, 272 F. 132, 270 F. 635, reversed. 274 F. 893 affirmed.

The first of these cases is an appeal from a decree of the district court dismissing on motion, for want of jurisdiction, a bill against the Fleet Corporation (the general nature of the bill is described in the third headnote) upon the ground that the suit, involving more than $10,000, must be brought in the Court of Claims. The second is a writ of error to a judgment of the district court which, upon the same ground, sustained a demurrer to the petition in an action for breach of contract brought against the Fleet Corporation, originally in a court of the state. The third comes here by certiorari to an order of the circuit court of appeals affirming one of the district court denying preference to a claim made by the Fleet Corporation in a bankruptcy proceeding.

Page 258 U. S. 564

MR. JUSTICE HOLMES delivered the opinion of the Court.

These cases present in different ways the question of the standing of the United States Shipping Board Emergency Fleet Corporation in the Courts -- the first two whether it so far embodies the United States that these suits should have been brought in the Court of Claims; the third whether it is entitled to a preference against a bankrupt which it is asserted would belong to the United States if the United States claimed in its own name. The facts material at this stage can be told in a few words. The Shipping Act of September 7, 1916, c. 451; 39 Stat. 728, passed, no doubt, in contemplation of the possibility of war, to create a naval reserve and merchant marine, established the United States Shipping Board and gave it power to form a corporation under the laws of the District of Columbia for the purchase, construction, and operation of merchant vessels -- the corporation to be dissolved "at the expiration of five years from the conclusion of the present European war." The stock was not to exceed $50,000,000, and the Board was authorized to purchase not less than a majority of such stock. War was declared on April 6, 1917, and the corporation was formed on the 16th of the same month.

Page 258 U. S. 565

The first case is a bill brought by the Sloan Shipyards Corporation, the Capital City Iron Works, and Anacortes Shipbuilding Company. According to the allegations, on May 18, 1917, the new corporation made an elaborate contract with the Sloan Shipyards Corporation for the building by the latter of sixteen wooden vessels. At that time, the Emergency Fleet Corporation had only the powers given by the incorporation laws of the District. The work was begun by the Sloan Shipyards Corporation and by the two other complainants, which were subsidiary companies organized for the purpose of carrying out that contract, and went on until December 1, 1917, at which time the Fleet Corporation refused to make further payments required by the contract, unlawfully took possession of all the property of the three companies named, has retained it ever since, and has done a series of acts causing them great loss. It is alleged that the defendant, having thus got the Sloan Shipyards Corporation wholly within its power, compelled it to execute another contract, set forth. The bill seeks to have this contract set aside, to have an accounting on the footing of the original contract of May 18, to have the defendant charged with all indebtedness incurred since December 1, 1917, and required to restore the properties described in the bill. The bill was dismissed by the district court on the ground that, as the claim was for more than $10,000, the suit must be brought in the Court of Claims. 268 F. 624, 272 F. 132.

The Shipping Act contemplated a corporation in which private persons might be stockholders, and which was to be formed like any business corporation under the laws of the District, with capacity to sue and be sued. The United States took all the stock, but that did not affect the legal position of the company. United States v. Strang, 254 U. S. 491. At that stage, the original contract was made. Subsequently, the powers of the corporation

Page 258 U. S. 566

were greatly enlarged. On July 11, 1917, the President delegated to it the powers that had been conferred upon him by the Act of June 15, 1917, c. 29, 40 Stat. 182, applicable to the construction, purchase, and requisitioning of vessels in process of construction and of materials for ship construction, and delegated to the Shipping Board his powers to take by purchase or requisition constructed vessels and the operation of all vessels acquired by the United States, with authority to exercise these powers either directly or through the Fleet Corporation. Whether the Fleet Corporation did or could rely upon this delegation in its alleged acts of December, 1917, or whether it purported to be acting under powers conferred upon it by the contract, does not appear from the allegations of the bill. Subsequently, the Fleet Corporation, by successive acts and proclamations, was authorized to condemn various forms of property. Act of March 1, 1918, c.19, 40 Stat. 438; Act of April 22, 1918, c. 62, 40 Stat. 535; Act of July 9, 1918, c. 143, 40 Stat. 845, 888; Act of November 4, 1918, c. 201, 40 Stat. 1020, 1026; Executive Order of December 3, 1918, delegating all powers as to ship or plant construction and ratifying previous acts. Perhaps it is enough to add a reference to the Act of June 5, 1920, c. 250, 41 Stat. 988, 993, continuing the existence of the Fleet Corporation and its authority to operate vessels until all vessels are sold as directed by the act (§ 12), but transferring the title to the Shipping Board. § 4.

These provisions sufficiently indicate the enormous powers ultimately given to the Fleet Corporation. They have suggested the argument that it was so far put in place of the sovereign as to share the immunity of the sovereign from suit otherwise than as the sovereign allows. But such a notion is a very dangerous departure from one of the first principles of our system of law. The sovereign properly, so called, is superior to suit for reasons that often have been explained. But the general rule is that any

Page 258 U. S. 567

person within the jurisdiction always is amenable to the law. If he is sued for conduct harmful to the plaintiff, his only shield is a constitutional rule of law that exonerates him. Supposing the powers of the Fleet Corporation to have been given to a single man, we doubt if anyone would contend that the acts of Congress and the delegations of authority from the President left him any less liable than other grantees of the power of eminent domain to be called upon to defend himself in court. An instrumentality of government he might be, and for the greatest ends, but the agent, because he is agent, does not cease to be answerable for his acts. Osborn v. Bank of United States, 9 Wheat. 738, 22 U. S. 842-843; United States v. Lee, 106 U. S. 196, 106 U. S. 213, 106 U. S. 221. The opposite notion left some traces in the law, 1 Roll. Abr. 95, Action sur case, T., but for the most part, long has disappeared.

If what we have said is correct, it cannot matter that the agent is a corporation, rather than a single man. The meaning of incorporation is that you have a person, and, as a person, one that presumably is subject to the general rules of law. The only serious question is whether special remedies have been provided by statute that displace those that otherwise would be at the plaintiff's command. The Acts of April 22, 1918, c. 62, § 3, 40 Stat. 535, and the Act of July 18, 1918, c. 157, § 13, 40 Stat. 913, 916, give compensation for a plant taken by the President under the powers conferred by the Act of June 15, 1917, c. 29, 40 Stat. 182, and otherwise, with a resort for claims exceeding $10,000 to the Court of Claims; in the later act, by a suit against the United States. But the taking possession of the plaintiffs' plants on December 1, 1917, is alleged to have been unlawful, and it cannot be assumed at this stage that the act of the Fleet Corporation was in pursuance of any powers then delegated to it or was within the ratification of December 3, 1918. The plaintiffs are not suing the United States, but the Fleet Corporation, and if its act

Page 258 U. S. 568

was unlawful, even if they might have sued the United States, they are not cut off from a remedy against the agent that did the wrongful act. In general, the United States cannot be sued for a tort, but its immunity does not extend to those that acted in its name. It is not impossible that the Fleet Corporation purported to act under the contract giving it the right to take possession in certain events, but that the plaintiffs can show that the events had not occurred. The district judge gave weight to the phrase in the general incorporation law of the District that corporations formed under it shall be capable of suing and being sued in any Court in the District, Code D.C. § 607. But we do not read those words as putting District corporations upon a different footing from those formed under the laws of the states.

We attach no importance to the fact that the second contract, alleged to have been illegally extorted, was made with the Fleet Corporation "representing the United States of America." The Fleet Corporation was the contractor, even if the added words had any secondary effect. But the bill alleges that it was brought about by the wrongful act of the Fleet Corporation. The conclusion that we reach is that the district court erred in dismissing the bill, and we regard it as led up to and almost required by the decisions heretofore reached in The Lake Monroe, 250 U. S. 246, and United States v. Strang, 254 U. S. 491. See, further, Dakota Central Telephone Co. v. South Dakota, 250 U. S. 163, 177-178 [argument of counsel -- omitted]; Northern Pacific Railway Co. v. North Dakota, 250 U. S. 135, 250 U. S. 152. The transfer of the property of the Fleet Corporation to the Shipping Board by the Act of June 5, 1920, c. 250, § 4, 41 Stat. 988, 990, may affect the value of the remedy afforded by the present suit, but not the jurisdiction of the Court.

It is suggested that there will be lack of uniformity if suits can be brought in state courts. This consideration cannot control our conclusion from the statutes. But it

Page 258 U. S. 569

is not very serious, since such suits against this corporation can be removed to the courts of the United States, Pacific Railroad Removal Cases, 115 U. S. 1, and afterwards are subject to review here. Creswill v. Grand Lodge Knights of Pythias, 225 U. S. 246, 225 U. S. 258; Southern Pacific Co. v. Stewart, 245 U. S. 359. The change in the law by the Act of January 28, 1915, c. 22, § 5, 38 Stat. 803, 804, extends only to railroads. The decree of the district court must be reversed.

In the next case, the Astoria Marine Iron Works sued in a state court for breach of a contract set forth. The suit was removed to the district court, and there dismissed upon demurrer on the same ground as the last -- that the only remedy was in the Court of Claims. 270 F. 635. This contract was made on February 1, 1919, when the character of the Fleet Corporation had been more fully developed and determined than in the previous case, and purported to be made with the Fleet Corporation,

"a corporation organized and existing under the laws of the District of Columbia (herein called the 'Corporation') representing the United States of America, party of the second part."

Throughout the contract, the undertakings of the party of the second part are expressed to be undertakings of the corporation, and it is this corporation and its officers that are to be satisfied in regard to what is required from the Iron Works. It is recognized that it may be necessary for the United States to exercise complete control over the furnishing of supplies to the Iron Works, and it is agreed that, if required by the Corporation "and/or the United States," the Iron Works will furnish schedules, etc. The whole frame of the instrument seems to us plainly to recognize the Corporation as the immediate party to the contract. The distinction between it and the United States is marked in the phrase last quoted. If we are right in this, further reasoning seems to us unnecessary to show that there was jurisdiction

Page 258 U. S. 570

of the suit. The fact that the corporation was formed under the general laws of the District of Columbia is persuasive, even standing alone, that it was expected to contract and to stand suit in its own person, whatever indemnities might be furnished by the United States. The judgment in this case also must be reversed.

The third case, as we have said, is a claim of priority in bankruptcy. It was asserted against the estate of the Eastern Shore Shipbuilding Corporation, in the District Court for the Southern District of New York, under a contract similar to that last described, made by that company with the Fleet Corporation "representing the United States of America" to construct six harbor tugs. The claim was presented by the Fleet Corporation in its own name, but was put forward by it as an instrumentality of the government of the United States. It was denied successively by the referee, the district court and the circuit court of appeals on the ground that the Fleet Corporation was a distinct entity, and that, whatever might be the law as to a direct claim of the United States, the Fleet Corporation stood like other creditors, and was not to be preferred. In re Eastern Shore Shipbuilding Corp., 274 F. 983. The considerations that have been stated apply even more obviously to this case. The order is affirmed.

308. Decree reversed.

376. Judgment reversed.

526. Order affirmed.

MR. CHIEF JUSTICE TAFT, dissenting.

I differ with the majority in the first two of these three cases. The question presented is one of the interpretation of the will of Congress. No one can contend that Congress, in using the Fleet Corporation for its purposes, might not have given it express immunity from suit as a

Page 258 U. S. 571

representative of the United States. What we have to decide is whether, in the mass of urgent legislation in respect to the government's construction and operation of shipping made indispensable by the peculiar exigencies of the great war, Congress intended that this corporate agent should be subject to suit only as its principal is. I concede that the legislation originally creating this corporation, without express immunity from suit, naturally gives rise to the inference that Congress concluded that the greater freedom of action secured by carrying on business in corporate form was desirable, and that, in the absence of express provision for it, and in respect to what the corporation was originally intended to do, immunity cannot be reasonably implied from the relation of the government to the corporation and its interest in its business. As I read the record, however, the transactions in the two cases I am discussing, and which we have to consider, took place after the situation prompting the creation of this corporation had greatly changed, and after much additional legislation. The power to do the things which were here done, and which are the subjects of these suits, is not to be found in the act creating the Fleet Corporation, or in legislation expanding its original faculties. It was power vested directly in the President himself, the exercise of which he was given express authority to delegate to an agent, who might be the Fleet Corporation. The act conferring this presidential power provided a specific remedy for compensation to those whose property rights were invaded by its exercise through award by the President and immediate payment of part due thereunder, with the right to the claimant to litigate the justice of the whole award in the Court of Claims. The Fleet Corporation, in the arrangements which it forced upon the claimants in these two cases to their detriment, expressly declared that it acted as a representative of the United States. I think the proper construction to be put upon

Page 258 U. S. 572

the facts and the law is that these suits are in fact against the United States, and cannot be brought except in the manner and under the procedure provided by the statute for claims for compensation for acts done by authority of the President under the act vesting him with it.

The opinion of the Court is carefully drawn, and if its conclusion is to rest merely on the nice distinction that it does not clearly appear from a proper construction of the pleadings that the acts here complained of were acts done under authority delegated by the President to the Fleet Corporation, as his agent, then the question I have been discussing and which seems to me to be in these cases is not here decided, and will only arise on answer and evidence.

I do not think that either the case of The Lake Monroe, 250 U. S. 246, or that of United States v. Strang, 254 U. S. 491, requires the conclusion reached herein by the majority of the Court, and, indeed, their opinion is not clear and unqualified in reference to the effect of those cases.

I should not think it necessary to record a difference with my brethren of the majority but for considerations of high public expediency which may properly weigh with us in construing a doubtful statute of Congress because they must have been in the mind of Congress in the enactment of the legislation. We are made aware of the very great number of suits pending and likely to arise out of the work of the Fleet Corporation and the enormous total involved in them. This was to be expected. Can Congress be supposed to have intended that these suits might be brought in 48 different states and in courts of first instance of those states with the lack of uniformity in the findings of fact and the conclusions of law likely to be encountered where trials are had by courts and by courts and juries in so many varying jurisdiction? Did it propose to allow the United States to be made liable in litigation anywhere or under any form of procedure,

Page 258 U. S. 573

without any regulation on its part to secure a reasonable limitation of its own as to the time within which such suits shall be brought? The Court suggests that judgments thus obtained will be good only against the Fleet Corporation, and the claimants must run the risk of getting a judgment against a debtor which cannot pay. Congress has taken over all the assets of the Fleet Corporation, so that such judgments will be valueless except as Congress shall conclude to pay them. If, in the judgments obtained in the various courts of the country, Congress shall find such variety of view as not to commend them to its sense of fairness, it will be slow to recognize its obligation to pay them, and we shall have a repetition of the history of the French spoliation claims, which, for many decades, occupied the attention of appropriation committees of Congress and wore out their patience with results that have put in the hearts of claimants a deep sense of the injustice of governments. On the other hand, a construction which will bring into one tribunal, the Court of Claims, the hearing and decision of this class of cases will secure uniformity and dispatch, and these two elements will make for justice and peace, because Congress pays the judgments of the Court of Claims against the United States in due course. The result reached by the Court, if it is to go as far as I fear it must, even with the careful limitation of the language of the judgment, will make the existing confusion as to the claims against the Fleet Corporation worse confounded. It is to be hoped that, if the ultimate view of the Court of the effect of the statutes under discussion is to spread this litigation all over the country with ineffective and doubtful results dependent on future approval of Congress, that Congress itself may, by further remedial legislation, avoid such an undesirable condition, unfavorable both to the United States and the litigants.

Page 258 U. S. 574

As to the preference claimed against a bankrupt in No. 526 by the Fleet Corporation, I concur in the conclusion of the Court that it cannot be allowed under the statute as to preferences in bankruptcy, because I do not think it extends to claims of the United States except those for taxes.