B-48380, JULY 14, 1945, 25 COMP. GEN. 49

B-48380: Jul 14, 1945

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GOVERNMENT CORPORATION VESSELS DAMAGED BY NAVAL VESSELS - APPROPRIATION AVAILABILITY FOR PAYMENT OF DAMAGE CLAIMS NAVY DEPARTMENT APPROPRIATIONS ARE NOT AVAILABLE TO PAY CLAIMS FOR DAMAGES CAUSED BY NAVY DEPARTMENT VESSELS TO VESSELS OR OTHER PROPERTY OF THE INLAND WATERWAYS CORPORATION OR THE DEFENSE PLANT CORPORATION. BOTH OF WHICH ARE INSTRUMENTALITIES OF THE UNITED STATES PERFORMING GOVERNMENTAL FUNCTIONS WITH FEDERAL FUNDS. THE QUESTION OF WHETHER THE NAVY DEPARTMENT IS AUTHORIZED TO PAY CLAIMS FOR DAMAGE CAUSED BY NAVY DEPARTMENT VESSELS TO THE VESSELS AND PROPERTY OF TWO SPECIFIC GOVERNMENT-OWNED CORPORATIONS. THESE CORPORATIONS ARE THE INLAND WATERWAYS CORPORATION AND THE DEFENSE PLANT CORPORATION.

B-48380, JULY 14, 1945, 25 COMP. GEN. 49

GOVERNMENT CORPORATION VESSELS DAMAGED BY NAVAL VESSELS - APPROPRIATION AVAILABILITY FOR PAYMENT OF DAMAGE CLAIMS NAVY DEPARTMENT APPROPRIATIONS ARE NOT AVAILABLE TO PAY CLAIMS FOR DAMAGES CAUSED BY NAVY DEPARTMENT VESSELS TO VESSELS OR OTHER PROPERTY OF THE INLAND WATERWAYS CORPORATION OR THE DEFENSE PLANT CORPORATION, BOTH OF WHICH ARE INSTRUMENTALITIES OF THE UNITED STATES PERFORMING GOVERNMENTAL FUNCTIONS WITH FEDERAL FUNDS.

ACTING COMPTROLLER GENERAL YATES TO THE SECRETARY OF THE NAVY, JULY 14, 1945:

CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER OF MARCH 12, 1945, AS FOLLOWS:

THE NAVY DEPARTMENT WISHES TO SUBMIT TO THE COMPTROLLER GENERAL, FOR DECISION, THE QUESTION OF WHETHER THE NAVY DEPARTMENT IS AUTHORIZED TO PAY CLAIMS FOR DAMAGE CAUSED BY NAVY DEPARTMENT VESSELS TO THE VESSELS AND PROPERTY OF TWO SPECIFIC GOVERNMENT-OWNED CORPORATIONS. THESE CORPORATIONS ARE THE INLAND WATERWAYS CORPORATION AND THE DEFENSE PLANT CORPORATION. THE INLAND WATERWAYS CORPORATION IS UNDERSTOOD TO BE FUNCTIONING UNDER THE JURISDICTION OF THE DEPARTMENT OF COMMERCE AND THE DEFENSE PLANT CORPORATION IS UNDERSTOOD TO BE A SUBSIDIARY OF THE RECONSTRUCTION FINANCE CORPORATION. ALL OF THE STOCK OF THESE CORPORATIONS AND THEIR ASSETS ARE GOVERNMENT-OWNED.

THE NAVY DEPARTMENT, IN COMPLIANCE WITH A LONG ESTABLISHED PRINCIPLE SET FORTH IN THE DECISIONS OF THE COMPTROLLER GENERAL, WITH RESPECT TO OTHER GOVERNMENT DEPARTMENTS AND AGENCIES, HAS UNDERSTOOD THAT THE NAVY DEPARTMENT IS PRECLUDED FROM COLLECTING FROM OR PAYING TO SUCH OTHER GOVERNMENT DEPARTMENTS ANY CLAIMS FOR DAMAGE ARISING OUT OF COLLISIONS WITH NAVAL VESSELS. THIS POLICY HAS BEEN CONSISTENTLY ADHERED TO, WITHOUT EXCEPTION, BY THE NAVY DEPARTMENT. PARTICULARLY FREQUENT HAVE BEEN THE INSTANCES OF CLAIMS OF THE WAR DEPARTMENT AND THE VARIOUS AGENCIES HANDLING THE GOVERNMENT-OWNED MERCHANT MARINE. THE LATTER INSTANCE HAS INVOLVED SUCCESSIVELY THE UNITED STATES SHIPPING BOARD MERCHANT FLEET CORPORATION, THE UNITED STATES SHIPPING BOARD, THE DEPARTMENT OF COMMERCE, THE UNITED STATES MARITIME COMMISSION AND THE WAR SHIPPING ADMINISTRATION.

THERE HAS BEEN RECEIVED AN INCREASING NUMBER OF CLAIMS ARISING OUT OF COLLISIONS BETWEEN NAVAL CRAFT AND CRAFT OPERATED BY CORPORATIONS, OF WHICH THE GOVERNMENT OWNS THE STOCK AND CONTROLS THE OPERATIONS, SUCH AS THE INLAND WATERWAYS CORPORATION AND THE DEFENSE PLANT CORPORATION.

THE SECRETARY OF COMMERCE HAS SUGGESTED THAT, BY REASON OF THE COMMERCIAL ASPECTS OF THE ACTIVITIES OF SUCH CORPORATIONS, THE DECISIONS OF THE COMPTROLLER GENERAL ARE INAPPLICABLE AND THAT THE NAVY DEPARTMENT HAS AUTHORITY TO PAY DAMAGE CLAIMS OF SUCH CORPORATIONS. IT WILL BE NOTED THAT ANY ASPECT OF COMMERCIAL OPERATIONS IS PRESENT TO A MUCH GREATER DEGREE IN THE MATTER OF COLLISIONS OF NAVAL VESSELS WITH WAR SHIPPING ADMINISTRATION VESSELS AND THE GOVERNMENT-OWNED MERCHANT MARINE. IN SUCH CASES PAYMENT OF INTER-DEPARTMENTAL CLAIMS ARE NOT MADE. IF THE FACT THAT REVENUE IS RECEIVED FROM OPERATIONS RATHER THAN SOLELY FROM GOVERNMENTAL APPROPRIATIONS IS AN EXCEPTION TO THE GENERAL RULE, IT WOULD APPEAR THAT THE RESULT WOULD BE THAT SUCH GOVERNMENT-OWNED DEPARTMENT CLAIMS AND COULD PAY SUCH DAMAGE CLAIMS. HOWEVER, IT IS NOT APPRECIATED HOW ANY COMMERCIAL ASPECT OF THE OPERATIONS OF THE INLAND WATERWAYS CORPORATION OR OF THE DEFENSE PLANT CORPORATION HAS ANY BEARING ON THE QUESTION OF WHETHER THE NAVY DEPARTMENT IS AUTHORIZED TO PAY DAMAGE CLAIMS OF OTHER GOVERNMENT DEPARTMENTS FROM ITS APPROPRIATIONS. IT WAS THOUGHT THAT ANY SITUATION, WHEREUNDER THESE CORPORATIONS COULD PAY BUT NOT COLLECT IN SUCH GOVERNMENT DEPARTMENT COLLISION CLAIMS, WOULD NOT BE A SATISFACTORY SOLUTION AND WOULD UNDOUBTEDLY RESULT IN A DISPOSITION TO OFFSET CLAIMS.

APART FROM THE ABOVE CONSIDERATIONS, THE NAVY DEPARTMENT DESIRES TO POINT OUT THAT THE PAYMENT OF CLAIMS AND TRANSFER OF FUNDS IN THE END CAN ONLY RESULT IN AN ACTUAL OUT-OF-POCKET EXPENSE AND LOSS TO THE GOVERNMENT. ANY RECOVERY BY THE NAVY FROM A GOVERNMENT DEPARTMENT OR AGENCY OR FROM AN INDIVIDUAL, GOES BACK TO THE TREASURY AS MISCELLANEOUS RECEIPTS; SUCH RECOVERY IS NOT RETAINED BY THE NAVY DEPARTMENT. THE EXPENSE, LABOR AND EFFORT DEVOTED TO THE NECESSARY ACTIVITIES IN THE HANDLING OF SETTLEMENT OF CLAIMS ARE NOT IN HARMONY WITH THE WAR EFFORT. TO AVOID INTERFERENCE WITH NAVAL OPERATIONS AND DISCLOSURE OF SECURITY INFORMATION, THE NAVY DEPARTMENT HAS MADE EVERY EFFORT TO ELIMINATE LITIGATION AND CONTROVERSY WITH RESPECT TO CLAIMS ADJUSTMENTS. IN KEEPING WITH THIS POLICY, WHEN THE ISSUE FIRST AROSE, THE NAVY DEPARTMENT SUGGESTED THAT THESE INTERDEPARTMENTAL CLAIMS SHOULD BE WAIVED BY AGREEMENT FOLLOWING THE ANALOGY OF THE AGREEMENT WITH THE WAR SHIPPING ADMINISTRATION ACCOMPLISHING SUCH A WAIVER WHICH IS PREDICATED UPON THE COMPTROLLER'S DECISIONS. AS IS DEVELOPED IN ENCLOSURE C, CONSIDERABLE EFFORT IS REQUIRED IN INVESTIGATING AND SETTLING CLAIMS. THE NAVY DEPARTMENT IN SUCH MATTERS FOLLOWS A DEFINITE PROCEDURE OF INVESTIGATION. IN SUCH MATTERS, IT IS NECESSARY FOR ALL PARTIES INVOLVED TO SURVEY EACH VESSEL AFTER THE DAMAGE AND DURING THE MAKING OF COLLISION REPAIRS. SUCH ACTIVITY INVOLVES EXPENSE AND TRAVEL. FURTHER, IT SHOULD BE POINTED OUT THAT, IN THE EVENT OF CONTROVERSY, THERE IS NO METHOD FOR DETERMINING ULTIMATE LIABILITY SUCH AS EXISTS THROUGH THE MEDIUM OF LITIGATION IN INSTANCES WHERE PRIVATELY-OWNED VESSELS ARE INVOLVED.

THE FEDERAL COURTS HAVE HELD THAT THESE GOVERNMENT-OWNED CORPORATIONS MAY NOT MAINTAIN SUIT AGAINST THE UNITED STATES ( DEFENSE SUPPLIES CORPORATION V. U.S. LINES COMPANY AND UNITED STATES OF AMERICA, 1944 AMERICAN MARITIME CASES 1042). SINCE THE END RESULT AND THE EFFECT OF NON-WAIVER ARE ONLY TO INCREASE EXPENSE AND PRODUCE NO PRACTICAL BENEFIT TO THE UNITED STATES, IT IS SUGGESTED THAT THESE CONSIDERATIONS EMPHASIZE THE FUNDAMENTAL SOUNDNESS OF THE DECISIONS, WHICH THE NAVY DEPARTMENT HAD CONSIDERED AS CONTROLLING, AND THAT THE OVERALL INTERESTS OF THE UNITED STATES ARE BEST SERVED BY CONTINUED ADHERENCE TO THESE DECISIONS OR A DIRECTION THAT INTERDEPARTMENTAL DAMAGE CLAIMS BE WAIVED.

FOR THE INFORMATION OF THE COMPTROLLER GENERAL, THERE ARE ENCLOSED THE FOLLOWING DOCUMENTS IN THESE MATTERS:

(A) LETTER JUDGE ADVOCATE GENERAL TO PRESIDENT, INLAND WATERWAYS CORPORATION, DTD 26 OCTOBER 1944.

(B) LETTER DEPARTMENT OF COMMERCE TO JUDGE ADVOCATE GENERAL, DTD 8 FEBRUARY 1945.

(C) MEMORANDUM, DTD 22 FEBRUARY 1945, IN ELABORATION OF THE POINTS MADE IN THIS LETTER.

A COPY OF THIS LETTER AND OF ENCLOSURE (C) HAVE BEEN SENT TO THE SECRETARY OF THE DEPARTMENT OF COMMERCE.

THE LETTER OF THE ACTING SECRETARY OF COMMERCE, DATED FEBRUARY 8, 1945, COPY OF WHICH WAS ENCLOSED WITH YOUR LETTER, READS:

THE INLAND WATERWAYS CORPORATION AND THE DEFENSE PLANT CORPORATION HAVE BEEN ADVISED BY THE JUDGE ADVOCATE GENERAL OF THE NAVY (JAG: III:HTL:AEM) THAT THE NAVY DEPARTMENT'S APPROPRIATIONS TO PAY FOR DAMAGES CAUSED BY NAVAL VESSELS ARE NOT AVAILABLE TO PAY FOR DAMAGES TO THE VESSELS BELONGING TO THE INLAND WATERWAYS CORPORATION AND THE DEFENSE PLANT CORPORATION. HE CITES THE FOLLOWING DECISIONS FOR HIS HOLDING THAT THE APPROPRIATIONS FOR ONE GOVERNMENT DEPARTMENT ARE NOT AVAILABLE TO PAY CLAIMS OF ANOTHER GOVERNMENT DEPARTMENT: 9 COMP. GEN. 263; 6 COMP. GEN. 171; AND 6 COMP. TREAS., 74.

BOTH THE INLAND WATERWAYS CORPORATION AND THE DEFENSE PLANT CORPORATION ARE GOVERNMENTAL AGENCIES CONDUCTED ALONG COMMERCIAL LINES. NEITHER OPERATES UNDER CONGRESSIONAL APPROPRIATIONS, NOR ARE THE AMOUNTS RECEIVED BY THEM FROM OPERATION OF THEIR VESSELS PAID INTO THE MISCELLANEOUS ACCOUNTS OF THE TREASURY DEPARTMENT.

THE COMPTROLLER GENERAL HAS RECOGNIZED CERTAIN EXCEPTIONS TO THE RULE LAID DOWN IN THE DECISIONS CITED BY THE NAVY DEPARTMENT UNDER CERTAIN CIRCUMSTANCES WHICH ARE DEEMED APPLICABLE TO THE CORPORATIONS UNDER THE FACTS INVOLVED (14 COMP. GEN. 256; 20 COMP. GEN. 699, AND COMP. GEN. DECISION B-34528 TO THE SECRETARY OF COMMERCE DATED MAY 22, 1943).

NOT ONLY IS AN ACCOUNTING PRINCIPLE INVOLVED WITH RESPECT TO THE TWO CORPORATIONS DUE TO THE FACT THAT THEY DO NOT OPERATE UNDER CONGRESSIONAL APPROPRIATIONS, BUT ADJUSTMENT WITH PRIVATE INSURANCE COMPANIES AND THE INTERESTS OF THE BAREBOAT CHARTERERS OF THE VESSELS PLAY A MATERIAL PART NY DETERMINATION OF THE GOVERNMENT'S INTERESTS IN THE MATTER. THE FAILURE OF THE NAVY DEPARTMENT AND THE TWO CORPORATIONS TO ADJUST THE DAMAGE CLAIMS WILL DISADVANTAGEOUSLY AFFECT CERTAIN OF THE GOVERNMENT'S INSURANCE RIGHTS WITH THE PRIVATE INSURANCE COMPANIES.

UNDER THE CIRCUMSTANCES, IT IS RESPECTFULLY SUGGESTED THAT THE JUDGE ADVOCATE GENERAL GIVE RECONSIDERATION TO THIS MATTER IN THE LIGHT OF THE THREE MORE RECENT COMPTROLLER GENERAL'S DECISIONS CITED ABOVE.

THE VIEWS OF THE CHAIRMAN OF THE BOARD OF THE RECONSTRUCTION FINANCE CORPORATION ARE PRESENTED IN HIS LETTER OF APRIL 21, 1945, AS FOLLOWS:

WE HAVE BEEN ADVISED BY THE SECRETARY OF THE NAVY THAT HE HAS SUBMITTED TO YOU BY LETTER DATED MARCH 12, 1945, THE QUESTION AS TO WHETHER THE NAVY DEPARTMENT IS AUTHORIZED TO PAY CLAIMS FOR DAMAGE CAUSED BY NAVY DEPARTMENT VESSELS TO VESSELS AND PROPERTY OF INLAND WATERWAYS CORPORATION AND DEFENSE PLANT CORPORATION.

DEFENSE PLANT CORPORATION REPRESENTATIVES HAVE DISCUSSED WITH NAVY DEPARTMENT REPRESENTATIVES VARIOUS ASPECTS OF THIS QUESTION AND WHILE WE APPRECIATE ANY ASSISTANCE YOU MAY PROVIDE, WE WERE NOT AWARE THAT THE NAVY DEPARTMENT HAD SUBMITTED THE MATTER TO YOU UNTIL WE RECEIVED A COPY OF THE MARCH 12, 1945 LETTER.

TO ASSIST YOU IN YOUR CONSIDERATION OF THE QUESTION WE ARE HEREWITH PRESENTING CERTAIN FACTS IN ADDITION TO THOSE SUBMITTED BY THE NAVY DEPARTMENT, WHICH WE BELIEVE TO BE IMPORTANT.

1. YOU ARE, OF COURSE, AWARE OF THE FACT THAT DEFENSE PLANT CORPORATION OPERATES ON FUNDS DERIVED FROM RECONSTRUCTION FINANCE CORPORATION'S BORROWING AUTHORITY, AND NOT FROM APPROPRIATED FUNDS. ITS RECEIPTS ARE NOT PAID INTO MISCELLANEOUS ACCOUNTS OF THE TREASURY DEPARTMENT.

2. ALL OF THE VESSELS OWNED BY DEFENSE PLANT CORPORATION ARE CHARTERED ON A BAREBOAT BASIS TO OPERATING COMPANIES UPON ALLOCATION OF SUCH VESSELS BY THE OFFICE OF DEFENSE TRANSPORTATION. MOST OF THE VESSELS ARE SO CHARTERED TO PRIVATE OPERATING COMPANIES, BUT SOME ARE SIMILARLY CHARTERED TO FEDERAL BARGE LINES, THE OPERATING NAME OF INLAND WATERWAYS CORPORATION.

3. ALL VESSELS OWNED BY DEFENSE PLANT CORPORATION ARE INSURED WITH COMMERCIAL MARINE INSURANCE UNDERWRITERS AGAINST COLLISION LIABILITY, AND THE INSURANCE POLICIES COVER DEFENSE PLANT CORPORATION AS OWNER AS WELL AS THE BAREBOAT CHARTERERS OF THE VESSELS. WITH RESPECT TO CERTAIN OF THE VESSELS, HULL INSURANCE IS CARRIED, BUT WITH RESPECT TO OTHERS, SUCH INSURANCE IS NOT CARRIED, AND THE RISK OF LOSS OR PHYSICAL DAMAGE TO THE LATTER VESSELS IS ASSUMED BY DEFENSE PLANT CORPORATION UNDER THE CHARTER PARTIES COVERING SUCH VESSELS. UNDER THE TERMS OF THE CHARTER PARTIES, THE BAREBOAT CHARTERERS ARE REQUIRED TO BEAR CERTAIN DEDUCTIBLES CONTAINED IN THE INSURANCE POLICIES, AND WITH RESPECT TO THOSE VESSELS AS TO WHICH THE RISK OF LOSS OR PHYSICAL DAMAGE IS ASSUMED BY THE DEFENSE PLANT CORPORATION, THE CHARTERERS ARE ALSO REQUIRED TO BEAR A DEDUCTIBLE FOR EACH ACCIDENT WHICH IS SPECIFICALLY PROVIDED FOR IN THE CHARTER PARTIES ON SUCH VESSELS. DEFENSE PLANT CORPORATION PAY THE COST OF THE INSURANCE.

4. UNDER THE TERMS OF THE INSURANCE POLICIES THE UNDERWRITERS WAIVE THEIR RIGHTS OF SUBROGATION AGAINST THE UNITED STATES AND ITS INSTRUMENTALITIES AND AGAINST THEIR VESSELS, INCLUDING RIGHTS AGAINST VESSELS FOR WHICH ULTIMATE LIABILITY THEREFOR HAS BEEN ASSUMED BY THE UNITED STATES FOR ITS INSTRUMENTALITIES.

THE ULTIMATE DETERMINATION OF THE QUESTION SUBMITTED BY THE SECRETARY OF THE NAVY MAY AFFECT THE RIGHTS OF THE BAREBOAT CHARTERS OF THE VESSELS OWNED BY DEFENSE PLANT CORPORATION TO PROCEED AGAINST THE NAVY DEPARTMENT FOR THE DEDUCTIBLES PROVIDED IN THE INSURANCE POLICIES AND CHARTER PARTIES AND FOR CLAIMS ARISING FROM THE LOSS OF USE OF THE VESSELS DURING THE PERIOD REQUIRED FOR REPAIRS.

THE DEFENSE PLANT CORPORATION WAS CREATED BY THE RECONSTRUCTION FINANCE CORPORATION ON AUGUST 22, 1940, PURSUANT TO AUTHORITY OF SECTION 5D OF THE RECONSTRUCTION FINANCE CORPORATION ACT AS AMENDED BY THE ACT OF JUNE 25, 1940, 54 STAT. 573, 15 U.S.C. 606B. BY EXECUTIVE ORDER NO. 9071 DATED FEBRUARY 24, 1942, ALL FUNCTIONS, POWERS AND DUTIES OF THE FEDERAL LOAN AGENCY AND OF THE FEDERAL LOAN ADMINISTRATOR WHICH RELATED TO THE DEFENSE PLANT CORPORATION WERE TRANSFERRED TO THE DEPARTMENT OF COMMERCE TO BE EXERCISED UNDER THE DIRECTION AND SUPERVISION OF THE SECRETARY OF COMMERCE, BUT BY THE ACT OF FEBRUARY 24, 1945, PUBLIC LAW 4, 79TH CONGRESS, IT WAS PROVIDED THAT THE FEDERAL LOAN AGENCY "SHALL CONTINUE AS AN INDEPENDENT ESTABLISHMENT OF THE FEDERAL GOVERNMENT AND SHALL CONTINUE TO BE ADMINISTERED UNDER THE DIRECTION AND SUPERVISION OF THE FEDERAL LOAN ADMINISTRATOR IN THE SAME MANNER AND TO THE SAME EXTENT AS IF EXECUTIVE ORDER 9071, DATED FEBRUARY 24, 1942, TRANSFERRING THE FUNCTIONS OF THE FEDERAL LOAN AGENCY TO THE DEPARTMENT OF COMMERCE, HAD NOT BEEN ISSUED.' THE SAID DEFENSE PLANT CORPORATION WAS CREATED TO AID THE GOVERNMENT OF THE UNITED STATES IN ITS NATIONAL DEFENSE PROGRAM BY FINANCING OR ENGAGING IN THE CONSTRUCTION, EXTENSION AND OPERATION OF PLANTS ENGAGED IN WAR PRODUCTION. THE INLAND WATERWAYS CORPORATION WAS CREATED BY THE ACT OF JUNE 3, 1924, 43 STAT. 360; 49 U.S.C. 151, AS A CORPORATION IN THE DISTRICT OF COLUMBIA, THE ACT PROVIDING THAT THE SECRETARY OF WAR SHOULD BE DEEMED TO BE THE INCORPORATOR AND THAT HE SHOULD GOVERN AND DIRECT THE CORPORATION IN THE EXERCISE OF THE FUNCTIONS VESTED IN IT BY THE SAID ACT. SECTION 6 OF REORGANIZATION PLAN II, EFFECTIVE JULY 1, 1939, 53 STAT. 1434, 5 U.S.C. 133T, NOTE, TRANSFERRED THE INLAND WATERWAYS CORPORATION AND ALL OF ITS FUNCTIONS AND OBLIGATIONS FROM THE WAR DEPARTMENT TO THE DEPARTMENT OF COMMERCE TO BE ADMINISTERED UNDER THE SUPERVISION AND DIRECTION OF THE SECRETARY OF COMMERCE. THE SAID CORPORATION WAS CREATED "FOR THE PURPOSE OF CARRYING ON THE OPERATIONS OF THE GOVERNMENT-OWNED INLAND, CANAL, AND COASTWISE WATERWAYS SYSTEM TO THE POINT WHERE THE SYSTEM CAN BE TRANSFERRED TO PROVIDE OPERATION TO THE BEST ADVANTAGE OF THE GOVERNMENT, OF CARRYING OUT THE MANDATES OF CONGRESS PRESCRIBED IN SECTION 201 OF THE TRANSPORTATION ACT, 1920, AS AMENDED, AND OF CARRYING OUT THE POLICY ENUNCIATED BY CONGRESS IN THE FIRST PARAGRAPH OF SECTION 500 OF SUCH ACT. * * *"

CLEARLY, BOTH THE DEFENSE PLANT CORPORATION AND THE INLAND WATERWAYS CORPORATION ARE INSTRUMENTALITIES OF THE UNITED STATES GOVERNMENT AND THEIR FUNDS ARE, IN REALITY, GOVERNMENT FUNDS. IN INLAND WATERWAYS CORPORATION V. YOUNG, 309 U.S. 517, THE COURT SAID WITH RESPECT TO CORPORATE AGENCIES OF THE FEDERAL GOVERNMENT (PAGE 524):

* * * THE FUNDS OF THESE CORPORATIONS ARE, FOR ALL PRACTICAL PURPOSES, GOVERNMENT FUNDS; THE LOSSES, IF LOSSES THERE BE, ARE THE GOVERNMENT'S LOSSES. * * * IN UNITED STATES GRAIN CORPORATION V. PHILLIPS, 261 U.S. 106, RELATIVE TO GOLD BELONGING TO THE UNITED STATES GRAIN CORPORATION, THE COURT SAID (PAGE 113): "IN SUBSTANCE THE GOLD WAS THE PROPERTY OF THE UNITED STATES.'

IN 22 COMP. GEN. 90, IT WAS HELD (QUOTING FROM THE SYLLABUS):

EVEN THOUGH THE ACTIVITIES OF THE FEDERAL SURPLUS COMMODITIES CORPORATION IN CONNECTION WITH PROCURING, TRANSPORTING AND DISTRIBUTING EMERGENCY SUPPLIES FOR THE TERRITORIES AND POSSESSIONS OF THE UNITED STATES IN ACCORDANCE WITH THE ACT OF DECEMBER 23, 1941, MAY PARTAKE OF THE NATURE OF A PRIVATE BUSINESS IN THAT THE COST OF THE SUPPLIES AND INCIDENTAL EXPENSES ARE PASSED ON TO CONSUMERS, SUCH ACTIVITIES ARE GOVERNMENTAL AND, HENCE, ARE WITHIN THE SCOPE OF THE EXEMPTIVE PROVISIONS OF SECTION 89 OF THE ORGANIC ACT OF HAWAII RESERVING TO THE UNITED STATES THE RIGHT TO USE WITHOUT CHARGE THE WHARVES AND LANDINGS OPERATED BY THE GOVERNMENT OF THE TERRITORY OF HAWAII. AT PAGE 92 OF THAT DECISION IT WAS SAID---

* * * IN OTHER WORDS, THE CONTENTION OF THE BOARD IS THAT THE EXEMPTIVE PROVISIONS OF SECTION 89 OF THE ORGANIC ACT ARE NOT FOR APPLICATION WHERE USE IS MADE OF THE PIERS BY AN AGENCY OF THE FEDERAL GOVERNMENT IN CONNECTION WITH THE DISCHARGE OF FUNCTIONS WHICH PARTAKE OF THE NATURE OF A PRIVATE BUSINESS.

BUT SUCH A CONTENTION COMPLETELY DISREGARDS THE WELL ESTABLISHED PRINCIPLE THAT SINCE THE FEDERAL GOVERNMENT IS ONE OF DELEGATED POWERS ANY CONSTITUTIONAL EXERCISE OF SUCH POWERS MUST BE CONSIDERED AS GOVERNMENTAL. THE LANGUAGE USED BY THE SUPREME COURT OF THE UNITED STATES IN ITS OPINION IN THE CASE OF FEDERAL LAND BANK OF SAINT PAUL V. BISMARCK LUMBER COMPANY, ET AL., 314 U.S. 95, 102, SEEMS ESPECIALLY APPROPRIATE IN THIS CONNECTION. IN THAT CASE, THE COURT IN HOLDING THAT THE CONGRESS CONSTITUTIONALLY COULD IMMUNIZE FROM STATE TAXATION ACTIVITIES IN FURTHERANCE OF THE LENDING FUNCTIONS OF FEDERAL LAND BANKS, SAID:

"THE ARGUMENT THAT THE LENDING FUNCTIONS OF THE FEDERAL LAND BANKS ARE PROPRIETARY RATHER THAN GOVERNMENTAL MISCONCEIVES THE NATURE OF THE FEDERAL GOVERNMENT WITH RESPECT TO EVERY FUNCTION WHICH IT PERFORMS. THE FEDERAL GOVERNMENT IS ONE OF DELEGATED POWERS, AND FROM THAT IT NECESSARILY FOLLOWS THAT ANY CONSTITUTIONAL EXERCISE OF ITS DELEGATED POWERS IS GOVERNMENTAL. GRAVES V. NEW YORK EX REL. O-KEEFE, 306 U.S. 466, 477. IT ALSO FOLLOWS THAT, WHEN CONGRESS CONSTITUTIONALLY CREATES A CORPORATION THROUGH WHICH THE FEDERAL GOVERNMENT LAWFULLY ACTS, THE ACTIVITIES OF SUCH CORPORATION ARE GOVERNMENTAL. PITTMAN V. HOME OWNERS' LOAN CORP., 308 U.S. 21, 32; GRAVES V. NEW YORK EX REL. O-KEEFE, SUPRA, 477.' SEE ALSO, 1 COMP. GEN. 279, HOLDING THAT FREIGHT SHIPMENTS OF PROPERTY OF THE UNITED STATES SHIPPING BOARD EMERGENCY FLEET CORPORATION WERE SUBJECT TO LAND GRANT DEDUCTIONS; 2 COMP. GEN. 38, HOLDING THAT THE SAID CORPORATION WAS ENTITLED TO GOVERNMENT RATES ON TELEGRAMS; 7 COMP. GEN. 576, HOLDING THAT A DEBT DUE FROM A PRIVATE COMPANY TO THE SAID CORPORATION PROPERLY WAS SET OFF AGAINST A DEBT DUE FROM THE UNITED STATES TO THE SAID PRIVATE COMPANY.

ATTENTION IS INVITED, ALSO, TO THE RECENT CASE ENTITLED DEFENSE SUPPLIES CORPORATION V. UNITED STATES LINES COMPANY. 148 F.2D 311, WHEREIN THE CIRCUIT COURT OF APPEALS, SECOND CIRCUIT, IN AFFIRMING THE DECISION OF THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK (57 F.1SUPP. 291), STATED.

IT SEEMS CLEAR TO US THAT THE COMPLETE OWNERSHIP OF THE DEFENSE SUPPLIES CORPORATION BY THE UNITED STATES SHOWS THIS TO BE NOTHING MORE THAN AN ACTION BY THE UNITED STATES AGAINST THE UNITED STATES. THE ACT WOULD APPEAR TO CONTEMPLATE NO SUCH ACTION. SECTIONS 1 AND 2INDICATE THAT THE UNITED STATES SHALL BE THE DEFENDANT. AND SECTION 3 STATES THAT SUCH SUITS AS ARE BROUGHT UNDER THE ACT SHALL PROCEED ACCORDING TO THE PRINCIPLES OF LAW AND RULES OF PRACTICE OBTAINING IN LIKE CASES BETWEEN PRIVATE PARTIES. IN PRIVATE LITIGATION THE PLAINTIFF AND DEFENDANT CANNOT BE THE SAME. FOR, IN THAT EVENT, THERE IS NO REAL CASE OR CONTROVERSY. WE CONCLUDE, THEREFORE, THAT THE DEFENSE SUPPLIES CORPORATION CANNOT MAINTAIN A SUIT AGAINST THE UNITED STATES UNDER THE SUITS IN ADMIRALTY ACT. THE LOWER COURT HAS STATED THE MATTER AS FOLLOWS:

BEING AN INSTRUMENTALITY OF THE UNITED STATES GOVERNMENT, IT IS CERTAIN THAT LIBELLANT, HAD ITS CARGO BEEN UNINSURED, WOULD HAVE HAD NO CAUSE OF ACTION AGAINST RESPONDENT FOR SUCH INJURY AS CAME TO THE WOOL AS AS RESULT OF THE SHIP'S NEGLIGENCE. UNITED STATES GRAIN CORPORATION V. PHILLIPS, 261 U.S. 106, 113, 43 S.CT. 283, 67 L.ED. 552. THE ONLY REASON FOR LIBELLANT'S EXISTENCE, LIKE THAT OF THE UNITED STATES GRAIN CORPORATION, WAS THAT THE GOVERNMENT, THROUGH ITS CORPORATE FORM, MIGHT MORE READILY AND EASILY THAN WOULD OTHERWISE BE POSSIBLE, ENGAGE IN ACTIVITIES THAT WERE DESIGNED AND INTENDED TO BE PART AND PARCEL OF THE WAR EFFORT. BETWEEN ITSELF AND PRIVATE INTERESTS, THE CORPORATION WAS AT LIBERTY TO SUE AND BE SUED, BUT IT IS HARD TO CONCEIVE THAT THERE EVER WAS ANY THOUGHT OR INTENTION UPON THE PART OF ANY ONE THAT IT COULD HOLD THE GOVERNMENT FOR LIABILITY FOR ANYTHING THAT THE LATTER MIGHT DO. * * *

WITH RESPECT TO THE GOVERNMENT DEPARTMENTS AND AGENCIES WHOSE FUNDS ARE SUBJECT TO THE CONTROL OF THE ACCOUNTING OFFICERS OF THE GOVERNMENT, IT HAS BEEN HELD REPEATEDLY THAT THEIR FUNDS ARE NOT AVAILABLE FOR PAYMENT OF CLAIMS FOR DAMAGES TO THE PROPERTY OF OTHER GOVERNMENT DEPARTMENTS OR AGENCIES. 6 COMP. DEC. 74; 22 COMP. DEC. 390; 6 COMP. GEN. 171; 9 COMP. GEN. 263. IN THE LATTER DECISION IT WAS HELD (QUOTING FROM THE SYLLABUS):

THE APPROPRIATION OF THE PANAMA CANAL PROVIDING FOR THE PAYMENT OF CLAIMS FOR DAMAGES TO VESSELS PASSING THROUGH THE LOCKS OF THE PANAMA CANAL IS NOT AVAILABLE FOR THE PAYMENT OF THE COSTS OF REPAIRS TO NAVAL VESSELS EVEN WHEN THE FACTS ESTABLISH THE RESPONSIBILITY OF THE PANAMA CANAL FOR THE DAMAGES. THE COSTS OF SUCH REPAIRS FOR DAMAGES TO NAVAL VESSELS ARE CHARGEABLE UNDER THE LAW TO THE SPECIFIC APPROPRIATION MADE UNDER THE BUREAU OF CONSTRUCTION AND REPAIR, NAVY DEPARTMENT, PROVIDING FOR THE "WEAR, TEAR, AND REPAIR OF VESSELS AFLOAT.'

IN VIEW OF THE FOREGOING, IT MUST BE HELD, IN SPECIFIC ANSWER TO YOUR QUESTION, THAT NAVY DEPARTMENT APPROPRIATIONS ARE NOT AVAILABLE FOR PAYMENT OF CLAIMS FOR DAMAGES CAUSED BY NAVY DEPARTMENT VESSELS TO VESSELS OR OTHER PROPERTY OF THE INLAND WATERWAYS CORPORATION OR THE DEFENSE PLANT CORPORATION.

AS TO PAYMENTS BY THE INVOLVED CORPORATIONS TO THE NAVY DEPARTMENT FOR DAMAGES CAUSED BY THEIR VESSELS TO PROPERTY OF THE SAID DEPARTMENT, IT WOULD SEEM TO FOLLOW FROM THE SEVERAL DECISIONS ABOVE REFERRED TO AND PARTICULARLY THE CASE OF DEFENSE SUPPLIES CORPORATION V. UNITED STATES LINES COMPANY, SUPRA, THAT THE NAVY DEPARTMENT WOULD NOT HAVE ENFORCEABLE CLAIMS AGAINST THE SAID CORPORATIONS. CONSEQUENTLY, THERE IS NOT PERCEIVED ANY VALID OBJECTION TO A MUTUAL WAIVER OF CLAIMS SUCH AS SUGGESTED IN YOUR LETTER.

WHETHER THE UNITED STATES MAY BENEFIT FROM ANY INSURANCE WHICH GOVERNMENT CORPORATIONS MAY CARRY TO COVER LIABILITY FOR DAMAGE CAUSED BY THEIR VESSELS, ETC., TO THE PROPERTY OF OTHERS WOULD, OF COURSE, DEPEND UPON THE CIRCUMSTANCES OF EACH CASE, INCLUDING THE PROVISIONS OF THE INVOLVED INSURANCE AGREEMENTS.

A COPY OF THIS DECISION IS BEING SENT TO THE FEDERAL LOAN ADMINISTRATOR.