No. 262.Circuit Court of Appeals, Second Circuit.
March 28, 1945.

Appeal from the District Court of the United States for the Southern District of New York.

Libel by Defense Supplies Corporation against the United States Lines Company and the United States of America for damages to wool shipped on a vessel owned by the United States. From a judgment, 57 F. Supp. 291, dismissing the libel upon exceptive allegations, libelant appeals.


This is an action brought under the Suits in Admiralty Act, 46 U.S.C.A. § 741 et seq., against the United States as respondent. The libellant, the Defense Supplies Corporation, is a corporation created by the Reconstruction Finance Corporation (the R.F.C.) pursuant to § 5(d)(3) of the Reconstruction Finance Corporation Act, 15 U.S.C.A. § 606b (3). The Defense Supplies Corporation was formed “to produce, acquire, carry, sell, or otherwise deal in strategic and critical materials as defined by the President.” Its stock is wholly owned by the R.F.C., the stock of which, in turn, is wholly owned by the United States. Defense Supplies is exempt from all taxation, as an instrumentality of the United States, and has the same privileges and immunities as are conferred upon the R.F.C., including the right to sue and be sued.

In June, 1942, at Fremantle, Australia, the respondent received on board the Robert Morris a cargo vessel owned by the respondent, 9143 bales of wool to be shipped to Boston or New York and to be delivered there to libellant’s order. The bills of lading were issued to the libellant by the respondent as represented by the War Shipping Administration. The wool was owned by libellant and had been purchased for war emergency stockpiles, as a strategic and critical material. The vessel, in addition to this wool which made up about eight per cent of the cargo, also carried wool shipped by the Australian Commonwealth to the Defense Supplies Corporation and the British Purchasing Commission, copper shipped by the Metals

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Reserve Corporation[1] to itself, wool shipped by Australia to private concerns, mother-of-pearl shell shipped by a private concern and consigned to a commercial bank (these last two items amounted to less than 1% of the total cargo), and a boxed chronometer, shipped freight-free to the United States Naval Observatory from a Navy Supply Depot.

When the vessel arrived in New York, it was discovered that libellant’s wool had been damaged as a result of contact with fresh water. The insurance companies, which had insured the libellant against marine risks and perils, advanced the sum of $21,940.32 “repayable only out of any net recovery” of the Defense Supplies Corporation because of the damage to the wool. The insurance companies, by an agreement with the Defense Supplies Corporation, were given the power to prosecute and collect any claims arising out of the damage to the wool. Upon exceptive allegations to the libel, (1) that the Defense Supplies Corporation could not maintain a suit against the United States, and (2) that the Robert Morris was not a merchant vessel, the district court dismissed the libel.

[1] The Metal Reserves Corporation is another corporation created by the R.F.C. “to produce, acquire, carry, sell, or otherwise deal in strategic and critical materials as defined by the President.” Its stock is wholly owned by the R.F.C.

Horace T. Atkins, of New York City, for appellant.

John F.X. McGohey, U.S. Atty., and Burlingham, Veeder, Clark
Hupper, all of New York City (Norman M. Barron, Edward L. Smith, Herbert M. Lord, and William J. Tillinghast, Jr., all of New York City, of counsel), for appellees.

Before SWAN, CHASE, and FRANK, Circuit Judges.

FRANK, Circuit Judge.

The threshold question is whether the Defense Supplies Corporation may bring suit against the United States under the Suits in Admiralty Act. We recognize the fact that the real parties in interest are the insurance companies. But their right to sue is dependent upon the right of the party to whom they are subrogated.[2]

“In interpreting the [Suits in Admiralty] act, permitting as it does a suit to be brought against the United States, we must follow the rule of strict construction. This follows from the fact that the United States cannot be sued without their consent, and, if Congress in certain cases gives its consent, the courts are confined to the letter of the statute which expresses such consent. Schillinger v. United States, 155 U.S. 163, 166, 15 S.Ct. 85, 39 L.Ed. 108.” The Isonomia, 2 Cir., 285 F. 516, 520. Cf. Knowlton v. United States, 2 Cir., 121 F.2d 192 and cases cited; Wallace v. United States, 2 Cir., 142 F.2d 240.

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.[3] The Act would appear to contemplate no such action. Sections 1 and 2 indicate 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.[4] For, in that

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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.[5]

Our disposition of the first question makes it unnecessary to determine whether or not the Robert Morris is a “merchant vessel” under the terms of the Act.


[2] Phoenix Insurance Company v. Erie W. Transportation Co., 117 U.S. 312, 321, 6 S.Ct. 750, 1176, 29 L.Ed. 873; Westchester Fire Insurance Co. v. Pennsylvania R. Co., 2 Cir., 96 F.2d 133; Switzerland General Insurance Co. v. Navigazione Libera Triestina, S.A., 2 Cir., 91 F.2d 960; Globe Rutgers Fire Insurance Co. v. Hines, 2 Cir., 273 F. 774.
[3] That the United States is the real plaintiff here is substantiated by those cases holding that the United States may be the plaintiff in an action based upon a contract of such a government corporation. Russell Wheel Foundry Co. v. United States, 6 Cir., 31 F.2d 826; United States v. Skinner Eddy Corporation, 9 Cir., 35 F.2d 889, certiorari denied 281 U.S. 770, 50 S.Ct. 248, 74 L.Ed. 1176; United States v. Czarnikow-Rionda Co., 2 Cir., 40 F.2d 214, certiorari denied 282 U.S. 844, 51 S.Ct. 24, 75 L.Ed. 749; Reconstruction Finance Corporation v. Krauss, D.C., 12 F. Supp. 44; Reconstruction Finance Corporation v. Graydon, D.C., 16 F. Supp. 765; United States v. Freeman, D.C., 21 F. Supp. 597; United States v. Arthur, D.C., 23 F. Supp. 537.
[4] Phoenix Insurance Co. v. Erie Western Transportation Co., supra; Globe Rutgers Fire Insurance Co. v. Hines, supra; Simpson Co. v. Thomson, L.R. 3 A.C. 279 (H.L. 1877).
[5] As libellant’s alleged claim must rest on subrogation, the suit here must be regarded as brought by one government agency against another, i.e., a dispute about the proper allocation of government funds between different parts of the government. The question whether such an action, even if authorized by statute, would be justiciable we need not here consider.