State of Alabama v. United States (282 U. S. 502, 51 Sup. Ct. 225). This suit was brought in the Court of Claims by the State of Alabama to recover from the United States a tax imposed by the law of the State upon the privilege of manufacturing and selling hydroelectric power. The claim was based upon a sale by the United States of the surplus power generated by it at its dam at Muscle Shoals, Ala. The Government demurred on the ground that the petition did not set forth a cause of action within the jurisdiction of the Court. The demurrer was sustained. The Supreme Court held that the petition should have been dismissed for want of jurisdiction. That the contract to be recovered upon must be an actual one, and if implied, must be implied in fact, not merely implied by fiction, or as it is said, by law.

In Sutton v. United States (256 U. S. 575, 581, 41 Sup. Ct. 563, 565), Mr. Justice Brandeis said:

"There is no necessity to consider what may be the equitable rule where there is a claim of unjust enrichment through work done upon the land of another under a mistake in fact. (Citing cases.) Nor need we consider whether the doctrine is ever applicable to transactions with the Government. For the right to sue the United States in the Court of Claims here invoked must rest upon the existence of a contract express or implied in fact."

Cases illustrating jurisdiction under the Tucker Act because of some other statute creating a right to sue the United States are easily found. We cite two as illustrations. United States v. Hvoslef (237 U. S. 1, 35 Sup. Ct. 549), and United States v. Emory, Bird, Thayer Realty Co. (237 U. S. 28, 35 Sup. Ct. 499).

The diligent reader of the cases cited can easily find a score of other cases dealing with the principles involved here and which we have examined in the preparation of this opinion. In closing we refer again to the text of Federal Law of Contract, page 311, volume 2, section 493, where an excellent discussion of contracts implied in law is to be found.

From the foregoing, we conclude that the district court was in error in entertaining jurisdiction of this suit and that the judgment below must therefore be reversed for want of jurisdiction.

Reversed.

Senator GUFFEY. I would like to ask Mr. Peacock one other question. What steps has the Government taken to have these contracts reformed so that the Government shall have a proper rate of interest? Mr. PEACOCK. That whole question is in the hands of the Solicitor for the Department, and I believe in the hands of the Department of Justice.

Senator GUFFEY. Do you think these people should all pay the same rate?

Mr. PEACOCK. I think they should pay whatever rate the law requires.

Senator GUFFEY. And they should all come down to the one-eighth of 1 percent, the low rate?

Mr. PEACOCK. Not if the law does not permit that low rate.

Senator GUFFEY. Is there any provision made in S. 3500 for adjusting these interest rates at the same time the mail contracts are up for settlement?

Mr. PEACOCK. There is no provision expressly relating to the interest rates that I recall. There is a provision that the Authority shall take into consideration all relevant facts and circumstances, and I will go on record right now that so far as our Bureau is concerned, we consider that a relevant fact and circumstance.

Senator GUFFEY. In title IV, section 402, page 21, it says: "That any vessel taken in exchange" shall not be placed in the same or similar competing services. Do you find that on page 21, section 402? What do you understand there is meant by "a similar competing service"?

Senator GUFFEY. I have not the line here, unfortunately.

The CHAIRMAN. Let us find the line. It is on line 21; lines 20 and 21.

SEC. 402 (d). The Authority may, upon such terms and conditions as it may consider proper, authorize the exchange of any merchant vessel owned by the United States for a vessel of no greater value, documented under the laws of the United States and owned by a citizen of the United States, but any such vessel so acquired by the United States shall not be placed in the same or similar competing services.

Senator GUFFEY. What do you understand by that?
Mr. PEACOCK. I don't know exactly what that means.

We found

that in the bill and left it there. I am not sure exactly what it

means.

Senator GUFFEY. Who put it in; do you know?

Mr. PEACOCK. I don't know.

Senator GUFFEY. You do not know the reason for it being there?
Mr. PEACOCK. I do not.

Senator GUFFEY. What can the Government do with such a vessel if it is so restricted?

The CHAIRMAN. Let me answer that, Mr. Peacock. If we are to subsidize shipping to give an operating subsidy, it is a very great advantage and necessity, as I see it, that these vessels which are to be operated and to receive the operating subsidy shall be vessels capable of economical operation, that they shall not be slow and expensive vessels, using the old-fashioned boilers, and that sort of thing. They would be of no advantage to the United States, to take over a ship of that type, an antiquated ship, and send it back into service where it would be necessary to pay the subsidy. On the other hand, there might be some sort of a service somewhere; it might be an intercoastal service or a coastwise service, it might be a vessel where, without expense to the Government, such a vessel as we would consider antiquated and improper in the subsidized service would be a queen of the fleet in the other kind of service. That was the reason for putting that in.

Senator CLARK. Then, in effect, to go back to the illustration I used a moment ago, let us take a case of a ship of which the cost is $1,000,000, in which the Maritime Authority determines the differences between the cost of production at home and abroad to be 50 percent, which I understand to be the maximum. Then the shipowner may borrow 75 percent of the $500,000, may he not? Mr. PEACOCK. That is right.

Senator CLARK. Which would leave him only $125,000 which he had to pay out. Then if he happened to have an old obsolete ship not capable of performing, he could saw that off on the Government at $125,000 and not be out a penny, and have a brand new ship in return for an old ship which was not fit for the trade, is that correct? The CHAIRMAN. He could if the Authority did not have any experience.

Mr. PEACOCK, But he would still owe $375,000.

Senator CLARK. Yes; he would owe $375,000, but he would have a brand fire new ship without the investment of a penny instead of an old ship.

54085-36- -3

Mr. PEACOCK. He might if the scrap value of that old ship came up to that figure. As I say, we found this provision in the bill. and left it there.

Senator CLARK. In other words, what we are doing in effect is simply signing a blank check to this Maritime Authority.

Mr. PEACOCK. No; I think if this provision stayed in, you would be doing something more. You would be getting a number of these obsolete ships off the high seas, and that is what we should be doing, which is in itself a desirable thing, and which Great Britain is doing right today, even going to the extent, if I understand it rightly, that in some instances Britain is paying a subsidy today to somebody to come over here and buy an old ship and scrap it in an American yard. I think that is not an extreme statement. I think there have been some instances that are almost as broad as that.

Senator GUFFEY. Will you look at page 25, subsection (d), lines 9 and 10, Colonel :

The owner shall warrant the vessel capable of making sustained sea speed of at least 15 knots for a period of 16 years after its completion.

Does that mean loaded, partly loaded, or light draft?

Mr. JOHNSON. That is your tanker provision.

Senator GUFFEY. What does it mean?

Mr. JOHNSON. I would assume it meant under service conditions. Senator GUFFEY. What?

Mr. JOHNSON. I would assume it would mean under service conconditions-loaded.

Senator GUFFEY. It does not say so.

The CHAIRMAN. Senator, that is a naval provision, and if you don't mind, leave that until the Navy representative is here.

Senator GUFFEY. All right.

Senator FLETCHER. Do I understand, Colonel, we have about reached this point, that either Congress must pass this bill as now submitted in substance, or else go to Government ownership?

Mr. JOHNSON. That is my opinion, and I think they are going to do one or the other pretty soon.

Senator GUFFEY. On page 26, section (e), or is it provided that a tanker only may not transfer title except to the United States without losing the benefits?

Mr. JOHNSON. That is a tanker provision, and that is largely written by the Navy Department.

Senator GUFFEY. That could be answered by the Navy?

Mr. JOHNSON. Yes.

Senator GUFFEY. You have not any way of getting the absolute accurate cost in Germany or Japan?

Mr. JOHNSON. I don't think you have anywhere to get an absolute accurate cost of building in an American yard.

The CHAIRMAN. Are there any other questions, Senator Guffey? Mr. JOHNSON. We have Mr. Haag here, who knows about these things. He will tell you how you arrive at those figures.

Senator GUFFEY. In section 502, page 33, why should the owner put up only 25 percent of the foreign cost in view of the fact that under the construction loan plan in 1928 he had to put up 25 percent of the total cost?

Mr. JOHNSON. I presume because we have not been very successful building an American merchant marine.

Senator GUFFEY. You think 3.5 percent is a fair rate of interest on the deferred payments?

Mr. JOHNSON. Well, you have got very much lower rates on very many other things the Government is financing, and I imagine that is a provision that could be altered from time to time on the recommendation of the Authority.

Senator GUFFEY. What is your idea of what would be a fair rate? Mr. JOHNSON. I think that is about a fair rate.

Senator GUFFEY. Three and five-tenths percent?

Mr. JOHNSON. Yes.

Senator GUFFEY. Then why should not the present emergency mail contracts be required to pay that rate at the present time? Mr. JOHNSON. Well, I don't know what were the circumstances and the financial conditions when the present rate in force was decided upon.

The CHAIRMAN. Let me answer that a little bit, if I may. I want the record to be clear, Senator Guffey. When we entered into the ocean-mail contracts to provide a subvention, it was understood by all concerned that that money paid was to equalize the added cost of building in American yards, and also the added cost of operating under the American flag. That was the reason that was done.

Senator GUFFEY. That is the same reason you permit an increase of 10 percent in the subsidy in some cases?

Mr. JOHNSON. No. That is to meet foreign subsidies.

Senator GUFFEY. What exceptional cases do you have in mind that will justify the payment of the 50-percent subsidy?

Mr. JOHNSON. When the foreign cost is 50 percent greater than the American cost.

Senator GUFFEY. If you get that information, you can prove that? Mr. JOHNSON. Only when it is proven to the Authority and to their complete satisfaction.

Senator GUFFEY. Don't you think that a particular service cannot be maintained without payment of a 50-percent construction subsidy, and an operating subsidy on that of that, and that it is sheer economic folly to attempt to maintain such a service?

The CHAIRMAN. Your manufacturers did not think that on the tariff in the State of Pennsylvania.

Senator GUFFEY. I am asking that question.

Mr. JOHNSON. No; I think it is worth that on the exceptional cases if we want a merchant marine, and it takes that much to put American ships on parity.

Senator GUFFEY. You don't think it would be better to let the foreigners have that service and concentrate our efforts on other services?

Mr. JOHNSON. Let the foreigners have all of our shipping? I certainly do not. We have been fighting to retain that for 150 years. The CHAIRMAN. I assume, Colonel, that you are anxious to have American trade go to the seven seas and every port of America, so far as possible, and to open up new markets to our manufacturers and our agriculturists?

Mr. JOHNSON. Yes, sir; everywhere in the world. We are a producing Nation; we are producing more than we can consume. It can only go to advantage in American bottoms.

In addition to that, with the world situation such as it is, I would like to know where our American Navy would be in our present condition of our merchant marine. Our ship fleet went around the world some years ago and they had to have foreign ships to service it, and if a war had happened, our Navy would have been far abroad and unable possibly even to get home.

Senator GUFFEY. Well, Colonel, as a matter of fact, is not that provision in there intended to take care of some of the operators who are attempting to engage in business where there is no possibility that it can be maintained at a profit?

The CHAIRMAN. The answer to that is "yes."

Senator GUFFEY. Is there any justification for that?

The CHAIRMAN. If you are going to promote trade, if you are going to open up new markets. I think that that would be largely experimental.

Senator CLARK. As I understand, Colonel, these foreign ships come over here with practically their holds open?

Mr. JOHNSON. They would not do it unless they had a load to go back.

Senator GUFFEY. Therefore they must be filled with American goods.

Mr. JOHNSON. That is right; they must be filled with our American goods, and if a war should come that ship would not be available to

us.

Senator GUFFEY. It would be cheaper to build auxiliary ships for the Navy than to grant subsidies?

Mr. JOHNSON. Yes; because when you get in that fix I can think of nothing more extravagant.

Senator GUFFEY. What experience have you had with shipping, Colonel, before you became Assistant Secretary of Commerce?

Mr. JOHNSON. I can do anything with a small boat that anybody can. I was born on the river and went to sea. I am perfectly familiar with ships. I am an engineer.

Senator GUFFEY. You know about shipping, then?

Mr. JOHNSON. What I know about shipping I learned since I got here, and I found out that I know about as much as anybody else here.

Senator GUFFEY. That is true. You really became an expert last year, did you not, Colonel?

Mr. JOHNSON. I am not an expert yet. I find confusion and bickering over small things that would defeat the American merchant marine. The nearer we get to legislation the more confused we get. Senator GUFFEY. We have some men in the Department that are supposed to be experts.

Mr. JOHNSON. Yes; and I find them to be pretty good.

The CHAIRMAN. Is it important for a further reason to have an American merchant marine, in order that American seamen and American labor may have a place to exercise their energies and draw their wages?

Mr. JOHNSON. Both in shipbuilding and in operation.