United States v. Cornell Steamboat Co.

Background

An owner of twelve tugboats leased the vessels to the United States in 1917–1918 under informal written charters. The contracts set a fixed per-day hire and said the owner would supply everything except coal and water, which the Government would provide. The tugs worked in and around New York Harbor and the owner sent monthly bills. After December 1917 the Government made deductions from the bills totaling $24,822.48, based on ship logs noting short crews, poor condition, or delays getting supplies. One tug sank, was later raised and repaired by the owner, and a deduction covered loss of time from that accident. The owner protested and sued to recover the withheld amounts.

Reasoning

The key question was whether these informal charters gave the United States full possession and control of the vessels (essentially like a lease) or were merely service contracts allowing the Government to make deductions. The Court accepted the factual findings that the Army Transport Service had complete use and could order operations. Relying on prior authority and the lower court’s decision, the Court concluded the charters amounted to a transfer of possession and control, so the Government could not lawfully keep the deductions from the agreed per-day hire. The Court affirmed the lower court’s judgment for the owner.

Real world impact

The decision lets the tug owner recover the withheld amounts and limits the Government’s ability to reduce agreed daily hire when it has full use and control of vessels. It focuses on who actually had possession and control during the charter period to resolve billing disputes.