National Home for Disabled Volunteer Soldiers v. Parrish

Background

A federal corporation called the National Home for Disabled Volunteer Soldiers built buildings at its Mountain Branch after Congress approved the project and money was appropriated. The Home made contracts with a private contractor, who largely completed the work but was in default when the last extension expired. The Home finished the work under a contract power. In a lawsuit in federal court the contractor was awarded the sum of 821,139.12, with interest added from when the buildings were fully completed and occupied; the Home appealed only the portion of the decree that allowed interest.

Reasoning

The Court considered whether interest can be required from the Home, given that the United States itself cannot be charged interest unless a statute or agreement allows it. The Justices concluded the Home is a separate corporate entity created by statute, with its own board, officers, and power to sue and be sued. Because the Home makes contracts and manages its own funds, the exemption that protects the United States from interest does not apply. The Court also noted that the statute allowing suits against the Home does not include the specific restriction on interest that applies to suits against the Government, so awarding interest was lawful. The lower courts’ allowance of interest was affirmed.

Real world impact

Contractors who do work for similar government-created corporations can look to recover interest on unpaid contractual balances, since such entities may be treated like separate corporations for this purpose. This ruling does not change the rule that the United States itself needs a statute or agreement to be charged interest. The Chief Justice did not take part in the decision.