Armstrong v. United States

• Decision Date: 14 January 1959
• Docket Number: No. 532-56.,532-56.
• Citation: 169 F. Supp. 259
• Parties: Cecil W. ARMSTRONG et al. v. UNITED STATES.
• Court: U.S. Claims Court

169 F. Supp. 259

Cecil W. ARMSTRONG et al. v. UNITED STATES.

No. 532-56.

United States Court of Claims.

January 14, 1959.

Burton R. Thorman, Washington, D. C., for plaintiffs. Solomon Dimond, Washington, D. C., was on the brief.

Kathryn H. Baldwin, Washington, D. C., with whom was Asst. Atty. Gen., George Cochran Doub, for defendant.

JONES, Chief Judge.

Petitioners were subcontractors under a contract executed with the Department of the Navy for the construction of military vessels. They bring this action to recover just compensation under the Fifth Amendment to the Constitution for property rights allegedly taken by defendant. Those rights consisted of statutory liens which plaintiffs claim were acquired under Maine law by reason of having provided materials and services in the construction of the vessels.

There appears to be substantial agreement between the parties as to the circumstances giving rise to plaintiffs' claim, and both parties have therefore moved for summary judgment.

In March 1954, defendant, acting through the Department of the Navy, entered into a contract for the construction of 11 personnel boats with the Rice Shipbuilding Corporation of East Boothbay, Maine.¹ For this work defendant agreed to pay $175,900.

After performance of the contract had begun, defendant commenced to make progress payments to the contractor based upon the estimated percentages of the work completed, less 3 percent retained percentages. At the request of the Rice Shipbuilding Corporation, plaintiffs furnished it with supplies, materials, and equipment in connection with its performance of the Navy contract. It is alleged in the petition that amounts are due the plaintiffs as consideration for furnishing such materials and supplies, and for work, labor, and services performed in connection therewith.

In August 1955, the Rice Shipbuilding Corporation was notified by letter that defendant had terminated the contract for default because of Rice's failure to deliver the boats within the specified time and to make satisfactory progress in performance of the contract. The contractor was also informed that defendant would exercise its rights under clause 11(c) of the contract and have the undelivered vessels completed by another shipbuilder, with the contractor held liable for any excess costs of completion. The final paragraph of the letter directed the contractor, pursuant to clause 11(d) of the general provisions of the contract, to transfer title to the Government of the partially completed vessels and certain "manufacturing materials,"² and to deliver those vessels and materials in the manner and at the time specified by a designated representative of the Navy.

As a consequence, the contractor executed a document entitled "Instrument of Transfer of Title" by which it transferred to defendant all of the transferor's right, title, and interest in the "manufacturing materials" as specified by defendant. The Government thereafter removed these materials from Maine and delivered them to naval shipyards at New York, Philadelphia, and Norfolk where the boats were completed, the materials transferred being used in their construction.³

Prior to termination of the contract, defendant paid the Rice Shipbuilding Corporation $141,387.20 in the form of progress payments. The cost of completing the boats amounted to $166,627.34, exclusive of the materials transferred to defendant and subsequently used in the construction work. This added cost to the Government resulted in the assessment of "excess costs" against the contractor, determined by the contracting officer to be $146,470.28. Demand was made upon the contractor for payment of these excess costs. No part of this amount has been paid. The contractor, now adjudicated a bankrupt, did not appeal the termination of the contract or the assessment of excess costs.

Plaintiffs' case rests on the assertion that they acquired "good and valid" liens on the vessels and the materials furnished for their construction under section 13, chapter 178 of the Revised Statutes of Maine, 1954.⁴ It was these liens which were allegedly taken by the Government when it obtained title to the partially completed vessels and manufacturing materials, and which were subsequently removed from Maine for completion elsewhere. The immediate question before us is thus whether plaintiffs had the "property rights" which they claim. If not, the Government has taken nothing.

It is Federal law, and not the law of a particular state, which governs the construction of contracts to which the United States is a party. United States v. Allegheny County, 1944, 322 U.S. 174, 64 S.Ct. 908, 88 L.Ed. 1209. This principle is founded upon the supremacy clause of the Constitution of the United States,⁵ which was designed to prevent the disparities, confusions, and conflicts that would ensue were the Federal authority subjected to state controls.

The Supreme Court on several occasions has stated in general terms that laborers and materialmen can acquire no lien on a Government work. United States v. Munsey Trust Co., 1947, 332 U.S. 234, 241, 67 S.Ct. 1599, 91 L.Ed. 2022; Equitable Surety Co. v. U. S., to Use of W. McMillan & Son, 1914, 234 U.S. 448, 455, 34 S.Ct. 803, 58 L.Ed. 1394; U. S., for Use of Hill v. American Surety Company of New York, 1906, 200 U.S. 197, 203, 26 S.Ct. 168, 50 L.Ed. 437. While the Supreme Court has not been called upon to determine the question of whether subcontractors may obtain recovery against the United States under the Fifth Amendment "taking" theory, the comprehensive language employed in Munsey Trust Company at page 241, 67 S.Ct. at page 1602, "nothing is more clear than that laborers and materialmen do not have enforceable rights against the United States for their compensation", would seem to preclude that basis for recovery.⁶

Plaintiffs contend that the above cited cases did not place in issue the subject matter of the contracts. Thus, whether they involved "public works" was not considered by the court. It is argued that a public work, such as to deny liens to laborers and materialmen, is one where title to the work rests initially with the Government, or is acquired by it as the work progresses. Plaintiffs refer us to United States v. Ansonia Brass and Copper Co., 1910, 218 U.S. 452, 31 S.Ct. 49, 54 L.Ed. 1107, in support of this assertion. In that case the Supreme Court had under review contracts for the construction of three vessels for the Federal Government. Creditors of the contractor there asserted liens under the supply-lien law of Virginia. A receiver was appointed by the state court and he took possession of the property of the contractor, including the three vessels. In its decision, the Court affirmed the Supreme Court of Appeals of Virginia's opinion that the state liens were superior to any claim or lien of the Government as to two of the vessels, but reversed that court's identical ruling as to the third vessel, holding that title to it passed to the United States under the terms of the contract providing for its construction. Plaintiffs read that case as disallowing state lien claims upon property forming the basis of a Government construction contract only where the contract provides that title to the work is to pass to the Government as progress payments are made. They argue that where defendant under the contract merely reserves title to the construction materials, subject to transfer to the Government upon the contractor's default, as clause 11(d) did here, subcontractors' statutory liens will attach to the materials before the Government exercises its right to acquire title. We cannot agree, however, that the Ansonia decision is to be so narrowly interpreted.⁷

In the recent case of Thomson Machine Works Co. v. Lake Tahoe Marine Supply Co., D.C.1955, 135 F.Supp. 913, it was held that an action would not lie to quiet title and foreclose an alleged...