Thomson Mach. Works Co. v. LAKE TAHOE MARINE SUP. CO.

• Decision Date: 23 November 1955
• Docket Number: No. 33911.,33911.
• Citation: 135 F. Supp. 913
• Parties: THOMSON MACHINE WORKS CO., a corporation, Plaintiff, v. LAKE TAHOE MARINE SUPPLY CO., Inc., a corporation, John Doe, Richard Roe, Doe Corporation and The United States of America, Defendants.
• Court: U.S. District Court — Northern District of California

135 F. Supp. 913

THOMSON MACHINE WORKS CO., a corporation, Plaintiff, v. LAKE TAHOE MARINE SUPPLY CO., Inc., a corporation, John Doe, Richard Roe, Doe Corporation and The United States of America, Defendants.

No. 33911.

United States District Court N. D. California, S. D.

November 23, 1955.

Hilary H. Crawford, Hilary H. Crawford, Jr., San Francisco, Cal., for plaintiff.

Lloyd H. Burke, U. S. Atty., James B. Schnake, Asst. U. S. Atty., San Francisco, Cal., for defendants.

ROCHE, Chief Judge.

This action is brought against the United States under the provisions of 28 U.S.C. § 2410, as a complaint to quiet title against lien and to foreclose lien. The facts of this case are as follows:

On December 10, 1952, the United States entered into a contract with Lake Tahoe Marine & Supply Co., Inc., (hereinafter referred to as "Tahoe") for the construction of several utility boats. During the course of the work and in accordance with the terms of the contract, the government made progress payments to Tahoe totaling $197,128.88, less deliveries of $177,316.62, leaving a net balance due of $19,812.25.

On April 25, 1953 Tahoe ordered certain bronze rods for propeller shafts for the aforementioned boats, which shafts were delivered to Tahoe, Care of Thomson Machine Works (hereinafter referred to as "Thomson"), in San Francisco. The delivery date was July 20, 1953 at which time title to the shafts passed from the supplier to Tahoe. From the time of delivery to June 14, 1954, Thomson performed work on the 21 shafts which are subject of this action, which work was of the reasonable value of $1,313.60.

On June 10, 1954 the government terminated the contract under the default clause contained therein, by reason of the contractor's failure to perform, and exercised its right under the contract to direct the contractor to transfer to it the title to completed supplies and manufacturing materials acquired for performance of the terminated part of the contract.

Accordingly Tahoe transferred title to the propeller shafts to the government on June 23, 1954. On July 1, 1954 the government demanded possession of the propeller shafts from Thomson, in whose possession the shafts had been since July 20, 1953. On July 8, 1954 Thomson commenced this present action. On July 22, 1954, the government took the propeller shafts from the possession of Thomson without its consent.

On July 23, 1954 a creditors' petition in bankruptcy against Tahoe was filed in the U. S. District Court for the Northern District of California and thereafter Tahoe was adjudged a bankrupt. On March 30, 1955 the government filed a proof of claim in the amount of $75,933.36 for excess costs from the default termination, asserting its priority under 31 U.S.C.A. § 191 and § 65, sub. a of the Bankruptcy Act, 11 U.S.C.A. § 105, sub. a.

The government claims superior rights to Thomson in the propeller shafts as owner and/or lienor and alleges:

(1) that the government has title to the property which must prevail over any lien claim on the part of Thomson; and

(2) that the government has a lien on the property which is paramount to the mechanic's lien acquired by Thomson under California law.

I. Title

Clause 11 of the general provisions of the contract between Tahoe and the government provides for termination by the government; and paragraph (d) of that clause states that:

"If the contract is terminated as provided in this clause, the government, in addition to any other right prevailing in this clause, may require the Contractor to transfer title and deliver to the government in the manner directed by the contracting officer (i) any completed supplies, and (ii) such manufacturing materials as the contractor has specifically produced or specifically acquired for the performance of such part of this contract as has been terminated."

No cases have been found which adjudicate the effect of a transfer of title made pursuant to the standard termination clause in government contracts, and as stated in the case of In re American Boiler Works, 3 Cir., 1955, 220 F.2d 319, it is clear that cases decided under contract language which vests title to the government as and when material is paid for do not help us here. The contract clearly does not contain such a provision. However, Clause 11 is clear in that the government in addition to any other right could require the contractor to transfer title and deliver to the government (i) any completed supplies and (ii) such manufacturing materials as the contractor has specifically produced or specifically acquired for performance of the contract. There is no question but that title to the propeller shafts was always in Tahoe. When Tahoe transferred title to the government, title as to the vessel and to materials vested in the government. Regardless of whether the reason back of the provision is beneficial or harsh, here we have the sovereign making a contract. In the absence of constitutional inhibitions the sovereign can make such contract as it pleases, and no one can object. In re American Boiler Works, supra.

The case of United States v. Ansonia Brass & Copper Co., 1910, 218 U.S. 452, 31 S.Ct. 49, 56, 54 L.Ed. 1107 has been referred to by both sides and demands consideration herein.

In the factual situation applicable to the Mohawk and the Galveston the court held that the state lien law was applicable. The reasons for this holding, in this court's opinion, were twofold. First, no provision was contained in the contracts for these vessels as to passing of title. Secondly, the Supreme Court analyzed the entire contracts, and stated, "We think that this contract, as the one for the Mohawk, was made in recognition...