Armstrong v. United States

Supreme Court of the United States · 1960 · Property

Propertytakingsjust compensationmaterialmen's lienssovereign immunitypublic usecompensable propertygovernment contracts

Facts

The United States contracted with Rice Shipbuilding Corporation to construct 11 navy personnel boats, and the contract allowed the Government, upon Rice's default, to require Rice to transfer title and deliver completed and uncompleted work and materials on hand. Petitioners supplied materials to Rice for the boats, but were not paid. After Rice defaulted, the Government exercised its contractual option as to 10 unfinished hulls, Rice transferred the hulls and materials to the Government, and the Government removed them to naval shipyards. Petitioners claimed that under Maine law they had liens on the hulls and supplied materials, and that the Government's acquisition made those liens unenforceable and thus destroyed them.

Issue

Whether petitioners had valid, compensable lien interests under Maine law before the Government acquired the property, and if so whether the Government's acquisition of the hulls and materials, which rendered the liens unenforceable because of sovereign immunity, constituted a taking requiring just compensation under the Fifth Amendment.

Rule

Private liens may attach to property not yet owned by the United States, even if the property is being constructed for eventual transfer to the Government. State-created lien interests that give the holder a right to resort to specific property for satisfaction of a claim are compensable property under the Fifth Amendment. When the Government acquires property and thereby destroys the value of such liens because they become unenforceable against government-owned property, that destruction is a taking for which just compensation is due.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakefront Fabrication, a private contractor in Milwaukee, agreed to build patrol barges for the federal government. The contract stated that if Lakefront defaulted, the government could require Lakefront to transfer title to unfinished barges and stored components; before any default, Nora Patel supplied engines on credit and, under Wisconsin law, acquired a lien when the engines were delivered. After Lakefront defaulted, the government required transfer of title and took possession of the barges and engines.

If Nora seeks just compensation for the loss of her lien, what is the strongest argument in her favor?

Explanation. The majority held that sovereign immunity from materialmen's liens extends only to property actually owned by the United States, not to property merely expected to be transferred later. If state law gave Nora a lien while the contractor still owned the property, the later federal acquisition that destroys its enforceable value can require just compensation.