364 U.S. 40 (1960)
The United States entered into a contract with the Rice Shipbuilding Corporation for the construction of eleven navy personnel boats.1 The contract included a provision allowing the Government to terminate upon default and require the contractor to transfer title and deliver all completed and uncompleted work along with manufacturing materials.2 Petitioners furnished materials to Rice for use in building the boats.3
Upon Rice's default, the Government exercised its option with respect to ten of the boat hulls still under construction.4 Rice executed an itemized Instrument of Transfer of Title conveying the hulls and materials on hand to the United States.5 The Government then removed all of these properties to out-of-state naval shipyards for completion of the boats.6 Petitioners had not been paid for their materials at the time of the transfer.7
Petitioners claimed they held valid liens under Maine law on the hulls and the materials at the time of transfer.8 Maine law provided that whoever furnishes labor or materials for building a vessel has a lien on it and on the materials before they become part of the vessel.9 Because the transfer made the liens unenforceable due to sovereign immunity, petitioners sought just compensation under the Fifth Amendment.10
The Court of Claims held that petitioners never acquired valid liens on the hulls or materials transferred to the Government.11 It relied on prior precedent and concluded there had been no taking of any property owned by the petitioners.12 The Supreme Court granted certiorari to review the case.13
Whether petitioners acquired valid liens on the hulls and materials under Maine law before the transfer to the United States?14
The sovereign’s immunity against materialmen’s liens has never been extended beyond property actually owned by the United States. A mere prospect that property will later be owned by the United States does not render that property immune from otherwise valid liens under state law.15
Yes. The United States entered into a contract with the Rice Shipbuilding Corporation for the construction of eleven navy personnel boats. The contract included a provision allowing the Government to terminate upon default and require the contractor to transfer title and deliver all completed and uncompleted work along with manufacturing materials. Petitioners furnished materials to Rice for use in building the boats.
Upon Rice's default, the Government exercised its option with respect to ten of the boat hulls still under construction. Rice executed an itemized Instrument of Transfer of Title conveying the hulls and materials on hand to the United States. The Government then removed all of these properties to out-of-state naval shipyards for completion of the boats. Petitioners had not been paid for their materials at the time of the transfer.
The terms of the contract show that title remained in Rice, not the United States, when petitioners furnished their materials.16 The agreement provided for delivery, preliminary acceptance, and final acceptance of the boats, the contractor to remain responsible for all supplies until delivery.17 Progress payments were secured by a paramount government lien on the property.18 Maine law provided that whoever furnishes labor or materials for building a vessel has a lien on it and on the materials before they become part of the vessel. Therefore, petitioners acquired valid liens under Maine law before the transfer to the United States.19
The petitioners acquired valid liens on the hulls and materials under Maine law before the transfer to the United States.20
Whether the petitioners' liens constituted compensable property interests under the Fifth Amendment?21
Yes. Under Maine law, materialmen become entitled to a lien when they furnish supplies.24 Although the lien must subsequently be enforced by attachment, petitioners were entitled to resort to the specific property for the satisfaction of their claims.25 This right is compensable by virtue of the Fifth Amendment.26
The Government's argument that its paramount lien made petitioners' liens worthless is not dispositive.27 On this record the value of the property may have exceeded the Government's claim.28 This would allow petitioners to realize some amount on their claims.29
The petitioners' liens constituted compensable property interests under the Fifth Amendment.30
Whether the United States' action in acquiring title to the property and thereby rendering the liens unenforceable constituted a taking requiring just compensation?31
The total destruction by the Government of all value of liens, which constitute compensable property, has every possible element of a Fifth Amendment “taking” and is not a mere “consequential incidence” of a valid regulatory measure.32 The Fifth Amendment’s guarantee that private property shall not be taken for a public use without just compensation entitles lienholders to just compensation when the Government destroys the value of the liens.33
Yes. Before the United States compelled Rice to transfer the hulls and all materials, petitioners had valid liens under Maine law against both the hulls and whatever unused materials which petitioners had furnished.34 After transfer to the United States the liens were still valid but they could not be enforced because of the sovereign immunity of the Government and its property from suit.35 The result was a destruction of all petitioners’ property rights under their liens.36
The Government for its own advantage destroyed the value of the liens, something that the Government could do because its property was not subject to suit, but which no private purchaser could have done.37 Since this acquisition was for a public use, the Government’s action did take the property value of those liens within the meaning of the Fifth Amendment.38
The United States' action constituted a taking requiring just compensation under the Fifth Amendment.39
Related opinions on this issue
Joined by Mr. Justice Frankfurter And Mr. Justice Clark
Justice Harlan dissented from the conclusion that the Government's action constituted a taking.40 He agreed that petitioners had valid liens representing compensable property interests.41 However, he argued that the Government had not exercised its power of eminent domain to extinguish the liens.42
Instead, it had merely exercised its power to contract and acquire title.43 The resulting unenforceability stemmed from sovereign immunity, which cannot be regarded as a taking.44 Treating it as such would effectively negate the immunity doctrine.45
He would therefore affirm the judgment of the Court of Claims.46