Where the United States claimed in an action in the state court
to determine liens on vessels in course of construction, that,
under the contract, title had vested in the United States, or that
liens had been specially reserved thereon, and also claimed that
the rights of the United States were superior to all others, and
could not he retarded or impeded by the state lien law, assertions
are made of rights and immunities which are the creation of federal
authority, and, if denied by the state court, this Court has
jurisdiction under § 709, Rev.Stat., to review the judgment.
Stipulations entered into by the United States district attorney
to obtain possession of vessels in course of construction and
seized by judicial proceedings under state law should not, under §§
3753, 3754, Rev.Stat., be construed as depriving the United States
of any rights asserted under the contracts for constructing such
vessels.
Construing the three contracts for construction of vessels
involved in this case, the Court construes one contract as vesting
title in the United States as the work progressed and the others as
not giving the United States a superior lien on the uncompleted
vessel as work progressed: in regard to the one contract, the state
lien law does not, and in regard to the other contract such law
does, apply.
Page 218 U. S. 453
Vessels in course of construction for the United States, the
title to which under the contract vests in the government as fast
as constructed, become instrumentalities of the government and, for
reasons of public policy, cannot be seized under state laws to
answer private claims.
Quaere whether a joint resolution has the effect of an
act of Congress, but
held that the resolution of May 5,
1894, No. 24, 28 Stat. 582, permitting partial payments on vessels
under construction for the Treasury Department, did not give the
government an express statutory lien on such vessels superior to
those given to materialmen by the state lien law.
110 Va. 165 affirmed in part and reversed in part.
The facts, which involve the construction of contracts for the
construction of certain vessels for the United States and the
relative rights of the United States and others claiming liens on
such vessels, are stated in the opinion.
Page 218 U. S. 461
MR. JUSTICE DAY delivered the opinion of the Court.
This is a writ of error to the Supreme Court of Appeals of
Virginia. The controversy grows out of contracts made between the
United States and the William R. Trigg Company, a corporation
organized under the laws of the State of Virginia, carrying on
business at Richmond, Virginia, for the construction of certain
vessels for the United States, namely, a seagoing suction dredge,
called the
Benyuard, for the War Department; a revenue
cutter, called the
Mohawk, for the Treasury Department,
and a cruiser, for the Navy Department, called the
Galveston. The contract price for the
Benyuard,
apart from its pumping machinery, was $254,550; for the
Mohawk, $217,000, and for the
Galveston,
$1,027,000. These contracts were dated, for the
Benyuard,
September 9, 1901; for the
Mohawk, April 20, 1900, and for
the
Galveston, December 14, 1899.
In December, 1902, S. H. Hawes & Company filed a bill in the
Chancery Court at the City of Richmond on behalf of themselves and
other creditors, asserting liens under the supply lien law of the
State of Virginia, averring the insolvency of the Trigg Company,
and asking for the appointment of a receiver, which was accordingly
made. The receiver took possession of the property of the Trigg
Company, including the vessels above named. Under §§ 3753 and 3754
of the Revised Statutes of the United States, a stipulation was
executed by the United States district attorney, on behalf of the
United States for the release and discharge of the vessels and the
material on hand applicable thereto.
Thereafter the case proceeded to judgment, and, on final appeal
to the Supreme Court of Appeals of Virginia, the liens under the
supply lien law of the state were held superior to any claim or
lien of the government. In the case of the
Benyuard, two
of the five judges of that court
Page 218 U. S. 462
dissented from the opinion of the majority, holding that the
title to the
Benyuard had passed to the United States
under the terms of the contract under which it was constructed. The
case is reported in 110 Va. 165.
It is contended that there is no jurisdiction in this Court to
review the judgment of the Supreme Court of Appeals of Virginia, as
no federal question was decided in that court which would lay the
foundation for the writ of error. In the third class of cases
provided for in § 709 of the United States Revised Statutes, it is
expressly provided that where any right, title, privilege, or
immunity claimed under the Constitution, treaty, or statute of the
United States, or an authority exercised under the United States,
is specially set up or claimed by either party, and the decision is
against such right, title, privilege, or immunity, the same may be
reexamined and reviewed by writ of error from this Court.
An examination of the record discloses that the government
claimed in the case that, under the contract, the title to the
dredge vested in the United States by virtue of the terms of the
contract; that a lien was reserved to the United States under the
contract for the cutter
Mohawk and the cruiser
Galveston which was superior to the claims of the supply
liens' creditors under the laws of the State of Virginia. The
government further contended that the right of the government to
its superior claims upon the vessels, whether of title or lien,
could not be affected by, and was not subject to, the lien statutes
of the State of Virginia. The government also claimed that the
state had no power to retard, impede, or control the operation of
the federal government in making and carrying out such contracts as
are herein under consideration.
We think that from this statement of the claims made in the
court below on behalf of the United States, assertions were made of
rights and immunities which were the creation of federal authority,
and the denial thereof
Page 218 U. S. 463
by the judgment of the state court brings the case within the
provisions of § 709 of the Revised Statutes of the United States.
It is not necessary to lay the foundation for jurisdiction that the
claims for federal rights asserted should be well founded; it is
enough if they are substantial claims of federal rights within the
statute, and such as were duly asserted and directly or necessarily
denied in the judgment and decision of the state court.
Nor do we think there is anything in the stipulation entered
into on the part of the government by the United States district
attorney, with a view to getting possession of the vessels, which
were in the hands of the receiver, which in anywise deprived the
government of the right to assert any such immunity and privilege
as it has because of the nature and character of the contracts and
the lien of the government in the premises.
An examination of these sections, 3753, 3754, shows that they
are intended to permit the United States to obtain possession of
property claimed by it, when the same has been seized by judicial
proceedings under the laws of the state, and to give to it and to
the persons asserting rights in the property protection in their
rights, notwithstanding such changes in possession.
In § 3753, it is expressly provided that
"nothing herein contained shall, however, be considered as
recognizing or conceding any right to enforce by seizure, arrest,
attachment, or any judicial process any claim against any property
of the United States, or against any property held, owned, or
employed by the United States, or by any department thereof, for
any public use, or as waiving any objection to any proceeding
instituted to enforce any such claim."
Section 3754 provides for the protection of persons asserting
claims against such property, and that, after final judgment given
in the court of last resort, to which the Secretary of the Treasury
may deem proper to carry
Page 218 U. S. 464
the proceedings, affirming the rights of the persons asserting
claims for the security or satisfaction of which such proceedings
were instituted in the state courts against such property,
notwithstanding the claims of the United States, the final judgment
shall be deemed to all intents and purposes as a final
determination of the rights of such persons, and shall entitle such
persons, as against the United States, to such right as they would
have in case the possession of such property had not been changed.
The section provides for the payment of such final judgment out of
the treasury of the United States.
The evident purpose of these sections is that neither the United
States nor the claimants to the property shall lose any rights
because of the release of the property under the stipulation, but,
as were the rights of the parties before the change of possession,
such they shall continue to be. We do not agree that, by entering
into a stipulation which embodied these terms, the United States
lost any right which it had to assert claims under the contracts,
or rights by reason of the sovereignty of the United States, if any
such exist. We think this Court has jurisdiction of this case upon
this writ of error.
Taking up the consideration of the case as to these several
vessels, and first as to the
Benyuard, this dredge was
constructed under the provisions of a contract which are thus
summarized by the master in the Virginia Chancery Court:
"Materials furnished and the work done by the William R. Trigg
Company were to be subject to rigid inspection by an inspector
appointed on the part of the government, his decision to be final
as to quantity and quality."
"If the Trigg Company should fail to begin or prosecute the work
in accordance with the specifications, which were made part of the
contract, the contract might be annulled by the government. In that
case, all payments were to cease, and all money or reserved
percentage must
Page 218 U. S. 465
be retained until the final completion and acceptance of the
boat. The government was to have the right to recover anything paid
for such completion in excess of the original contract price with
the William R. Trigg Company, including all extra cost of
inspection, and might proceed under § 3709 of the Revised Statutes
of the United States to provide for the completion of the boat by
open purchase or contract, unless the time for such completion
should be extended."
"It was expressly provided that the William R. Trigg Company
should be responsible for and pay all liabilities incurred in the
prosecution of the work for labor and materials."
"Section 9 of the contract was as follows:"
" It is further agreed by and between the parties hereto that,
until final inspection and acceptance of, and payment for, all
materials and work herein provided for, no prior inspection,
payment, or act is to be construed as a waiver of the right of the
party of the first part to reject any defective work or material,
or to require the fulfillment of any of the terms of the
contract."
"Section 199 of the specification was as follows:"
" The purpose and spirit of these specifications are that the
contractor is to provide and deliver a staunch dredge hull and
first-class machinery, complete in every respect."
"Section 206 of of the specifications was as follows:"
" It is understood and agreed that the contractor assumes full
responsibility for the safety of his employees, plant, and
materials, and for any damage or injury done by or to them from any
source or cause."
"Section 209 provided for sea trials at the expense of the
contractor, any defects that might appear to be remedied at his
expense, and trials to be repeated until the steamer should be
found satisfactory in all respects. Section 210 provided that, if
the requirements of the specifications were complied with, ten (10)
equal payments
Page 218 U. S. 466
should be made, based on the reports of the inspector, the first
when the hull and propelling machinery should be 10 percent
complete, the second when 20 percent complete, and so on, to the
last payment, to be made when the vessel should be turned over to
the United States after successful trial; from each of said
payments, except the last, 20 percent to be reserved until final
payment."
"Section 211 was as follows:"
" The parts paid for under the system of partial payments above
specified shall become thereby the sole property of the United
States; but this provision shall not be interpreted as relieving
the contractor from the sole responsibility for the proper care and
protection of said parts prior to the delivery of the dredge to the
United States, or from any other of the provisions of these
specifications."
"Section 212 provided for insurance against fire and marine
risks at the contractor's cost, for and in behalf of the United
States, to at least the amount of each partial payment."
"The evidence shows that the government had paid $142,550.80 on
account of this contract when the receiver was appointed in this
cause, and that said dredge was then 70 percent complete."
It is the contention of the government that the terms of this
contract are such that, by its expressed provisions, the vessel was
to become the property of the United States as fast as it was paid
for. A majority of the learned judges of the Supreme Court of
Appeals of Virginia were of opinion that title did not pass to the
government under this contract, and that it was subject to the
superior lien of claimants under the state laws of Virginia. It is
undoubtedly true that the mere facts that the vessel is to be paid
for in installments as the work progresses, and to be built under
the superintendence of a government inspector, who had power to
reject or approve the materials, will
Page 218 U. S. 467
not, of themselves, work the transfer of the title of a vessel
to be constructed in advance of its completion. But it is equally
well settled that, if the contract is such as to clearly express
the intention of the parties that the builder shall sell and the
purchaser shall buy the ship before its completion, and at the
different stages of its progress, and this purpose is expressed in
the words of the contract, it is binding and effectual in law to
pass the title. 2 Parsons on Contracts, 8th ed. 259, and cases
cited.
All sections of the agreement must be read in the light of the
purposes of the contracting parties, as gathered from the entire
contract, and must be considered in connection with other
provisions of the contract. And it is said that § 212, as to
insurance, does not show an intention to protect the title
transferred to the government, but must be read in the light of the
purpose of the government to acquire title to the dredge in the
event that it ultimately elected to take it over as a purchaser,
the ownership in the meantime remaining in the builder until such
final decision was made, and the insurance was required for the
government's security for the partial payments.
But we cannot agree to this construction of § 212. The ownership
clause provides that parts paid for
are to become the sole
property of the United States (specifications, § 211),
insurance was to be provided by the contractor preceding each
partial payment -- that is, as fast as title vested in the
government by reason of the partial payments, insurance was to be
effected
"to at least the amount of such partial payment, and the
property was to be kept insured to at least the aggregate of the
payments made until delivery and final acceptance."
It is insisted that the right to reject the dredge or to annul
the contract is inconsistent with the passage of title under the
provisions of § 211 of the specification, however positive that
section may be in terms.
Section 9 of the contract provides:
Page 218 U. S. 468
"It is further agreed by and between the parties hereto that,
until final inspection and acceptance hereof, and payment for, all
the material and work herein provided for, no prior inspection,
payment, or act is to be construed as a waiver of the right of the
party of the first part to reject any defective work or material,
or to require the fulfillment of any of the terms of this
contract."
Let it be conceded that this section gave the government the
right to reject defective work or material, or even the entire
dredge, if, upon trial and before final acceptance, it proved
defective -- is that right inconsistent with the vesting of title
in the parts as paid for, as specifically provided in § 211? We
think not. It may be that, in such contingency, the government
might reject the dredge. This might be true consistently with the
acquirement of title in parts accepted and paid for after
inspection. That is, if the whole, upon final trial, proved
defective, all, including the restoration of that acquired, might
be within the power of the government.
See, in this
connection,
The Poconoket, 67 F. 262, 266.
The provisions of § 4 look rather to the completion of the
vessel by the government in the event of the annulment of the
contracts for failure to keep its requirements. In that
contingency, it is provided that payments shall cease and reserved
payments be retained until the final completion and acceptance of
the work. In this section, the United States is given a remedy for
the cost of completion upon the failure of the contractor to
prosecute the work according to the contract.
Nor do we find it inconsistent with the vesting of the title in
parts that bond was taken in the sum of $60,000 for the performance
of the contract. The United States might well secure itself in this
sum, notwithstanding it took title to parts as paid for. Security
might nevertheless be required for the faithful doing of the work
within the stipulated time. It is also true that the Trigg
Company
Page 218 U. S. 469
was to be responsible for and pay all liabilities for labor and
material incurred in the prosecution of the work. We are at a loss
to see any inconsistency between this provision and the passing of
the title in parts as paid for. Construing the whole contract, we
find nothing in its other provisions which cuts down or lessens the
binding force of the clear and distinct provisions of § 211 as to
ownership. The parties therein dealt with a specific part of the
contract, they expressed themselves clearly upon the subject, and
it is not to be presumed, in the absence of clear expression or
necessary implication, that they intended to supersede this
provision in dealing with other specific or general parts of the
agreement.
It is suggested, in this connection, that the contract with the
government in the case of the
Benyuard is not different in
effect than the one passed upon in
Clarkson v. Stevens,
106 U. S. 505. In
that case, the contract provided that the materials received at the
yard for the construction of the steamer should be distinctly
marked with the letters "U.S." and should become the property of
and belong to the United States. There was no provision that title
to the vessel should vest in the United States as fast as parts
thereof were constructed, and Mr. Justice Matthews, who delivered
the opinion of the Court, approved the opinion of the Court of
Errors and Appeals of New Jersey expressing the view that the
declaration as to the materials excluded the implication sought to
be raised as to the title in the unfinished ship; "for," said Mr.
Justice Matthews, "the inference is obvious, from the particularity
of such a provision, that the larger interest would not be left to
mere intendment." P.
106 U. S.
516.
In
Briggs v. A Light Boat, 7 Allen 287, a builder's
lien, taken under the Massachusetts statute on a light boat being
built for the United States, was sustained. In that case, the
contract made no provision for a lien in favor
Page 218 U. S. 470
of the government, or the passing of the title to the boat in
progress of construction. Mr. Chief Justice Bigelow, delivering the
opinion of the Supreme Judicial Court of Massachusetts, used this
significant language (page 297):
"If this were a suit brought by the builders to enforce a lien
for materials furnished for the construction of a ship under a
contract directly with the government, or for repairs on a public
vessel, the title of which was vested in the United States at the
time the work was done or the supplies were furnished, the argument
founded on public policy, and the suggestions arising from the
inconvenience of causing delay and embarrassment to the public
service, would be entitled to very great weight. It might in such
case be open to grave doubt whether a lien on the property of the
United States could be given by virtue of an enactment of the
legislature of a state, or whether services rendered and materials
supplied directly to the government must not be presumed to have
been furnished exclusively on the faith and credit of the United
States, to the exclusion of any intent to rely on a lien upon the
public property. But considerations of this nature have no
application to a case like the present. It would have been
competent for the United States, if they wished to avoid the
inconvenience or danger of delay arising from liens in favor of
private persons, to make their contract in such form as to divest
the builder of any title to the property in the vessel during the
process of construction, or to stipulate for the application of the
purchase money to the extinguishment of all claims for materials
furnished to the builder."
As we construe the contract for the construction of the
Benyuard, it did "divest the builder of any title to the
property in the vessel during the process of construction." The
question in this aspect of the case then becomes one as to the
right of a state lien law to fasten upon the property
Page 218 U. S. 471
of the United States, and that property a vessel intended for
the use of the government in carrying on its necessary operations
in the exercise of its governmental authority.
It was in recognition of the inability of contractors for labor
and material to take liens upon the public property of the United
States that Congress passed the Act of August 13, 1894, c. 280 (28
Stat. 278), amended February 24, 1905, c. 778 (33 Stat. 811),
providing for bonds in favor of those who furnished labor or
materials in the construction of public works. It was in view of
this purpose to provide protection for those who could not protect
themselves by liens upon public property that the statute was given
liberal construction in this Court.
See Guaranty Trust Co. v.
Pressed Brick Co., 191 U. S. 416,
191 U. S. 425;
Hill v. Surety Co., 200 U. S. 197,
200 U. S.
203.
As we read the decision of the Supreme Court of Appeals of
Virginia, it is not held that a lien was fixed upon the dredge if
in fact the title thereto passed to the United States. In any
event, it could not be tolerated that property of the United States
could be seized or encumbered under state lien laws of the
character in question. We are not now dealing with the right of a
state to provide for such liens while property to the chattel in
process of construction remains in the builder, who may be
constructing the same with a view to transferring title therein to
the United States upon its acceptance under a contract with the
government. We are now treating of property which the United States
owns. Such property, for the most obvious reasons of public policy,
cannot be seized by authority of another sovereignty, against the
consent of the government. The
Benyuard, as fast as
constructed, became one of the instrumentalities of the government,
intended for public use, and could not be seized under state laws
to answer the claim of a private person, however meritorious.
Page 218 U. S. 472
Nor do we think the case one for the application of the doctrine
governing cases where the United States claims an interest in
property lawfully in possession of a court which is administering
it, as in equity or in admiralty, and the government intervenes to
protect its interest therein. In such instances, its rights must be
adjudicated in recognition of the rights and demands of others
interested in the same property. In this case, the vessels were
released under a stipulation which fully protected the rights of
the United States, and the government claims the exclusive right
and title in the
Benyuard as the parts were completed and
paid for.
In the case of the
Mohawk, there is no such stipulation
as to passing of the title on partial payments in the progress of
the work as is found in the contract for the
Benyuard. The
Secretary of the Treasury was, in his discretion, to make partial
payments under the contract during the progress of the work, not to
exceed 75 percent of the value of the labor and materials actually
furnished and delivered, and a lien was reserved for such payments,
in the following language:
"
Provided, That a lien shall be, and hereby is,
reserved to the United States upon the hull, machinery, fittings,
and equipment of said vessel, and the materials on hand for use in
her construction, respectively and collectively, for all moneys
advanced on account thereof, and that such lien shall commence with
the first payment, and shall thereupon attach to the work and the
materials furnished, and shall in like manner attach from time to
time, as the work progresses, and as further payments are made, and
shall continue until the completion and acceptance of said
vessel."
This lien, it is asserted, was reserved in accordance with a
joint resolution of Congress passed May 5, 1894, No. 24 (28 Stat.
582, 583), which is as follows:
"
Resolved by the Senate and House of
Representatives
Page 218 U. S. 473
of the United States of America in Congress assembled,
That the Secretary of the Treasury be, and he hereby is, authorized
to make partial payments, from time to time, upon existing
contracts and all contracts hereafter made for the construction of
vessels for the Treasury Department, but not in excess of 75
percent of the amount of the value of the work already done, and
that the contracts hereafter made shall provide for a lien upon
such vessels for all advances so made:
Provided, That
nothing in this joint resolution shall be construed to hereafter
authorize any partial payments except on contracts stipulating for
the same, and then only in accordance with such contract
stipulation."
On behalf of the government, it is contended that this
resolution makes the lien of the government, reserved under the
contract, an express statutory lien by authority of the United
States, and consequently superior to any asserted rights under the
lien laws of a state. But we cannot agree to this contention. The
joint resolution, if it be conceded to have the effect of an act of
Congress, does not undertake to create a statutory lien, but
directs how contracts thereafter made shall provide with reference
to liens upon such vessels. As to future contracts, it is directed
that they shall provide for liens upon vessels for advances thus
made. We think the lien mentioned is only one created by the terms
of the contract, and is to be considered in the light of the other
provisions thereof.
At the time of entering into the contract, a bond was required
and was given by the Trigg Company in the penal sum of $45,000,
conditioned for the proper construction of the vessel according to
the contract and specifications, and that the Trigg Company should
promptly make payments to other persons supplying labor and
materials in the prosecution of the work. We think this requirement
was a distinct recognition on the part of the government that the
Trigg Company might become indebted
Page 218 U. S. 474
to other persons who should perform labor or furnish materials
in the building of the vessel, who might become entitled, by reason
of such claims against the company, to liens upon the property.
The contract was made with the Virginia corporation, and it was
intended that the bond required of the Trigg Company should protect
the government against rights arising out of labor performed or
material furnished in the construction of the vessel. Conceding it
to be true for this purpose, as asserted by the counsel for the
government, that the United States can make contracts providing
liens of this character which shall be superior to the claims of
any person for liens under state laws, it is nonetheless certain
that it may, if it chooses, recognize the authority of the labor or
materials for the construction of labor or materials for the
construction of government work. Indeed, such, as we have seen, is
the policy of the government in respect to public buildings and
structures, upon which liens cannot be taken under the laws of the
states. In order that such claims may be satisfied, the United
States has made provision for their protection by bonds upon which
persons may recover damages, so that those who furnish property of
which the government receives the benefit shall not entail a loss
by so doing. Read in the light of this policy, so manifestly just
and proper, and the requirements of this contract and bond, we
think that the government did not intend that the lien which it
reserved for itself should be superior to that of contractors for
labor and material who had contributed to the work.
The case of the
Galveston is controlled by the same
principles. In that contract, there was no provision for taking
title to the vessel; on the contrary, it was stipulated that, on
certain conditions, the title should vest in the United States as
collateral security, and the eighteenth clause of the contract
provides for the release of liens
Page 218 U. S. 475
before partial payments shall be required. This clause is
distinct and clear in its requirements, and reads:
"When a payment is made under this contract, as a condition
precedent thereto, the Secretary of the Navy may, in his
discretion, require, for the protection of the party of the first
part, evidence satisfactory to him, to be furnished by the party of
the first part, that no lien or rights
in rem of any kind
against said vessels, or her machinery, fittings, or equipment, or
the material on hand for use in the construction thereof, have been
or can be acquired for or on account of any work done or any
machinery, fitting, equipment, or material already incorporated as
a part of said vessel, or on hand for that purpose, or that such
liens or rights have either been released absolutely, or so
subordinated to the rights of the government as to make its lien
for all payments paramount, so as not to encumber or hinder in any
way the right of the government to accept or reject said vessel,
and so as to become absolutely extinguished in case of the
acceptance of the vessel."
The effect which we give this provision is strengthened by the
opinion rendered to the Secretary of the Navy by the Attorney
General, that in his opinion, the practice of the Navy Department
in making such contracts recognized that liens of this class might
be acquired on vessels where there was no provision in the contract
for vesting title in the same in the United States. 23 Op.Atty.Gen.
174, 176.
We think that this contract, as the one for the
Mohawk,
was made in recognition of the rights of those who should furnish
work or material for the vessel to secure their claims by liens
which it was made the duty of the contractor to provide for in
order to protect the title of the United States.
Upon the whole case, we reach the conclusion that judgment must
be affirmed as to the
Mohawk and
Galveston,
Page 218 U. S. 476
and reversed as to the
Benyuard, and it is so ordered.
The case is remanded to the Supreme Court of Appeals of Virginia
for further proceedings not inconsistent with this opinion.