Armstrong et al. v. United States
364 U.S. 40 (1960)
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Rule of Law:
When the government acquires title to property for public use, its action constitutes a compensable 'taking' under the Fifth Amendment if it completely destroys the value of pre-existing, valid state-law liens by rendering them unenforceable due to sovereign immunity.
Facts:
- The United States contracted with Rice Shipbuilding Corporation (Rice) for the construction of navy personnel boats.
- The contract stipulated that upon Rice's default, the government could require Rice to transfer title to all completed and uncompleted work and materials.
- Petitioners, a group of materialmen, furnished materials to Rice for the boat construction, for which they were never paid.
- Under Maine law, petitioners held valid liens on the vessels and the materials they supplied.
- Rice defaulted on its contract with the government.
- The government exercised its contractual option, and Rice transferred title of the unfinished boat hulls and all related manufacturing materials to the United States.
- The government then moved the property to its own out-of-state shipyards, making it impossible for the petitioners to enforce their liens against the property.
Procedural Posture:
- Petitioners (materialmen) filed an action in the United States Court of Claims against the United States.
- Petitioners sought just compensation under the Fifth Amendment for the value of their state-law liens.
- The Court of Claims granted summary judgment for the United States, holding that petitioners never acquired valid liens.
- The Supreme Court of the United States granted petitioners' writ of certiorari to review the judgment of the Court of Claims.
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Issue:
Does the government's acquisition of title to property, which makes pre-existing and otherwise valid state-law materialmen's liens unenforceable due to sovereign immunity, constitute a 'taking' of private property for public use that requires just compensation under the Fifth Amendment?
Opinions:
Majority - Mr. Justice Black
Yes. When the government's acquisition of property renders valid, pre-existing liens unenforceable and valueless, it constitutes a 'taking' of those liens for which just compensation is required under the Fifth Amendment. The Court reasoned that the liens were valid property interests that attached while the private contractor, Rice, still held title; the property was not a 'public work' immune from liens at that time. Citing Louisville Bank v. Radford, the Court affirmed that such liens are compensable property interests. The government's subsequent acquisition of title and the resulting application of sovereign immunity completely destroyed the value of these liens. This total destruction was not a mere 'consequential' result of government action but a direct appropriation of the liens' value for a public purpose, triggering the constitutional requirement for just compensation. The purpose of the Takings Clause is to bar the government from forcing individuals to bear public burdens that, in fairness, should be borne by the public as a whole.
Dissenting - Mr. Justice Harlan
No. The government's action did not constitute a 'taking' under the Fifth Amendment. While agreeing that the petitioners held valid, compensable property interests, the dissent argued that the destruction of the liens' value was not a 'taking' but an indirect consequence of the separate legal doctrine of sovereign immunity. The government did not exercise its power of eminent domain to condemn the liens; it merely exercised a contractual right to acquire title. The unenforceability of the liens resulted from the government's pre-existing immunity from suit, not from an act of taking the lien itself. To hold that the government must pay for the effects of its sovereign immunity is to effectively negate that immunity.
Analysis:
This decision clarifies that the Fifth Amendment's Takings Clause protects intangible property interests, such as liens, not just tangible property. It establishes the critical precedent that when government action, even a lawful exercise of contract rights, is the direct cause of the total destruction of a valid private property interest's economic value, a compensable taking has occurred. The case distinguishes between direct destruction of a property right (a taking) and indirect, 'consequential' harms from government activity (often not a taking), reinforcing that sovereign immunity cannot be used as a shield to circumvent the constitutional obligation to pay for property rights that the government eliminates for public benefit.
