ERROR TO THE SUPREME COURT OF APPEALS OF THE STATE OF VIRGINIA.
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 sea-going 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
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 Virginia, 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 were 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
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 of 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
the proceedings, affirmed 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 a 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 precentage must
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 section 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 ...