Appeal from the United States District Court, Eastern District of Wisconsin. No. 85-C-767 -- Robert R. Warren, Judge.
Easterbrook, Ripple, and Manion, Circuit Judges.
The United States brought this replevin action to gain possession of certain tank gears in the possession of the defendant Lindberg Corporation (Lindberg). Lindberg counterclaimed for the value of work performed in manufacturing the gears. Rejecting various defenses raised by the defendant, the district court granted summary judgment for the government and ordered Lindberg to relinquish its possession; it also dismissed the defendant's counterclaim for lack of jurisdiction. Lindberg now appeals the district court's grant of summary judgment and its dismissal of the counterclaim. We affirm the judgment of the district court.
In March 1983, the United States Army Tank Automotive Command entered into a contract with MTC Gear Corporation (MTC) for the purchase of gears.*fn1 This government contract provided that the United States would purchase gears for use in military vehicles from MTC at the price of $604 per gear. R.7 at 2. The contract incorporated Armed Services Procurement Regulation 7-104.35(b) (Procurement Regulation) -- "Progress Payments for Small Business Concerns." One of the provisions in that regulation is a title-vesting clause that grants title to the government in all "parts; materials; [and] inventories" allocable or chargeable to the contract upon production or acquisition by MTC. R.10 at Ex. 5.
In the course of performing its work under the contract, MTC arranged for the gears to be heat "treated" or "enhanced by Lindberg. This process was necessary to meet the specifications of the government contract. Thus, the unfinished gears were shipped from MTC to Lindberg, which, through its Harris Metals division, performed the treatment procedure. No formal subcontract was drawn up between MTC and Lindberg; MTC simply sent the gears, along with purchase orders explaining the proper specifications, to Lindberg for treatment.*fn2 Lindberg performed work on MTC-manufactured gears from April through October 1983.
In November, MTC closed active business and became insolvent. R.16A. At that time, MTC owed Lindberg $224,424.06 for its work; it also owed the government a substantial amount of money because, prior to MTC's going out of business, the government had advanced $945,340 in progress payments. The government later recovered all but $273,420.20. MTC's insolvency prompted both the government and Lindberg to seek some form of repayment.
Lindberg acted first. In May 1984, Lindberg filed suit in the Circuit Court for Racine County, Wisconsin against MTC and the Chase Commercial Corporation (Chase).*fn3 It sought foreclosure of a common-law bailment lien against the gears for the value of the heat treatment performed by Lindberg. On July 25, 1984, the circuit court granted Lindberg a final default judgment foreclosing the lien. R.7 at Ex. 1. At about this same time, the government, after having recovered as much of the cash progress payments as it could, took its first steps toward repossessing the gears. In December 1984, the government notified Lindberg of the government's title to the gears and demanded that Lindberg relinquish possession.*fn4 Lindberg refused. Instead, in March 1985, Lindberg arranged a private foreclosure judgment sale of the gears to the Profile Gear Corporation (Profile) for $70,225. Notice of the private sale was provided to MTC, Chase, and the government. Upon receiving this notice, the government informed Profile of its claim of ownership, after which Profile refused to consummate the transaction.
On May 3, 1985, the government filed this replevin action seeking possession of the gears. Lindberg answered and filed an amended counterclaim, asserting that its common-law bailment lien was "superior to plaintiff's claim of title." R.17 at 2, para. 7. Both parties moved for summary judgment.
B. Holding of the District Court
In two separate rulings, reported together as United States v. Lindberg Corp., 686 F. Supp. 701 (E.D.Wis. 1988), the district court granted summary judgment for the government. In its view, the government had title to the gears through operation of the title-vesting clause in the contract. 686 F. Supp. at 702-03. That title, continued the district court, was not lost upon the gears' being sent to Lindberg for heat treatment. Title to the property is "not tied directly to the progress payments." Id. at 703. Furthermore, it held, "under federal law, laborers and materialmen can acquire no liens on a public work without the consent of the United States." Id. at 707 (citing Armstrong v. United States, 364 U.S. 40, 4 L. Ed. 2d 1554, 80 S. Ct. 1563 (1960); In Re Murdock Mach. & Eng'g Co., 620 F.2d 767, 769-70 (10th Cir. 1980)). Consequently, Lindberg's state-law based bailment lien could not be valid against the United States. 686 F. Supp. at 707. Nor, continued the court, can the state lien support a claim for ...