101 N.J. Eq. 78 | N.J. Ct. of Ch. | 1927
The problems submitted involve the distribution of $37,698.94 paid into court by the board of education of Elizabeth under an interpleader decree.
The Morgan Construction Company contracted with the board of education to erect the Alexander Hamilton Junior High School, in Elizabeth, and gave the statutory bond (Comp. Stat. p. 1765) with the Globe Indemnity Company as surety for the performance of the contract, and for the payment of labor and material. Contemporaneously, with the execution of the bond, the indemnity company took an assignment from the Morgan company of money that may be due upon default, if the Morgan company should make default, in the performance of the contract. This assignment did not come to light until after the Morgan company failed. The Liberty Trust Company financed the Morgan company in its various building operations, including the Alexander Hamilton School, and, to secure loans of $21,500, took an assignment from the Morgan company of the moneys to grow due on the contract. Notice of this assignment was filed with the board of education. During the course of construction the Morgan company was petitioned into bankruptcy and the federal court appointed a receiver, who, by direction of the court, undertook to finish the job, and who, by like direction, quit when it was found inexpedient to continue, *80 and, thereupon, the board of education completed the contract, and after deducting the cost of completion there remained of the contract price the sum now in dispute. The claimants are the receiver, who spent $17,864.64 in the work, and wants reimbursement; materialmen, who filed liens, under the Municipal Mechanics' Lien act, after the receiver was appointed; the Globe Indemnity Company and the Liberty Trust Company, which lay claim to the fund under their respective assignments. The indemnity company assignment is prior in point of time, but the trust company claims a superior equity because of priority of notice of its assignment to the board of education. The indemnity company denies, but the trust company concedes the priority of the receiver's claim; both contend that the lien claims are invalid.
The lien claims filed after the appointment of the receiver do not attach to the fund. Mack Manufacturing Co. v. CitizensConstruction Co.,
As to the receiver's claim. Upon the appointment of the receiver, which was in the usual form, commanding him to take possession of the bankrupt's property and enjoining all interference, the court ordered the receiver to borrow not exceeding $15,000 on receiver's certificates for the purpose of continuing the business of the bankrupt in order to preserve and protect the property, and later ordered an additional $10,000 of certificates. These certificates are declared to be liens on the bankrupt's property and assets. The first order was without notice; of the second the indemnity company had notice and assented; in fact, it purchased $8,000 of the certificates. The indemnity company now contends that the court had not the power to displace the security of its assignment without notice. An all-sufficient answer to this is that the indemnity company kept its assignment hidden until after the bankruptcy and was not entitled to notice. Moreover, it stood by and without protest saw the receiver expend the money to its advantage, for at that time it was chargeable *81
with the cost of finishing the work. It was silent then, it cannot be heard now. Furthermore, had the receiver had notice of the assignment, it is well settled that a court, in custody of assets of a private corporation, through a receiver, may carry on the business for the purpose of realization and preservation of its property, and when realization or preservation is as well for the interest of fixed charges, to subject such fixed charges to the expenses. Lockport Felt Co. v. United Box, Board and PaperCo.,
The remaining question is, Which of the assignees is entitled to the balance of the fund? The indemnity company *82
claims it, aside from its assignment, by way of subrogation to the rights of the board of education. What rights? If the indemnity company had been called upon, and had finished the work, upon the contractor's failure, it would have stood in the shoes of the board of education, and entitled, of the contract price, only to the sum expended in the completion. St. Peter'sCatholic Church v. Van Note,
The fact that the board of education exacted from the trust company a consent or release to the payment to the contractor of installment payments under the contract, did not effect a valuable consideration for its assignment. It may possibly have suffered harm in consquence, but such injury is not a valuable consideration relating to the execution of the assignment.
The balance of the fund after paying the receiver will be ordered paid to the Globe Indemnity Company. *84