146 N.Y.S. 449 | N.Y. App. Div. | 1914
Lead Opinion
Michael W. Nolan rendered certain services and furnished certain materials under a contract with the city of Watervliet for paving, curbing and improving certain streets, and on the 11th of January, 1912, was adjudged a bankrupt. Prior to the bankruptcy the plaintiff under a contract with said Nolan furnished certain material which were used by him in performing said contract, and on the 13th day of January, 1912, and within thirty days from the completion of said contract filed a mechanic’s hen for the value of such material. This action was brought to foreclose that lien. Upon the trial the complaint was dismissed upon the ground that the plaintiff’s lien was rendered ineffectual by the bankruptcy of the contractor Nolan, adjudicated two days prior to the filing of the lien. This ruling presents the only question for our consideration.
In Kane Co. v. Kinney (174 N. Y. 69) it was held that under an assignment for the benefit of creditors the assignee took the title of the assignor as it was at the time of the assignment, subject to the legal or equitable claims thereon, and that under the Lien Law the materialman had a preferential statutory right in the nature of an unperfected equitable lien, which could not be defeated by the act of the debtor, and when the notice was duly filed the assignment became subject to the lien. In York Mfg. Co. v. Cassell (201 U. S. 344), decided in 1906, it was held that a vendor under a conditional contract of sale, which. under the Ohio law was void as against creditors and purchasers in good faith because not filed, but good as between the parties thereto, could hold the property against a trustee in bankruptcy, as the latter was in no better position than the bankrupt at the time of adjudication.
It has been held that prior to the amendment of the Bank
Subdivision a of section 47 of the Bankruptcy Law, prior to the amendment of 1910, defined the duties of the trustee, and required him to account for all moneys received, and to collect and reduce to money the property of the estate for which he was trustee under the direction of the court. In 1910 this was amended by adding thereto the following: “And such trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a creditor holding a hen by legal or equitable proceedings thereon; and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied.” (30 U. S. Stat. at Large, 557, § 47, subd. a, as amd. by 36 id.' 840, § 8.)
It appears from the discussions in Congress at the time of the passage of the amendment that the primary intention of the amendment was to do away with the effect of the decision in the case of York Mfg. Co. v. Cassell (supra). The trial court (See 82 Misc. Rep. 243) has held that the effect of the amendment, however, exceeded the primary intent and gives the trustee in bankruptcy a creditor’s lien, which is superior to the merely equitable hen of the materialman, which was not perfected at the time of the bankruptcy by the filing of his notice of his lien under the Mechanics’ Lien Law. (Consol. Laws, chap. 33 [Laws of 1909, chap. 38], art. 2, as amd.)
I am unable to agree with the trial court or with Mr. Justice Kellogg in this interpretation of the statute. As to moneys actually in the custody of the court, or coming into the custody of the court, the trustee in bankruptcy is vested
It must be admitted that the language used in the amendment is unfortunate and is not perfectly clear. It should, if possible, receive such interpretation, however, as in the case at bar will preserve the substance of the rights given under the Mechanics’ Lien Law, which have been jealously guarded by the decisions of all courts. The interpretation given by the court below would require a materialman, in order to protect his rights, to file a new lien immediately after each load of material furnished, lest the contractor might file a petition in bankruptcy and defeat his rights. The policy of the law is well indicated in the opinion of Judge O’Brien in the Kane Co. Case (supra): “A certain time is allowed in which the lien may be asserted or lost. During that time there is a preferential statutory right in the nature of an unperfected equitable lien in favor of the laborer, mechanic, materialman or subcontractor. And when a notice of lien is filed that right is perfected. But until the ninety days allowed by the statute within which the lien may be filed have elapsed the right cannot be defeated by the voluntary act of the party against whom it might be asserted, such as a general assignment for the benefit of creditors. If such were the effect of the assignment, no
I recommend, therefore, that the order be reversed and a new trial granted, with costs to the appellant to abide the event:
All concurred, except Kellogg, J., dissenting in opinion, in which Howard, J., concurred.
Dissenting Opinion
Michael W. Nolan rendered certain services and furnished certain material under a contract with the city of W atervliet, for paving, curbing and improving certain streets, and on the 11th day of January, 1912, was adjudged a bankrupt. Prior to the bankruptcy the plaintiff, under a contract with said Nolan, furnished certain material which was used by bim in performing said contract, and on the 13th day of January, 1912, and within thirty days from the completion of said contract, filed a mechanic’s hen for the value of such material.
The only question for consideration is whether the plaintiff’s lien, filed two days after the adjudication in bankruptcy, takes precedence over the interest of the trustee in bankruptcy in the amount due upon the contract.
In Kane Co. v. Kinney (174 N. Y. 69) it was held that under an assignment for the benefit of creditors the assignee took the title of the assignor as it was at the assignment, subject to the legal or equitable claims thereon, and that under the Lien Law the materialman had a preferential statutory right in the nature of an unperfected equitable lien which could not be defeated by act of the debtor, and when the notice was duly filed the assignment became subject to the lien.
In York Mfg. Co. v. Cassell (201 U. S. 344), decided in 1906, it was held that the vendor under a conditional contract of sale, which under the Ohio law was void as against creditors and purchasers in good faith, could hold the
In 1910, subdivision a of section 47 of the Bankruptcy Law, which defines the duties of the trustee in requiring him to account for all money received, and to collect and reduce to money the property of the estate for which he is trustee, under the direction of the court, and to close up the estate as expeditiously as is compatible with the best interests of the parties in interest, was amended by adding thereto the following: “And such trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings thereon; and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied.” (30 U. S. Stat. at Large, 557, § 47, subd. a, as amd. by 36 id. 840, §8.)
The discussions in Congress at the time of the amendment show that the amendment was intended primarily to do away with the effect of the decision in the York case, but it expressly gave the trustee all the rights of a creditor who had a lien by legal or equitable proceedings. The language cannot be warped from its fair meaning. The amendment changed the rule established by the cases cited, with the result that the rights of the trustee in bankruptcy take precedence over the defendant’s claim.
It is urged, however, that the bankrupt had a mere chose in action against the municipality and that the money sought to be reached by the plaintiff was not property in the custody or coming into the custody of the bankruptcy court. I think the
It is unnecessary to consider whether the same rule would apply to property outside of the jurisdiction of the court or to property which at the time of the adjudication may be in the custody of another court. • Such cases, and perhaps others, may be covered by the 2d paragraph of the amendment, when it speaks of property not in the custody of the court. I think the claim to .the moneys due from the municipality was property in the custody of the court before the mechanic’s lien was filed, and that, therefore, at that time the trustee had all the rights in the property of a creditor holding a lien by legal or equitable proceedings. His claim was, therefore, superior to the plaintiff’s.
The order and judgment should, therefore, be affirmed, with costs.
Howard, J., concurred.
Judgment and order reversed and new trial granted, with costs to appeEant to abide event.