112 F. 759 | E.D. Va. | 1902
(after stating case as above). This case is now before the court upon exceptions taken to the report of the referee, D. Lawrence Groner, F,sq., and the questions to be determined are: The ownership of the insurance money aforesaid; whether the supply lien creditors have any claim thereto; the validity of the supply lien creditors’ claims against the company; together ' with the order of priority, as among themselves, and what preferences, if any, have been given by the bankrupt to any of its creditors.
i. The claim of the Bank of Delaware to the fund derived from the policies of insurance on the burned buildings, which were payable to it at the time of the fire, will be considered. This money the bank insists is not a part of the bankrupt’s estate, “but belongs to it,” and that, as the amount is.less than the indebtedness to the bank, the same should be applied, independently of the bankruptcy proceedings, as a credit on its debt; while the supply claimants, on the other
The statute of Virginia is exceedingly broad, and it may be conceded that liens properly perfected under it take precedence of claims due for money advanced before the supplies are furnished; but the question presented here is as to whom the money actually belongs. If the bankrupt company had no interest in the money other than a mere equitable interest in any surplus that might arise after the payment of the debt for which the insurance policies were pledged, and there was no such surplus, then there would be nothing belonging to the company. There was no estate upon which the supply lien creditors’ claims could attach. This arises from the character of the contract, viz., a policy of insurance against loss by fire, which is a mere personál contract of indemnity against a possible loss on account of the interest of an insured in the thing insured. Money derived on policies of insurance taken out by the mortgagor upon property is .in no way liable for the payment of a lien or mortgage thereon, except by express agreement between the parties. Such contracts for indemnity do not attach to the property insured, nor go with the same as incident, by any conveyance or assignment, unless there is some special stipulation to that effect between the insurer and the insured. This is the result of the decisions, and it follows that the money received from policies of insurance, being less than the amount for which the pledge was made, held by the Bank of Delaware upon the property and estate of the bankrupt, taken out and assigned to it for its protection, belongs to the bank, and not to the estate of the bankrupt.
The supreme court of the United States, has quite recently had under review this subject, and there seems to be no doubt from their decisions as to the correctness of the conclusions herein reached. Wheeler v. Insurance Co., 101 U. S. 439, 25 L. Ed. 1055, was a case of insurance upon certain buildings and improvements upon real estate upon which there was a lien, and on a certain cotton gin and cotton. Policies of insurance had been taken out by one who made advances to the owner of the propertjq and, a fire occurring, the holders of the notes, previously secured upon the same property, claimed the benefit of thé insurance money, and insisted that the insurance was really taken out by the policy holders as the agent of the debtor, and for his benefit, and that the owner of the property having paid the premiums to secure the insurance, and having in the mortgage securing .the notes on the property agreed to insure for the benefit of the mortgagees, and to transfer- such policies to them, the holders of said notes were equitably entitled to the insurance, and that the persons who effected the insurance had in fact no insurable interest
The City of Norwich, 118 U. S. 468, 6 Sup. Ct. 1150, 30 L. Ed. 134, was a case of marine insurance, arising in a limited liability proceeding in admiralty, and in which the supreme court, in determining the extent of the owner’s interest in the ship insured, held that the policy of insurance on the ship lost was no part of the owner’s interest in the ship, and did not enter into the amount for which the ship could be held liable. In a word, the supreme court held the shipowner free from liability under the act of congress, 'and decreed him the money due himself under insurance policy taken to indemnify him against hazard incurred by the ship, leaving persons who had sustained loss by reason of the disaster to the ship unpaid. In this case Mr. Justice Bradley, in the course of a very exhaustive and learned opinion, in discussing the extent of the interest of'the shipowner in the property destroyed, at page 494, 118 U. S., page 1157, 6 Sup. Ct., and page 144, 30 L. Ed., said:
“This view is corroborated by reference to a rule of law w'hicli we slip-pose to be perfectly well settled, namely, that the insurance which a person has on property is not an interest in the property itself, but is a collateral contract, personal to the insured, guarantying him against loss of the property by Are or other specified casualty, but not conferring upon him any interest in the property. That interest he has already, by virtue of his ownership. If it wore not for a rule of public policy against wagers, requiring insurance to be for indemnity merely, he could just as well take out insurance on another’s property as on his own, and it is manifest that this would give him no interest in the property. He would have an interest in the event of its destruction or nondestruction, but no interest in the property. A man’s interest in property insured is so distinct from the insurance that unless he has such an interest independent of the insurance his policy will be void. This rule of law manifests itself in. various ways. If a mortgagor insures the property mortgaged, the mortgagee has no interest in the insurance. He may stipulate that the policy shall be assigned to him, and the mortgagor may agree to assign it; and, if it be assigned with the insurer's consent, the mortgagee will then have the benefit of it; or, if not assigned according to agreement, the mortgagee may have relief in equity to obtain the benefit of it. So, where property is sold, the insurance does not follow it, but censes to have any value, unless the insurer consent to the transfer of the policy to the grantee of the property. In other words, the contract of insurance does not attach itself to the tiling insured, nor go with it when it is transferred. It is hardly necessary to cite authorities for a rule which has become so elementary. We will only refer to a few of them. Lord Chancellor King in Lynch v. Dalzell, 4 Brown, Parl. Cas. (2d Ed.: London, 1803) 431 (vol. 3, 1st ed., p. 497); Id., 2 Marsh. Ins. 801; Lord Hardwicke in Sadlers Co. v. Badcock, 2 Atk. 554; Carroll v. Insurance Co., 8 Mass. 515; Insurance Co. v. Lawrence, 10 Pet. 507, 512, 9 L. Ed. 512; Carpenter v. Insurance Co., 16 Pet. 495, 503, 10 L. Ed. 1044; Insurance Co. v. Tyler, 16 Wend. 385, 397, 30 Am. Dec. 90; Wilson v. Hill, 3 Metc. 66, 68; Powles v. Innes, 11 Mees. & W. 10, 13; McDonald v. Black’s Adm’r, 20 Ohio, 185, 55 Am. Dec. 448; Plimpton v. Insurance Co., 43 Vt. 497, 5 Am. Hop. 297. Carroll v. Insurance Co., Powles v. Innes, and McDonald v. Black’s Adm’r*764 were cases of marine insurance, and the same rule was followed in those cases as in cases of insurance against fire.”
■ In the further progress of this opinion the learned justice, in discussing the question of the stress laid upon the hardship of the shipowner’s being entirely indemnified for the loss of his vessel, and persons sustaining damage from the collision by the fault of the owner’s employes getting nothing, at page 495, 118 U. S., page 1158, 6 Sup. Ct., and page 144, 30 L. Ed., said:
“This mode of contrasting the condition of the parties is fallacious. If the shipowner is indemnified against loss, it is because he has seen fit to provide himself with insurance. The parties suffering loss from the collision could, if they chose, protect themselves in the same way.”
In this case, as the contest is entirely between creditors, the question of hardship, if it could have any effect, would be entitled to little consideration. The supply lien creditors, upon whom the loss falls, in addition to th'eir special and peculiar lien, given them by statute, might have availed themselves of the same protection, by way of insurance, as the bank did. Reference may also be had to Heller v. Bank, 89 Md. 602, 43 Atl. 800, 45 L. R. A. 438, 73 Am. St. Rep. 212; In re Little River Lumber Co. (D. C.) 92 Fed. 585; May, Ins. p. 1040; Bank v. Hume, 128 U. S. 195, 204, 205, 9 Sup. Ct. 41, 32 L. Ed. 370. The latter case is one of life insurance, and is referred to with a view of showing the inability of one, other than the person in whose name the insurance policy is issued, to claim the money thereunder, and the similarity between life insurance policies and fire insurance policies; and the first case of Heller v. Bank; supra, will be found to contain an exceedingly full and able discussion of, the subject under consideration.
2. The referee, having reported in favor of the Bank of Delaware as to the insurance money, in accordance with the views herein expressed, further held that the bank was, nevertheless, chargeable on account of dealings had by it after insolvency, and within four months of the bankruptcy, with certain preferences arising from payments made to it, to wit, for the sum of $1,374.68, and that such amount should be charged against it, and deducted from the insurance money to be received. The position of the referee in this respect would be entirely correct in dealing with any money properly a part of the estate of the bankrupt, if the bank sought to prove against the estate any claim on account of its indebtedness; but, as neither of these conditions exists, the action of the refere'e cannot be sustained. The theory on which the money is decreed to the bank is that it, and not the bankrupt company, is entitled to the money due under the insurance policies by virtue of the assignment of the policies; there being no surplus arising from such policies, after the payment of the bank’s debt. The petition filed in these proceedings by the bank, in view of the circumstances under which the money was paid into court, is not the equivalent of the presentation of a claim against the estáte of' the bankrupt. The money was paid in court with the express understanding that it was to be without prejudice to the rights of any of the parties in interest, and the petition filed was merely to have the court determine to whom the money belonged, in view of
3. The principles announced in reference to the insurance policies held by the Bank of Delaware apply with equal force to the insurance policies held by the Merchants’ & Farmers’ Bank of Portsmouth, and the said bank is entitled to the amount of the two insurance policies held by it, one of which has been already paid, and a decree should be entered in its favor for the amount arising from the remaining policies paid into court in these proceedings. The balance due the bank will be subordinated to the payment of the lien claims for supplies hereinafter allowed, the said supplies having been furnished prior to the date of the recordation of the bank’s mortgage. The section of the statute (section 2485, Code Va.) in terms provides that the lien of persons furnishing supplies shall be prior to any lien by deed of trust, mortgage, hypothecation, sale, or conveyance, made or executed, and admitted to record, subsequent to the day on which said supplies were furnished. The date of recordation being the time fixed by the statute after which supplies cannot be furnished and a lien secured, it follows in this case that the liens, in so far as they are allowed as above, take precedence of the deed of trust in favor of the bank.
4. This brings us to the consideration of the validity of the supply claims, and how far such liens will be enforced under the present bankruptcy act. The validity of the supply lien act of the state has been judicially passed upon by the supreme court of the state of Virginia, by the United States circuit court of appeals and the circuit court of the United States for this circuit. Virginia Development Co. v. Crozer Iron Co., 90 Va. 127, 17 S. E. 806, 44 Am. St. Rep. 893; Liberty Perpetual Building & Loan Co. v. M. A. Furbush & Son Mach. Co., 26 C. C. A. 38, 80 Fed. 631, 42 U. S. App. 496; Fidelity Ins., Trust & Safe Deposit Co. v. Roanoke Iron Co., 81 Fed. 439. This court, heretofore, in the matter of the Reese Manufacturing Company, in bankruptcy, not reported, recognized the existence of such liens under the present bankrupt act; following in Re Kerby-Dennis Co., 36 C. C. A. 677, 95 Fed. 116, and In re Emslie, 42 C. C. A. 350, 102 Fed. 291. The order of priority of payment of supply lien creditors, as among themselves, was also passed upon in the Reese Manufacturing Company Case, referred to, and held to be that adopted by the supreme court of the state in the case of Virginia Development Co. v. Crozer Iron Co., supra; that is to say, that such liens took precedence as of the date of their recordation in the clerk’s office. There seems to be no reason to depart from the conclusions then reached, either as to the recognition of such claims in bankruptcy or their order of priority among themselves.
It is earnestly insisted, however, that the supply claims in this case are not valid, because the bankrupt was not such a manufacturing company as was contemplated by the supply lien statute; that said, company was not principally engaged in the manufacture of lumber,
5. We come next to the consideration of the question of the time within which supply liens may be filed, whether from the date the supplies are furnished, or only within 90 days after the last item of the account becomes due and payable. This involves the interpretation to be given .sections 2485 and 2486 of the Code of Virginia, as amended, under which the liens are claimed. The referee, in an able and carefully considered report, held that the liens could not be filed from the time that the supplies were furnished, where credit was given, but only after the last item of the account became due and payable, and within 90 days from that date. After giving the subject much thought and consideration, I have reached a different conclusion from that arrived at by the referee. Taking into view both sections of the statute,—the one under which the lien is given, as well as the one under which it is secured,—with the various amendments to each section, together with the subject-matter of legislation, which is of a remedial character, and intended to encourage the business of
Section 2485 of the Code, as amended by Act Feb. 15, 1892, provides that:
“All persons furnishing supplies to a mining or manufacturing company, necessary to the operation of the same, shall have a prior lien upon the personal property of such company, other than that forming a part of its plant, to the extent of the money due them for such supplies, and also a lien upon all of the estate, real and personal, of said company; which said last lien, however, upon such real and personal estate, shall he subject and inferior to any lien by deed of trust, mortgage, hypothecation, sale or conveyance, made or executed and duly admitted to record prior to the date upon which said supplies are furnished.” Acts 1891--92, p. 362.
And section 2486, as amended by Act Feb. 12, 1896,. this being the section providing for the “perfection and enforcement” of the lien given by the preceding section, provides that:
“No person shall be entitled to the lien given by the preceding section unless lie shall, within ninety days after the last item of his bill becomes due and payable, for which said supplies are furnished or services rendered, file in the clerk’s office,” etc., “a memorandum of the amount and consideration of his claim, verified by affidavit, which memorandum shall he” recorded, indexed, etc. Acts 1895-96, p. 340.
The language of the first section of this act is broad and comprehensive, and plainly contemplates the existence of the lien from the time the supplies are furnished. It gives a prior lien upon the personal property of such company other than that forming a part of its plant, and also a lien upon the estate, real and personal, of such company, subordinating such latter lien, however, only to liens duly admitted to record prior to the date at which the supplies are furnished; in a word, against liens acquired by deeds of trust, mortgage, hypothecation, or in case of a sale or conveyance. The time of furnishing the supplies is the period as of which the material man is given a right of lien.
The right to claim the lien arises under this section, and may be enforced at any time after the supplies are furnished, but may be lost by failure to comply with some provisions of the act giving the right. The only requirement is that the lien shall be filed “within ninety days after the last item of the bill becomes due and payable.” If the claim is filed within that time, the lien secured relates back to the time the supplies were furnished, subject to be defeated by prior or intervening supply liens. There is nothing incongruous or unusual in having security for a debt which, although due and owing, is yet not payable. It is just what is done in nearly every trust deed or mortgage, and the legislature can as well pro-1 vide for such character of lien as can parties contract for the same among themselves. The word “due” in this section should be construed as meaning “owing,” rather than “payable.” This interpretation has frequently been given to this word in similar statutes, such as mechanics’ liens and attachment statutes. Williamson v. Bowie,
The language of section 248b, amended, “within ninety days after the last item of his bill becomes due and payable,” is not used to designate the beginning and the end of the period in which the memorandum may be filed, but to prescribe the time within which such lien must be filed; or, to state it differently, to fix a period not later than and beyond which it cannot be filed. The construction of the word “within,” used in statutes, has frequently been had. In Levert v. Read, 54 Ala. 531; Merchants’ & Traders’ Nat. Bank v. Mayor, etc., of City of New York, 97 N. Y. 355; Dawson v. Black (Ill.) 36 N. E. 413; Railway Co. v. Eubanks, 32 Mo. App. 189; Atherton v. Corliss, 101 Mass. 40; Young v. The Orpheus, 119 Mass. 179,—the interpretation herein placed is given.
No case in Virginia seems to have been decided under this particular section of the supply lien law, as amended, and we are therefore left without specific interpretation of the meaning of the act by the highest court of the state. Much light, however, is thrown upon the subject by the decisions of that court, of comparative recent date, under the clause of the mechanic’s lien law giving material men and subcontractors a lien.
In Railroad Co. v. Miller, 80 Va. 821, President Rewis, construing section 5 of the act approved March 31, 1875, which was as follows:
“Any sub-contractor, or any person contracting to furnish materials about a building or other improvement, for a general contractor, or other person than the owner, may give notice in writing to the owner of such building or other improvement, stating the value of the labor performed or materials furnished, and. shall, within twenty days after such building or other improvement is completed, or the work thereon otherwise terminated, furnish the owner thereof with an affidavit, showing a correct account of the amount due the said party by the contractor and remaining unpaid to the subcontractor, or person contracting to furnish materials, and the said owner shall be liable, in,” etc. Acts 1874-75, p. 437.
—After remarking that the principal question sought to be raised by the instruction was that the notice and affidavit required by the statute to entitle the subcontractor to the benefit of its lien must, in order to have that effect, be furnished after, and not before, the entire completion of the work by the general contractor, said:
“Obviously, this is not the true construction of the statute. * * ⅜ It is plain from the language thus employed that the intention of the legislature was to authorize notice to be given after the materials have been furnished by the subcontractor, and to prescribe a limit within which the essential affidavit, ‘showing a correct account of the amount due’ to the subcontractor, shall be furnished, namely, twenty days after the completion of the work, and no longer. In other words, the subcontractor may give notice as soon as the materials are furnished, and may at the same time, if he pleases, furnish- the required affidavit, or at any time thereafter, provided the same is furnished within twenty days after the work is completed.”
“The subcontractor was not obliged to wait until tbe work was finished or terminated otherwise before he gave his notice. He was. entitled, under the amended law, to serve his notice at any time after the labor was performed and the materials furnished, before the expiration of twenty days from the completion of the building or other improvement, or the day the work was otherwise terminated.”
Another view of this statute strongly convinces me of the correctness of the views herein expressed. If the supply lien can only be secured after the last item in the bill becomes due and payable, and within 90 days from that time, the result will be that no credit can be given by a vendor in the sale of his goods. The moment credit is given, a subsequent vendor, less, considerate of his vendee’s interests and wishes, will sell his goods either for cash or on a shorter credit, and file his lien and secure the same, to the exclusion of the earlier and more lenient creditor, who would be powerless to avail himself of a security that the law gave him, and that he had only lost by reason of his generosity to his debtor. Sales on credit could no longer be had to mining and manufacturing companies. They would in their dealing be reduced to a strictly cash basis, and the statute designed to secure them, enlarged and additional means of credit, and thereby to foster their interests, would prove a disadvantage rather than a benefit to them. I am informed that Judge Prentis, of the circuit court of the county in which the bankrupt corporation did business, has recently, in an unreported case, taken the same view of this act. To his opinion great weight should be given, as well because of his eminent capacity to reach a correct conclusion, as because it is the construction given by the local state court.
, 6. An exception made to the report presents the further' question of the sufficiency of the supply lien claim of the Branding Manufacturing Company, one of the bankrupt’s creditors; the contention being that said claim was invalid, because the memorandum of account filed with the lien failed to show what part of the debt was actually due at the time of filing, and what part not due; the total claim being for $6,836.27, $3,415,1:7 of which amount had actually fallen due. The referee wa§ of opinion that the claim as filed was sufficient, but that only the sum actually due could be allowed thereon. Under the view taken by the court, as hereinbefore expressed, as to the time within which.accounts may be filed, this exception becomes less material, as the date of the sale of the supplies is the time from which the claim can be filed, and not that at which the last item of the account falls due. The account, as filed,, is sufficient, under the court’s view of the law, though the better practice would have been to have filed an account in detail, in order that the record would show the amount for which the lien was claimed, as well as .the portion for which it, at any given time, was enforceable. A coitrt of equity in the enforcement of the claim would, I take it, have no difficulty in providing only for the collection at the particular time of the amounts actually due. Iaege v. Bossieux, 15 Grat. 83, 76 Am. Dec. 189.
7. Another exception presents for the consideration of the court the question of whether the claim of one Parsons, the assignee of sundry small orders issued by the bankrupt company, for the payment of its hands, should be allowed, and, granting that the assignee can make such claim, whether the fact he is unable to state just from whom he received these assignments, when they were issued, or positively at what time the labor was performed for which they were issued, should disentitle him to recover. The first question is one of law, and under the ruling of Liberty Perpetual Building & Loan Co. v. M. A. Furbush & Son Mach. Co., 26 C. C. A. 38, 80 Fed. 631, 42 U. S. App. 496, the assignee of claims under the supply lien law can ordinarily file the lien.
The other questions presented are largely dependent upon the facts, and, as thé point is made that the evidence as to this claim is not returned by the referee, the claimant should have an opportunity to again submit his proof of lien to the referee, and have him pass thereon.
The report of the referee will be recommitted, with directions to state an account of the fund under the control of the court, according to the views herein expressed. „