11 Del. Ch. 110 | New York Court of Chancery | 1916
The question is as to the ownership of the twelve boxes of leather, or rather of the proceeds of the
In this last case the court said:
“To dedicate property to a particular purpose, to provide that a specified creditor and that creditor alone shall be authorized to seek payment of his debt from the property or its value, is unmistakably to create an equitable lien.”
The form of the agreement is immaterial, “if the intent-appears' to make any identified property a security for the fulfillment of an obligation.” 3 Pomeroy’s Equity Jurisprudence, §1237.
Here there was an agreement in consideration of a loan of money that the creditor, and it alone, should be authorized to seek payment of the debt from the leather, or its value, and so there was an equitable lien enforceable against the company itself, or its receivers and its creditors, who are volunteers. If an invoice of goods shipped to an agent or factor of the shipper for sale on commission be assigned as collateral security for a loan, then theré is an equitable lien created in favor of the lender, which entitled him to the proceeds of sale of the goods when sold.
There being, then, an equitable right, this court in this cause will enforce it, for the receivers cannot assert in behalf of the general creditors a claim to the proceeds of the sale of property which the insolvent corporation could not have asserted in a contest exclusively between it and the creditor. This has been well established as to assignees or trustees in bankruptcy, and the following cases were cited on the point: Hauselt v. Harrison, 105 U. S. 401, 406; Yeatman v. Savings Institution, 95 U. S. 764; First National Bank v. Pennsylvania Trust Co., 124 Fed. 968, 60 C. C. A. 100. A receiver appointed by a court of chancery to wind up the affairs of an insolvent company is like a receiver in bankruptcy, in that it takes the property of the company as a purchaser from the company with notice of all outstanding rights and equities. Inasmuch, then, as the receivers could acquire mo greater right than the United Leather Company had to the proceeds of the leather whenever and however sold, it seems to be a simple proposition that the
It is not necessary to consider the rights of a creditor of the United Leather Company having a legal lien on the leather as against the holder of the equitable lien, for there is no such legal lien. But it has been held that a specific equitable lien has preference over a subsequent legal lien. 25 Cyc. 679; Dwight v. Newell, 3 N. Y. 185.
There is in this cause no fraud on the rights of creditors of the United Leather Company, for it was a bona fide transaction throughout, the Security Trust and Safe Deposit Company lending money on certain property as collateral security, and the arrangement was a step in securing to the lender repayment by giving it a preference of payment from the things constituting the security. No other creditor of the borrower has any right to object, nor has he been deprived of any right or been put in a worse position because of the transaction between the United Leather Company and the Security Trust and Safe Deposit Company than he would have been if they had not made the agreement.
In my opinion, then, the Security Trust and Safe Deposit Company haying loaned to the United Leather Company money on the faith of the proceeds of sale of the leather consigned by the United Leather Company to its own factors, is entitled to the proceeds of sale thereof as against the receivers of the borrowing company, who represent the company and its creditors and stockholders.
Let an order be entered accordingly.