219 F. 397 | 7th Cir. | 1914
(after stating the facts as above).
One of the contentions for reversal is that the plaintiff in error had a valid and enforceable mechanic’s lien for this unpaid claim, notwithstanding its so-called waiver thereof, and much of the argument on this appeal is directed for and against the dual propositions on which it rests, namely: (a) That the stipulation of waiver is not an independent one, but dependent on the ensuing stipulation for final payment to be made “within forty days after the contract is fulfilled”; and (b) that such waiver in an executory contract of the lien provided by the Indiana statute “is contrary to public policy and void.” We have not been impressed with either of these theories as tenable, either on the oral argument or upon examination of the authorities cited in the briefs, and they appear to be met and overruled by ‘a decision of the Appellate Court of Indiana (since the hearing of this appeal, called to attention by supplemental brief) in the suit of Carson-Payson Co. v. C., C., C. & St. L. Ry. Co. — for enforcement of
The agreement thus relied upon (in connection with the undisputed facts in reference to the claim) to render the payment lawful is entirely free from doubt as to its bona fides and purposes. It plainly provides a fund which was completely segregated from the estate of the bankrupt so long as any claim within its purview remained unsettled. It is free from ambiguity in any of its terms, except as to the meaning with which the term “lienable claims” was used .therein. It was executed by both parties to the primary contract for the work and by both sureties for its performance by the contractor (bankrupt), and it expressly recites: An existing controversy between the Railway Company and the contractor in reference to performance and liabilities thereunder, to be adjusted; that various liens had been filed by parties who had furnished labor and materials, wherein suits were threatened and attachments had been brought to reach ambunts due from the Railway Company; that “the amount of said lienable claims exceeds the amount hereinafter conceded” to be due tile contractor, and the Railway Company asserts claim against the sureties for any amount it is required “to pay on account of lienable claims” in excess thereof; and that all parties “desire to provide funds necessary to take care of such claims as may be lienable against the property” of the Railway Company “to the end that costs and expenses of litigation may be avoided and said claims adjusted.” The contract then provides, in substance: (1) The Railway Company accepts the buildings in their present condition “as having been completely constructed according to said contract, except that work being performed' by subcontractors shall be fully completed.” (2) The Railway Company cancels its several claims (as mentioned) for breach of the contract; and it agrees to pay and the Construction Company agrees to accept $42,000 in satisfaction of all claims thereunder. (3) This payment, together with $20,000 furnished by the surety companies, making $62,000, is to' be deposited in a bank (specified) “in the names of” Willson and Littleton “as trustees for the parties hereto,” and “used in paying lienable claims” which have been or may be filed against the Railway Company, but “no claims, except judgments, shall be paid out of said fund, except upon approval of the Railway Company, the surety companies, and the Construction Company”; and “lienable claims” shall include all costs adjudged against the Railway Company in suits, and the surety companies “shall bear the burden and expense of litigating any claims asserted to be lienable” and shall furnish any additional sums if the above fund proves insufficient. (4) If any balance of the fund remains “after all lienable claims are paid,” the Surety Companies are to be reimbursed therefrom for their contribu
We are of opinion that these recitals and provisions clearly establish the purposes of the fund thereby created to be r First, to protect the Railway Company, in consideration of its paying in $42,000 (when it was questionable whether even half that sum was due the contractor), against all lien claims (then estimated in excess of $60,000) and litigation thereof, so that it was to be free from further liability;, second, to protect the surety companies from their ultimate liability for the expenses and delay of litigation over the claims, in consideration of their contribution to the fund, by providing (in lieu of a judgment) for their settlement out of the fund on joint approval of the parties; third, to assure the lien claimants (who participated in the negotiations, but are mentioned only as a class), as the ultimate beneficiaries, of such dedication of the fund so set apart for settlement' of their claims without litigation, on approval thereof. The bona fide provisions and purposes so described, not only constitute an equitable arrangement for all interests therein, but, thus made more than four months prior to the bankruptcy proceedings, are immune from the statute. Its purpose to provide for settlement of “liens and claims on account of labor and materials furnished on said buildings” for which lien claims had been filed is expressly mentioned, so that it is not open to .question, as we believe, that the plaintiff in error, having long theretofore filed his lien claim, is clearly identified as a beneficiary for settlement out of the fund whenever his claim is either adjudicated or approved by the parties; and this view arises irrespective of the equities presented both in its favor and in favor of the Railway Company, under the facts (stated in the findings) of its completion of the work after payment therefor had been assured on behalf of the Railway Company. Furthermore, the contention in support of the judgment, that the term “lienable claims,” as used in the agreement, is to be construed as excluding any claim not legally enforceable as a lien against the property, impresses us to be inconsistent, both with the provisions as an entirety and with the. undisputed testimony as to the negotiations leading up to the agreement that the parties “considered all claims” lienable “which were legitimate claims for labor and material”.; and no discussion or suggestion arose whether any of the numerous claims represented at the meetings were or were not enforceable as valid liens. Indeed, the agreement to avoid litigation and substitute approval by the parties in lieu of adjudication is strongly persuasive that-all just claims for labor and materials were embraced in the provision.
The fund of $62,000 thus provided must be treated as an. entirety for carrying out its- purpose's. While it refers to Willson and Little^
In Van Iderstine v. Nat. Discount Co., supra, and Greey v. Dockendorff, supra, assignments of book accounts as security for advances are upheld as conferring equitable liens, good faith appearing; and the objection raised “that this lien was secret” is overruled as without force. In McDonald v. Daskam, supra, an equitable lien is recognized and enforced in favor of a creditor and against a trustee in bankruptcy, through notations on fire insurance policies left in the hands of the insurer’s agent.
We believe the findings of fact clearly authorize our above stated conclusions of law, and thus establish the right of the plaintiff in error to retain the payment made to it out of the fund described.
The judgment is therefore reversed, and the cause remanded to the District Court, with direction to enter judgment thereupon in favor of the defendant below.