St. Marys Machine Co. v. National Supply Co.

| Ohio | Jun 16, 1903

The solution of the controversy between the parties depends upon a proper construction of Section 3206a, Revised Statutes. That section is as follows:

“Laborers and employes of any persons, association of persons or corporation, whether such employment be at agriculture, mining, manufacture or other manual labor, shall have a lien upon the real property of their employers for their wages, which is hereby declared to be superior to the following liens taken or -attaching during the existence of such unpaid labor claims, to-wit: Liens of attachment, liens of mortgages given or taken at a time of actual insolvency of the debtor, or with a view of preferring creditors or to secure a pre-existing debt, and superior to all claims for homestead or other exemptions, except under section fifty-four hundred and thirty; and in all cases where property of an employer is placed in the hands of an assignee, receiver or trustee, claims due for labor performed within the period of three months prior to the time such assignee, receiver or trustee is appointed, shall first be paid out of the trust fund, in preference t'o all other claims against such employer, except claims for 'taxes and the costs of administering the trust. The lien herein provided shall be deemed to be waived by the laborer or employe, as to any portion of such labor, unless within thirty days from the expiration of three months from the performance of such portion he shall file with the recorder of the county where the labor was performed, an itemized statement verified by affidavit of the amount, kind and value of the labor performed within said period, with all credits and off-sets, and the amount then due him therefor, which verified statement, when so filed, shall be recorded in a book kept for the prtr-pose, and shall become and operate as a lien upon the real property of the employer without -any specific description thereof, for the period of one year from and after the filing thereof, and if an action is brought to enforce the lien within that time, it shall continue in force until finally adjudicated; and the proceedings to enforce such lien shall be the same as in other eases of lien, against the owner of the property and all other persons interested; provided, that if several persons have or obtain liens under the provisions of this section, against the property of the same employer, they shall have no priority among themselves, hut shall be paid pro rata, nor shall they have priority over those obtaining liens under sections thirty-one hundred and eighty-four, thirty-one hundred and eighty-five, thirty-one hundred and eighty-six, thirty-one hundred and eighty-seven of this chapter, but the persons obtaining liens under said sections thirty-one -hundred and eighty-four, thirty-one hundred arucl eighty-five, thirty-one hundred and eighty-six and thirty-oine hundred and eighty-seven shall have priority 'as provided •therein.”

As there was no real estate in this case, the only part of the section here applicable is the following:

“Ancl in all cases where property of an employer is placed in the hands of an assignee, receiver or trustee, claims due for labor performed within the period of three months prior to the time such assignee, receiver or trustee is appointed, shall be first paid out of the trust fund, in preference to all other claims against such employer, except claims for taxes and the cost of administering the trust.”

As the amount found clue the St. Marys Machine Co. was greater than the value of the mortgaged property, as shown by the amount for which it sold, the property covered by the mortgage was the property of the machine companj', and not the property of Mr. Bloomfield. All he had was a right of redemption, by payment of the debt. Sayler v. Simpson, 45 Ohio St., 141, 150. This is a property right, but not property itself, within the purview of this section. It was therefore not the property of the employer, Mr. Bloomfield, but the property of the machine company, that came into the hands of the receivers in this case, and according to the holding of this court in Hughes v. Bank, 61 Ohio St., 386, it could not be subjected to the payment of labor claims under this section.

Again, said section provides that such labor claims “shall be first paid out of the trust fund, in preference to all other claims,” etc. “Trust funds,” under this section, must be the same, whether the estate is in the hands of an assignee, receiver or trustee, and in all such cases the fund for distribution among creditors generally is known as a trust fund, because the person in charge of the estate, holds the fund in trust -for all who can show themselves to be beneficiaries under the general law of the land, and not entitled as owners in whole or part, by virtue of a special property or particular lien. As to such the receiver holds the property or its proceeds not' in the sense of a trust fund, but under a special obligation to restore it to its owner.

The correctness of the -foregoing holding is strengthened by a reference to Section 6355, Revised Statutes, which is in pari materia, with said Section 3206a, and both sections must be read and construed together. Section 6355 is as follows:

“All taxes of every description assessed against the assignor upon any personal property held by him before his assignment, shall be paid by the asignee or trustee out of the proceeds of the property assigned -in preference to any other claims against the assignor, and every person who shall have performed any labor as an operative in the service -of the assignor, shall be entitled to receive out of the trust funds, before the payment of the other creditors, the full amount of the wages due to such person for such labor performed within twelve months preceding the assignment not exceeding three hundred dollars. But the foregoing provisions shall not prejudice or in any way 'affect securities given or liens obtained in good faith, for value, but judgments by confession on warrants of attorney rendered within two months prior to such assignment, or securities given within such time to create a preference among creditors or to secure a pre-existing debt other than: upon real estate for the purchase money thereof, shall be of no force or validity as against such claims for labor to the extent above provided, in case of assignment.”

This section provides fox the distribution- of the assets of the estate of an insolvent in cases of assignment' for the benefit of creditors, and provides for the payment of labor claims of operatives in the service of the assignor, for labor performed within ■twelve months, not exceeding three hundred dollars, but such labor claims cam. not prevail over securities given or liens obtained in good faith for value. From this it is clear that the fund ont of which such labor claims can be paid in cases of assignees or trustees in insolvency, is the general fund remaining after the payment of all securities and liens obtained in good faith for value. This general fund corresponds to, and is the same as the “trust fund” mentioned in said Section 3206a, and each of said funds is what remains after the payment of the valid securities and liens against the property in the hands 'of the assignee or trustee; and to the extent of such securities amid liens, construing both sections together, the property in the hands of the assignee or trustee is not' regarded as the. property of the employer, but as the property of the owner of the security or lien, and as being so connected with the property of the employer or assignor as to require the whole to be administered by the assignee or trustee, rendering to the owner of the securities am-cl liens, the proceeds of their property, and distributing by order of the probate court the remainder among the general creditors, subject to the rights of labor claims. Under the one section a labor claim includes all labor within -twelve months, not exceeding three hundred dollars, and in the other the period is only three months with no limitation as to amount. In this regard there seems to be some conflict, but in any particular case the laborer should be allowed to invoke tire provision most favorable to himself.-

Said Section 6355 applies only to assignees and trustees, while the other section, applies to assignees, trustees and receivers; but when the section is properly construed as to assignees and trustees, the same construction must be applied to receivers, because in said Section 3206a all three stand upon exactly the same footing.

This section of the statute has been differently construed by the circuit court in several cases, and while the true construction may not be clear at a glance, after mature deliberation, and a full examination of the principles involved, the above construction seems to be clearly warranted, and when so construed the section is constitutional. With this construction, of the section the other questions, so ably argued by counsel, become unimportant, and are not here considered.

The judgment of the circuit court will be reversed, and cause remanded to that' court with instructions to render a judgment of distribution, applying the net proceeds of the sale of the property covered by each chattel mortgage to the payment of the amount due upon such mortgage, preserving priorities where there are two or more chattel mortgages on the same property, and that the balance, if any, be applied upon the labor claims pro rata.

Judgment reversed, and judgment for plaintiff in error.