Case Name: C. C. HARTWELL CO., Limited, et al. v. MILLER et al.
Court: United States Court of Appeals for the Fifth Circuit
Jurisdiction: United States
Decision Date: 1918-12-17
Citations: 256 F. 273
Docket Number: No. 3255
Parties: C. C. HARTWELL CO., Limited, et al. v. MILLER et al.
Judges: Before WALKER and BATTS, Circuit Judges, and GRUBB, District Judge.
Reporter: Federal Reporter
Volume: 256
Pages: 273–277

Head Matter:
C. C. HARTWELL CO., Limited, et al. v. MILLER et al.
(Circuit Court of Appeals, Fifth Circuit.
December 17, 1918.
On Petitions for Rehearing, March 15, 1919.)
No. 3255.
1. Mortgages <&wkey;151(3) — Priority Over Mechanic's Lien — Recording.
Under Civ. Code La. art. 3274, a mechanic’s lien is subject to a later mortgage, unless the lien is recorded as therein required within seven days after the act or obligation of indebtedness.
2. Mechanics’ Liens &wkey;>312 — Subcontractors—“Concursus” Under Louisiana Statute — Bankruptcy Proceedings.
Proceedings in a bankruptcy court, after sale by the trustee of a building contractor of property on which bankrupt held, a lien, requiring subcontractors holding liens to show cause why their inscriptions should not ho erased and their claims referred to the proceeds, held not to operate as a •‘concursus,” under Act La. No. 134 of 1906, requiring subcontractors to object to the sufficiency of contractor’s bond or be remitted to their remedy thereon.
[Ed. Note. — For other definitions, see Words and Phrases, Concurso.]
Appeal from the District Court of the United States for the Eastern District of Louisiana; Rufus E. Eoster, Judge.
In Bankruptcy. C. C. Hartwell Company, Limited, and others, appeal from an order in favor of Mrs. Izabel Danziger Miller and others.
Modified.
William Grant, Wm. B. Grant, J. C. Llenriques, Robert H. Marr, and Henry P. Dart, all of New Orleans, La., for appellants.
A. D. Danziger and Charles Payne Eenner, both of New Orleans, La., for appellees.
Before WALKER and BATTS, Circuit Judges, and GRUBB, District Judge.

Opinion:
GRUBB, District Judge.
This is an appeal from an order of the District Court in bankruptcy, made upon oppositions to the trustee's account, and which disallowed the liens of appellants, and directed the payment of a mortgage claim out of the sale fund ahead of the claims of appellants. The liens were disallowed by the District Judge, because they were found to have been not seasonably filed.
The appellants' claims were for materials furnished in the construction of an improvement on the realty of the bankrupt. The materials furnished prior to February 26, 1912, were furnished to the bankrupt as owner of the real estate direct. Article 3274 of the Civil Code of Louisiana provides that—
"No privilege shall have effect against third persons, unless recorded in the manner required by law in the parish where the property to be affected is situated. It shall confer no preference on the creditor who holds it, over creditors who have acquired a mortgage, unless the act or other evidence of the debt is recorded within seven days from the date of the act or obligation of indebtedness, when the registry is required to be made in the parish where the act was passed or the indebtedness originated and within fifteen days if the registry is required to be made in any other parish of this state. It shall, however, have effect against all parties from date of registry."
As to materials furnished the owner, before a certain building contract was entered into on February 26, 1912, the mortgage of appellees would prime the claims unless a lien was acquired by the recording of the act or other evidence of the debt within seven days from the date of the act or obligation of indebtedness, as provided for by article 3274. Whitney-Central Trust & Savings Bank v. General Fire Extinguisher Co., 240 Fed. 631, 153 C. C. A. 429; Whitney-Central Trust & Savings Bank v. Luck, 231 Fed. 431, 145 C. C. A. 425; Hibernia Bank & Trust Co. v. C. F. Knoll Planting & Mfg. Co., 133 La. 698, 63 South. 288; Carolina Portland Cement Co. v. Southern Wood D. & F. Co., 137 La. 470, 68 South. 831; Wheelwright v. St. L., N. O., etc., Co., 47 La. Ann. 533, 17 South. 133; Allen-Wadley Lbr. Co. v. Huddleston, 123 La. 522, 49 South. 160; Shreveport Nat. Bank v. Maples, 119 La. 42, 43 South. 905. The record fails to show that any of the claims for materials furnished prior to February 27, 1912, the date of the recording of the building contract, were recorded so as to create a lien under the terms of article 3274, and the District Court rightly directed payment of the mortgage as against them.
On February 26, 1912, the bankrupt conveyed the real estate to one Singer, and entered into a building contract with Singer to complete the building for him, which contract was duly recorded February 27, 1912. Some of the materials were furnished to the bankrupt after this trade had been consummated, and while he was a contractor, and no longer owner. The rights of the materialmen for materials, thereafter furnished, ceased to be controlled by article 3274 of the Civil Code, but came under the influence of Act No. 134 of the Legislature of Louisiana, approved July 10, 1906, relative to building contracts. By the terms of this act, the building contract having been recorded before the day fixed on which the work was to commence, and not later than 7 days after the date of the contract, a lien is created in favor of those furnishing material to the contractor on the building ground, etc., as their interests may appear. The owner must require of the contractor the execution of a bond, with, good and sufficient surety, for not less than one-half of the contract price, to be recorded with the contract, and conditioned, among other things, that the contractor pay all subcontractors and furnishers of materials; the bond to be made in their favor as their interests may appear. All persons with claims against the contractor may perfect their liens by filing a sworn statement with the owner, and recording a similar one with the recorder .of mortgages in the parish where the work is done, within 45 days after the completion of the contract.
Under this act the appellants, who furnished materials after the building contract was executed and recorded, acquired a lien for the portion furnished the building contractor, which they perfected as required by the act, within 45 days from the completion of the contract, and were entitled thereby to prime the mortgage. Brown v. Staples, 138 La. 602, 70 South. 529. The appellees, however, rely on subsequent provisions of the act to show that the appellants were remitted to the surety on the bond required by the act to be executed in favor of the subcontractors and material furnishers as their interest may ap pear. The act further provides that if, at the expiration of 45 days, no recorded claims are filed, the recorder of mortgages shall, upon written demand of any party in interest, cancel and erase from the books of his office all inscriptions resulting from the recordation of the contract and bond. In the event there are recorded claims filed, the owner is required to file a petition in a court of competent jurisdiction citing all claimants and the surety on the bond for the assertion of all claims in concursus. The act then provides that, if no objection is made by any of the claimants to the sufficiency or solvency of the surety on the bond, within 10 days after the filing of the concursus, the clerk of the court shall give to any party in interest a certificate to that effect, and, on presentation of such certificate to the recorder of mortgages, he shall cancel and erase ,all inscriptions created by the recordation of said contract bond or said claim. If objection is made to the sufficiency or solvency of the surety, a summary method of hearing the objection is provided for.
Appellees claim that they are entitled to the benefit of the cited provisions of the act. It is not claimed that either the owner or the bankrupt filed a concursus. The contention is that the bankruptcy proceeding operated as one. Possibly if the appellants, in the bankruptcy proceeding, had been called upon by the trustee of the bankrupt to object to the sufficiency and solvency of the surety, and had failed to do so within the 10 days, the contention might prevail, though, in this instance, the bankrupt was the contractor and not the owner. However, an examination of the bankruptcy proceedings fails to reveal any proceeding or petition on the part of the trustee in which the appellants were either called upon, or given the right, to interpose the objection to the sufficiency or solvency of the surety on the bond, which the statute of Louisiana accords them, before they are remitted to the surety, as the only recourse for the collection of their claims. In this state of the record, we do not think the bankruptcy proceeding was a substitute for the concursus.
The order of the District Court should be modified, so as to provide for the payment out of the sale fund prior to the payment of the mortgage claim of those portions of the claims of appellants which are for materials furnished after the recordation of the building contract, and the cause remanded for the ascertainment of the proper amounts and the modification of the order accordingly and conformably to this opinion; and it is so ordered. Costs on appeal to be equally divided between appellants and appellees.