Opinion ID: 1550675
Heading Depth: 1
Heading Rank: 8

Heading: Does Act Prefer Junior Liens to Senior Liens?

Text: In our discussion of appellants' proposition Tenth, we stated that we would leave for later discussion their point entitled, As here applied, the Bankruptcy Act prefers junior liens to senior liens, and discriminates among liens of equal rank. The point is without merit. We quote appellants' argument: Much of the land within the Merced Irrigation District is subject to mortgages securing debts owing to banks and individuals. In addition to being encumbered by the bonds of Merced Irrigation District, most of the lands in the district are burdened with bonds of one or more other public agencies. Wholly or partly within Merced Irrigation District are to be found five road districts, three high school districts, thirty-five grammar school districts, one mosquito district, three drainage districts, and three cities, all of which have outstanding bonds collectible by assessment upon lands in the respective districts mentioned. In addition, the county itself has outstanding a large amount of bonds. Under the law of California the bonds of most of the foregoing public agencies are of equal rank.    The result therefore of the application of Chapter IX of the Bankruptcy Act to the petitioner is to prefer junior claims to senior claims, and to discriminate among claims of equal rank. In other words, the contention is that because some of the lands of the District are subject to mortgages or bonds of other independent and distinct public agencies, the effect of this proceeding is to prefer junior liens and to discriminate among claims of equal rank. The conclusion is not justified. The obligations of mortgages or bonds of overlapping agencies are simply not affected by the plan. It is true that a scaling down of the obligations of this District should leave the taxpayer more money with which to pay his other obligations, but this is not a preference of liens.