Court Opinion

ID: 9445444
Source: CourtListenerOpinion
Date Created: 2023-08-03 21:29:04.445902+00
Date Added: 2024-06-11T17:30:16.031673
License: Public Domain

JAMES ALGER FEE, Circuit Judge
(dissenting).
The whole Court is in agreement that an inchoate mechanic’s lien upon property of the bankrupt may be paid either by the bankrupt himself or from his *248property without creating a preference or a fraudulent conveyance to the transferee. There are several theories upon which a transaction of that type can be upheld.
But here the able trial judge, Hon. Leon Yankwich, held the issue was whether a designated assignment constituted a preference. All of the elements necessary to constitute a preference were pleaded by the trustee, found to exist by the trial court, and judgment was based thereon. Efficient findings to support the determination were entered. The District Court negatived the affirmative defenses relating to the lien and an agreement that the credit was given therefor. The effect of these findings was only to indicate that these defenses were not relevant to the case at bar, and the preference was affirmatively found to exist. In opposition to the situation which developed in the case, the majority opinion now adjudges affirmatively that the facts in the record show that a valid inchoate lien was in existence and further that there was an agreement between the contractor and the owner that the credit given was a consideration for a forbearance to perfect this supposed lien. The difficulty with this position is that this Court has no jurisdiction to enter affirmative findings of fact.
All of this highlights the fact that the trial court held that the existence of the lien and the supposed forbearance of Greenblatt to file an alleged inchoate lien as consideration for discharge of the encumbrance were not within the issues of this-particular case.1 Therefore, such issues of fact were not tried in the District Court and cannot be tried here.2 Grave doubt exists as to whether a valid lien can be filed where the purported lienor is indebted to the owner.3 This doubt is increased in geometrical proportions where, as in this case, there is evidence from which it might be concluded that the contractor and the owner agreed that the contract price was to be applied as a credit upon the pre-existing debt of the contractor.4 The question of whether the credit given was over any just credit or offset was not decided. Likewise, the question whether there was a lien in law or in fact was never adjudicated until the majority of this panel decided it in the foregoing opinion.
The trial court held properly that the existence of the lien and its validity with regard to any property of bankrupt could be adjudicated in a foreclosure in the' bankruptcy court. If the holding of the trial court as to the issues is correct, it should be affirmed. If the trial judge erred as to the issues to be determined, the cause should be remanded to determine whether a lien existed and what the effect was of any agreement between the owner and the contractor regarding credit on the pre-existing debt.5 Even if this Court is of opinion that the trial judge passed upon the facts and entered an erroneous negative finding as to the defenses, since there is no power to make affirmative findings here, the cause should nevertheless be remanded.

. Judge Yankwich quoted at great length from In re Etherton, D.C., 88 F.Supp. 874, and then said: “[T]he main point is this: we are not deciding whether you have a lien.” This view was reaffirmed in these words: “I am not deciding that they had a lienable right. That question is not before us.”

. See Paramount Pest Control Service v. Brewer, 9 Cir., 177 F.2d 564, 565.

. See Cal.Code Civ.Proc. § 1193.1 (j): “A claim of lien filed for record by any- person claiming the benefit of 'this chapter * * * shall contain the following: (1) a statement of his demand after deducting all just credits and offsets; * * *.’’

. Decided cases under the statute treat generally of pre-lien-payment by ownerlienee to contractor-lienor as a “just credit,” See Los Angeles Pressed Brick Co. v. Higgins, 8 Cal.App. 514, 516, 97 P. 414, 416, or sums paid by owner to materialmen and subcontractors to extinguish their liens or claims for which the contractor is primarily responsible as “offsets.” Covell v. Washburn, 91 Cal. 560, 27 P. 589; Clancy v. Plover, 107 Cal. 272, 40 P. 394.

. Paramount Pest Control Service v. Brewer, supra.