Court Opinion

ID: 8811026
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:03:17.529703+00
Date Added: 2024-06-11T17:04:17.447758
License: Public Domain

On Petitions for Rehearing.
Both parties are dissatisfied with the disposition of the appeal, and each asks for a rehearing.
The appellees contend that the bankruptcy proceeding brought the appellants and the mortgage creditor in concursu, and that the failure of the appellants in that proceeding to affirmatively assert any objection to the solvency of the surety company has the effect of remitting them to their remedy against the surety company, and of releasing any claim they might otherwise have upon the proceeds of the sale of the *276property to which the liens attached. The property was sold by the trustee in bankruptcy, and the appellants and other lienholders were called upon, on motion of the trustee, to show cause why they should not have their inscriptions erased and their claims referred to the proceeds of the sale of the property to which the liens had attached. The bankruptcy court, upon such motions, and after service thereof on appellants and appellees, entered an order directing the erasure of the inscriptions of mortgages and liens, and that “the rights of the holders of the mortgage notes and lienors are referred to the proceeds of the sale of said property” “for the satisfaction of their respective mortgage and lien rights in the premises.” Thereafter the trustee filed his account, distributing the fund, and oppositions were filed thereto by the mortgage and lien creditors, and the order of the District Court, based on such oppositions, is the order presented for review.
Conceding that a proceeding in bankruptcy, where lien creditors were called in to assert their liens upon the property sold, might be a proceeding in concursu, within the meaning of Act No. 134 of 1906, though the lienholders were not expressly required to come in and object to the solvency of the surety for the performance of a building contract, yet in the instant case we think the bankruptcy proceedings cannot be so construed. The trustee in bankruptcy, by his motion to erase the appellants’ inscription of liens, expressly prayed that their liens might be transferred from the property sold to the proceeds of the sale, and the court so directed by the order made on the trustee’s motion. The litigation thereupon proceeded in the bankruptcy court, upon the theory that appellants, by virtue of their liens, had an interest in the fund that arose from the proceeds of the sale of the property. The ap-pellees participated in this litigation long after the 10 days the appellants had within which to object to the sufficiency of the surety had expired. In view of this state, of the record, it is apparent that the trustees and appellees have both treated the appellants as having an interest in the proceeds of the sale, and as being entitled to have their liens satisfied out of them, if they were held to prime appellees’ mortgage.
In response to appellants’ petition for a rehearing, the decree appealed from confirmed the referee’s order dismissing the oppositions filed by the lien creditors, and establishing the priority of the mortgage, and directed the payment of tire mortgage and costs out of the proceeds of the sale. Ify reference to the opinion of the District Judge, it appears that he found that none of the liens had been seasonably recorded. The appellants appealed from this decree. Their appeal presented the issue of the existence of the appellants’ liens and the extent of them, and no cross-appeal by appellees was necessary to present that issue.
The case of Equitable Real Estate Co. v. National Surety Co., 133 La. 474, 63 South. 104, cited by appellants, is to be distinguished from the instant case, in that the material in that case was unused when the second building contract was entered into, and was thereafter used by the second contractor in the construction of the building. In this case, on the contrary, the material furnished the owner before the building contract was made was used by the owner, and was part of the building before the building contract was entered into. It was *277therefore furnished to the owner, and not taken over by the contractor, and a lieu could be perfected to secure it only by the method provided by law in cases of material furnished the owner. Failing to seasonably adopt that method, the furnisher became an unsecured creditor of the owner.
Interest at 5 per cent, from the date material was furnished should be allowed lienholders whose liens are held to prime the mortgage: With this modification, the previous order of the court is confirmed, and the petitions for rehearing denied; and it is so ordered.