Central Sav. Bank v. Newton

• Decision Date: 05 April 1915
• Docket Number: 7923.
• Citation: 147 P. 690,59 Colo. 150
• Parties: CENTRAL SAVINGS BANK et al. v. NEWTON et al.
• Court: Colorado Supreme Court

147 P. 690

59 Colo. 150

CENTRAL SAVINGS BANK et al. v. NEWTON et al.

No. 7923.

Supreme Court of Colorado

April 5, 1915

Error to District Court, City and County of Denver; Harry C Riddle, Judge.

Mortgage foreclosure by the Central Savings Bank, trustee, and another, against the Argentine Railway Company and others, in which James Q. Newton was appointed receiver of the railway company. There was a judgment allowing claims of laborers and adjudging that they were prior to the mortgage lien, and plaintiff and purchaser at the mortgage foreclosure sale bring error. Reversed and remanded, with directions.

S.E. Marshall and Pershing & Titsworth, all of Denver, for plaintiffs in error.

Gillette & Clark, E. M. Sabin, and J. A. Marsh, all of Denver, for defendants in error.

BAILEY J.

This controversy arose in an action by the Central Savings Bank Trustee, one of the plaintiffs in error, as plaintiff against the Argentine Central Railway Company and certain judgment creditors, defendants, to foreclose a mortgage upon the property of such company, in which case the judgment rendered was finally reviewed by this court. Booth, Trustee et al. v. Central Savings Bank, Trustee, reported in 146 P. 240. Upon allowing a supersedeas therein an order was entered, permitting foreclosure sale by virtue of an agreement between the parties, in which it was directed that a certain portion of the purchase price realized be deposited with the clerk of the district court pending final adjudication, subject, however, to the payment from the fund of such proportion of preferred labor and salary claims, if any, as the district court might allow, to be deducted before distribution. The property was accordingly sold to plaintiff in error Rogers, for $5,000.00, but upon failure of confirmation thereof, because of objections and protests filed by defendants in error and other claimants, it was offered a second time and purchased by him for $20,002.00, which latter sale was confirmed.

During the progress of the foreclosure proceedings in the district court, James Q. Newton, one of the defendants in error here, was appointed receiver of the railway company. The other defendants in error are claimants against the foreclosure fund, whose respective bills for wages, salaries, services, materials, etc., were filed with the receiver and made a part of his report. The claims were all allowed and adjudged prior to the mortgage lien without the introduction of any evidence whatsoever upon them. Objections were filed by plaintiffs in error to the entry of judgment, which were overruled, and they prosecute this writ of error.

The statute enacted in 1903, entitled 'An act to protect employés and laborers in their claims for wages, and to make the claims of employés and laborers preferred claims as against all other creditors,' sections 6998, 6999 and 7000, R. S. 1908, as applied to the present case, provides that upon the suspension of the business of any person, corporation, company or firm, by putting the same in the hands of a receiver, the debts owing to laborers, servants or employés, by reason of their labor or employment shall be considered and treated as preferred claims, and such laborers and employés shall be preferred creditors; tnat a statement of claim, under oath, showing the amount due, the kind of work and when performed, shall be presented to the officer, person or court charged with such property, within sixty days; and that any person interested may contest any such claim, or part thereof, by filing exdeptions thereto, supported by affidavit, with the officer having the custody of the property, whereupon the claim shall be reduced to judgment, in a court having jurisdiction thereof, before any part of it shall be paid. It also contains the following provision:

'That the provisions of the act shall not be construed to extend to creditors who held a duly recorded mortgage upon the property attached, which was given for a debt actually existing from such mortgage before the labor was performed.'

The statements of the claims of the various defendants in error were not filed in court by the receiver until some months after the sixty days, required by statute for filing the claims with such officer, had elapsed. No facts with reference to such claims appear, as no evidence was introduced at the hearing. The court below assumed that, as no contrary showing was made, the respective claims were filed with the receiver in apt time, and held that the objections put forward to them for the first time upon the hearing of an application for their allowance came too late, and that they were therefore confessed. It was further determined that, independent of statutory provision, the claims should be allowed under the rule of equity peculiar to railroad properties under receivership.

The first question is whether the statute cited gives a preference to claims specified therein over a lien of debts secured by mortgage described in the proviso above quoted, such as the one here involved. Plaintiffs in error contend that the most reasonable interpretation of the proviso is that the claims specifically mentioned in the act shall not take precedence over the debts of creditors secured by a mortgage given for a debt actually existing before the labor for which the statutory preference is claimed was performed. Defendants in error urge that such construction would render the proviso contradictory and not germane to the title of the act, and that it should therefore be disregarded; that its language is so ambiguous as to render it incapable of construction; and that, in any event, its true meaning is that such mortgage creditors as therein described are not to be included among creditors given a right of priority by the statute.

When a business is suspended as contemplated by the statute certain claims therein specified are by its terms preferred for the purposes of payment. It is provided, in the last section, that the act 'shall not be construed to extend to creditors' under a certain kind of mortgage. While such mortgage debts are not thereby declared, in direct and positive terms, superior to the claims specified, the intent is, however, clear and unmistakable that these latter claims should not be given preference over the former. The proviso is certainly not an idle and meaningless expression of the law-making power, and therefore a construction should be given the language which will effect its evident purpose, and at the same time harmonize it with the letter and spirit of the act as a whole, which is, in our view of the matter, that a mortgage such as therein described, being like the one involved in this suit, is declared a prior and superior lien to the claims for which specific provision is made. It is not apparent in what particular such...