In re Floyd & Bohr Co.

• Decision Date: 20 December 1912
• Citation: 200 F. 1016
• Court: U.S. District Court — Western District of Kentucky
• Parties: In re FLOYD & BOHR CO.

200 F. 1016

In re FLOYD & BOHR CO.

United States District Court, W.D. Kentucky.

December 20, 1912

Kohn Bingham, Sloss & Spindle, of Louisville, Ky., for German Ins bank.

Gifford & Steinfeld, of Louisville, Ky., for priority creditors.

S. M Sapinsky, of Louisville, Ky., for trustee.

EVANS District Judge.

In this case the German Insurance Bank has sought a review by the court of an order of the referee. Section 2487 of the Kentucky Statutes is in this language:

'When the property or effects of any (mine), railroad, turnpike, canal or other public improvement company, or of any owner or operator of any rolling mill, foundry or other manufacturing establishment, whether incorporated or not, shall be assigned for the benefit of creditors, shall come into the hands of any executor, administrator, commissioner, receiver of a court, trustee or assignee for the benefit of creditors, or shall in any wise come to be distributed among creditors, whether by operation of law or by the act of such company, owner or operator, the employes of such company, owner or operator in such business, and the persons who shall have furnished materials or supplies for the carrying on of such business shall have a lien upon so much of such property and effects as may have been involved in such business, and all the accessories connected therewith, including the interest of such company, owner or operator in the real estate used in carrying on such business.' This provision (which it may be important to remember was enacted in 1893 and amended in 1894), in connection with section 64b, cl. 5, of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 563 (U.S. Comp. St. 1901, p. 3448)), has often been before this court and before the Circuit Court of Appeals; but on the pending petition for review the question presented is a new one, and we have felt the pressure of the argument of the bank's counsel, and have been much inclined, if possible, to yield to it.

In Re Falls City Shirt Mfg. Co. (D.C.) 98 F. 592, we held, in substance, that the lien created by the Kentucky statute became effective whenever, but not before, the estate of the bankrupt came under the control of the court to be distributed under the adjudication. See, also, the opinion of the Circuit Court of Appeals in Re Bennett, 153 F. 673, 82 C.C.A. 531. The inchoate lien thus becoming effective thereafter rested upon that portion alone of the property of the bankrupt which had been involved in its manufacturing business, as provided in section 2487. In Re Starks-Ullman Saddlery Co., 171 F. 834, 96 C.C.A. 506, it was settled that no lien exists upon the property of the bankrupt involved in the mere mercantile part of its business.

In the phase of the case now presented the question is whether the creditors who have priority under section 2487, after crediting the amounts to be realized from that priority, can each hold on to what he receives under the statute and also prove the balance, not thus provided for, as a general claim, and be entitled to share upon it pro rata with the general creditors in the general assets. The referee held that any creditor entitled to priority under the Kentucky statute was also entitled to prove as a general creditor the balance of his debt not paid through the operation of that statute, and with some reluctance we are constrained to affirm that ruling. Unless possibly in partnership cases, we know of no provision in the Bankruptcy Act which in any wise demands that, where a creditor has received part payment on a debt as the result of a legal priority, he shall be denied further dividends until the general creditors are paid dividends equal to those received as the result of the legal priority. On the contrary, section 57, c. 'h,' is in this language:

'The value of securities held by secured creditors shall be determined by converting the same into money according to the terms of the agreement pursuant to which such securities were delivered to such creditors or by such creditors and the trustee, by agreement, arbitration, compromise, or litigation, as the court may direct, and the amount of such value shall be credited upon such claims, and a dividend shall be paid only on the unpaid

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