In re Potee Brick Co. of Baltimore City

• Decision Date: 31 May 1910
• Citation: 179 F. 525
• Parties: In re POTEE BRICK CO. OF BALTIMORE CITY.
• Court: U.S. Court of Appeals — Fourth Circuit

179 F. 525

In re POTEE BRICK CO. OF BALTIMORE CITY.

United States District Court, D. Maryland.

May 31, 1910

Isidor Rayner and John F. Williams, for the landlord.

C Howard Millikin and Myer Rosenbush, for petitioning creditors appearing on behalf of the bankrupt estate.

ROSE District Judge.

In this opinion, for brevity, the Curtis Bay Company of Anne Arundel county will be spoken of as the 'landlord'; the Potee Brick Company of Baltimore City will be called the 'bankrupt'; and James O. Dickinson and Robert Moss his attorney and assignee, will be called the 'mortgagee.'

The questions which are now to be decided relate to the relative rights of the landlord, the bankrupt's estate, and the mortgagee to certain property which now and at the time of the filing of the petition in bankruptcy were on the property which the bankrupt held as tenant of the landlord.

The lease was made March 1, 1904, for one year. While it said nothing as to renewal of the term, it did contain provisions which seem to show that the parties expected the lease to last longer than one year.

By the terms of the lease the property was to be used by the bankrupt for the manufacture of bricks. The bankrupt was authorized to take clay and other brick-making material from the soil. The rent covenanted to be paid was in the form of a royalty of 50 cents a thousand on the bricks manufactured with the proviso that the rent should in any event amount to at least $400 per annum.

On March 1, 1909, and at all times thereafter, up until the institution of the bankruptcy proceedings, the bankrupt owed the landlord for rent in arrear $3,567.76, of which $494.03 was due for the year beginning March 1, 1908, and ending March 1, 1909.

On September 27, 1904, the bankrupt mortgaged to the mortgagee all its brick kilns, sheds, machinery, tools, brick office, small frame houses, and all other bricks, machinery, goods, fixtures, or equipments that might be then in possession or hereafter acquired by the bankrupt, to secure the payment of $5,000 one year after date.

On July 28, 1909, the mortgagee having brought suit at law against the bankrupt for the same debt secured by the mortgage, recovered a judgment against him of $5,500 debt and $17.20 costs, upon which judgment the mortgagee gave credit for $1,008.

On the 31st of July, 1909, the mortgagee caused execution to issue on this judgment and a levy to be made on the property of the bankrupt on the premises leased from the landlord. The sheriff's return shows that the property levied upon was substantially the same property as that described in the mortgage.

On the 6th of August, 1909, the landlord gave the sheriff notice in writing, under the statute of 8 Anne, c. 14, that the bankrupt was a tenant of the landlord and was largely indebted to it for rent due and in arrears. Nothing further appears to have been done under this levy, nor was the property ever removed by the sheriff or sold by him.

Some time after September 20, 1909, the mortgagee under the power contained in the mortgage advertised the mortgaged property for sale on October 20, 1909.

On October 13, 1909, the landlord filed a bill of complaint in the circuit court of Anne Arundel county in equity against the bankrupt and the mortgagee. The bill was filed by it for itself and any other creditors of the bankrupt who might come in and become parties complainant and contribute to the costs and expense. It recited, substantially, all the facts above set forth, and asserted that by the levy the landlord was deprived of its right to distrain. It said that the debt for which the judgment had been given was the same debt for which the property was about to be sold under the mortgage; that the property being held by the sheriff, and the landlord being thereby deprived of its right to distrain, a sale under the mortgage and a removal of the property would deprive the landlord of its lien for rent due and in arrears. It asserted that the mortgagee should be required to pay the rent due and in arrears before making sale of the property or removing it. It said that the landlord was alone entitled as the owner of the freehold to everything which belonged to the freehold, and that as lessor and under its distraint it was entitled to priority upon all the goods and chattels upon the premises. It prayed for the appointment of a receiver, for an injunction to restrain the bankrupt from further dealing with its property and the mortgagee from selling any of it, that the bankrupt might be dissolved, and its assets applied to the payment of its liabilities, and for other and further relief.

On the same day the bankrupt answered neither admitting nor denying the allegations of the bill, but consenting to the appointment of a receiver.

The mortgagee answered that it would be to the interests of all parties concerned to have a receiver appointed; but it expressly denied that the landlord had any rent claim which took priority over the mortgage claim.

On the 14th of October, 1909, the circuit court for Anne Arundel county appointed receivers for the bankrupt.

On the 24th of November, 1909, within less than four months from the recovery of the judgment, four creditors of the bankrupt filed a petition in this court to have the bankrupt so adjudicated. On the 15th of December the adjudication was made.

The landlord in its argument at the hearing and in the brief afterwards submitted on its behalf claims under the terms, covenants, and conditions of the lease absolute title to all the property situated on the premises and annexed to the freehold, whether such property be trade fixtures or not.

By the terms of the lease the bankrupt covenanted to deliver possession of the premises at the end of one year from March 1, 1904. If the covenants of the lease were not carried out or if possession was not delivered at the expiration of the lease, the lessee...