In re Shelly

• Decision Date: 24 May 1917
• Docket Number: 2179.
• Parties: In re SHELLY. v. E. & Z. VAN RAALTE, Inc. MacEVOY
• Court: U.S. Court of Appeals — Third Circuit

242 F. 251

In re SHELLY.

MacEVOY v. E. & Z. VAN RAALTE, Inc.

No. 2179.

United States Court of Appeals, Third Circuit.

May 24, 1917

Olcott Gruber, Bonynge & McManus, of New York City (Harold Riegelman, of New York City, of counsel), for appellant.

William S. Bennett, of New York City, for appellee.

Before BUFFINGTON, McPHERSON, and WOOLLEY, Circuit Judges.

McPHERSON Circuit Judge.

This dispute arises upon the following facts:

Shelly was a building contractor, and on November 3, 1913, undertook to erect a mill for $76,000 at Paterson, N.J., for E. & A Van Raalte, a corporation. Sections 4 and 9 of the contract are as follows:

'Sec 4. Should the contractor at any time during the progress of said work refuse or neglect to supply a sufficiency of materials or workmen, the owner shall have power to provide materials and workmen, after three (3) days' notice, in writing, being given, to finish the said work, and the expense shall be deducted from the amount of the contract.'

'Sec. 9. All work and materials delivered on the premises to form part of the works are to be considered the property of the owner and are not to be removed without its consent; but the contractor shall have the right to remove all surplus materials after the completion of the work.'

The contract was duly recorded in the clerk's office of the proper county. On November 29 Shelly applied for a payment on account, and on December 2 received the architect's certificate for $3,000; this sum being paid him on December 5. Ten days later the petition in bankruptcy was filed, and at that time materials appraised at $1,787.52 were on the ground, but not yet incorporated in the building. The receiver (who is now the trustee) claimed the property as the bankrupt's, and a claim was also made by the Van Raalte Company on two grounds: (1) That the materials had already been paid for by the $3,000; and (2) that sections 4 and 9 gave them a right superior to the receiver's or the trustee's. By agreement the company used the property in completing the building, undertaking to pay its value to the trustee if the dispute should be decided in his favor. The total cost of the building to the company was more than $79,000. The referee and the District Court decided in favor of the company, the court's opinion being reported in 235 F. 311, and in this proceeding the trustee raises two questions: First, whether the company had paid for the materials in full; and, second, whether his own title is better than the title of the company.

1. The referee considered the question of payment to be immaterial, and the District Court did not discuss it at all. If the matter were important, we may note that the referee found as a fact (and in this proceeding the fact must be accepted) that of the property found at the date of bankruptcy only certain items valued at $666.60 had been on the ground when Shelly received the architect's certificate; the rest having been delivered since that time. But we agree that the decisive question is the second, viz. the effect of the contract, and to that we turn for a brief consideration.

2. Only a few words are necessary, for Judge Rellstab has come to a satisfactory conclusion, and we shall add little to what he has said. In our opinion the decision of this court in Duplan Co. v. Spencer (C.C.A. 3) 115 F. 689, 53 C.C.A. 321 (writ of error dismissed for want of jurisdiction 191 U.S. 526, 24 Sup.Ct. 174, 48 L.Ed. 287), is controlling, and we shall confine ourselves to explaining why we think the amendment of 1910 has not impaired the force of that ruling as applied to the facts now before us. A fresh examination of the Duplan opinion shows that the reasoning of Judge Gray took the following course: The relevant article there was more elaborate than the provisions in the present contract; but the object in both cases is the same, namely, to give the owner of the premises security for such advances as he may make,...