Louisville Woolen Mills v. Tapp

• Decision Date: 06 February 1917
• Docket Number: 2958.
• Citation: 239 F. 463
• Parties: LOUISVILLE WOOLEN MILLS v. TAPP et al.
• Court: U.S. Court of Appeals — Sixth Circuit

239 F. 463

LOUISVILLE WOOLEN MILLS v. TAPP et al.

No. 2958.

United States Court of Appeals, Sixth Circuit.

February 6, 1917

[Copyrighted Material Omitted]

W. S Mendel, of Louisville, Ky., for petitioner and appellant.

J. B Baskin and D. A. Sachs, Jr., both of Louisville, Ky., for respondents and appellees.

Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges.

DENISON Circuit Judge.

In the case of Louisville Woolen Mills v. Johnson, 228 F. 606, 143 C.C.A. 128, we had for review certain proceedings in the matter of the Tapp Clothing Company, bankrupt, and we held that the Woolen Mills had a materialman's lien, under the Kentucky statute, against the bankrupt estate. In further proceedings below, in the same estate, it appeared that Tapp, as owner of the factory premises, had a landlord's lien against the same body of property. There was not enough to satisfy both; and the referee and the District Judge have both held that the landlord's lien takes precedence. Whether this view was right is the question for present decision.

Each lien is created by an independent section of the Kentucky Statutes. The sections have no direct relation to each other. Apparently, when each lien was created, the existence of the other was not distinctly in the legislative mind. Which one is superior must be determined by comparison of the statutes and by interpretation of the general language. Unfortunately the subject has not been considered in any direct way by the Kentucky Court of Appeals.

A landlord's lien arises under Kentucky Statutes, Sec. 2317, and is regulated by sections 2314, 2315 and 2316. Section 2317 says:

'A landlord shall have a superior lien on the * * * personal property of the tenant * * * owned by him after possession is taken under the lease.'

Section 2314 provides that 'if, after the commencement of any tenancy, a lien be created on the property upon the leased premises,' the lienor may remove the property from the premises only upon satisfying the landlord's lien; by section 2315, an execution against the tenant, levied on the property found on the leased premises, must be satisfied subject to the landlord's lien; and section 2316 says: 'All valid liens upon the personal property of a lessee, * * * created before the property was carried upon the leased premises, shall prevail against * * * the landlord,' while, 'if such lien be created whilst the property is on the leased premises,' then the landlord must have preference.

The materialman's lien arose under section 2487, and is regulated by sections 2488, 2489, and 2490. Section 2488 provides that it 'shall be superior to the lien of any mortgage or other incumbrance thereafter created. ' This court has considered the nature of the landlord's lien, as applicable in bankruptcy proceedings, in Courtney v. Fidelity Co., 219 F. 57, 134 C.C.A. 595, and has discussed the character of the materialman's lien in the Johnson Case, supra, and the cases therein cited.

The District Judge applied the rule of some earlier decisions in the District Court. These depended, essentially, upon the theory that the lien of the materialman did not vest or exist or attach in any tangible way until the time of bankruptcy, but was an inchoate right to a preference upon distribution if the specified distribution should occur, rather than a definite lien. If this view should be adopted, it would solve the present controversy; but we think it is inconsistent with the Johnson Case and our previous opinions there cited and discussed. The unescapable inference from these opinions is that the materialman's lien is created along with the shipment and delivery of the goods, and that the statutory provisions which specify 'when' the materialman shall 'have' the lien refer to the maturity of the lien and to the time when and the event on account of which it may be foreclosed or enforced. We see no construction, other than this, which will make the law reasonably efficient and workable. It is a mistake to suppose that this lien may never come to full maturity, unless under exceptional conditions which the lienor cannot control. It may be avoided by payment; but, short of that, the lienor can always bring it to maturity by taking judgment and levying execution. ^[1]

Keeping in view these characteristics of the materialman's lien, and without expressing any opinion as to whether it may be subject to a landlord's lien under a lease in existence when the property was taken upon the leased premises, we are compelled to think that it does take priority over the lien of the landlord under a lease made after the shipment and delivery of the raw materials to the manufacturing tenant. With otherwise equally balanced considerations on both sides of the argument, there are three things which lead us to the conclusion stated:

The first is that section 2316, which undertakes to declare the respective rank of the landlord's lien and all other valid liens on defendant's property, makes it turn upon the situation when the property, sought to be subjected, was carried upon the premises; and the lien of the materialman, for the unpaid purchase price, is in the nature of a reservation. In a very substantial, though not in a technical, way, the materials are subject to this claim from the time they leave the vendor's hands until they are paid for, and this reserved claim is, for convenience, transferred to the body of property with which the materials are mingled. The landlord's lien has no opportunity to attach to such materials, original or substituted, save subject to the already existing claim and contingent lien of the vendor. The landlord can hardly be prejudiced by the assertion of the other and-- in a sense-- earlier lien, and this because it is not required to be recorded, and the landlord must usually know of the existence of this class of liens and may govern himself accordingly.

The second is that the materialman's lien is given by the same statute and is enforced in the same way as the employe's lien for wages. Section 2488 says that the lien for material or wages 'shall be superior to the lien of any mortgage or other incumbrance thereafter created,' and that the lien for wages accruing within 6 months shall be superior even to the lien of any mortgage or other incumbrance theretofore created. It follows that the landlord's lien, created after materials were furnished cannot be given priority over the lien for material without, at the same time, making it superior to any lien for wages which are more than 6 months old. Since the landlord's lien may reach back 11 months, this would be to say that the lien for rent of a factory building, accruing during the first 5 of the 11 months just ended, was superior to the lien for wages accruing during the same period and in view of the universal...