New York Casualty Co. v. City of Lagrange, Ky.

• Decision Date: 24 July 1940
• Citation: 33 F. Supp. 993
• Parties: NEW YORK CASUALTY CO. v. CITY OF LAGRANGE, KY., et al.
• Court: U.S. District Court — Western District of Kentucky

33 F. Supp. 993

NEW YORK CASUALTY CO. v.CITY OF LAGRANGE, KY., et al.

District Court, W. D. Kentucky.

July 24, 1940.

Burwell K. Marshall, of Louisville, Ky., for plaintiff.

D. A. Sachs, Jr., of Louisville, Ky., for trustee in bankruptcy.

D. E. Wooldridge, of LaGrange, Ky., for First State Bank of LaGrange.

MILLER, District Judge.

This matter is before the Court on motions to dismiss for lack of jurisdiction filed by the defendants, the First State Bank of LaGrange, Kentucky, and by Morris W. Jones, Trustee in Bankruptcy of Zaepfel & Russell, Inc.

Zaepfel & Russell, Inc., was adjudicated a bankrupt on April 30, 1940 in the District Court for the Western District of Kentucky, and the defendantMorris W. Jones was duly elected Trustee.The bankrupt was a defaulting building contractor.The plaintiffNew York Casualty Company was its surety on its bond for the construction of a hospital at LaGrange, Kentucky, at a cost of $46,937.The petition filed by the Casualty Company states that Zaepfel & Russell, Inc., completed said contract in accordance with its terms, except that it failed to pay certain outstanding labor and material claims, which claims the Casualty Company paid in the amount of $6,007.44.The city of LaGrange owes $4,906.35 as the unpaid balance on the construction contract.The Casualty Company claims that the city of LaGrange should be required to pay this balance to it by reason of its subrogation rights under its contract of suretyship with the bankrupt.Several other parties are also making claims against this unpaid balance.The petition filed by the Casualty Company made all claimantspartiesdefendant, asserted a first lien to the unpaid balance owed by the city of LaGrange, asked that the city of LaGrange be required to pay the money into the registry of the Court and that all defendants be required to answer and set up their respective claims or be forever barred.The motions to dismiss are based upon the proposition that since the bankrupt estate is being administered by the bankrupt court that court has exclusive jurisdiction of all the assets of the estate including the right to determine the priority of liens against any such assets.The plaintiff contends that since the lien claims against the funds in question exceed the amount of the funds there remains no equity in favor of the trustee, and that it will avoid circuity of action if the Court will permit the priority of conflicting liens and unsecured claims between...