Wilds v. Board of Education

Laughlin, J.: The material facts are sufficiently stated by Mr. Justice Shearn, but I am of the opinion that the law applicable thereto requires an affirmance of the judgment. The contract, in so far as it authorized the defendant to take possession of the building material, upon a breach thereof by the contractor and action to’ be taken by the defendant thereunder, was wholly executed prior to the institution of [473] the bankruptcy proceeding in which the plaintiff was appointed trustee. The provisions of the contract thus authorizing the defendant to take possession of and use the building material in the construction of the building were manifestly inserted as security or as additional security to the defendant with respect to the performance of the contract which it entered into with the bankrupt. That contravened no statute or public policy of this State. It was neither alleged nor shown that those provisions were inserted for the purpose of defrauding the creditors of the contractor, and there is no ground for holding that they are constructively fraudulent as against such creditors. Such provisions have customarily been inserted in municipal contracts from time immemorial, and so far as I recall or have been able to find, no court heretofore has held that the possession of the building material acquired by a municipality or a branch of the municipal or State government under such provisions is unlawful as against the general creditors of the contractor or that an action in replevin, or for the conversion of such building material will lie while such possession is continued pursuant to the contract. We are not now concerned with any question relating to the rights of the defendant with respect to this material prior to the time it became entitled to take possession thereof, and did take such possession. Those are questions which were discussed in the majority opinion in Titusville Iron Co. v. City of New York (207 N. Y. 203), after, however, the court had therein decided that the board of education had not complied with the conditions precedent to its right to take possession of the building material, upon which point it was recognized in the majority opinion that the case might have been decided adversely to the claim of the board of education in that case. It being uncontroverted in that case that the board of education, upon no view of the evidence, had taken any step to acquire the right to the possession of the building material or took possession thereof until after the institution of the bankruptcy proceeding and the appointment of the receiver therein, the majority of the court were of the opinion that title to the material passed to the trustee in bankruptcy, and that his title could not be impaired by any subsequent action by the board of education under the contract. But [474] even in this view two of the judges did not concur, and one dissented therefrom in an opinion. As I read the majority opinion in that case, it clearly recognizes that if the board of education had acquired the right to take possession of and use the building material before the trustee in bankruptcy was appointed and had taken possession thereof, those facts might have required a different decision. It- appears to be conceded that the board of education had a right to retain possession of the contractor’s plant under the contract and to use the same in the erection of the building. The principle applicable to the material is, I think, precisely the same. Upon the contractor’s default and the due termination of his contract by the board of education as therein provided, the board of education became the lawful bailee of the plant and of the building material, with the right to use the one for the reasonable time required in completing the contract, and with the right to use the other in the erection of the building as it is doing. As the board of education used the building material in the erection of the building, its right, which down to that time was merely to the possession, ripened into title, and if on the completion of the building any of the building material delivered on the site by the contractor which the board of education thus took possession of, remains unused, then the right to possession thereof by the board of education will terminate, and it will be obligated to deliver the same to the plaintiff. It appears to me, therefore, quite clear that the board of education acquired a vested right to the possession of the building material before the plaintiff was appointed trustee, and that the plaintiff has utterly failed to show that its lawful right to possession has in any manner terminated. The judgment should, therefore, be affirmed, with costs. Clarke, P. J., and Merrell, J., concurred; Page and Shearn, JJ., dissented.