Bassett v. Baird

Mr. Justice Gobdon delivered the opinion of the court, January 7th 1878. From the statement submitted to us, we learn that the mechanics’ lien, the subject of the present controversy, was not filed until sometime after the property had been sold and conveyed to Mrs. Moorehead. Previously to the sale, Baird, the vendor, had settled with the plaintiffs, and given to them his note for the work done. Afterwards Baird became insolvent and his property passed, in due course, into the hands of an assignee. As this sale to Mrs. Moore-head seems not to have been made subject to this claim of these mechanics, a duty rested upon Baird to discharge it. The plaintiffs proved their claim before the register and received a dividend, but neglected to state, in their probate, as required by sect. 5077, of the Bankrupt Act, the fact that such claim was secured by a mechanics’ lien. It is now contended, on part of Mrs. Moorehead, who is the real defendant in interest, that the neglect above stated had the effect, under the decisions upon the section referred to, to waive the lien and relinquish it to the assignee. There is no doubt that this would be the result as to any estate of the bankrupt, which might be affected by that lien, in the hands of the assignee: Bump’s L. & Pr. Bk. 547. The question, however, naturally arises, can any one but the assignee take advantage of this forfeiture ? The design of the act was, that there should be a fair distribution of the estate of the bankrupt among his creditors; that the creditor having a lien should not have an undue advantage over those creditors who were not thus secured. This being “the intent of the law it would seem that if those interested in the distribution of the estate make no complaint, third parties, not being so interested, have no standing so to do. But Mrs. Moorehead is such third party. Her complaint is, not that she is put in a worse condition by the want of compliance with the Bankrupt Act on part of the plaintiffs, but that the estate is thereby affected to the detriment of creditors ; hence, a positive release of the lien is worked by the act. As, however, this would benefit, not the estate, but a third party not in interest, it cannot be the true rendering of the statute. And so it was held in Cook v. Farrington, 104 Mass. 212, that although proof, without release or conveyance, is contrary to law, it does not, nevertheless, of itself, operate to discharge a mortgage. It may, indeed, prevent the creditor from setting up the mortgage against the assignee, but the assignee alone can avail himself of the rights this provision is intended to secure. Third parties can derive no advantage therefrom. Again, the release of this lien can add nothing to the bankrupt estate, except that it might operate to discharge a claim which might eventually be proved against it by Mrs. Moorehead, but which having already been proved by the plaintiffs and the dividends received thereon having been passed to her credit puts that claim out of the question. On the other hand, an assign [387] ment of the lien to the assignee, would come to nothing, since he could not enforce it. It is manifest, that this case as it now stands is one in which neither the assignee nor creditors of Baird have the slightest interest, and we must, therefore, treat it as an ordinary-case of mechanics’ lien. It was said in Hoyt v. Freel, 4 B. R. 131, cited in Bump’s L. & Pr. Bk. 547, that there is no provision in the Bankrupt Act, that the claim of a proving creditor against joint debtors with or without sureties for the bankrupt, shall bo assigned or given up by the creditor to the assignee ; that such a proposition would indeed be absurd, since the claim of the creditor against the surety is in no sense the property of the bankrupt. A creditor, who has proved a claim against the bankrupt’s estate, arising from a contract made by the bankrupt and certain others, as joint contractors, without stating, in his proof, that the same was in any manner secured, may, nevertheless, maintain an action upon such contract, against the other joint contractors. So, in the case in hand, there is nothing to assign which would either relieve the bankrupt estate by discharging an encumbrance upon it, or increase the amount of that estate by its sale. The property covered by the lien, occupies the place of a surety for the payment of the debt of the bankrupt, hence there is no reason why the plaintiffs should have set it forth in their proof, except that by its concealment they came in for a larger dividend on distribution of the bankrupt estate than they were entitled to. But as this wrought no injury to Mrs. Moorehead, but rather a benefit, she has no right to complain. Judgment reversed, and venire facias de novo awarded.