Mack Manufacturing Co. v. Citizens Construction Co.

96 A. 101, 85 N.J. Eq. 331, 1915 N.J. Ch. LEXIS 10

• Court: New Jersey Court of Chancery
• Decided: December 8, 1915
• Status: Published

Opinion

Beaming, Y. C.

Two suits of the same title have been heard and considered together. They are in all material respects identical except that they relate to two separate municipal contracts. The bills are filed by complainant pursuant to the provisions of the act commonly referred to as our Municipal Biens act. 3 Comp. Stat. p. 3315. Complainant seeks to establish and enforce a claim of lien against money due from defendant municipality under certain contracts made by the municipality for public improvements, complainant’s claim being for the value of materials supplied to the contractor, a corporation of this state.

Complainant’s notices of claim of lien were served pursuant to the act after a decree of insolvency had been made by this court against the corporation contractor pursuant to the provisions of our Corporation act and the usual decree of injunction had been issued and a receiver in insolvency had been appointed and had qualified. There are no other parties claiming liens under the act, except by reason of lien claims filed after the receiver’s appointment and qualification.

I entertain the view that in these circumstances complainant has acquired no lien under the act and its bill must be accordingly dismissed.

The insolvency provisions of our Corporation act render it clear that upon the appointment of a receiver in insolvency the title .of the insolvent corporation to its assets are divested and forthwith vested in the receiver subject only to liens then existing, to the end that an equal distribution of the net assets may be made among general creditors. The assets are thus placed in custodia legis for the purpose stated.

It will, not be contended that a judgment entered against tire corporation by a general creditor after the appointment and qualification of a statutory receiver in insolvency is operative to confer a lien prior to other general creditors. The creation of any" liens against the assets after the appointment and qualification of a receiver are utterly destructive of the obvious purposes of the act, unless, perchance, such liens may be properly based upon rights antecedent the receivership.

The statute under which complainant claims a lien expressly provides that the lien shall attach from the time it is filed, and our courts have repeatedly held that this provision, unlike the provisions of the Mechanics’ Lien act which relates the lien to a prior date, is destructive of the idea of an inchoate lien prior to that time. This has been held in the following cases in this court and in our Court of errors and appeals: Garretson v. Clark and Harris v. Garretson, 57 Atl. Rep. 414; Somers Brick Co. v. Souder, 70 N. J. Eq. 388, 394; Same Case on appeal, 71 N. J. Eq. 759, 762; Cope v. Walton Company, 77 N. J. Eq. 512, 517; Board of Education v. Tait, 80 N. J. Eq. 94, 96; Agnew Company v. Paterson Board of Education, 83 N. J. Eq. 49, 66; Same Case on appeal, Ibid. 336, 339.

The views stated by Vice-Chancellor Stevenson in Agnew Company v. Paterson Board of Education, supra, touching the effect of a federal bankruptcy receivership are, in nry judgment, equally applicable to a receivership under our Corporation act.

An amendment to the bill asserts that the receiver, after his appointment, finished the work under the contracts of the insolvent contractor corporation and used material which had been theretofore supplied by complainant to the contractor. It is clear that this cannot have any effect upon the claim of lien filed bjr complainant for materials supplied to the contractor. The assets of the insolvent corporatibn, including its rights under .the municipal contracts, passed to the receiver; it was his privilege to finish the work and enhance the assets. Any controversy between complainant and tire receiver touching the ownership of materials used by the receiver can find no place in this suit.

Complainant has also attacked the rights of the Broad Street National Bank which are asserted by that bank under an assignment from the contractor of moneys due or to grow due under these contracts. As complainant’s bill is wholly based on a claim of lien the rights of that bank cannot be properly adjudicated in this suit. Under the statute it is the duty of the receiver to pass upon the claim of the bank and his determination is subject to review.

I will advise an order dismissing the bill.