The Lady Franklin

14 F. Cas. 933, 2 Biss. 121

Opinion

DRUMMOND, District Judge.

The question for decision is whether these petitioners are entitled to a preference of payment as against the original creditors of the bankrupt; in other words, whether the fund, which is in court, should be turned over to the assignee in bankruptcy, to be distributed under the order of the court in bankruptcy for the benefit of the general creditors, or whether it should be paid over to these claimants to the extent of their demands, by this court.

There is no controversy but that, if the propeller Lady Franklin had remained, without any proceedings, in the admiralty court at the time that the claimants filed their claims against the proceeds, they would have been entitled under the law of the state to proceed by attachment and perfect their lien, or priority of payment under that law, against the Lady Franklin, and, according to the view which the court takes of the question, that substantially concedes the right, on the part of the claimants, to be paid out of the fund in court; because it is the duty of the court to distribute the proceeds to the parties who under the law, state or federal, are entitled to them. For instance, if the owner, whom the assignee in bankruptcy in this case represents, had made application to the court that the proceeds should be paid over to him, in the absence of any conflicting claim an order would have been made, of course, that the money should be so paid. And so it would be in the case of a mortgage, or any other valid subsisting claim upon the propeller. As soon as the court is satisfied of the existence of such claim, the money is, of course, paid in conformity with the rights of the parties.

NOTE. As to distribution of surplus, see, also. The Skylark [Case No. 12.92S]; The Grace Greenwood [Id. 5.052], and eases there cited. Where a surplus remains in court, after a sale in admiralty, a party having a lien or appropriation of the vessel precedently legally fixed, may claim a distribution of such surplus, although his original demand was not such as could be proceeded for in admiralty. Harper v. The New Brig [Id. 6,090]: Bracket v. The Hercules rid. 1.7G2]. In a recent case. — Francis v. The Harrison [Id. 5.03S]. — it is held that the lien of domestic material-men will be preferred to the demand of a subsequent mortgagee against proceeds in the registry.

In this case, these parties proceed against the fund in this court, instead of against the propeller under the state law, and the court, being satisfied that under the state law they would have been entitled to a lien, or a priority of payment, this court must recognize their right when proceeding against the proceeds as against the owner, and in the case, as has already been stated, the assignee substantially represents the owner, the Michigan Transportation Company.

This principle decided by the court is in accordance with the rule laid down in the cases of Zane v. The President [Case No. 18,201]; The Packet [Case No. 10,655]; The Stephen Allen [Id. 13,361]; and Andrews v. Wall, 3 How. [44 U. S.] 568. An order will therefore be entered that from the fund in court the respective claimants be paid according to their priority.