The Federal Reporter with Key-Number Annotations, Volume 256: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, May-July, 1919. Page: 276
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250 FEDERAL REPORTER
property to which the liens attached: The property was sold by the
trustee in bankruptcy, and the appellants and other lienholders were
called upon, on motion of the trustee, to show cause why they should
not have their inscriptions erased and their claims referred to the pro-
ceeds of the sale of the property to which the liens had attached. The
bankruptcy court, upon such motions, and after service thereof on ap-
pellants and appellees, entered an order directing the erasure of the
inscriptions of mortgages and liens, and that "the rights of the holders
of the mortgage notes and lienors are referred to the proceeds of the
sale of said property" "for the satisfaction of their respective mortgage
and lien rights in the premises." Thereafter the trustee filed his ac-
count, distributing the fund, and oppositions were filed thereto by the
mortgage and lien creditors, and the order of the District Court, based
on such oppositions, is the order presented for review.
Conceding that a proceeding in bankruptcy, where lien creditors were
called in to assert their liens upon the property sold, might be a pro-
ceeding in concursu, within the meaning of Act No. 134 of 1906,
though the lienholders were not expressly required to come in and ob-
ject to the solvency of the surety for the performance of a building con-
tract, yet in the instant ease we think the bankruptcy proceedings can-
not be so construed. The trustee in bankruptcy, by his motion to erase
the appellants' inscription of liens, expressly prayed that their liens
might be transferred from the property sold to the proceeds of the sale,
and the court so directed by the order made on the trustee's motion.
The litigation thereupon proceeded in the bankruptcy court, upon the
theory that appellants, by virtue of their liens, had an interest in the
fund that arose from the proceeds of the sale of the property. The ap-
pellees participated in this litigation long after the 10 days the appel-
lants had within which to object to the sufficiency of the surety had ex-
pired. In view of this state of the record, it is apparent that the trus-
tees and appellees have both treated the appellants as having an inter-
est in the proceeds of the sale, and as being entitled to have their liens
satisfied out of them, if they were held to prime appellees' mortgage.
In response to appellants' petitiff fdpr a -rehearing, the decree ap-
pealed from, onfirmed the referee's order dismissing the oppositions fil-
ed by the lien creditors, and establishing the priority wf the mortgage,
and directed the payment of the mortgage and costs out of the proceeds
of the sale. By reference to the opinion of the District Judge, it ap-
pears that he found that norie of the liens had been seasonably record-
ed. The appellants appealed from this decree. "Their appeal presented
the issue of the existence of the appellants' liens and the extent of them,
and no cross-appeal by appellees was necessary, to present that issue.
The case of Equitable Real Estate Co. v. National. Surety Co,, 133
La. 474, 63 South. 104, cited by appellants, is to be distinguished from
the instant case, in that the material in that case was unused when the
second building contract was entered into, and, was thereafter used
by the second contractor in the xconStruction of the building. ,,In this
case, or the -contrary, the material furnished the, owner, before ,the
building contract,.was made was-used by the owner,.anl-1we patty of
the building before the building contrast was entered into. :It was,
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The Federal Reporter with Key-Number Annotations, Volume 256: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, May-July, 1919., legislative document, 1919; Saint Paul, Minnesota. (https://digital.library.unt.edu/ark:/67531/metadc38827/m1/290/: accessed April 23, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.