OHIO FALLS CAR MANUF'G CO. v. CENTRAL TRUST CO. OF NEW YORK et al., 71 F. 916

After stating tlx* foregoing facts, the opinion of the court was delivered by LURTON, Circuit Judge. In the view we take of this case, it becomes unnecessary to consider the fact that this petition was uot filed within 60 days after the appointment of the receiver, which appellee contends was essential to the preservation of the statutory lien, under

section 5 of the act of March 20, 1876. Neither is it necessary to decide whether freight ears are “'materials or supplies,” within the meaning of the Kentucky act. It is clear .that before the railway company’s note was made and discounted, July 01, 18.90, the car company had no complete lien on tlx* property of the railway company. The statute only gave a lien upon the occurrence of some one of the situations mentioned. None of Hu* conditions upon which the statutory lien depended had arisen, transpired, or occurred.

At most, it liad a possibility of a lien should its claim remain unpaid until the property of its debtor should lie “assigned for the benefit of creditors,” or should “come into the hands of any executor, administrator, commissioner, receiver of a court., trustee, or assignee, or shall in any wise come to be distributed among creditors, whether by operation of the law, or by the a cl of such company, owner, or operator in such business.” The plain purpose of the act was that furnishers of material or supplies should he preferred in the distribution of the assets of an insolvent company over mortgages or other incumbrances theretofore or thereafter created.

Bui this lien did not actually attacli so long as the property remained in the hands of the debtor railway company. and *was managed and operated by it on its own account.

The most that can be said is that such a creditor, prior to the happening of one or other of the conditions mentioned in the statute, had an unfixed right in the property of the debtor, amounting, at most, to an inchoate lien, which could be perfected upon the occurrence of one or other of the conditions precedent named in the statute, and the beginning of legal proceedings for its declaration and enforcement within the time and in the manner prescribed by the statute.

But if we assume that it had, for the security of the balance due on its account, an inchoate lien, then it seems clear that this incipient security was lost as the legal result of the transaction stated as occurring July 31, 1893. The facts concerning the arrangement and settlement of that date are reasonably subject to but two constructions, either of. which is fatal to the lien now asserted. One

interpretation, entirely reasonable and consistent with the facts stated in the petition and shown on the face of the note made to the Bank of America by the Ohio Falls Oar Manufacturing Company, is that the balance due by the railway company to the car company for freight cars was paid and discharged with money borrowed from the Bank of America, the proceeds of the car company’s note, secured by its mortgage bonds deposited as collateral, and further secured by the guaranty of the car company.

The car company thereby secured the immediate payment of an open account, and, though it assumed a liability as surety for the railway company, yet such arrangements are not unusual nor inconsistent with an intent that the old account should be paid and discharged. Whether its position was better or worse in respect of security after this settlement is debatable. It had, at least, a collateral security in the second mortgage bonds deposited with the bank, to which, by subrogation, it would be entitled in case, as surety, it was compelled to pay the note.

The value of this collateral may have been the subject of doubt; nothing is averred in the petition concerning their value. But it is not necessaryto decide this case upon the question of payment. We prefer to rest our decision upon the ground that, if it be assumed the car company had a complete or an incipient lien, that lien was waived.

If it be, as appellant has affirmed in its petition and urged in argument, that the note of the railway company was, in legal effect and intent, executed to the car company, or to the Bank of America for the use of the car company, the latter must be regarded as having thereby contracted for a hew security.

Appellant cannot be heard to say that, when the note was made to the bank, as payee, this was only done to accommodate the car company, and is to have no greater legal consequence than if the note had been made to the car company as payee, without adopting the entire agreement nominally made between the bank and the railway company.

To contend that the requirement that the note should be secured by a deposit of mortgage bonds and by a lien on all securities owned by it in the bank’s possession, or which should thereafter come tó its possession, as well as upon any balance to its credit as a depositor, was a requirement of the bank, and not an agreement between the railway company and the car company for a new security, is wholly inconsistent with its contention that the bank was but the nominal payee.

The agreement to take a note secured by a deposit of the railway company’s second-mortgage bonds was an agreement for a new security, inconsistent with the lien now asserted, and consistent only with an intent to waive the inchoate lien dependent upon the Kentucky statute. The vague offer to file the bonds thus contracted for, as a security “subject to such disposition as the court may direct,” cannot operate to revive a lien waived as a consequence of an agreement for a security inconsistent with the lien sought to be restored and enforced. Central Trust Co. v. Richmond, N., I. & B. R. Co., 15 C. C.

A. 273, 68 Fed. 90-94; Grant v. Strong, 18 Wall. 623. The decree sustaining the demurrer of the Central Trust Company is, for the reasons given, affirmed.