Indemnity Ins. Co. v. Reisley ( 1945 )

FRANK, Circuit Judge.

1. The insurance company’s appeal: The order of April 14, 1942, was based upon an interpretation of § 36-a of the New York Lien Law, Consol.Laws, c. 33, as in effect before amendments effective. September 1, 1942.¹ ******But since April 1942, New York’s highest court has held that that statute creates no lien. See Raymond Concrete Pile Co. v. Federation Bank & Trust Co., 288 N.Y. 452, 43 N.E.2d 486; New York Trap Rock Corp. v. National Bank of Far Rockaway, 293 N.Y. 884, 59 N.E.2d 787. The insurance company’s appeal must therefore fail.² We cannot agree with the insurance company’s contention that, absent any lien under state law, a bankruptcy court can create a lien on the basis of “fire side equity.”

2. The trustee’s appeal. The order of April 14, 1942, directing payment to the insurance company was open to reconsideration at any time before the estate was closed, for § 57, sub. k of the Bankruptcy Act, 11 U.S.C.A. § 93, sub. k, expressly so provides Federal Rules of Civil Procedure, rule 60 (b), 28 U.S.C.A. following section 723c, has no bearing here, since, under General Order No. 37, 11 U.S.C.A. following section 53, the Rules are applicable only “in so far as they are not inconsistent with the Act.” The order denying Tyler’s previous application for reconsideration cannot operate as res judicata, in the light of § 57, sub. k, and Wayne United Gas Co. v. Owens-Illinois Glass Co., 300 U.S. 131, 57 S.Ct. 382, 81 L.Ed. 557. The court below erroneously decided against the trustee on the ground of his delay.

However (particularly as the trustee on oral argument here assented) we remand for determination of whether the insurance company changed its position since it received payment of the $5,263.40.³

Affirmed on the insurance company’s appeal; reversed and remanded on the trustee’s appeal.

1 That section, before such amendments, provided: “The funds received by a contractor from an owner for the improvement of real property are hereby declared to constitute trust funds in the hands of such contractor to be applied first to the payment of elaims of subcontractors, architects, engineers, surveyors, laborers and materialmen arising out of the improvement, and to the payment of premiums on surety bond or bonds filed and premiums on insurance accruing during the making of the improvement and any contractor and any officer, director or agent of any contractor who applies or consents to the application of such funds for any other purpose and fails to pay the claims hereinbe-fore mentioned is guilty of larceny and punishable as provided in section thirteen hundred and two of the penal law.”

The insurance company concedes that the amendments are inapplicable here.

2 Cf. Huddleston v. Dwyer, 322 U.S. 232, 64 S.Ct. 1015, 88 L.Ed. 1246; Vandenbark v. Owens-Illinois Glass Co., 311 U.S. 538, 61 S.Ct. 347, 85 L.Ed. 327.

3 The previous decision that it had is not to be taken as res judicata or otherwise binding.