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IN RE NEW YORK

January 6, 1942

In re NEW YORK, O. & W. RY. CO.


The opinion of the court was delivered by: HULBERT

The objections filed by Federal Creosoting Company bring on, as the sole question for review and determination, whether the Special Master properly denied the creditor's application for priority within the so-called 'six months' rule.

The facts are not in dispute.

 In October 1936 the debtor delivered to the creditor 15,066 railroad ties to be creosoted, all of which were so treated and 12,920 ties were delivered to the debtor within that month; the balance, 2,146 ties, were stacked on the premises of the creditor and removed at the rate of 533 ties in March 1937, 531 in April 1937, 534 in May 1937, 269 in June 1937, and 279 in July 1937.

 The Creosoting Company issued a bill on November 2, 1936, for the treatment of the 15,066 ties in the amount of $ 7,819.02. On March 1, 1937, the debtor issued to the creditor two trade acceptances, one due May 1, 1937 for $ 4,862.65, in which was included an item of $ 2,819.02 for the 2,146 ties, and the other due June 1, 1937 for $ 5,000, the balance of the 15,066 ties.

 The claim for priority rests upon the fact that between March 22nd and July 9, 1937, and within the six months prior to the approval of the petition herein, viz, -- May 20, 1937, the charges for servicing the creosoted ties delivered to the debtor amounted to $ 1,058.04 for which the creditor had an artisan's lien pursuant to Section 180 of the Lien Law of the State of New York.

 The Special Master has allowed the creditor a general claim reduced to $ 4,918.82 without priority as to any part thereof.

 The Special Master in his report, and counsel for the debtor in his brief, have each treated the creditor's claim for a priority as embracing the whole amount due.

 According to the stenographer's minutes of the hearing before the Special Master which took place on Oct. 26, 1938, the following colloquy appears:

 'Mr. Oakes: The question involved here is not one as to the amount of the claim. The Federal Creosoting Company by order No. 47 was allowed $ 5,021.78. * * * and the priority is granted on page 535 to the extent of $ 21.78 of that sum, leaving the Federal Creosoting Company as a general creditor as to $ 5000.

 'That concern made application to the Court to amend its proof of claim to claim priority under the six months rule as to the $ 5000 and the Trustee filed objections to their right of priority, and this stipulation deals with this question of the right of priority and not with regard to the amount.

 'Now Mr. Jackson may have some statement to make with regard to that.'

 'Mr. Jackson: Well, I think the six months dates here are the dates of the delivery of the ties, the price for which priority is claimed. Now, those deliveries were from March to July, 1937, and within the six months period.'

 'Mr. Jackson: So that the ties were delivered during the six months period and a trade acceptance in payment for them was issued on March 1, 1937, also within the six months period. Those facts are in the stipulation.

 'Now, my argument briefly on it is this: That the work was done under such circumstances and the nature of the contract was such that the claimant had by common law an artisan's lien for the value of the work that was done on the ties and that until it parted with possession of the ties the artisan's lien remained in force; that when during the six months period it parted with possession, it then made a contribution to the carrying on of the ...


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