It has been suggested that a landlord's lien may come within § 9-310 as a lien for 'services or materials', and accordingly take priority over a security interest. See Pa. Bar Association Notes to § 9-310; Schwartz, Pennsylvania Chattel Security & the Commercial Code, 98 U.Pa.L.Rev. 530, 540-41 (1950). This approach seems highly questionable in light of the distinction drawn between such liens and that of a landlord in § 9-104(b, c). Furthermore, the drafters of the Code have stated that § 9-310 was intended to secure claims arising from work that enhances or preserves the value of the collateral. § 9-310, Comment 1. The act of leasing the premises could hardly be thought to bear this relation to the value of the goods situated thereon.
Aside from this aspect of the problem, the Code evidences no intent to change existing law. The most that may be safely said is that it does not deal with the question, as indicated by 9-104(b) excluding a landlord's lien from the purview of the article. While appearing to concede this in its brief, the absence of any applicable provision leads Textile to assert that a Code security interest is superior to the landlord's lien. The Court feels that a more rational conclusion is that existing law was undisturbed by enactment of the Code.
Finally, Textile resorts to a plea that the doctrine of marshaling be invoked. This is the doctrine whereby one claiming a lien against two or more classes of property, one of which is also subject to a junior lien, will be required to exact satisfaction from the property not subject to the junior lien. Thus, the junior lien is preserved where other assets exist sufficient to satisfy the senior lien. See Collier, op. cit. supra, par. 67.27, at 300. Textile's reliance upon the doctrine in the instant case is misplaced. Although the landlord's lien attached to property on the bankrupt's premises other than that subject to Textile's security interest, by virtue of § 67, sub. c(1), 11 U.S.C.A. § 107, sub. c(1), the lien is subordinated to both wages and costs of administration. These latter claims are more than sufficient to exhaust all other assets of the estate, thus compelling the landlord to resort to the fund claimed by Textile. In this situation the possibility of marshaling is obviously excluded.
The Court is next faced with Textile's argument that its security interest is superior to the claim of the Commonwealth for unemployment contributions and interest. The Pennsylvania statute provides that claims by the state for contributions shall constitute a lien upon the employer's property, Pa.Stat.Ann. Tit. 43, § 788.1 (Purdon 1952), and further that the lien 'shall be paid in full prior to all other claims * * *.' upon distribution of the employer's assets, id. 790 (Purdon Supp. 1958). The statutory material cited would appear to establish the state's priority. Textile seeks to avoid this construction by reliance upon Ersa, Inc., v. Dudley, 3 Cir., 1956, 234 F.2d 178. The Ersa case involved a question of priority between a similar state claim and a Federal tax lien. The court held that the state's lien had not been perfected to the extent required by Federal law to take priority over the Government's lien. While this case is controlling on the question of the relative standing as a matter of Federal law of a lien such as that held by the state and a Federal tax lien, it is not concerned with the status under state law of the Commonwealth's lien as opposed to a security interest. The Ersa case, in turn, relied heavily upon Commonwealth ex rel. Unemployment Compensation Fund v. Lombardo, 1947, 356 Pa. 597, 52 A.2d 657. There the question posed was whether a lien for contributions which had been recorded, but upon which no writ of fieri facias (the first step in execution) had issued, was valid against a purchaser for value without notice of the lien. The Pennsylvania Supreme Court affirmed on the basis of an opinion of the lower court which had held the lien ineffective under the facts stated until a writ of fieri facias had issued. While there is language in the opinion pertaining to sales in the ordinary course of trade, it does not appear whether the sale in question was actually such. Compare Pa.Stat.Ann. Tit. 12A, § 9-307(1) (Purdon 1954). It was upon the basis of this case that the Circuit Court in Ersa held that the lien of the state was not perfected at the time the Federal lien attached. However, as noted above, Ersa turned upon a point of Federal law.
The Lombardo case itself does not suggest that the lien of the Commonwealth in the instant case is inferior to Textile's security interest; for Textile does not stand in the same position as the claimant in Lombardo. To extend the effect of the case to a situation where the competing claimants are the state and a secured creditor would be to render the language of the statute dealing with priority, Pa.Stat.Ann. Tit. 43, § 790 (Purdon Supp. 1958), meaningless, and to frustrate the evident intent of the legislature to assure prior payment of the Commonwealth's lien. This interpretation is in accord with the decisions of the lower Pennsylvania courts. See Ferbro Trading Corp. v. Jo-Mar Dress Corp., C.P.1951, 78 Pa.Dist. & Co.R. 337, (Lombardo distinguished); Potter Title & Trust Co. v. International Penn Collieries Co., C.P.1949, 68 Pa.Dist. & Co.R. 591.
It should be mentioned that the great bulk of the liens for unemployment contributions were filed subsequent to the perfection of Textile's security interest. Textile attempts to turn this fact to its advantage by quoting the principle 'the first in time is the first in right.' Unfortunately, for Textile, it has once again confused the applicable law; for the cases cited in support of the principle deal with facets of Federal rather than State law. The language of the Pennsylvania statute indicates no distinction between liens filed prior and those filed subsequent to the perfection of interests such as Textile's; and none has been drawn in the cases. See, e.g., Ferbro Trading Corp. v. Jo-Mar Dress Corp., supra.
From what has been said it is clear that both the landlord's lien and that of the Commonwealth are superior under Pennsylvania law to Textile's interest. Since the available fund is adequate for the payment of both, it is unnecessary to decide their priority inter se. See Ferbro Trading Corp. v. Jo-Mar Dress Corp., supra. Being statutory liens they are subordinated to wages and the costs of administration by § 67, sub. c(1) of the Bankruptcy Act. Applying the reasoning of the Quaker City case, Textile's interest, being inferior under applicable lien law to both, is also subordinated.
For the foregoing reasons, the decision of the Referee will be affirmed.