In re Chandler

• Decision Date: 03 January 1911
• Docket Number: 1,734.
• Citation: 184 F. 887
• Parties: In re CHANDLER. v. BROOKS. COMMERCIAL GERMAN NAT. BANK OF PEORIA COUNTY, ILL.,
• Court: U.S. Court of Appeals — Seventh Circuit

184 F. 887

In re CHANDLER.

COMMERCIAL GERMAN NAT. BANK OF PEORIA COUNTY, ILL., v. BROOKS.

No. 1,734.

United States Court of Appeals, Seventh Circuit.

January 3, 1911

On June 7, 1907, an involuntary petition in bankruptcy was filed against Charles V. Chandler and Clara A. Chandler as partners and as individuals.

Adjudication followed accordingly, and Brooks was duly elected trustee of each of the three estates. The bank, petitioner herein, owner of a $10,000 note executed in September, 1906, by Charles V Chandler alone, filed its claim against the individual estate of the maker for the principal and for $137.50 interest due on June 7, 1907. The claim was allowed as filed, and by November, 1909, the trustee had paid the bank $10,137.50.

In the individual estate of Charles V. Chandler, after 100 per cent had been paid on all claims, including interest down to June 7, 1907, a considerable sum remained; but the assets of the partnership estate were inadequate to meet the partnership debts, and the addition of the unconsumed assets of the individual estates will not suffice to pay the partnership creditors in full.

The bank, in December, 1909, filed a petition in the District Court, setting out the foregoing facts, and asking payment from the individual estate of Charles V. Chandler of interest on the $10,000 note at 6 per cent., the contract rate, or at 5 per cent., the Illinois statutory rate in the absence of contract, from June 7, 1907, until payment should be made. This petition the District Court adjudged to be wanting in equity, and the ruling is assailed here by an original petition to review and revise. Respondent interposed a motion to dismiss for want of jurisdiction, which was presented in connection with the argument on the merits, and was denied on reference to Coder v. Arts, 213 U.S. 223, 29 Sup.Ct 436, 53 L.Ed. 772, In re Friend, 134 F. 778, 67 C.C.A. 500, In re Janes, 133 F. 912, 67 C.C.A. 216, and Euclid Nat. Bank v. Union Trust Co., 149 F. 975, 79 C.C.A. 485.

Pinkney & McRoberts, for petitioner.

George T. Page, S.D. Wead, Jay T. Hunter, and John C. Scully, for respondent.

Before DAY, Circuit Justice, and GROSSCUP and BAKER, Circuit Judges.

BAKER Circuit Judge (after stating the facts as above).

Shall a surplus in the individual estate of a bankrupt partner be used to pay interest on the claims of individual general creditors accruing after the filing of the petition in bankruptcy, or shall that surplus be added to the partnership fund, the estates as a whole being insolvent?

Section 5f of the bankruptcy act provides that:

'The net proceeds of the partnership property shall be appropriated to the payment of the partnership debts, and the net proceeds of the individual estate of each partner to the payment of his individual debts. Should any surplus remain of the property of any partner after paying his individual debts, such surplus shall be added to the partnership assets and be applied to the payment of the partnership debts. Should any surplus of the partnership property remain after paying the partnership debts, such surplus shall be added to the assets of the individual partners in the proportion of their respective interests in the partnership. ' Act July 1, 1898, c. 541, 30 Stat. 547 (U.S. Comp. St. 1901, p. 3424).

The contention of the bank is that interest, by the terms of the note, is as much a part of the 'individual debt' as is the principal, and that 'payment of individual debts' cannot be made by slighting the interest any more than it could by...