In re John Osborn's Sons & Co., Inc.
| Decision Date | 21 March 1910 |
| Docket Number | 159. |
| Citation | 177 F. 184 |
| Parties | In re JOHN OSBORN'S SONS & CO., Inc. |
| Court | U.S. Court of Appeals — Second Circuit |
W. G Cook, for petitioners.
Maxwell C. Katz, for respondents.
Before LACOMBE, COXE, and WARD, Circuit Judges.
This is a petition to revise an order of the District Court refusing to require the trustee in bankruptcy to pay over to the trustees in liquidation of a bankrupt corporation a balance of funds in his hands. The petition in the District Court alleged that none of the debts of the bankrupt corporation was based upon any contract providing for the payment of interest, but that they were all ordinary debts arising out of the purchase of goods, that the principal of all the indebtedness had been paid in full, and that the ground of the trustee's refusal to pay over the balance was that he intended to collect enough out of the bankrupt estate to pay interest on the said indebtedness. These allegations are uncontradicted.
There can be no doubt as matter of law that, if a creditor who has not stipulated for interest accepts payment of the indebtedness in full, he cannot subsequently recover interest thereon. The reason is that interest, in the absence of an express agreement to pay it, is a mere incident of the debt and is to be recovered as damages for its detention. Stewart v. Barnes, 153 U.S. 456, 14 Sup.Ct. 849, 33 L.Ed. 781. It makes no difference that the payment is accepted under protest (Cutter v. The Mayor, 92 N.Y 166); nor that the payment is made while a suit for both principal and interest is pending (Canfield v. School District, 19 Conn. 529; Davis v. Harrington, 160 Mass. 278, 35 N.E. 771). The district judge, admitting this to be the general rule, held that it did not apply to bankruptcy proceedings because they constitute a mere division of the fund belonging to the creditors, dividends from which are not to be regarded as payments on account of the bankrupt's indebtedness. In other words, that it is a distribution among equitable co-owners of their own property. We cannot accede to this view. The creditors are not owners of the bankrupt's assets; on the contrary, the trustee owns them in trust to pay the bankrupt's debts and any surplus to the bankrupts. Payment by the trustee, unless differentiated for some other reason, is as much subject to the rule that after a debt unaccompanied by a contract for interest is paid in full no interest can be recovered as if the payment were made by the bankrupt.
The trustee, however, contends that upon authority the rule does not apply to payments by executors, administrators, or receivers or trustees in bankruptcy. He cites a number of cases to prove this which do not appear to us to be controlling. In Williams v. President, etc., of American Bank, 4 Metc. (Mass.) 317, the question whether the creditors of a decedent's estate were entitled to interest in addition to principal arose before the principal had been paid. Chief Justice Shaw decided merely between the equities of the creditors and the next of kin without the question under consideration being raised at all. The subsequent case of Brown v. Lamb, 6 Metc. (Mass.) 203, under the insolvent laws of Massachusetts, did involve the question, but it was not considered, and the decision was rested entirely upon Williams v. President, etc., of American Bank. Judge Bond's decision in Re Bank of North Carolina, 12 N.B.R. 130, Fed. Cas. No. 895, is founded on these two cases. In the Matter of Murray, 6 Paige (N.Y.) 204, a proceeding under the insolvent laws of New York in which the indebtedness had not been paid in full, Chancellor Walworth held that the balance with interest was payable out of funds subsequently collected.
In People v. Trust Co., 187 N.Y. 293, 79 N.E. 1004, it was held that interest should be paid out of the estate of an insolvent trust company to depositors and holders of certified checks who had no contract for interest and whose claims had been paid in full. The court said it felt committed to this doctrine because of certain obiter observations in the earlier case of People v. American Loan & Trust Co., 172 N.Y. 371, 65 N.E. 200. In that case, however, all that was decided was that interest ceases from the appointment of a receiver of an insolvent trust company. This is the usual rule in all cases of insolvency because, the assets almost invariably not being sufficient to pay the debts, calculations of interest are waste of time. The court...
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In re Rappaport
...cases. See 4 Collier, supra, citing Bruning v. United States, 376 U.S. 358, 84 S.Ct. 906, 11 L.Ed.2d 772 (1964) ; In re John Osborn's Sons & Co., Inc., 177 F. 184 (2d Cir.1910). The Ridge did not develop any argument for post-petition interest based on Debtor's solvency or concerns of conve......
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In re Rappaport
...cases. See 4 Collier, supra, citing Bruning v. United States, 376 U.S. 358, 84 S.Ct. 906, 11 L.Ed.2d 772 (1964); In re John Osborn's Sons & Co., Inc., 177 F. 184 (2d Cir.1910). The Ridge did not develop any argument for post-petition interest based on Debtor's solvency or concerns of conven......
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In re Dow Corning Corp.
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Ad Hoc Comm. of Holders of Trade Claims v. Pac. Gas & Elec. Co. (In re PG&E Corp.)
...another court had compared allowed bankruptcy claims to judgments. See Johnson , 190 F. at 465 (citing In re John Osborn's Sons & Co. , 177 F. 184 (2d Cir. 1910) ). But PG&E directs us to no other historic case that made such a comparison. To the contrary, cases applying the solvent-debtor ......