In re National Trade Corp., Bankruptcy No. 79 B 8407.
| Decision Date | 03 September 1982 |
| Docket Number | Bankruptcy No. 79 B 8407. |
| Citation | 22 BR 877 |
| Parties | In re NATIONAL TRADE CORPORATION, an Illinois corporation, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Richard E. Alexander, Alexander & Zalewa, Ltd., Chicago, Ill., for petitioner.
Leo H. Arnstein, Laurence H. Kallen, Arnstein Gluck & Lehr, Chicago, Ill., for respondent and receiver.
This cause of action comes to be heard on a petition by K mart Corporation (hereinafter referred to as K mart) to order Leo H. Arnstein, Receiver for National Trade Corporation of Illinois, to pay to K mart all the interest he accumulated on a certain amount of money in his possession as Receiver.
On December 11, 1978, K mart inadvertently sent a check for $2,000,000.00 to National Trade Corporation of Illinois (hereinafter referred to as NTC). Despite a demand for the return of this money on December 20, 1978, NTC did not return the money to K mart. Accordingly, on January 11, 1979, K mart filed suit in the United States District Court for the Northern District of Illinois seeking the return of this money with interest.
On September 1, 1979, NTC filed a voluntary petition under Chapter XI of the Bankruptcy Act. Leo H. Arnstein was appointed as Receiver of the debtor's estate. The bankruptcy court modified the automatic stay stemming from the bankruptcy petition on December 7, 1979, so that K mart's action could proceed in the United States District Court. The district court granted summary judgment against NTC and on May 14, 1981, ordered that K mart be paid $2,000,000.00 plus $574,734.34 in interest.
As a part of that court's order, the Clerk of the District Court was required to turn over to K mart a certificate of deposit valued at $2,121,896.17 (including accrued interest). Thus, the balance to be satisfied out of funds held by the Receiver was $452,838.17. Instead of promptly paying K mart this amount, the Receiver filed a petition to vacate a portion of the district court's order. The Receiver primarily based his petition on the grounds that the district court's order related only to funds held by the Clerk of the District Court, not to funds held by the Receiver as part of the debtor's estate. On November 12, 1981, the district court denied the petition to vacate, and the Receiver paid K mart $452,838.17 on December 9, 1981. Subsequently, on May 22, 1982, Leo H. Arnstein was appointed to act as Trustee of the Chapter 7 estate.
K mart has filed the petition herein requesting that the Receiver (or his successor) be ordered to pay K mart all the interest that was earned on the $452,838.17 held by the Receiver from May 14, 1981 (the date of the district court's order) to December 9, 1981 (the date the Receiver actually transferred the funds to K mart). The Receiver, however, contends that under 28 U.S.C. § 1961, K mart is entitled to only the rate of interest allowed by state law, Ill.Rev. Stat.Ch. 74, § 3 (1979) (9%), from May 14, 1981 to November 12, 1981 (the date the Receiver's petition to vacate was denied). Consequently, the issues to be decided by this court are: (1) to what rate of interest is K mart entitled and (2) should the interest run from the date of the district court's order (May 14, 1981) to the date the appeal was dismissed (November 12, 1981) or to the date the funds were actually transferred to K mart (December 9, 1981).
28 U.S.C. § 1961 (1976) provides:
Interest shall be allowed on any money judgment in a civil case recovered in a district court. Execution therefor may be levied by the marshal, in any case where, by the law of the State in which such court is held, execution may be levied for interest on judgments recovered in the courts of the State. Such interest shall be calculated from the date of the entry of the judgment, at the rate allowed by State law.
See also Gurley v. Lindsley, 466 F.2d 498, 499 (5th Cir. 1972) (); Laminoirs, Etc. v. Southwire Co., 484 F.Supp. 1063, 1071 (N.D.Ga.1980) (same). The Illinois Interest Act requires that "judgments recovered before any court shall draw interest at the rate of 9% per annum from the date of the judgment until satisfied...." Ill.Rev.Stat.Ch. 74, § 3 (1979). The interest begins to run at the date of the entry of the judgment after trial, not after the exhaustion of the appeal process. Penn Central Co. v. Chicago, Milwaukee, St. Paul & Pac. R.R., 433 F.2d 943, 944 (7th Cir. 1970).
In the case at bar, K mart sought and received a judgment against NTC in the United States District Court for the Northern District of Illinois. Accordingly, by operation of 28 U.S.C. § 1961 in conjunction with the Illinois Interest Act, this court holds that K mart's judgment should accrue interest at a rate of 9% per annum.
K mart argues that it had to borrow money due to the Receiver's failure to transfer promptly the appropriate funds and that the debtor's estate will be unjustly enriched if it is allowed to keep the interest earned on the sum in question in excess of the 9% statutory rate. Although it is true that the debtor's estate will benefit if the $452,838.17 were invested at a rate greater than 9%, it would be inappropriate for this court to apply the equitable doctrine of unjust enrichment to contradict an explicit statutory provision. It must be assumed that the Illinois Legislature realized that the accrual of 9% interest per year on judgments would not correspond exactly to the cost one has to pay for the use of money. The statutory interest rate was not designed to make the judgment creditor perfectly whole; it is merely an approximation, with the judgment debtor benefiting from any excess or bearing the burden of any deficiency. K mart has not alleged bad faith on the part of the Receiver or any other extraordinary grounds for relief which may justify deviating from the...
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