In re Stamps
| Decision Date | 14 June 1924 |
| Docket Number | 2118. |
| Parties | In re STAMPS. |
| Court | U.S. District Court — Northern District of Georgia |
Willingham Wright & Covington and Denny & Wright, all of Rome, Ga., for trustee and Penn Mut. Life Ins. Co.
Paul H Doyal, of Rome, Ga., for Citizens'-Floyd Bank & Trust Co.
The bankrupt was in possession of land on which he had given a security deed to the Penn Mutual Life Insurance Company to secure a debt of $6,000, with interest and 10 per cent attorney's fees. A second lien on this land was held by Floyd County Bank for a debt of $10,000. The Floyd County Bank debt was also secured by other lands. On August 22 1923, an involuntary petition in bankruptcy was filed, and adjudication had on September 10, 1923. A trustee was elected on October 6th, and took possession of the bankrupt's real estate. On December 28, 1923, the insurance company, disregarding the bankruptcy, declared its debt in default because of nonpayment of taxes, gave a notice of intention to sue, as required by Georgia statute, in order to collect attorney's fees, and on February 15, 1924, filed a suit in the city court of Floyd county for the purpose of enforcing its debt against the land securing it. On February 15, 1924, the trustee in bankruptcy, representing to the court that the lands were incumbered to their full value, applied for leave to disclaim them as burdensome. A hearing was set upon the application for February 26th. A creditor then objected that there was a valuable equity in the lands and insisted upon a sale. The trustee thereupon applied for leave to sell free of liens, and was ordered to serve the Penn Mutual Life Insurance Company and Floyd County Bank, and one Denny, who was transferree of certain tax fi. fa.'s, that they might show cause against the sale.
The Penn Mutual Insurance Company answered, setting up their lien of $6,000, with interest and 10 per cent. attorney's fees, and stating that it was willing that the property be sold free of liens, provided the court, by order, should require the trustee not to sell unless for an amount 'sufficient to satisfy their debt in full, principal, interest, attorney's fees, and court costs, and that the trustee shall not accept or receive any bid for a lesser amount than is necessary to pay their debt in full. ' An order was granted for the sale in language following the consent quoted. No bid being received, the order was modified in unimportant respects, and a sale had, at which an amount was bid sufficient to satisfy the lien claimed by the insurance company and that of Floyd County Bank also, if the claim for attorney's fees be not allowed. Floyd County Bank attacks the allowance of the attorney's fees, and the referee, on a hearing, disallowed them, and ordered the lien of the taxes to be prorated between the funds arising from the sale of the land included in the insurance company's deed and that not so included. Exception is taken to these rulings.
1. The transferred tax liens, under the Georgia law, remain a first charge against all the property of the bankrupt. The two funds arising from the sales of separate lands are equally liable thereto. They should in equity contribute in proportion to their amount to the discharge of this common burden. The proceeds of the sale of the land incumbered by the lien of the insurance company, after discharging its pro rata of the taxes, is subject to the claim of the insurance company until it be satisfied in full. Any surplus remaining will be paid to the Floyd County Bank. The other fund, after discharging its pro rata of the tax lien, will go to the Floyd County Bank, until it is satisfied.
2. The allowance of increased interest after default on the debt of the insurance company is in accordance with the absolute provisions of the contract, and is affirmed as correct.
3. The main contention is over the allowance of the $600 as attorney's fees. The contract between the bankrupt and the insurance company expressly refers to the Georgia homestead law, was made in Georgia, and deals with Georgia lands. Although the debt is made payable in Pennsylvania, the contract is a Georgia contract. By the statutes of Georgia (...
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