In re T.H. Thompson Mill Co.

• Decision Date: 13 March 1906
• Docket Number: 78.
• Citation: 144 F. 314
• Parties: In re T. H. THOMPSON MILLING CO.
• Court: U.S. District Court — Western District of Texas

144 F. 314

In re T. H. THOMPSON MILLING CO.

No. 78.

United States District Court, W.D. Texas, Austin Division.

March 13, 1906

It is disclosed by the record that, on May 20, 1904, a petition was filed by certain creditors of the T. H. Thompson Milling Company, seeking to have the latter adjudged bankrupt, and subsequently, on July 9, 1904, an order of adjudication was duly made. The Mechanics' National Bank of St. Louis proved up and presented for allowance two promissory notes executed by the milling company and payable to the order of the bank, as follows: (1) One note, dated March 21, 1904 payable 60 days after date, for $5,000, and (2) the other dated April 20, 1904, payable 30 days after date, for $2,500. The two notes contained the following stipulation as to the payment of attorney's fees: 'And in the event default is made in the payment of this note at maturity and it is placed in the hands of an attorney for collection, or suit is brought on the same, then an additional amount of 10 per cent. on the principal and interest of this note shall be added to the same as collection fees. ' The referee duly allowed the principal of the two notes as a claim against the estate of the bankrupt, but disallowed the amount of the attorney's fee claimed by the bank. The latter thereupon filed its petition to review the order of the referee, and it devolves upon the court to determine whether the following finding of the referee was correct: 'The notes sued on provide that if not paid at maturity and placed in the hands of an attorney for collection, or suit is brought on the same, 10 per cent. additional as attorney's fee shall be added. The notes were placed in the hands of an attorney before the filing of the petition in bankruptcy, but said notes did not mature and become due until after the filing of said petition. It was held that the attorney's fee was not a fixed liability at the time of the filing of the petition and therefore not a provable claim in bankruptcy. ' It may be observed that, owing to the disqualification of the judge of the Southern district of Texas to try the cause, the same was, by stipulation of counsel, transferred to this district for determination.

Lane Jackson, Higgins & Wolters, for Mechanics' National Bank.

Sam R Perryman, for trustee in bankruptcy.

MAXEY District Judge (after stating the facts).

By section 63 of the bankruptcy act of July 1, 1898, c. 541, 30 Stat. 562, it is, among other things, provided:

'Debts which may be proved. Debts of the bankrupt may be proved and allowed against his estate which are (1) a fixed liability, as evidenced by a judgment or an instrument in writing, absolutely owing at the time of the filing of the petition against him, whether then payable or not, with any interest thereon which would have been recoverable at that date or with a rebate of interest upon such as were not then payable and did not bear interest. ' U.S.Comp.St. 1901, p. 3447; Brandenburg on Bankruptcy (3d Ed.) Sec. 1412; Collier on Bankruptcy (4th Ed.) p. 839.

To authorize proof of the claim for attorney's fees, it was then incumbent upon the bank to show that the debt was a fixed liability, absolutely owing at the time the petition was filed against the milling company. The note of March 21st, for $5,000, was payable 60 days after date, and that of April 20th, for $2,500, was payable 30 days after its date. The petition in bankruptcy was filed against the milling company on May 20th. Allowing three days of grace on the notes, it is quite obvious that they did not become due and payable prior to May 22d, and hence they did not mature until after the petition was filed. Brown & Co. v Chancellor, 61 Tex. 437; Gin & Mill Co. v. Sinker, Davis & Co., 74 Tex. 51, 11 S.W. 1056; Watkins v. Willis & Bro., 58 Tex. 521. The fees were recoverable only upon the happening of the contingency, and the very contingency as to which the parties had contracted. The contingency, within the contemplation of the parties, was default in the payment of the notes at maturity, and placing them in the hands of an attorney for collection, or bringing suit upon them. But no suit was brought to enforce their collection; and, while the record discloses that they were placed in the hands of an attorney...