184 F. 887 | 7th Cir. | 1911
(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 slighting the principal. '
But the bankruptcy act furnishes its own terminology. “Debt,” according to section 1, par. 11, means any “debt, demand, or claim provable in bankruptcy.” Section 63a enumerates what debts, and section 63b what claims, may be proved and allowed. Proof and allowance of'the note in question were governed by section 63a (1), which
*889 “Debts of the bankrupt may be proved and allowed against Ms estate wMch 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 nit then payable and did not bear interest.”
As a provable debt — that is, as a debt within the scope of the bankruptcy act — the note was limited to the principal and the interest thereon that would have been recoverable at the time of the filing of the petition in bankruptcy. The only other reference to interest is in section 63a (5), wherein authority is given for the allowance of provable debts reduced to judgments after the filing of the petition, in bankruptcy, “less costs incurred and interests accrued after the filing of the petition and up to the time of the entry of such judgments.” This requirement, like the stopping of interest and the rebating of unearned interest under section 63a (1), shows the legislative intent that all creditors having the right to share in the distribution of the bankrupt's property should be placed on an equal footing as of the date of the filing of the petition. Reverting now to section 5f, the conclusions seem clear that partnership creditors have a recognized right to look to the assets of the individual estates, that individual “debts” are satisfied under the bankrntpcy act by the payment thereof to the extent “proved and allowed,” that this statutory limitation becomes by operation of law a part of the “instrument in writing” that evidences the debt, and that, therefore, any surplus that remains in an individual estate, after payment of individual debts as allowed, should be added to the partnership assets and be applied to the payment of the partnership debts. These conclusions should be read, of course, as applicable only to contests between individual and partnership creditors where, as here, the total net proceeds arc inadequate to meet all the claims as allowed. What the equitable rights between the hank and Charles V. Chandler would be, if there were a surplus after payment of the partnership debts as allowed, is a question not involved.
No precedents under the present act have been adduced by counsel or found by us. But our holding accords with interpretations of similar provisions of the act of 1867 and of the English acts. In re Orne, Fed. Cas. No. 10,581 ; In re Haake, Fed. Cas. No. 5,883; Thomas v. Minot, 77 Mass. (10 Gray) 263; Ex parte Reeve, 9 Ves. Jr. 588.
The ruling of the District Court was right, and the petition to review and revise is therefore dismissed.