94 F. 454 | U.S. Circuit Court for the District of Eastern Wisconsin | 1899
Tlie question to be determined arises upon exceptions to the report of the special master filed September 20, 1898. The Northern Pacific’ Railway Company, the purchaser of the Northern Pacific Railroad under the decree of foreclosure, filed its claim with the special master under the sequestration proceedings for payment of the amount due for principal and interest upon the consolidated bonds of the Northern Pacific Railroad Company owned by claimant The amount of the principal of these bonds held by the claimant is $44,928,000. The exceptions present the question of the rate of interest which should be allowed upon the principal of the bonds and upon the interest coupons after their respective dates of maturity. The special master cast the interest at the rate of 5 per cent, per annum; the claimant insists that it should be cast at the rate of 6 per cent, per annum; and this is the contention. The difference in the amount of interest, computed at the two rates mentioned, is $1,664,382; so that the question, although one of no great difficulty, is of moment to the claimant.
The bonds in question bear date December 2, 1889, and are respectively payable on the 1st day of December, 1989, “and interest thereon in the meantime at the rate of five per cent, per annum, * * * semiannually, on the first day of June and on the first day of December in each year.” Coupons were attached to each bond for the semiannual interest contracted to be paid for the entire period of 100 years. By article 10 of the trust deed securing these bonds it was provided that in case of default in the payment of any installment of interest, or of any coupon annexed to the bonds, such
I have found, and have been referred to, no case which directly rules the question involved, and must ascertain the principle which should govern from the rulings of the supreme court in cases more or less analogous. In Brewster v. Wakefield, 22 How. 118, it was ruled that a stipulated rate of interest greater than that allowed by statute, in the absence of stipulation for a rate of interest after maturity, would not be allowed after maturity, and that the legal rate should govern. In Cromwell v. Sac Co., 96 U. S. 51, 60, it was held, under the statute of Iowa allowing the same rate of interest after maturity as that expressed in the contract to be paid until maturity, that the stipulated rate attended the contract until it should be merged in judgment. In Holden v. Trust Co., 100 U. S. 72, it was ruled that, under the law prevailing in the District of Columbia, a note payable with 10 per cent, interest only drew that rate up to its maturity, and thereafter the legal rate of 6 per cent.; and the principle is there stated by Mr. Justice Swayne as follows:
“If payment be not made wlien tlie money becomes due, there is a breach oí the contract, and the creditor is entitled to damages. Where none has been' agreed upon, the la.w fixes the amount according- to the standard applied in all such cases. 11 is the legal rate of interest where the itarties have agreed upon none. If the parties meant that the contract rate should continue, It would have been easy to say so. In the absence of a stipulation, such an intendment cannot be inferred.”
The case of Ewell v. Daggs, 108 U. S. 143, 2 Sup. Ct. 408, may also be referred t.o, but it does not alter the rule declared. So that the principle would seem to be established that the legal rate of interest is to be allowed as damages for the nonfulfillment of the contract, unless by the contract itself it is manifest that a different rate was intended to govern. Interest upon a matured debt is given by the law as damages for the improper detention of money. The rate specified by statute is allowed only in the absence of contract stipulation upon the subject, speaking to a period subsequent to its maturity. In the one case the obligation to pay interest after maturity arises from the assent of the parties; in the other, from a duty imposed by law.
Here the obligor by its bond agreed to pay a certain sum of money on December 1, 1989, a period of 100 years from the date of its obligation, and to pay interest upon its debt in the meantime, — that is, until December 1, 1989, — at the ra:e of 5 per cent, per annum. It attached to each obligation coupons representing the semiannual
The special master allowed interest upon the coupons at the like rate of 5 per cent. If that question was not embarrassed by considerations to which I shall presently advert, I am free to say that the creditor 'was entitled to interest at the rate of 6 per cent, upon the coupons. The law allows interest on a coupon for interest. It is a contract to pay a specified sum on a specified day. There is no provision in them, nor in the trust deed, with respect to the payment of interest upon the interest coupons. Consequently the legal rate of interest should prevail. But there is this difficulty in applying that principle to the present case: The trustee filed its bill to foreclose the trust deed. That cause was consolidated with the previous suit of Winston to subject the property of the debtor to the payment of its debts. In the consolidated cause the trustee demanded of the court that it ascertain the amount due upon the mortgage, and decree therefor, and for the sale of the mortgaged property pledged for the debt. A decree passed pursuant to the request of the trustee, in which the court determined the amount due on these bonds, the interest upon the coupons as well as upon the principal being therein computed at the rate of 5 per cent, per an-num. This was the rate which the trustee asked the court to determine should govern, and it was so determined. The bondholders,
The exceptions are overruled, and the report of the master confirmed.