162 F.2d 10 | D.C. Cir. | 1947
This is an appeal from a District Court order directing the executors and trustees of the estate of Morton H. Goldenberg to compute and allow; interest on certain claims against the estate. Appellants, who are creditors with non-interest bearing claims based on open accounts, brought the motion for the order, but appeal from the order because they contend they are entitled to more interest than the court allowed. The order appealed from allowed appellants, referred to as merchandise or general creditors, interest at the rate of one and one-half per cent, per annum on their non-interest bearing claims, while allowing other creditors, referred to as bank creditors, having claims expressly providing for interest, interest at the expressed rate. The executors and one of the creditors having an interest-bearing obligation are appellees.
The issues here presented revolve around the right of these creditors holding non-interest bearing claims to receive interest on them. The question of the payment of interest first arose around 1935. Prior to then, in 1933, the first dividend had been paid amounting to 25 per cent., at which time the bank creditors were paid interest at the expressed rate on 25 per cent, of their claim in addition to the dividend. After a series of conferences, meetings, and hearings before the court auditor, to whom the matter had been referred in 1934, a procedure was developed whereby on the payment of the second dividend, which was 10 per cent., the bank creditors received no interest and an adjustment was made to bring the general creditors on a par with the bank creditors by paying the general creditors 25 per cent, of the interest accrued to them at the legal rate of 6 per cent.; and thereafter all subsequent dividends were made pro rata based on a fixed percentage of the original claims. Portions of the auditor’s report, ratified by the court on June 27, 1935, which bear on this point and have a further important bearing on the issues of the case are as follows:
“4. * * * Thereafter, at a hearing held on February 21, 1935, after various adjournments, the following occurred: Mr. Koenigsberger: * * * In the account as filed, which shows the first dividend to creditors, the banks and the Estate of Julius M. Goldenberg, which held claims interest-bearing by their terms, were allowed dividends on their claims plus interest in accordance with the terms of the obligations, but no interest was allowed on the claims of other creditors, principally merchandise creditors, whose claims were not by their express terms interest-bearing. Although there is no statute on the subject, it is believed to be consistent with the practice in this jurisdiction and elsewhere to allow interest on these claims from November 14, 1931, that being 13 months after the grant of letters testamentary by the Orphans’ Court of Baltimore, in which Court the will and codicil were probated and the letters testamentary were originally issued. * * * * * *
“10. Schedule ‘C’ is a statement of payments of 25 per cent., made by said Executors to certain creditors, under the authority of said order of October 4, 1934, and shows the balances of the claims of said creditors, exclusive of interest. The auditor finds t
At the time of these proceedings below, all creditors here involved had received an amount equal to 100 per cent, of the face of their claims. However, by the time of the declaration of what was purported to be the final dividend, the executors had acquired doubt as to whether the position they had taken in 1935 was correct, and whether the general creditors were entitled to any interest. They accordingly made their final payment in an amount which together with the prior dividends equaled the face amount of the general creditors’ claims. The general creditors thereupon filed the motion resulting in the order here
Appellants’ main contentions are that the court erred in finding that the auditor’s report constituted a limitation upon the rate of interest to be computed on the claims of the merchandise creditors, in finding that no agreement that the merchandise creditors were to receive interest existed between them, the executors and trustees of the estate and the general creditors whose claims were on interest-bearing obligations, and in allowing interest at the rate of one and one-half per cent, in lieu of interest at the legal rate.
The question raised in the brief of the appellee executors as to whether Maryland or District of Columbia law governs the instant proceedings is disposed of by our decision in Duehay v. Acacia Mut. Life Ins. Co.
As far as the, law in this jurisdiction is concerned, there is no statute which supplies an answer to the issues presented, and we have been referred to no decisions' of this court in point. We believe the correct rule to be that in paying the debts of a decedent, interest should be allowed on all claims which are of a nature entitled to interest, irrespective of whether they are interest-bearing by their terms or not.
Several points remain for discussion, the first of which is whether the claims presented by appellants are of a nature which are entitled to interest. We think they are. As far as we can determine from the record, appellants’ claims are based on transactions involving the sale of merchan
“On the other hand, counsel for the iron & Steel Company contend that as these stipplies were sold on a credit of thirty days a promise was implied to pay interest after that date as an incident of the debt itself. From (cases cited), we reach the conclusion that whatever may have been the English and early American rule, the tendency in Virginia, as elsewhere in this country, is to allow interest on contracts to pay money from the date that the debt becomes due. 2 Minor’s Institute, 381. The sale here of supplies on thirty days’ credit was not, as argued, a mere agreement for the benefit of the buyer that it should not be sued before the expiration of that time, but was the fixing of a definite date for payment of the purchase money. The acceptance of the supplies, sold on those terms, was equivalent to a promise to pay the money on that day. Atlantic Phosphate Co. v. Grafflin, 114 U.S. [492] 500, 5 S.Ct. 967, 29 L.Ed. [221] 224. As payment was not then made, the Railway Company was in default, and interest began to accrue as an incident of the debt, recoverable as such, and not merely as damages to be allowed in the discretion of court or jury.”
We turn now to the interpretation to be given the finding of the auditor pertaining to the allowance of interest. The statement by the auditor, set out above, does not set a limitation on the amount of interest appellants were entitled to as a whole. The clear meaning, we think, is as asserted by appellants, that as the bank creditors had previously, at the time of the first 25 per cent, dividend, been paid interest not allowed the merchandise creditors, and as had been expressed at the hearings before the auditor that it was the intention of the parties that the merchandise creditors be allowed interest, they should be put on an equal footing with the bank creditors by the payment to them of 25 per cent, of the interest on their claims. It was not a finding that appellants were to be limited to one and one-half per cent, interest throughout the entire administration, but was a summation of the action to be taken sometime in the future to remedy an inequitable situation existing because of certain erroneous action taken in the past, and consequently, was not determinative of the issues before the Court in this case.
In this disposition of the case it is not necessary to determine whether an agreement concerning interest existed between the parties. There appears to be no dispute concerning the time from which interest should run, or as to the rate of interest. The question as to whether the payments previously made to all creditors here involved should be considered as applying to interest, as is normally the fact, or principal, should be answered, we‘think, in view of the circumstances existing in the case, by the general rule applied to the administration of insolvent estates that interest is not paid, although it continues to run, during the period the assets are insufficient to pay the principal of the claims, but that if the estate proves sufficient to cover the claims in full, the interest will be paid, either in full or pro rata as the facts may dictate.
Reversed and remanded, with costs to be borne by the Estate.
70 App.D.C. 245, 105 F.2d 768, 771, 124 A.L.R. 1268.
2 Woerner, American Law of Administration (3d Ed.1923) Sect. 411.
2 Schouler, Wills, Executors and Administrators, Sect. 1440.
Turk v. Grossman, supra.
Williams v. The American Bank, 4 Metc., Mass., 317; Mowry v. Peck, 2 R. I. 60; Beatty v. Snouffer, 164 Iowa 746, 146 N.W. 844; Town of Panton v. Noonan, 112 Vt. 138, 22 A.2d 174. cf. Estate of Olvera, 70 Cal. 184, 11 P. 624.
Brown v. Lamb, 6 Metc., Mass., 203.
233 U.S. 261, 34 S.Ct. 502, 504, 58 L.Ed. 949.