In re Murray

| New York Court of Chancery | Oct 18, 1836

The Chancellor.

The court has been referred to the cases decided in England, under their bankrupt laws, where it has been held that the creditors of the bankrupt, under a commission of bankruptcy, could prove for the interest of their debts only in those cases where interest was payable by the terms of the contract; that they could not prove for interest where it was only given by a court or jury as damages for the detention of a debt, as upon a bill of exchange or note not upon interest but which was not paid when it became due; (Ex parte Marler, I Atk. 151. Ex parte Champion, 3 Bro. C. C. 436;) and that interest cannot be proved beyond the date of the commission. These cases under the English bankrupt laws are the result of a principle established at an early day in that country, before the present liberal and equitable doctrines in relation to interest, as between debtor and creditor, were fully recognized and settled; and they cannot, therefore, be considered as proper rules for the guidance of our courts in establishing the principles upon which the distribution of the effects of an insolvent debtor shall be made under the provisions of the insolvent laws of this state. Equality among creditors is equity; and where interest is recoverable either upon the express agreement of the parties or as legal damages, for the non-payment of the debt when it should have been paid, the creditors are all entitled to participate in the distribution of the fund, rateably, in proportion to the amount due to them respectively for principal and interest up to the date of the assignment. In settling the tableau of distribution, therefore, the interest upon those debts which bear interest, 01 upon which it is recoverable as damages, upon settled legal principles, should be computed to that time; and if any debts are not then due, and which are not upon interest, a proper discount should be made. As to subsequent interest, if the debts are not paid at that time, and the fund which is afterwards realized by the assignee is more than sufficient to pay the amount thus found due at the time of the assignment, the interest on all the debts subsequent to the assignment should be paid rateably out of the surplus. I know of no principle, either legal or equitable, which can deprive the creditors of the full amount due to them respectively, including the interest to the time of payment, or so far as the fund will go. The payment of subsequent interest upon those debts which originally drew interest by the agreement of the parties, was allowed even under the bankrupt laws after the principal debts proved under the commission had been fully paid. (1 Deacon's Law of Bank. 269.)

An order must therefore be entered directing the assignee to make a distribution of the fund in his hands, among the creditors, upon the principles above stated; computing the interest on policies from the time when the loss became payable according to the terms of the policy, and upon judgments recovered against the insolvent company from the dates or times of rendering such judgments. The distribution of the fund already realized to be made as soon as practicable, upon a notice of three weeks, to be published in a paper in New-York and in the state paper; and a further dividend to be made, on the like notice, upon the receipt of the residue of the fund.