251 F. 514 | 6th Cir. | 1918
(after stating the facts as, above). The Detroit, Toledo & Ironton Railroad Company (the new company) resists the appellants’ claims for interest. The question as to whether any of such claims was improperly given an equitable priority by the trial court, as between its owner and the bondholders, need not be considered, as no issue is made on that point.
[4 | The foregoing statement of the law has been deemed advisable because the appellants contend that their contracts for supplies must be read as if the state statutes relating to interest were imported into them, and that, so read, their respective contracts provided for interest upon any default of payment, and that therefore their right to interest is contractual. The Ohio General Code provides that parties may stipulate for the payment of intei'est at any rate not exceeding 8 per cent, per annum, payable annually (section 8303), and that all judgments upon contracts made as provided in that section shall bear interest at the stipulated rate (section 8304). Section 8305, which deals with cases other than those mentioned in sections 8303 and t8304, provides inter alia that the owners of claims, such as the appellants have, when the same become due and payable, “shall be entitled to interest at the rate of six per cent, per annum, and no more.” Section 2869, How-elks Michigan Stat. Anno. (2d Ed.) declares that the interest rate shall be 5 per cent, per year, but parties may stipulate for the payment of any rate not exceeding 7 per cent. A fair interpretation of decisions touching the interest laws of such states warrants the conclusion that the legislative intent, in the enactment of the above-mentioned statutes, was merely to regulate the legal rate of interest.
The case of Pennsylvania Steel Co. v. New York City Ry. Co., reported in 208 Fed. 168, and again after it reached the Circuit Court of Appeals, in 216 Fed. 458, 132 C. C. A. 518, throws no light on the question for decision. The holders of claims for material and supplies bought shortly before the receivership for use in operating the road did not ask -the displacement of any prior lien or for payment out of other than unmortgaged property (208 Fed. 183), and the fund was sufficient to pay them in full, with interest, and leave a balance over for general creditors (216 Fed. 471, 132 C. C. A. 518).
The appellants cannot, for the recovery of interest, avail themselves of the doctrine first formulated in Fosdick v. Schall, 99 U. S. 235, 25 L. Ed. 339, and applied in Southern Ry. Co. v. Carnegie Steel Co., 176 U. S. 257, 20 Sup. Ct. 347, 44 L. Ed. 458, that, where there is a diversion of income, restoration of the income so diverted must be made for the payment of six months claims and expenditures for supplies during the receivership. There is no evidence that any such diversion occurred or that any appellant has in that manner been deprived of any of his equitahle rights. If there has in reality been no diversion, there can be no restoration directed for any purpose. Fosdick v. Schall, 99 U. S. 254, 25 L. Ed. 339.
The contention that the mortgagees delayed the receivership proceedings, the sale of the railway company’s property and the distribution of the proceeds arising therefrom must also- fail. The court proceedings were protracted, for which none of the appellants was responsible; but there is no evidence that the mortgagees, or any of them, provoked a vexatious, unreasonable or unnecessary delay and thereby postponed the payment of claims. The several postponements were for satisfactory reasons sanctioned by the presiding judge, and the distribution of the railway company’s estate was thereby in each instance quite as effectually stayed as were the proceedings in Grand
It was said, in Redfield v. Ystalyfera Iron Co., 110 U. S. 176, 3 Sup. Ct. 570, 28 L. Ed. 109, that the allowance of interest as damages is often a matter of discretion, and in Jourolmon v. Ewing, 80 Fed. 604, 607, 26 C. C. A. 23, 27, Judge Severens, speaking for this court regarding the rule that interest, when not stipulated, will generally be allowed as damages, said:
“The rule lias its exceptions, and as in other cases where there are reasons founded on the conduct of the plaintiff, or other special circumstances existing in the case, and the justice of the situation requires it, interest will he denied.”
See. also, New Orleans v. Fisher, 180 U. S. 185, 198, 21 Sup. Ct. 347, 45 L. Ed. 485.
The property of the insolvent railway company passed into and was retained in the hands of the court’s receivers until it could he converted into cash to satisfy the debts whose equitable priority was recognized, and, when so converted, the proceeds of the sale were insufficient to pay any part of the mortgage debt. The strong equity mentioned in Nashua & Lowell R. Corp. v. Boston & Lowell R. Corp., 61 Fed. 251, 9 C. C. A. 468, which will stop the running of interest in exceptional cases, even where it is ordinarily given as a matter of right, was present.
In case No. 3099, the judgment of the District Court is modified, to the extent that interest may be computed on claims due prior to the