Powell v. Hood Ex Rel. United Bank & Trust Co.

189 S.E. 483, 211 N.C. 137, 1937 N.C. LEXIS 24

Opinion

CoNnoe, J.

It is conceded by both plaintiff and defendants that, there is no error in tbe judgment in tbis ease that plaintiff recover of tbe defendants tbe sum of $468.63. It was agreed by them that tbis is. tbe amount now due tbe plaintiff on ber deposit in tbe United Bank & Trust Company, at tbe date of tbe closing of said bank, to wit, 8 February, 1933. Tbe judgment to that effect is affirmed.

Tbe defendants contend that plaintiff is not entitled to recover interest on tbe amount of ber deposit or any part thereof, and on their appeal to. tbis Court assign as error in tbe judgment tbe allowance of interest on said amount, or any part thereof.

It was agreed that after tbe partial liquidation of tbe assets of tbe United Bank & Trust Company by tbe defendants, and tbe payment of two dividends on tbe claims of its creditors and depositors, aggregating 35 per centum of said claims, there now remains in tbe bands of tbe defendants sufficient assets for tbe payment in full of all tbe costs and expenses of the liquidation of the United Bank & Trust Company, of all unpaid secured or preferred claims against said bank, with interest, and of the claims of the plaintiff and of all persons in like plight with her, with interest on such claims from the date of the closing of said bank, and that after the payment of said costs and expenses, and of said claims, with interest, there will remain in the hands of the defendants sufficient assets for the payment of a dividend in a substantial amount on the claims of depositors and creditors, which are not secured or entitled to preferential payment.

In view of this agreement, the contention of the defendants that plaintiff is not entitled to recover interest on the amount of her deposit in the United Bank & Trust Company, or any part thereof, cannot be sustained, if as adjudged by the court, the plaintiff is entitled to the preferential payment of the amount of her judgment. Conceding for the present that there is no error in the judgment to that effect, there is no error in the judgment that plaintiff recover interest on the amount of her deposit.

In American Iron & Steel Manufacturing Company v. Seaboard Air Line Railway, 58 L. Ed., 949, in the opinion of Mr. Justice Lamar, it is said:

“And it is true, as held in Tredegar Co. v. Seaboard Air Line Railway Co., 105 C. C. A., 501, 183 Fed., 290, that as a general rule, after property of an insolvent is in custodia legis, interest thereafter accruing is not allowed on debts payable out of the fund realized by a sale of the property. But this is not because the claims had lost their interest-bearing quality during that period, but is a necessary and enforced rule of distribution, due to the fact that in case of receiverships the assets are generally insufficient to pay debts in full. If all claims were of equal dignity and all bore the same rate of interest from the date of the receivership to the date of final distribution, it would be immaterial whether the dividend was calculated on the basis of the principal alone, or of principal and interest combined. But some of the debts might carry a high rate and some a low rate, and hence inequality would result in the payment of interest which accrued during the delay incident to collecting and distributing the funds. As this delay was the act of the law, no one should thereby gain an advantage or suffer a loss. For that and like reasons, in case funds are not sufficient to pay claims of equal dignity, the distribution is made only on the basis of the principal of the debt. But that rule did not prevent the running of interest during the receivership; and if as the result of good fortune or good management, the estate proved sufficient to discharge the claim in full, interest as well as principal should be paid. Even in bankruptcy, and in the face of the argument that the debtor’s liability on the debt and its inci dents terminated at the date of adjudication, and as a fixed liability was transferred to the fund, it has been held, in the rare instances when the assets ultimately proved sufficient for the purpose, that creditors were entitled to interest accruing after adjudication. 2 Blk. Com. Cf. Johnson v. Norris, 1915-B, L. R. A. (N. S.), 884, 111 C. C. A., 291, 190 Fed., 460(5).

“The principle is not limited to cases of technical bankruptcy, where the assets ultimately prove sufficient to pay all debts in full, but principal as well as interest, accruing during a receivership, is paid on debts of the highest dignity, even though what remains is not sufficient to pay claims of a lower rank in full. Central Trust Co. v. Condon, 14 C. C. A., 314, 31 U. S. App., 387, 67 Fed., 84; Richmond & I. Constr. Co. v. Richmond, N. I. & B. R. Co., 34 L. R. A., 625, 15 C. C. A., 289, 31 U. S. App., 704, 68 Fed., 116; First Nat. Bank v. Ewing, 43 C. C. A., 150, 103 Fed., 190.”

This principle was recognized and applied by this Court in Hackney v. Hood, Commissioner of Banks, 203 N. C., 486, 166 S. E., 323. In that case, the assets of an insolvent bank in the bands of the defendant for liquidation and distribution among its creditors and depositors, were sufficient for the payment of all claims against said bank, with interest from the date of its insolvency. It was held that the creditors and depositors were entitled to the payment of interest on their claims from date of the insolvency of the bank, in preference over the rights of stockholders to share in the distribution of said assets. In In re Central Bank & Trust Company, 206 N. C., 251, 173 S. E., 340, it was held that a preferred creditor was not entitled to the payment of interest after the insolvency of the bank, on bis claim. In that case, the assets were not sufficient for the payment of all the preferred claims. For that reason, the principle was not applicable.

In the instant case, if her judgment is entitled to preferential payment by the defendants out of the assets of the United Bank & Trust Company now in their bands, the plaintiff is entitled to recover interest on the amount of her deposit from the date of the insolvency of the bank until paid. There is error in the judgment allowing plaintiff interest on her claim only from 11 October, 1934. The judgment should be modified and interest allowed on plaintiff’s claim from 8 February, 1933, as contended by plaintiff on her appeal to this Court. As thus modified, the judgment should be affirmed, if plaintiff is entitled to the preferential payment of her claim, as adjudged by the court.

It was agreed that the payment by the plaintiff of her promissory notes, aggregating the sum of $780.00, and payable to the United Bank & Trust Company or its order, to the Reconstruction Finance Corporation, as the bolder in due course of said notes, resulted in the partial discharge of the indebtedness of the bank to the said Reconstruction Finance Corporation, and that after the payment in full of said indebtedness, assets of the United Bank & Trust Company, in the hands of the Reconstruction Finance Corporation as collateral security for said indebtedness, exceeding in value the amount of plaintiff’s claim against said bank, were delivered by the Reconstruction Finance Corporation to the defendants.

In view of this agreement, the plaintiff has an equity to have the amount of her deposit applied as a payment on her notes, with the result that her deposit is entitled to preferential payment out of the assets of the United Bank & Trust Company, now in the hands of the defendants. There is no error in the judgment to that effect. On facts substantially identical with the facts of the instant case, it was so held in Hall v. Burrell (Colo.), 124 Pac., 751, and in Becker v. Seymour (Minn.), 73 N. W., 1096.

As modified in accordance with this opinion, the judgment is

Affirmed.