Case ID: f-supp_387/html/0407-01.html
Source: Caselaw Access Project
Author: {"author": "ROBERT W. PORTER, District Judge.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

In the Matter of UNITED METAL FABRICATORS, INC., Bankrupt.
    No. BK3 2455.
    United States District Court, N. D. Texas, Dallas Division.
    Jan. 3, 1975.
    Vernon O. Teofan and Steve A. Ungerman, Dallas, Tex., for New Process Steel Corp.
    L. E. Creel, III, Dallas, Tex., trustee in bankruptcy.
   OPINION

ROBERT W. PORTER, District Judge.

This appeal from an order of the bankruptcy judge denying appellant’s claim for $1,052.08 turns on the meaning of the words “paid in full” in § 57 sub. n of the Bankruptcy Act, 11 U.S. C. § 93(n), which reads in part:

When in any case all claims which have been duly allowed have been paid in full, claims not filed within the time hereinabove prescribed may nevertheless be filed within such time at the court may fix or for cause shown extend and, if duly proved, shall be allowed against any surplus remaining in such case.

Because the Court agrees with the interpretation of Judge Learned Hand in Hammer v. Tuffy, 145 F.2d 447 (2d Cir. 1944) that “paid in full” means payment of principal and interest, the decision of the bankruptcy judge will be affirmed.

In this case, the bar date was June 17, 1972. Almost three weeks later, on July 5, 1972, the appellant, New Process Steel Corporation, filed its claim. Although the trustee had on hand $2,550.-04 in excess funds after the principal amounts of all timely claims had been paid, the bankruptcy judge denied payment of appellant’s claim and instead ordered the trustee to pay interest prorata to the timely claimants. The bankruptcy judge stated that his sole reason for so acting was the Hammer case, supra.

In its brief on appeal, New Process gives no reason for its failure to file a timely claim. Instead, it challenges the reasoning of Judge Hand, who— in a case of first impression — examined congressional intent in amending § 57, sub. n in 1938 so as to provide that surplus funds might in some cases be distributed to late-filing creditors rather than be returned to the debtor.

The Hammer case, however, involved a question of whether excess funds were to be paid to a late-filing creditor or to the timely creditors; there was no question of returning some of the excess to the bankrupt. It is the same in the case at bar: it appears that payment of interest to the timely creditors will exhaust the excess funds. If any of the excess is left, the appellant’s claim would be paid before anything is returned to the bankrupt.

The availability of surplus funds is also the key to distinguishing City of New York v. Saper, 336 U.S. 328, 69 S.Ct. 554, 93 L.Ed. 710 (1949), which appellant cites for the proposition that post-petition interest should not be allowed. In Saper, the Court was not called upon to distribute excess funds; there were none. Among other things, the Court in Saper examined the language of a House Report on the proposed amendment to § 57, which said in part:

. . . Interest on general unsecured debts, on unsecured Government debts other than taxes, and on debts entitled to priority under section 64a, is suspended at the date of bankruptcy so that, except in the rare case of a solvent estate, interest is allowable only to such date.

336 U.S. at 340, n. 17, 69 S.Ct. at 560, n. 17, 93 L.Ed. at 719, n. 17 (emphasis added).

Because here there are excess funds, making the Saper decision inapplicable and because no reason for the late filing has been shown, I find no reason not to follow the decision of Judge Hand, who wrote:

Nor do any equities favor a “barred” creditor; for, while, as against the bankrupt, he has ... a good claim to be paid, we cannot see why, as between himself and his more diligent fellows, he should be allowed to reap where he has not sown. They have not misled him; he took his chances as to the assets, they did not; they should not be compelled to feed his lamp with oil from their own; he must be content that his former plight has been relieved vis-a-vis the only person against whom he has any shadow of grievance.

Hammer v. Tuffy, supra, 145 F.2d at 450.

The decision of the bankruptcy judge is affirmed.