Opinion ID: 1708729
Heading Depth: 1
Heading Rank: 2

Heading: The Accrued Interest Issues.

Text: Shortly after its appointment as receiver, the commission sold the grain and invested the proceeds. The trial court ruled this interest should be distributed on a pro rata basis to depositors holding valid claims before the extent of the surety's liability was determined. The surety contends that it was error to return the accrued interest on the grain sale proceeds to depositors. According to its theory, the interest should be credited to its obligation as surety on the warehouse bond. It bases its argument on section 543.4(4), which provides: The plan of disposition, as approved by the court, shall provide for the distribution of the stored commodities, or the proceeds from the sale of commodities, or the proceeds from any insurance policy or surety bond, or any combination thereof, less expenses incurred by the commission in connection with the receivership, to depositors on a pro rata basis as their interests are determined. Distribution shall be without regard to any setoff, counterclaim, or storage lien or charge. Under the surety's theory, interest earned on the grain sale receipts became part of the proceeds under section 543.4 and therefore must be used to satisfy receivership expenses and claims before there is a determination of the surety's liability. In other words, the accrued interest would be applied to the benefit of the surety. We do not agree. A receiver is an officer appointed by the court to take into its custody the control and management of property or funds of another, pending judicial determination of its proper distribution. Dobler v. Bawden, 238 Iowa 76, 81-82, 25 N.W.2d 866, 869 (1947). Title to the property does not pass to the receiver; it remains in the original owner. 75 C.J.S. Receivers § 103, at 745-46 (1952). Despite the fact section 543.4(4) makes no distinction between the proceeds of the sale of the grain and proceeds gained by the investment of the sale proceeds, we agree with the district court that the interest should be treated separately. It should be paid to the depositors on a pro rata basis and should not be used to reduce the surety's obligation. This, it seems to us, more logically effects the purpose of the receivership legislation which is, in part, to protect the depositors. See Iowa Code § 543.3(1). The depositors, who have been deprived of the grain and the proceeds of this sale during the pendency of the receivership, should be compensated by receiving the interest on the proceeds. If there had been no receivership, and the depositors of the grain, rather than the receiver, had sold the grain, they would, of course, be entitled to any interest on the proceeds. The intervention of a receiver should, as nearly as possible, preserve the rights of those depositors. If there is a shortfall, the surety, not the claimants, must bear the loss. That is the purpose of requiring a bond. See Iowa Code § 543.12. This disposition also resolves another of IGF's arguments, that the distribution of accumulated interest to the depositors results in their unjust enrichment. For the reasons discussed above, the interest belonged to the depositors; it cannot be considered unjust enrichment.