Court Opinion

ID: 8634787
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:43:26.467468+00
Date Added: 2024-06-11T16:55:53.641368
License: Public Domain

McKENNAN, Circuit Judge.
I think the basis of computation of the value of the bonds chargeable upon the fund for distribu*668tion, which was adopted by the register and approved by the court below, was erroneous. It is undoubtedly true, as a general rule, that no interest accrues upon a note or bond until the relation of debtor and creditor Is created by the transfer and delivery of such note or bond by the maker to another, for a sufficient consideration; and this is so for the reason that such is the constructive import of the contract between the maker and holder of such instrument But it is none the less certain that the maker of a note may make himself liable for interest apparently accrued upon it, where he expressly stipulates to become so for a lawful consideration. It was altogether competent then for the bankrupt and John I. House to agree that the interest upon the bonds transferred to. the latter as collateral security should be computed from their date according to their tenor, and that the whole or a part of such interest should stand as a security for a loan made expressly upon the faith of it. Nor have the holders of the other bonds of the same class any equity to gainsay such an arrangement, because, as such bonds were hypothecated to them several years after date, they must be presumed, in the absence of proof to the contrary, to have acted upon the assumption that the bonds not held by them were outstanding for interest as well as principal, according to their face tenor.
The proper method, then, of determining the value of the collateral securities, is to compute the interest upon all of them from the date of their last hypothecation to the time of distribution, and to add to the amount of the securities held by John I. House the interest which had accrued upon them before the date of their hypothecation, and, as the fund for distribution is insufficient to pay in full the debts for which the collaterals were pledged, to apportion it among the creditors upon the basis of the value, thus ascertained, of the securities hypothecated to them respectively.
In regard to the exceptions filed in behalf of the estate of McCullough, I deem it necessary to say that they were properly overruled by the court below.
The order of the district court confirming the report of the register is, therefore, reversed, and the cause is remanded to that court with directions to cause distribution to be made of the fund in the hands of the as-signee among the creditors entitled to it in conformity with the method herein indicated.