This case is now before the court on exceptions to the report of the special master, to whom it was referred mainly for the purpose of ascertaining, the relative priorities of the claimants against the fund in the hands of the receiver. The finding of the special master that the Bank of Commerce, formerly the Bates-Farley Savings Bank, is entitled to priority over other claimants to the fund, except as against the cost of administration,
In Thomas v. Car Co., 149 U. S. 95, 13 Sup. Ct. 824, 37 L. Ed. 663, it is said that:
“As a general rule, after property of an Insolvent passes into the hands of a receiver or of an assignee in insolvency, interest is not allowed on claims against the funds. The delay in distribution is the act of the law; it is a necessary Incident to the settlement of the estate,”—citing Williams v. Bank, 4 Metc. (Mass.) 323; Thomas v. Minot, 10 Gray, 263.
In Bowman v. Wilson (C. C.) 12 Fed. 864, Circuit Judge McCrary says:
“Interest is allowed upon the ground that the debtor is in default and has the use of claimant’s money. It is never allowed where, by the order of a court of competent jurisdiction, or by the interposition of the law, or the act of the creditor, payment of a debt has been prevented. During the continuance of such prevention the interest does not run. If a fund is in the custody of the law,—in the possession of a court,—and cannot be paid out without the order of such court, it does not ordinarily bear interest I know of no principle of law or equity upon which the interest claimed can be allowed at the expense of the general unsecured creditors, who are certainly in no wise responsible for the delay in making the final order of distribution,”—citing 1 Am. Lead. Cas. (3d Ed.) 516 et seq.
The cases of Trust Co. v. Condon, 14 C. C. A. 314, 67 Fed. 84, Central Trust Co. v. Richmond, N., I. & B. R. Co., 15 C. C. A. 273, 68 Fed. 90, 41 L. R. A. 458, and Jourolmon v. Ewing, 29 C. C. A. 41, 85 Fed. 103, would draw a distinction between claims of creditors with and without liens, in favor of lien creditors, which might be applicable here if the bank was attempting to enforce its lien. While the special master does find that the Bank of Commerce is entitled to a special lien on the property described in the loan deed which was given to secure the loan, he recommends that they be paid out of the general fund in the hands of the receiver.
Taking the entire facts of the case together, I do not believe this claim should draw interest after the appointment of the receiver and the sequestration of the assets of the association.
The next question is as to the rights of the holders of script determined under the Eowry intervention. The holders of this script had given notice of a desire to withdraw from the association, and the script was issued for the withdrawal value of their stock. The relation of the scriptholders to the association as stockholders was terminated, and the relation of creditor created, when the script was issued. This being the condition when the affairs of the association came to be administered in court by the appointment of a receiver, the rights of these scriptholding creditors could only be defeated by showing fraud in the transaction, or an intent and effort to give them a preference over other stockholders. Nothing of that kind is shown in this case. It seems to have been an ordinary business transaction in which the
The next question is as to the rights of holders of stock called “Class C Stock.” This is fully discussed by the special master in his report, in which he classes it with other stock of the association, and gives it no preference. The stock on which the issue was raised was that of S. S. Solomons. The certificate calls the stock “Class C, full-paid, guarantied interest, coupon stock, of the par value of one hundred dollars per share, of the full-paid capital stock thereof, fully secured, and all payments of interest guarantied by first deeds of trust and first mortgages on real estate worth at least double the amount invested therein.” No deed of trust or mortgage was given as provided in the certificate of stock. This stock was issued under a by-law of the association, as follows:
“See. 3. Glass O, full-paid, guarantied interest, coupon stock may be issued and sold at the price of one hundred dollars per share in advance. Said stock shall bear a guarantied interest of 7 per cent, per annum, payable semiannually, from the date of the certificate, out of the earnings of the association, and shall be nonassessable. In consideration of the holders of Class G stock receiving a guarantied interest in cash from the first earnings of the association and the withdrawal privileges accorded, they shall waive all right to participate in any greater dividends declared by the association than the stipulated rate specified in their certificates of stock. The balance of the net profits on such stock, after deducting such dividend, shall accrue to the association as profits. Class C stock may be withdrawn at any semiannual dividend period on thirty days’ written notice to the secretary, subject to article VII, sec. 1, and the withdrawing member shall be entitled to receive payment of the purchase price of. the stock withdrawn and any coupons matured and unpaid at the time of such notice.”
It is contended for the holders of this stock that it is a debt against the association; that while it is called “stock” it is in effect a bond and an outstanding obligation of the association; that it was really a loan to the association of the amount at 7 per cent, per annum. This contention is not justified by the by-law or by anything in the certificate. The benefit that the holder of this stock was supposed to receive is contained in this language of the by-law: “Said stock shall bear a guarantied interest of 7 per cent, per annum, payable semiannually, from the date of the certificate, out of the earnings of the association, and shall be nonassessable.” This stock had interest on the money invested by its holders guarantied. While the holders of the ordinary stock of the association, Class A, might receive greater profits, they took their chances, and any benefits they obtained were subject to the rights of this Class C stock to be first paid its interest at 7 per cent.