American Iron Steel Manufacturing Company v. Seaboard Air Line Railway

Under the provisions of § 6 of the act of March 3, 1891 (26 Stat. at L. 828, chap. 517, U.S.C.omp. Stat. 1901, p. 549), the circuit court of appeals of the fourth circuit certified to this court a question on which it desired instruction, and in that connection made the following statement of facts:

'Upon a bill filed by a railway company alleging its insolvency and consequent inability to maintain itself as a going concern, except through the medium of a receivership, receivers were appointed. The bill alleged that a receivership would enable the property of the railway company to be preserved and maintained as a whole, and the sums due and to become due to the bondholders and creditors to be secured and ultimately paid in full.

'The trustee in the first mortgage answered the bill, admitting its allegations, and afterwards filed a cross bill again admitting the allegations of the bill in regard to the insolvency of the company. The suit was not a creditors' suit. The trustee subsequently filed a bill in the same court to foreclose the mortgage, seeking a sale of the equity of redemption, and the two suits were consolidated. No prior encumbrancers were made parties to either suit. Prior to the receivership the claimant furnished supplies to the railway company, for which, shortly after the receivers were appointed, a lien was duly perfected under the statute of Virginia known as the labor and supply lien statute, Code of Va. § 2485. The supplies were sold on a credit of 'thirty days, 1 per cent discount allowed for payment in ten days.' Claimant filed its claim before the special master in the receivership proceedings, relying upon a statutory lien under the statute above mentioned. The special master reported against the allowance of interest on the claim, to which report in that particular claimant excepted.

'Subsequently, on the petition of the railway company, a decree was entered approving 'a plan of adjustment' of the finances of the company, and providing for turning back to the company its property, and for ending the receivership at a certain time. From time to time during the receivership and at the ratification of the plan of adjustment, and as a part thereof, all interest due at the time of the appointment of the receivers and accruing during the receivership on all the funded and many of the floating obligations of the railway company were paid in full. The amount so paid for interest aggregated some millions of dollars.

'The decree approving the plan of adjustment provided that the company should pay in due course of business all its obligations, liabilities, and indebtedness, and reserved the right, in the event of default in that regard, to any claimant aggrieved by such default, to present his petition to the court to have his claim enforced 'to the same extent as though the receivership had continued.'

'After the receivership had been thus terminated, claimant filed its petition in the court, praying that its exceptions to the special master's report should be sustained, and for the enforcement of its claims, including interest thereon during the period of the receivership, and seeking to enforce it not upon the doctrine of an equitable lien, but as a statutory lien. The circuit court refused to allow interest for the period of the receivership, and from that ruling an appeal was taken.

Question.

Is interest recoverable on such a claim for the period of the receivership?

Messrs. George Wayne Anderson and Henry R. Pollard for the American Iron & Steel Manufacturing Company.

Mr. L. L. Lewis for Seabord Air Line Railway et al.

Statement by Mr. Justice Lamar:

Mr. Justice Lamar delivered the opinion of the court: