Appeal from the District Court of the United States for the Southern District of Indiana, Indianapolis Division; Robert C. Baltzell, Judge.
Before EVANS, MAJOR, and TREANOR, Circuit Judges.
This is an appeal from a decree of the District Court, confirming on petition for review an order of the Referee in Bankruptcy, denying to appellant interest on the sum of $120,000 paid pursuant to the order of compromise and settlement to the order by this Court in Re Van Camp Products Co., 7 Cir., 95 F.2d 206, February 28, 1938. Subsequent to such decision and denial of certiorari by the Supreme Court, Shubrick v. Van Camp Products Co., 305 U.S. 605, 59 S. Ct. 65, 83 L. Ed. 384, the trustee filed a petition for insuructions as to the payment of interest upont he amount of such settlement; appellant filed a cross-petition demanding interest from the date of the oririginal approval of such settlement (August 18, 1936); the principal sum was ordered paid and accepted without prejudice to the claim for interest, determination upon which was reserved; and appellant's claim for interest was theeafter denied by the referee, whose order was confirmed by the District Court in the decree from which this appeal is prosecuted. The facts were stipulated. The error relied on arises out of the failure of the District Court as a matter of law and equity to allow to appellant any interest.
Many of the facts involved in the present controversy may be found in our opinion in Re Van Camp Products Co., supra. In view of the question presented by the present appeal, however, it seems important to relate a summary of the proceedings whcih preceded the compromise agreement by which appellant was to receive the sum of $120,000, without interest.
In 1933, while appellant was in receivership, its receiver filed in the bankruptcy proceeding for Van Camp Products Company, two claims, one in the amount of $138,900.98, and the other in the amount of $17,025.62. No action was had upon the former claim, but the latter was allowed pending the Trustee's petition for reconsideration and review. Other matters in dispute involved appellant's unfiled claim in the amount of $504,000 against the bankrupt, and a counter-claim of the bankrupt against appellant int he amount of $1,025,000. On may 8, 1934, appellant's receiver made an offer to the trustee to compromise all matters in dispute between the two parties in the amount of $100,000. On November 27, 1934, the referee, upon the trustee's refused to approve this offer. On June 30, 1936, upon the closing of the receivership, all claims were assigned by the receiver to appellant. At this time, all claims of appellant against the bankrupt had been disposed of except the two claims on file as heretofore described.
On June 30, 1936, appellant again submitted to the trustee an offer to compromise all claims and controversies between the trustee and appellant. It was proposed that one claim be allowed in the amount of $17,025.62, without interest, and that the other claim be allowed in the amount of $102,974.38, but without interest.
On July 1, 1936, the trustee reported the offer to the referee, describing the offer as being one for settlement "by the payment by this trustee to said Van Camp Milk Company of sums aggregating $120,000 without interest." The trustee, in his report, referred to the offer as being similar to the one theretofore made wherein it was proposed to compromise and settle "for sums aggregating $100,000, but with interest on said sums." On July 2, 1936, Douglas C. Jillson, et al., owners of a large majority of the first preferred stock of the bankrupt, filed a petition praying that the settlement proposed in the offer of June 30, 1936, be approved. In comparing the offer of May 8, 1934, and that of June 30, 1936, it was pointed out that the former offer included interest, while the latter offer was without interest, and for this reason, the second offer was practically the same as the first. The petition prayed that appellant's proposal "to accept in full payment of its claims, without further interest, the sum of $120,000, be approved, and that said amount be speedily paid." On July 10, 1936, The Indianapolis Protective Committee, acting for certain preferred stockholders of the bankrupt, wrote to each of them as follows:
"The Milk Company, formerly in receivership, now ended, has again offered to compromise its claims, of the face amount of $153,926.50, plus a large amount of accrued interest for the sum of $120,000 without interest, if paid immediately. * * * "
In each of such letters was enclosed a form of consent which reads as follows:
"I the undersigned, the owner of . . . shares of the first preferred stock of the Van Camp Products Company, hereby express my consent to and approval of the proposed settlement of the claims of the Van Camp Milk Company by allowing and paying said company the sum of $120,000.00, without interest."
On July 13, 1936, the referee, gave a written notice of a hearing upon the offer of compromise, to all parties in interest, in which the proposal was stated to be "by the payment of said trustee in bankruptcy herein to Van Camp Milk Company of sums aggregating $120,000.00, without interest. * * * " Attention was also called to the petition filed by Douglas C. Jillson, et al., praying that the proposal of appellant "to accept in full payment of its claims, without further interest, the sum of $120,000, be approved, and that said amount be speedily paid."
At the hearing before the referee, held on July 23, 1936, more than two-thirds of the owners of preferred stock filed their written consents, in the form above set forth, to the proposed compromise, and about one-third of such preferred stockholders were opposed to its approval or acceptance. On August 18, 1936, the referee in bankruptcy entered an order approving the proposal of appellant "to accept in full payment of its claims, without further interest, the sum of $120,000." One claim was allowed in the amount of $17,025.62, and the other in the amount of $102,974.38, (total $120,000) and all claims in excess of those amounts were disallowed. The referee's order contained the following direction:
" * * * that the Trustee in Bankruptcy herein, be, and he is, instructed to proceed to carry out and consummate said compromise and settlement herein approved, including the execution of appropriate release of the claims and demands of the Trustee and the bankrupt against said Van Camp Milk Company, final settlement of which is made a condition of said offer of compromise and settlement; * * * "
On January 20, 1937, the matter was before the District Court on a petition to review the referee's order, and an order was entered returning the proceeding to the referee because of the failure to comply with general order in Bankruptcy XXXIII, 11 U.S.C.A. following section 53, and directing the referee to enter an order granting reasonable time to the trustee in which to file his petition to compromise in accordance therewith. In this order of the court, appellant's proposal is referred to in one instance "to accept in full payment of its claims, without further interest, the sum of $120,000," and in another instance "sums aggregating $120,000, without interest." After the proceeding had been returned to the referee, the trustee, on February 25, 1937, filed his petition for a meeting of interested parties to consider the appellant's offer of June 30, 1936, in which was stated the advantages to accrue from the acceptance of appellant's offer in "the sum of $120,000, without interest," and praying for "an order approving the settlement, and authorizing the payment by the trustee to appellant of the sum of $120,000, without ...