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Vol. II.]

MCDONALD v. SAGINAW VALLEY AND ST. LOUIS RAILROAD Co.

Mr. Theo. Romeyn, for the exceptions.
Mr. O. F. Wisner, contra.

[No. 1.

LONGYEAR, J. Several of the exceptions appear to be based upon what is claimed to have been the evidence before the referee, aside from and independently of his findings of facts as stated in his report. There appears in the files in the case a mass of writing, indorsed as filed of the same date as the filing of the report, purporting to be testimony of witnesses in this case. It is not signed by the witnesses, nor is it anywhere referred to or mentioned in the report, or in any manner certified or authenticated by the referee, as the testimony upon which he acted; and of course there is no evidence that it is all the testimony adduced before him. But even if all these had been supplied, the returning and filing of the testimony with the report would have been without authority of law, and have constituted no part of the record or foundation upon which the court could base any opinion or action in deciding exceptions to the report. The referee law makes no provision for preserving or reporting the testimony, and the only means by which it can be got before the court in any case is by exceptions before the referee to its admissibility, or to the finding of facts by the referee, and then having it, or so much of it as may be necessary to show the pertinency of the exceptions, embodied in a bill of exceptions duly settled and certified by the referee, and returned by him with his report. The supreme court of Michigan, in People v. Circuit Judge, 18 Mich. 483, 489, say: "The referee law makes no provision for preserving the testimony. In case a party insists, before a referee, that there is no evidence tending to maintain a case, undoubtedly he raises a question of law, which will enable him to require a report showing what the testimony was, and this would be done by exception." There being no bill of exceptions returned with the referee's report, the court, in deciding the exceptions in this case, must be confined exclusively to the finding of facts by the referee as stated in his report.

The first, second, and third exceptions are to the referee's conclusions of law, that the defendant was not entitled to recoup for damages. The non-performance complained of in the notice, and on account of which a right to recoup was claimed was, first, in not completing the job by the time agreed on; second, in abandoning the job before completion, leaving large portions of the work undone; third, in doing imperfectly what was done.

The facts found by the referee bearing upon these points are: 1. That defendant being unable to furnish the iron for the track until after the time limited in the contract for the completion of the work, it was mutually understood between the parties that the work was not required to be prosecuted with reference to its being completed within such time, and that no specific time was afterwards agreed on. 2. That" said plaintiffs commenced the work under said written contract by or before the middle of September, 1871, and prosecuted the same from that time until some time in November, 1872, when the officers of said company, in its behalf, directed the plaintiff to quit the work, and he did so." 3. The report is silent as to the quality of the work done.

Certainly, under such a state of facts, the referee could come to no other conclusion of law than that arrived at by him, that the defendant

Vol. II.]

MCDONALD v. SAGINAW VALLEY AND ST. LOUIS RAILROAD CO.

[No. 1.

was not entitled to damages for the causes named in the notice. The time fixed by the contract for its completion was waived; the work was abandoned by plaintiff by defendant's own direction, without its being made to appear that it was on account of any fault on the part of the plaintiff; and it does not appear that the allegation that the work done was imperfect was sustained.

The first, second, and third exceptions are overruled.

The fourth exception is to the referee's "omission and refusal" to allow the defendant any damages for plaintiff's failure to increase his force in July and August, 1872, as he was notified and directed to do by defendant's engineer. The contract itself (which is set out in full in the report) makes provision as to what was to be done in such case. The provision is, in substance, that in case of such failure on the part of plaintiff for ten days after such notice, the defendant might put on a force of its own, or re-let the job, and charge the expense, or loss, if any, to the plaintiff. Plaintiff had ten days in which to comply with the notice, and, of course, no damages could be claimed for non-compliance during that time; and after that time defendant had it in its power to avoid damages by putting on a force of its own or re-letting the job, and charging the plaintiff with the expense or loss occasioned thereby; and I am of opinion that this was all the defendant could claim of the plaintiff for a non-compliance by him in that respect. The report shows that defendant did put on a force of its own and that the referee has allowed the full amount of the expenses thereof. The fourth exception is therefore not well taken, and the same is overruled.

The fifth exception was abandoned at the hearing.

The sixth exception is to the "omission and refusal" of the referee to allow the defendant the fifteen per cent. specified in the contract as liquidated and settled damages. The contract provides for estimates at stated times, of work done and material furnished, and for the retention by defendant of fifteen per cent. of such estimates until full performance of the contract on the part of the plaintiff; and that in case of plaintiff's failure to perform, the said fifteen per cent. should be retained by defendant as liquidated and settled damages; and it is to these provisions that the sixth exception relates. What has been said in answer to the first, second, and third exceptions is fully applicable and constitutes a complete answer to this. The sixth exception is therefore overruled.

The seventh exception is "to the omission and refusal of the referee to adopt the award and decision and estimates of the engineer of the defendant as final and conclusive between the parties, in the absence of any proof of fraud or mistake on his part." The report is silent as to whether the findings of the referee of the amount allowed the plaintiff were or were not based upon estimates by the engineer, and as to whether any such estimates were or were not in fact before him. There is therefore an entire absence of anything in the report to which this exception can be given any application. The seventh exception is therefore overruled.

The eighth and tenth exceptions are based upon what the testimony before the referee is claimed to prove or disprove. For reasons stated in the commencement of this opinion these exceptions cannot be considered, and they are therefore overruled.

Vol. II.]

IN RE BARTtenback.

[No. 1.

The ninth and only remaining exception is "to the conclusion of the referee that the claim of the plaintiff was subject only to the deductions specified in the report." This exception is but a restatement in general terms of what had been already specifically stated in preceding exceptions concerning defendant's claims for damages; and it has therefore been disposed of adversely in what has been said as to those exceptions, and the same is overruled.

It results that judgment must be entered on the referee's report. At the hearing on the exceptions plaintiff's attorneys acknowledged the payment of $2,500, June 13, 1874, and asked that in entering judgment the amount so paid be deducted from the amount reported due. Let judgment be entered overruling the exceptions and confirming the referee's report; and for the recovery by plaintiff of the amount reported, with interest from May 11, 1874, the date of the report, abating therefrom the payment of $2,500, of the date of June 13, 1874, and costs of suit.

DISTRICT COURT OF THE UNITED STATES. EASTERN DISTRICT OF MICHIGAN.

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1. Upon a contract for payment of money, and for interest thereon by instalments, but which is silent as to interest after the time specified for the payment of the principal, the creditor is entitled to interest after that time by operation of law, and not by any provision of the contract.

2. A statute authorizing the computation and collection of interest upon unpaid instalments of interest has no application to interest accruing after maturity of the principal debt, where the contract is silent as to the payment of interest after such maturity. 3. In case of a sale in the bankruptcy court of property subject to two mortgages, and the proceeds are sufficient to pay the senior mortgage in full and all costs and expenses, the senior mortgagee is entitled to be paid his debt in full, the same as he would be in case of a sale by way of foreclosure of his mortgage.

4. Where a wife joins in a mortgage of her husband's property, her right of dower can be barred only by a sale of the mortgaged property under a power of sale contained in the mortgage, or a decree of a court of competent jurisdiction, where she can be made a party to the proceedings, and not by a sale in the bankruptcy court free of the incumbrance.

5. Money paid by the assignee by direction of the bankruptcy court, to obtain a release of dower in mortgaged property in order to a sale of the same free of the incumbrance, for the purpose of avoiding the delay and expense of a foreclosure, must be borne by the parties interested in the proceeds, proportionately to their respective interests.

On the application of the Michigan Health and Relief Society, a secured creditor, to review a computation by the register of the amount

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Vol. II.]

IN RE BARTENBACK.

[No. 1.

due upon its note and mortgage; and of C. J. Riley, the assignee, for the allowance and adjustment of the costs and expenses of the sale of mortgaged premises free of the incumbrances.

Mr. C. J. Riley, assignee, in person.

Mr. Ward (Ward & Palmer), for the society.

LONGYEAR, J. A portion of the assets of the bankrupt, certain city lots in Detroit, were subject to two mortgages: one, which is the senior mortgage, to the Michigan Health and Relief Society, to secure a note of the bankrupt; and one to Workum & Schloss, to secure a bond of the bankrupt, — both being for the payment of money. The first named note and mortgage bear interest at the rate of ten per cent. per annum, payable semi-annually. They were given January 30, 1869, for $4,000, payable three years from date, with interest as above stated. The interest on this note and mortgage was paid, as stipulated, up to and including the time the debt matured, namely, January 30, 1872; and on the 30th of July following, another six months' interest was paid, but no portion of the debt, nor any interest thereon since July 30, 1872, had been paid at the time of the bankruptcy.

The property has been sold by the assignee under an order of this court, made on the application of the holder of the bond and junior mortgage and notice to all persons interested, free from both incumbrances. The proceeds were sufficient to pay the first mortgage in full and all costs and expenses of the sale, and leave a surplus to apply on the second mortgage, but nothing for the benefit of the general creditors; and the assignee was directed to apply the proceeds accordingly. It was referred to the register, Hovey K. Clark, Esq., to compute the amount due upon the respective mortgages, as a guide to the assignee in applying the proceeds. The register having made the computations, the Michigan Health and Relief Society objected, and complained that the register had not allowed interest on each instalment of interest remaining unpaid at the end of every six months, as is claimed to be its right under the following statute of Michigan:

"That when any instalment of interest upon any note, bond, mortgage, or other written contract shall become due, and the same shall remain unpaid, interest may be computed and collected on any such instalment so due and unpaid, from the time at which it became due, at the same rate as specified in any such note, bond, mortgage, or other written contract, not exceeding ten per cent.; and if no rate of interest be specified in such instrument, then at the rate of seven per centum per annum.' Act of February 19, 1869; 1 Compiled Laws of 1871, p. 541, sec. 1637.

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The costs and expenses of the proceedings to sell and of the sale have been considerable; and in addition to those of an ordinary character the assignee, under an order of court, paid one hundred dollars to obtain a release of the right of dower of the wife of the bankrupt in the mortgaged property. A dispute arose as to the payment of these costs and expenses, the assignee claiming that the same should be retained by him proportionately out of the respective amounts going to each mortgagee; and the Michigan Health and Relief Society, the said senior mortgagee,

Vol. II.]

IN RE BARTENBACK.

[No. 1.

claiming that the proceeds being sufficient to pay such costs and expenses over and above its debt and interest, it is entitled to payment in full without any deduction on that account. The assignee thereupon reported to the court the said costs and expenses, and asked that the same be audited and allowed, and for an adjustment of the same as between the said mortgagees.

1. Interest. The note and mortgage in question are not set out in the papers, and are not before me, but I take it for granted that they contain no express stipulation for payment of interest on the debt after maturity, in case the debtor should fail to pay the debt by the time specified. The contract being silent as to interest after maturity, "the creditor" (say the United States supreme court) "is entitled to interest after that time by operation of law, and not by any provision of the contract." Brewster v. Wakefield, 22 How. 118, 127. This being the law, and the debt being past due, the provision of the note and mortgage for payment of interest by instalments had ceased. The interest up to maturity of the debt had been paid, and the only interest in question here is such as had accrued after that time by operation of law, and not by any provision of the contract. It was therefore not due by instalments, but it was due at any and all times, as fast as it accrued. It is clear, therefore, that the above quoted statute of Michigan for computing and collecting interest on unpaid instalments of interest had no application and did not cover this case. In fact I do not see how, in the absence of an express provision of the "note, bond, mortgage, or other written contract," for payment of interest at specified times after maturity of the debt, the statute can, in any case, have any application whatever to interest accruing after such maturity.

For these reasons I concur with the register in his conclusion, and in his refusal to compute and allow interest on the interest accrued on the note and mortgage in question after the expiration of every six months, or otherwise, and the same is approved.

2. Costs and expenses of sale. The mortgage in question was a first lien upon the property; and, by the terms of the mortgage, the mortgagee was entitled, in case of foreclosure, to payment in full, including all legal costs, to the full extent of the proceeds. The junior mortgagee was entitled only to the surplus, if any, and that could be ascertained only after payment in full of the prior lien and all legal costs and expenses of its enforcement. Such were the rights of these parties under their respective mortgages. Those rights are sacredly preserved by the bankrupt act, and must be enforced in this court the same as in any other. The proceeds were sufficient to pay the entire debt and interest secured by the note and mortgage of the Michigan Health and Relief Society remaining unpaid, and all costs and expenses of the proceedings and sale, and leave a surplus to apply on the junior mortgage. That surplus is all the junior mortgagee can claim. The costs and expenses here spoken of, however, include only such as are usual in such cases, and not the one hundred dollars paid to obtain release of dower. That was an extraordinary expenditure, and stands upon a different footing from the other expenditures. It is true, the wife had joined with her husband in both mortgages; but,

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