ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY C.A. No. 74-427
Before: ADAMS, ROSENN and WEIS, Circuit Judges.
These appeals confront us with a novel procedural issue regarding the scope of Bankruptcy Rule 11-44 as well as questions pertaining to a summary judgment in favor of a bank, and pre- and post-judgment interest on that judgment.
Before we can consider the merits of the appeal and cross-appeal in this matter, it is necessary first to determine whether under Bankruptcy Rule 11-44 the filing of a Chapter XI petition operates to stay the appeals.
Plaintiff, Mid-Jersey National Bank (hereinafter Mid-Jersey), is a National Banking Association with its principal office in New Jersey. Defendant, Fidelity-Mortgage Investors (hereinafter FMI), is a Massachusetts real estate investment trust. Beginning in December 1971 Mid-Jersey extended a line of credit to FMI. FMI utilized this line of credit for nearly two years by borrowing money in exchange for a series of 90-day promissory notes.
On November 7, 1973, FMI executed the promissory note which is the subject of the present suit. The note was payable at the offices of Mid-Jersey on February 5, 1974 in the principal amount of $300,000. Since FMI prepaid interest at the rate of 9 3/4% per annum, on the date the note was signed, the note, itself, stated no rate of interest.
Shortly after the execution of the note, Mid-Jersey learned of FMI's worsening financial condition and of an attempt by FMI's other creditor banks to obtain Mid-Jersey's agreement to a revolving credit plan designed to keep FMI out of bankruptcy. Instead of becoming a party to the revolving credit agreement, Mid-Jersey decided to terminate FMI's line of credit on the expiration date of the November 7, 1973 note. After the failure of FMI to pay the note on the date of maturity, Mid-Jersey made a written demand for payment on February 13, 1974. Mid-Jersey then applied against the principal amount of the note FMI's compensating balances on deposit with the bank, thereby reducing the amount due Mid-Jersey to $240,000.
After unsuccessfully seeking a voluntary payment from FMI, Mid-Jersey brought this action in the Superior Court of New Jersey, Law Division, Hudson County, alleging default on the note and damages in the amount of $240,000. plus interest from February 5, 1974. The action was removed to the United States District Court for the District of New Jersey, based on diversity of citizenship. On April 10, 1974, a motion by Mid-Jersey for summary judgment was granted, and interest was awarded at the rate of six per cent from February 5, 1974 to the date of entry of judgment.
An order was entered on April 17, 1974, by the district court staying execution of the judgment pending appeal, providing a supersedeas bond was filed by FMI. Subsequently, FMI moved for, and the district court allowed, a modification of the order permitting FMI to make a deposit in court in lieu of the supersedeas bond. The deposit was made in the form of a Chase Manhattan Bank negotiable certificate of deposit, payable to the Clerk of the District Court for the District of New Jersey. The certificate of deposit is in the amount of $300,000, and provides for interest at the rate of 8 1/4% per annum. FMI then appealed from the order and judgment in favor of Mid-Jersey, and Mid-Jersey cross-appealed, challenging the rate of prejudgment and post-judgment interest.*fn1
While the appeal and cross-appeal were pending before this Court, FMI on January 29, filed a petition for reorganization under Chapter XI in the United States District Court for the Southern District of New York. Since that date, FMI's affairs have been administered subject to the supervision and ...