Meilink

This is an appeal from an order of the bankruptcy court denying a claim for a portion of the interest included in the appellant’s claim for taxes or “contributions” to unemployment reserves and for interest thereon due to it as an agency of the state of California. The amount of the “contribution” by the appellant was $822.40 in 1937. The trustee paid $936.35, principal and interest, on February 13, 1939. The amount of unpaid interest (5 per cent) was $156. The trustee filed objections to the claim of priority for the balance of the unpaid interest (6 per cent) which he objected to on the ground that it constituted a penalty within the meaning of § 57, sub. j of the Bankruptcy Act, 11 U.S.C.A. § 93 , sub. j, prohibiting approval of claims of states for penalties in greater amounts than the loss incurred by the debtor’s default. 1 The referee in bankruptcy sustained the objection of the trustee as to 5 per cent hut allowed 1 per cent additional, making the total allowance of 7 per cent on said overdue “contributions”, or taxes. The District Court affirmed the order of the referee and this court allowed the appeal, the amount of interest involved being less than $500. 11 U.S.C.A. §…