Palo Alto Mutual Savings & Loan Ass'n v. Williams

This is an appeal from an order of the District Court for the Northern District of California, Southern Division, in a bankruptcy proceeding disallowing the claims of Palo Alto Mutual Savings & Loan Association, hereafter appellant, for simple post-bankruptcy interest on its two secured claims against the bankrupt estate.

Appellant lent the bankrupt funds secured by deeds of trust on two pieces of realty. The deeds recited that they secured principal and interest. The bankrupt used the funds to improve the security by erecting houses on the properties. Thereafter he went into bankruptcy and the bankrupt’s securing properties were thereafter sold for an amount which is sufficient to pay the principal and interest on each up to the time of the sale. The referee disallowed the claims for interest after the date of the filing of the petition and the district court affirmed. There are junior lienors with claims against the properties, but it appears that whether or not post-bankruptcy interest is allowed to appellant the funds will be inadequate to pay the junior encumbrancers in full.

The appellant contends that the proceeds of the sale of the mortgaged security being sufficient to…