216 F. 308 | 7th Cir. | 1914
The general doctrine of anticipatory breach of an executory contract whenever the contractor disenables himself from performance is well established (Lovell v. St. Louis Life Ins. Co., 111 U. S. 264, 274, 4 Sup. Ct. 390, 28 L. Ed. 423; Roehm v. Horst, 178 U. S. 1, 7, 20 Sup. Ct. 780, 44 L. Ed. 953, and cases reviewed) and its application, when the contractor “becomes bankrupt and goes into liquidation,” is upheld in Carr v. Hamilton, 129 U. S. 252, 256, 9 Sup. Ct. 295, 32 L. Ed. 669, in reference to a policy of life insurance, for the reason that the company thereby “becomes civiliter mortuus; its business is brought to an absolute end.” It has likewise been pronounced applicable to an executory contract “broken by the insolvency of the railway companies and the appointment of receivers” thereof, whenever the receivers reject the contract, and that in such event the “rejection relates back to the beginning of the receivership.” Pennsylvania Steel Co. v. New York City Ry. Co., 198 Fed. 721, 736, 744, 117 C. C. A. 503, 2d Circuit.
Upon the concrete question presented in this case, however, whether intervention of bankruptcy constitutes such breach for which damages are provable therein, considerable diversity appears in various rulings of the District Courts, as reported, in the administration of bankruptcy under the present acts, and it is contended for support of the ruling herein against that proposition that several decisions in the Circuit Court of Appeals of other circuits (Watson v. Merrill, 136 Fed. 359, 69 C. C. A. 185, 69 L. R. A. 719, 8th Circuit; In re Roth & Appel, 181 Fed. 667, 104 C. C. A. 649, 31 L. R. A. (N. S.) 270, 2d Circuit; Colman Co. v. Withhoft, 195 Fed. 250, 115 C. C. A. 222, 9th Circuit), disallowing claims for rent or damages accruing subsequent to bankruptcy under leases held by the bankrupt, are applicable and of controlling weight and force. On the other hand, two., decisions of like appellate tribunals are cited (In re Swift, 112 Fed. 315, 50 C. C. A. 264, 1st Circuit; In re Neff, 157 Fed. 57, 84 C. C. A. 561, 28 L. R. A. [N. S.] 349, 6th Circuit) as direct authorities for upholding provability of the claim in controversy.
We are of opinion that these decisions are well founded, both in their definition of the general doctrine referred to and in respect of the instantaneous effect of proceedings in bankruptcy for anticipatory breach of the unperformed contract, unless the trustee in bankruptcy elects performance thereof in the interest of the estate, and that it is equally applicable whether the proceedings are voluntary or involuntary, notwithstanding the distinction in that particular suggested in one or more of the District Court citations. Provability of the claim for damages rests on this instantaneous legal effect of the proceedings, as no subsequent breach can authorize the claim. It is thus brought within clause 4 of section 63a (Bankr. Act July 1, 1898, c. 541, 30 Stat. 562, 563 [U. S. Comp. St. 1901, p. 3447]), which includes all indebtedness founded upon contract existing “at the time of the filing of the petition in bankruptcy” (Zavelo v. Reeves, 227 U. S. 625, 631, 33 Sup. Ct. 365, 57 L. Ed. 676), to be liquidated pursuant to section 63b. Whether the trustee may have authority to carry out the contract in question’ if he so elects, is not involved for consideration, as no such
In reference to the above-mentioned authorities disallowing claims for breach of leasehold contract arising through bankruptcy, each must rest for approval on the distinction well pointed out in the opinion of the Circuit Court of Appeals of the Second Circuit (In re Roth & Appel, 181 Fed. 667, 104 C. C. A. 649, 31 L. R. A. [N. S.] 270) bo tween the relation and rights of lessor and lessee of realty under such instruments and the rights of .the contracting parties, under general executory contracts. This distinction is observed as well in a note appended to the opinion in Pennsylvania Steel Co. v. New York City Ry. Co., supra, and thereupon these rulings become inapplicable to the present inquiry.
The order of the District Court is reversed accordingly, with direction to reinstate the claim and proceed therein in conformity with this opinion.