230 F. 681 | D. Conn. | 1916
This is a petition brought by John B. Mullings to review certain rulings of the referee made in relation to a claim which the petitioner attempted to file and prove against the bankrupt estate of the Mullings Clothing Company. The essential facts, practically undisputed, are as follows:
On July 25, 1913, the bankrupt corporation was and for many years prior thereto had been conducting a general clothing and men’s furnishing business in a store belonging to the petitioner under the terms of a written lease which expired October 1, 1914, in which it was provided, among other things, that the corporation should pay rent for the premises at the rate of $800 a month.
On said July 25, 1913, the parties entered into a written agreement for a lease of the premises for a further period of five years beginning at the expiration of the old lease, to wit, October 1, 1914, by the terms of which the corporation was to pay the petitioner rent at the rate of $1,000 per month during tire five-year period agreed to in the new lease.
On August 19, 1914, the directors of the bankrupt corporation voted “to discontinue tire business and wind up its affairs.” A few days later all stockholders joined in an action, returnable to the state court, praying for the appointment of a receiver to take charge of the business of the corporation and wind up its affairs.
Pursuant'to that action, and on August 21, 1914, Carl A. Macomber was appointed by the state court temporary receiver, and on October 19, 1914, he was confirmed as permanent receiver. The court authorized the receiver to take charge of and continue the business of the corporation until the same should be disposed of by order of court. The receiver qualified and took possession of the assets and the business of the corporation.
On the 18th of September, 1914, acting upon the advice and order of the superior court, the receiver repudiated the contract of lease, refused to be bound by its terms, and notified the petitioner of such action. Counsel for both parties admit that a complete repudiation of the lease by the receiver took place.
The receiver continued to occupy the petitioner’s premises until October 23,-1914. On that day he turned the keys of the store over to J.- H. James, to whom the receiver sold all of the corporation’s stock, fixtures, etc., in accordance with an order of the superior court. Thereupon James took possession and continued to occupy the premises with the knowledge and consent of the petitioner until the last Saturday of November, 1914, when all of James’ property was removed therefrom. The keys were left on the premises by one G. E. Donnelly, formerly secretary of the corporation, in order that the
On January 23, 1915, the petitioner entered into a new contract of lease of said premises with a new tenant, in which it was provided among other things, that the term of the new lease should begin March 1, 1915, and that the annual rental should be $9,000, payable in monthly installments of $750; this being the most favorable price the petitioner was able to obtain. James paid the petitioner $800 as rent for the use of the store for the month of November, 1914.
The receiver paid rent to the petitioner from the date of his appointment until October 1, 1914, as required by the terms of the old lease. For the month of October he paid him $800, in accordance with a stipulation which the attorneys for both sides entered into, and which became the basis of an order passed by the state court, which stipulation was as follows:
“Stipulation.
“In the matter of the amount to be paid by the receiver to the landlord, John 15. Mullings, for use and occupation of the store and premises in the property of said landlord, Mullings, by the receiver of the Mullings Clothing Co. during the month of October, 1914.
“It is hereby stipulated by and between counsel for the receiver and counsel for said Mullings, by and with the consent of the court, that the receiver shall pay §800, and that same shall be accepted by said Mullings in full for his claim against said receiver on that account.”
No evidence was produced to show that the petitioner ever demanded payment of any portion of the rent required by the terms of the new lease from either the receiver or any officer of the corporation after the state court had appointed the receiver; and no claim has been made in these bankruptcy proceedings that any sum for rent was due or had become payable from the corporation to the petitioner at the time of the corporation’s adjudication in bankruptcy. There is also nothing to show that the petitioner ever filed a claim with the state court receiver for any damages which he may have suffered by reason of a breach of the contract of lease on the part of the bankrupt corporation then in the hands of a receiver.
On December 30, 1914, the Mullings Clothing Company was duly adjudicated a bankrupt, upon its own petition filed on that day, and the matter was referred to the referee in bankruptcy for New Haven county. The first meeting of creditors wa.s held January 18, 1915, and at this meeting counsel for the petitioner offered for proof a claim against the bankrupt estate in the sum of $20,000 damages, claimed for breach of the contract of lease, although at this time the premises had not been relet. Objection to the filing of the claim was made by the attorneys for creditors, on the ground that the claim was one for rent of the premises under the lease repudiated by the receiver of the state court, and was therefore, at most, an unliquidated claim. The referee sustained the objection and refused to permit the claim to be filed or voted until testimony was offered sufficient to show that the claim was one allowable by the Bankruptcy Act, and ad
At the adjourned hearing the petitioner attempted to show by competent witnesses the reasonable rental value of the premises. for a period of five years beginning October 1, 1914, as compared with the rent reserved in said repudiated lease covering the same period; it being contended by counsel that he had the right to do this in order that the referee might ascertain and liquidate the amount of the damage caused petitioner by the breach of the lease agreement. Counsel further claimed that the difference thus shown, amounting to $15,000, should be found as the damage actually sustained by the petitioner.
Technically speaking, there had not been, up to this time, any petition filed with the referee requesting him to ascertain and liquidate the damage, though petitioner’s counsel had indicated his willingness to have the referee ascertain and liquidate the damage. The referee, however, sustained the objection to the evidence, refused to admit that offered, and denied the petitioner the privilege of filing and voting his claim on the question of electing a trustee.
Eight days after John B. Mullings filed his petition asking that the loss to him by the breach of the lease be ascertained and liquidated by the referee and that he then be permitted to file for allowance so much of the claim as the referee might find was due. The trustee’s attorney objected, and filed a motion to dismiss the petition. Thereupon the petitioner, with leave of the referee, filed an amended petition, showing that since the first hearing the premises had been leased as above stated to another tenant for a five-year period from March 1, 1915, at a yearly rental of $9,000, payable $750 monthly. Thereupon the trustee’s attorney filed another motion to dismiss this petition, and after due hearings had the referee granted the motions and dismissed both petitions.
The lease in question contained no provision whereby, in case of insolvency, receivership, or bankruptcy proceedings any portion of the rent reserved therein, covering any time subsequent to such event, would become immediately due, and be an ascertained and fixed liability or debt due from the corporation and presenfable against its estate. It did provide, however, that in case the rent should remain unpaid for 10 days after the same became payable under the terms of the lease that the lease would thereby terminate, and the lessor might then recover possession of the premises in the manner prescribed by the Connecticut statute relative to summary process, and that the necessity of demand on the part of the lessor for the rent and for re-entry for condition broken, as at common law, as well as to that of the actual notice to quit'as required by the statute, were expressly waived by the lessee. Another provision gave the corporation the right to assign the lease and to sublet the premises for the purpose of conducting any similar business, or for a dry goods or millinery business.
The petition for review raises the question whether the petitioner’s claim is one provable under section 63, subdivisions “a” and “b” of the Bankruptcy Act, the essential parts of which read:
*687 “(a) Debts oí the bankrupt may be proved and allowed against his estate which are (1) a fixed liability, as evidenced by a judgment or an instrument in writing, absolutely owing at the time of the filing of the petition against him, whether then payable or not, with any interest thereon which would have been recoverable at that date or with a rebate of interest upon such as were not then payable and did not bear interest; * * * (4) founded upon an open account, or upon a contract express or Implied; * * *
“(b) Unliquidated claims against the bankrupt may, pursuant to application to the court, be liquidated in such manner as it shall direct, and may thereafter be proved and allowed against his estate.”
In the judgment to be rendered here the court must follow the decision of the Circuit Court of Appeals for this Circuit in the Matter of Roth & Appel, 181 Fed. 667, 104 C. C. A. 649, 31 L. R. A. (N. S.) 270. But aside from that decision there seem to be various reasons why the rulings of the referee must be sustained.
It seems to be well settled that, where a landlord takes possession of property after its surrender by a lessee and lets it to another person, he will be deemed to have accepted the surrender, unless facts are shown sufficient to rebut this inference. Kerr on Real Property, § 1287; Underhill v. Collins, 132 N. Y. 269, 30 N. E. 576; Miller v. Benton, supra. No facts having been shown to bring the petitioner within the exception, it must be held that he accepted possession of
The facts and circumstances of that case and the one here are so entirely different that the view taken by Judge Platt can have, as 1 view it, no possible bearing upon the decision which I am called upon to render here. There the facts disclosed equities so strongly in favor of the claimants that the court was fully warranted in giving them solicitous consideration, while here we find that Mullings was not adverse to entering into an agreement with the corporation for a lease of his property on terms which very much appear to have been largely to his own advantage and to the disadvantage of the corporation. There is nothing in the case which indicates that petitioner, in negotiating the lease, was interested in anything but his own personal welfare ; and subsequent events tend to show that he would have found it next to impossible to rent the premises to any one else on terms equally as beneficial to himself as those he obtained from the corporation. “He who seeks equity must do equity” is the maxim which applies, if the equities of the case are to be urged.
The case of In re Frederick L. Grant Shoe Co., 130 Fed. 881, 66 C. C. A. 78, referred to and urged by petitioner to support his contention, was a claim, for damages for breach of warranty in the sale of personal property, where the damages were certain, but the amount unliquidated. It was held there, of course, that the amount of the damage could be liquidated, and when found by the court the claim could be filed. There was nothing in that case to indicate the impossibility of ascertaining the real damage which the claimant had sustained, while in the matter here under consideration it appears that until the expiration of the whole period covered by the lease in question it would be impossible to tell whether the breach of contract of lease would or would not prove to be of advantage to the petitioner.
Petitioner’s counsel, in their very elaborate and exhaustive brief, have shown remarkable astuteness in their attempt to extricate their client from the embarrassing situation in which they find him because of the decisions of the Supreme Court of Errors of Connecticut in Wells v. Hartford Manilla Co., 76 Conn. 27, 55 Atl. 599, and Miller v. Benton, supra. In.the first of these cases application was made to the state court and a receiver appointed to take charge of and wind up-the affairs of the defendant,corporation. The receiver afterwards refused to assume or adopt a certain unfulfilled contract - which the corporation had long before entered into with the plaintiff, who claimed that by the receiver’s abandonment of the contract he had bound the estate in his hands to respond for the damages which such abandonment had occasioned, and that therefore plaintiff was entitled to have the extent of the damages caused him allowed as a general claim against the estate which was found to be insolvent. The court held, however, that it was the privilege of the receiver, in acting for the best interests of the estate and its creditors, not only to elect what contracts he would assume or reject, but to make the election without in the least subjecting the fund required for the satisfaction of existing claims of creditors to a charge for damages, and that such election could not result in allowing plaintiff to present a general claim entitling him to share with other creditors in the assets of the estate. The court said, further, that if the law were otherwise there might be danger
“No debt can arise against an insolvent estate in tho hands of a receiver, from this principle comes the general rule that only claims as then existing can be recognized as obligations of tho estate.”
In Miller v. Benton, supra, the court held that where a lessee gives notice of liis 'refusal to comply with the terms of his lease in so far as concerns the payment of rent (unless the lessor joins with him in rescinding the contract), the act of the lessee does not constitute such a breach as will permit an action to lie for damages occasioned by such breach, but that the lessee is nevertheless liable for rent as such when it becomes due.
In whatever light we may view the situation presented because of the decisions in these two cases, we must, of necessity, come to the conclusion that, it is sufficient to defeat the petitioner’s claim in the case at bar.
The petitioner further relies upon Board of Commerce of Ann Arbor v. Security Trust Co., 225 Fed. 454, 140 C. C. A. 486. In that case the Board of Commerce of Ann Arbor, Mich., and the Climax Specialty’ Company, then located at Schenectady, N. Y., entered into an agreement whereby the board agreed to procure for the company a factory site at Ann Arbor without cost to the company
In re Stern, 116 Fed. 604, 54 C. C. A. 60, was an appeal from the judgment of the District Court adjudicating the Manhattan Ice Company a bankrupt, because certain persons who had sustained damages by the breach of executory contracts whereby that corporation had agreed to furnish them ice covering a period/of years at a certain price per ton, a portion of the full period covered by the contract not haying then expired, were allowed to join as creditors in the bringing of an involuntary petition in bankruptcy against the corporation upon their showing that they had already been damaged to a considerable extent by the corporation’s refusal to carry out its agreement to furnish them ice, and because they had been unable to obtain ice at as low a price from any other party. Judge Townsend, in his opinion upholding the decision of the District Court, went into an extensive review of the cases on both sides of the question as to what should be considered as provable debts under sections 63a and 63b of the Bankruptcy Act. But it would take a very much strained construction of the opinion in that case to enable one to find anything in it which could be taken as indicating any error on the part of the referee in the rulings made by him in the matter now under consideration.
But why continue to traverse fields afar in the endeavor to seek the light necessary to aid us in reaching the right conclusion here? Many of the cases referred to by the petitioner, which he claims sustains the principles of law urged upon the court, are cases in which damages were claimed by lessees because of refusal on the part of the lessors to permit the lessees to enjoy the use of the premises leased to them, or were cases where indorsers or holders of promissory notes, etc., which had not yet become payable, but were outstanding obligations, were permitted to file claims against bankrupt estates; while in others, like In re Neff, 157 Fed. 57, 84 C. C. A. 561, 28 L. R. A. (N. S.) 349, the facts were such that little analogy can be found to exist between them and the matter in question here.
Whether or not the case of People v. St. Nicholas Bank should be considered a precedent in favor of the propositions urged by the petitioner matters not, for I feel bound to follow the principles of law laid down by the highest state court in this district in Wells v. Hartford Manilla Co., supra. See also People v. Metropolitan Surety Co., 205 N. Y. 135, 98 N. E. 412, Ann. Cas. 1913D, 1180. And, as before stated, my decision, must in the main be governed by the opinion of the Circuit Court of Appeals for this Circuit in Roth v. Appel, supra, wherein Judge Noyes, who wrote the opinion of the court, said:
“The lessee may bo evicted by title paramount or by acts of the lessor. The destruction or disrepair of the premises may, according to certain statutory provisions, justify the lessee in abandoning them. The lessee may quit the premises with the lessor’s consent. The lessee may assign his term with the approval of the lessor, so as to relieve himself from further obligation upon the lease. In all these cases the lessee is discharged from his covenant to pay rent. The time for payment never arrives. The rent never becomes due. It is not a case of debitum in prsesenti solvendum in futuro. On the contrary, the obligation upon the rent covenant is altogether contingent. * * It follows from these principles that rent accruing after the filing' of a petition in bankruptcy against the lessee is not provable against his bankrupt estate as ‘a fixed liability * * * absolutely owing at the time of the filing of the petition,’ within the meaning of section 03a (1) of the Bankruptcy Act of 180?. It is not a fixed liability, but is contingent in its nature. It is not absolutely owing at the time of the bankruptcy, but is a mere possible future demand. Both its existence and amount are contingent upon uncertain events. * * * Even under the Bankruptcy Acts of 1841 and 1867, which, unlike the present act, expressly permitted the proof of contingent demands, claims for unaecrued rent were not provable. * * * The present bankruptcy statute * * * does not provide for the proof of contingent claims. * * * Section 63b adds nothing to the class of debts provided under 63a. It merely permits the liquidation of an unliquidated claim provable under the latter provision.”
The conclusion is imperative — and sound, as I view the law — that the referee properly granted both motions to dismiss, and his rulings are sustained.
Decree accordingly.