64 N.J. Eq. 50 | New York Court of Chancery | 1902
If I properly understand, the report of the case of Stockton v. Mechanics Bank, 5 Stew. Eq. 163, the question presented by this appeal is res judicata in this court. That was a suit to wind up a savings bank, and the receiver asked the direction of the chancellor as to several matters which arose in the course of the administration of the estate, and the questions were argued before him by the receiver himself and by counsel for the creditors of the estate. One of the matters submitted was this: Whether the rent on a lease of a store, &e., the term under which had not expired when the decree in insolvency was made, is payable after the time when the receiver delivered up the premises to the lessor. The report does not distinctly and expressly state that the insolvent corporation in that case was the lessee and covenantor to pay the rent; but I think it fairly to be inferred that it was such lessee. The depositors in the insolvent corporation, which was a savings-bank, were of the nature of stockholders and stood on an equal footing, and were entitled to have divided among them what remained after the ordinary debts of the bank were paid; and the argument before the chancellor seems to have gone on the basis that there were sufficient assets to pay all the ordinary creditors in full and leave something to be divided among the depositors; so that the question was not whether the lessor should receive a dividend on his claim for rent, but whether he should be paid anything; for if he was paid anything, he would be paid in full. See Hannon v. Williams, 7 Stew. Eq. 255 (at p. 260), in the court of errors and appeals, and Una v. Dodd, 12 Stew. Eq. 173 (at pp. 182, 183), in this court.
If I am right in my construction of the report, it would seem that the answer of the chancellor to the question so propounded must be decisive of the present case. That answer was as follows: “The object of the proceedings in insolvency, under the act, is to distribute the estate of a debtor corporation, no longer able to
That seems to be the view taken of the decision by Vice-Chancellor Reed in Bolles v. Crescent Drug and Chemical Co.; 8 Dick. Ch. Rep. 614 (at p. 620). (At p. 618 et seq. the learned vice-chancellor states clearly and accurately the present condition of the law on this subject.)
But it does not appear that the claimant of the rent in Stockton v. Mechanics Bank was represented by counsel before the chancellor; and the authority which he cites (Burrill Ass. § 374) does not sustain the rule laid down by him in all its length. The learned author did not there have in view a claim made by a lessor upon a covenant made by the insolvent corporation to pay rent in futuro. On the contrary, it is plain that he did have in view something quite distinguishable, namely, a large class of cases which hold that a receiver in insolvency, or an assignee in bankruptcy, does not, as -the result of the making to him, by operation of law or by express words, of an assignment óf a leasehold estate previously vested in the insolvent, become liable by virtue of privity of estate as assignee to pay the rent reserved upon the lease.
There is a long line of cases in England, and also in the United States, sustaining the latter proposition. In the supreme court of the United States: Glenny v. Langdon, 98 U. S. 20 (at p. 30, bottom; p. 31, top); American File Co. v. Garrett, 110 U. S. 288; Sparhawk v. Yerkes, 142 U. S. 1 (at p. 13); Sunflower Oil Co. v. Wilson, 142 U. S. 313 (at p. 322), and Quincy, &c., Railroad Co. v. Humphreys, 145 U. S. 82 (at p. 99), and cases there cited. In Pennsylvania: Pratt v. Levan, 1 Miles
Chancellor Walworth, in dealing with the question, in Martin v. Black, 9 Paige 641, alludes to the English cases, and uses this language: “If the assignee elects to waive the term, and neither enters upon the demised premises nor does any other act signifying his acceptance of the term as assignee, he is not liable for the rent; and the lessor must come in as a general creditor of the bankrupt’s estate, dr may sue the bankrupt for the rent subsequently accrued,” citing the cases. But it is proper here to remark that in 'none of the older English cases has any such claim made against the assets of the insolvent been countenanced.
The explanation of this state of the law is found in the terms of the old English Bankrupt law, which discharged the bankrupt from liability only on debts due at the date of the bankruptcy; and left him liable for those accruing subsequently; and the English courts, in applying that provision 'to covenants to pay rent in futuro, refused to classify, such covenants as debitum in prcesenti, solvendum in futuro, on the ground, presumably, that the rent deemed die in -diem, and arose out of the land itself. Hence they held that the rent to accrue upon the bankrupt’s covenant after the act of bankruptcy was not provable against the bankrupt’s estate, and the bankrupt himself was not discharged from his liability thereon. This ruling gave rise to the line of cases cited in 2 Platt Leas., and which were followed by those in this country above cited.
This rule occasioned so much inconvenience and injustice that
“Any person injured by the operation of this section shall be deemed a creditor of the bankrupt to the extent of such injury, and may, accordingly prove the same as a debt under the bankruptcy.”
Under that clause the court, in the case just cited, allowed a claim for damages for injury for the loss of a lease of land.
In Pennsylvania the same sort of relief was granted in Sweatman’s Appeal, 150 Pa. 369.
. In New York the ruling has been in accordance with the equity of the English statute. Underhill v. Collins, 132 N. Y. 269 (Court of Appeals); People v. St. Nicholas Bank, 151 N. Y. 592, decided in 1897. There the St. Nicholas Bank failed while it was lessee of an unexpired term of a banking-house on Wall street, for which it was paying a rent of $12,000 a year. After it vacated the premises the landlord, pursuant to a right reserved in the lease, relet it at $9,000 a year, and made a claim against the receiver for the difference in rent—$3,000 a year for three years—and the claim was allowed.
This review of the law leads me to the conclusion that the appellant’s claim, in its present ■ shape, must be rejected—first, on the authority of Stockton v. Mechanics Bank, supra, and second, because, independent of the authority of that case, I can find no principle upon which it can be sustained in its present shape and amount. I cannot assume upon the facts admitted before me that the leasehold is of no'value whatever. The claim, therefore, must be disallowed, without prejudice, however, to the right of the claimant to presenta new claim based upon equitable principles.
Before dismissing the case I desire to refer to a consideration
There is great force in this argument; but I do not find it-necessary to arrive at or express any definite conclusion upon it.
I will advise an order to the effect above stated, and that will leave the case in such a condition that my conclusion may be reviewed by. a higher court.