Reversed and remanded by published opinion. Judge RUSSELL wrote the opinion, in which Judge NIEMEYER and Judge MICHAEL joined.
This case requires this Court to decide a discrete issue of bankruptcy law: whether a debtor’s obligation to pay money under a nonexecutory contract remains a continuing obligation on the debtor after the bankruptcy filing, or simply gives the creditor a claim against the bankrupt estate. The bankruptcy court and district court both concluded that the debtor’s obligation under a non-executory contract remained a continuing obligation on the debtor. We reverse and remand, holding that the debtor’s obligation under a non-exeeutory contract created a claim to be handled as part of the bankruptcy proceedings.
I.
Stewart Foods, Inc., the Appellant, filed for bankruptcy on December 31,1992. Long before Stewart Foods’ financial troubles began, Theodore J. Broecker, the founder, former owner, and former president of Stewart Foods, made plans for his retirement. On December 22, 1988, Stewart Foods and Broecker entered into a retirement agreement, entitled the “Stewart Sandwiches, Inc. Salary Continuation Retirement Plan for Theodore J. Broecker” (the “Agreement”). The Agreement provided that Broecker would remain employed with Stewart Foods until he reached the age of 65 and, upon retirement, would receive income for the next ten years.
Broecker retired on May 31, 1991. About a month before his retirement, on April 29, 1991, Stewart Foods and Broecker modified their Agreement. Under the amended Agreement, the parties set Broecker’s retirement date and agreed that Stewart Foods would pay Broecker $7,104 per month for 120 months, commencing June 1,1991.
Stewart Foods filed for bankruptcy under Chapter 11 of the Bankruptcy Code. On March 4, 1993, Broecker filed Proof of Claim No. 552, asserting ai claim against Stewart Foods in the amount of $717,504 for the remaining 101 monthly payments.
On May 12, 1993, j Stewart Foods filed a Motion for Authority to Reject Broecker Contract. Stewart Foods sought to reject the Agreement as an executory contract under 11 U.S.C. § 365(a). If the bankruptcy court determined that the Agreement was not executory, Stewart Foods alternatively sought a determination that the Agreement gave Broecker a pre-petition claim against Stewart Foods. Brojecker opposed the motion, asserting that ijhe Agreement was not executory and that he had no claim against Stewart Foods. !
During the proceedings in the bankruptcy court, Stewart Foods stipulated that the Agreement was non-exeeutory. In doing so, Stewart Foods abandoned its attempt to reject the Agreement under 11 U.S.C. § 365(a). Nonetheless, Stewart Foods continued to maintain that the Agreement merely gave Broecker a pre-petition claim against the estate and that Stewart Foods did not have a continuing obligation to fulfill the terms of the Agreement after the bankruptcy filing date.
The bankruptcy court disagreed. On August 17,1993, the bankruptcy court held that Broecker had no pre-petition claim against Stewart Foods. The court found that the Agreement was not a retirement contract but a salary continuation agreement, and that, as such, the Agreement constituted a continuing and binding contract on Stewart Foods. As a result of the bankruptcy court’s decision, Stewart Foods was obligated to continue making monthly payments to Broecker and could not simply treat Broecker as a general unsecured creditor in the bankruptcy proceedings.
II.
The Bankruptcy Code defines the term “claim” as follows:
(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or
(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured....
11 U.S.C. § 101(5). Congress intended to adopt the broadest possible definition of the term “claim,” so that a bankruptcy case would deal with all of the debtor’s legal obligations. The House and Senate Reports to the Bankruptcy Reform Act of 1978 state the following about the definition of “claim”:
By this broadest possible definition, and by the use of the term throughout the title 11, especially in subchapter I of chapter 5, the bill contemplates that all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case. It permits the broadest possible relief in the bankruptcy court.
H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 309 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6266; S.Rep. No. 95-989, 95th Cong., 2d Sess. 22 (1978), reprinted in 1978 U.S.C.C AN. 5787, 5808; see also Johnson v. Home State Bank,
When Stewart Foods filed for bankruptcy on December 31, 1992, the Agreement gave Broecker a right to 101 future monthly payments of $7,104. Therefore, Broecker obtained a claim against Stewart Foods when it filed for bankruptcy. Broecker’s claim is not defeated simply because his right to the individual payments had not yet become due as of the date of the bankruptcy filing. The definition of “claim” in 11 U.S.C. § 101(5) specifically provides that an unmatured right to payment is a claim. We need no further analysis to conclude that Broecker has a claim against Stewart Foods for 101 payments of $7,104.
The district court reached the wrong conclusion because it improperly relied on § 365 of the Bankruptcy Code, which allows a debtor-in-possession to reject or assume executory contracts. 11 U.S.C. § 365(a). The rejection or assumption of a contract does not determine whether a claim exists, but whether any claim that does exist is treated as a pre-petition obligation of the debtor or as an administrative expense entitled to highest priority. See Leasing Serv. Corp. v. First Tenn. Bank Nat’l Assoc.,
The district court’s reasoning was logically flawed. The district court noted that, under §§ 365 and 502(g), the rejection of an execu-tory contract creates a general unsecured claim. From this premise, the district court erroneously inferred that the existence of a general unsecured claim must imply the rejection of an executory contract.
This conclusion, however, violates the district court’s own logic. Where a debt- or-in-possession assumes an executory contract, he remains bound by the terms of that contract after the bankruptcy filing. Thus, under the district court’s flawed logic, a debt- or-in-possession who remains obligated under a contract after the bankruptcy filing must have assumed that contract. Because Stewart Foods could not assume a non-executory contract, it follows that Stewart Foods could not remain obligated by the terms of the Agreement after the bankruptcy filing. Strangely enough, the same flawed reasoning that led the district court to conclude that Stewart Foods had a continuing obligation to make payments to Broecker should also have led it to the opposite conclusion that Stewart Foods could not have had a continuing obligation to make such payments. Cf. First Sec. Bank of Utah, N.A. v. Gillman,
Besides being logically invalid, the district court’s conclusion that Broecker had no claim against the debtor’s estate would have pernicious consequences. Under the district court’s holding, a debtor’s debts arising out of any non-executory contracts, even promissory notes, could not be handled as
The bankruptcy court reached the wrong result because it could not overcome its impression that the Agreement was exec-utory, even after the parties stipulated that it was non-executory. Joint Appendix (“J.A.”) 44, 51. The parties’ stipulation accurately represented the nature of the contract. At the time of the bankruptcy filing, Broecker had already retired and owed no further employment responsibilities to Stewart Foods. The only remaining obligation under the Agreement was for Stewart Foods to make 101 monthly payments to Broecker. However, the bankruptcy court viewed the Agreement as a “salary continuation and employment document,” not as a retirement document. The bankruptcy court believed that Stewart Foods was making payments to Broecker for work performed, J.A. 52, and that the Agreement was therefore executory. Although the bankruptcy court believed that the debtor took an “unusual, if not weird, position” by stipulating that the Agreement was non-executory, it accepted the parties’ stipulation and Stewart Foods’ abandonment of its attempt to reject the Agreement.
The bankruptcy court, nevertheless, held that the Agreement, as a salary continuation agreement instead of a retirement contract, did not create a pre-petition claim but remained a continuing and binding contract on the debtor. The bankruptcy court found that none of the 101 payments owed to Broecker constituted a pre-petition obligation of Stewart Foods. However, the fact that the payments became due after the bankruptcy filing does not alter the conclusion that the payments are pre-petition obligations. Chiasson v. J. Louis Matherne & Assocs. (In re Oxford Management, Inc.),
III.
We conclude that the Agreement, a non-executory contract, gave Broecker a right to 101 payments from Stewart Foods. Under the definition in § 101(5) of the Bankruptcy Code, we find that Broecker had a claim against the debtor’s estate. We conclude that the bankruptcy court and district court erred in finding that Stewart Foods had a continuing obligation to make payments to Broecker after the bankruptcy filing. We therefore reverse the decision of the district court and remand for further proceedings consistent with this opinion.
REVERSED AND REMANDED.
Notes
. The parties modified the Agreement because Broecker was indebted to Stewart Foods in the amount of $427,000. The original Agreement provided that Broecker would receive between sixty to sixty-five percent of his Final Average Salary during the teniyears after retirement. In modifying the Agreement, Broecker accepted a reduction in the amorint of the monthly payment he would have received under the original Agreement to offset his debt to Stewart Foods.
. For a claim to qualify as an administrative expense, (1) the claim must arise out of a post-petition transaction between the creditor and the debtor-in-possession (or trustee) and (2) the consideration supporting the claimant's right to payment must be supplied to and beneficial to the debtor-in-possession in the operation of the business. Trustees of Amalgamated Ins. Fund v. McFarlin's, Inc.,
. This fype of inference is an example of affirming the consequent, a classic form of invalid reasoning. Consider the following syllogism:
(1) If A is true, then B is true.
(2) B is true.
(3) Therefore, A is also true.
The conclusion that A is true does not logically follow from the premises. The district court's reasoning roughly reduces to the following syllogism:
(1) If a debtor rejects a contract, then a general unsecured claim exists.
(2) A general unsecured claim exists.
(3) Therefore, the debtor must have rejected a contract.
The district court's conclusion does not follow from its premises.