In re Pincus Clothing Co. , 5 F. Supp. 365 ( 1933 )

ERVIN, District Judge.

This matter comes up on a motion for rehearing from my order affirming the referee’s finding in the lien claim of Mrs. Florence M. Pineus.as landlord.

After considering the matter and again going over the facts, I am convinced that the finding of the referee was correct in part and erroneous in part, and therefore my affirmance was wrong. The order entered by me on November 25th affirming the referee’s finding is therefore set aside.

As I now gather the facts, the lease was made by the claimant to the bankrupt on May 3, 1928, for ten years at an agreed rental of $1,009 a month to be payable on the last day of each month, and this rent was paid until May, 1931, when a further agreement was entered into between the landlord and the tenant, which provides:

“That the rent payable for the months of May 1931 to and including the month of April 1933, instead of being payable $1,000.-00 on the last day of May 1931, and on the last day of each month thereafter, to and including the last day of April 1933, being payable as follows, * * * $650.00 on the last day of May 1931, and $350.00 with interest on the last day of March 1938, said amount of $350.00 to bear interest at the rate of 8% per annum from the last day of May 1931. * * * That if the lessee shall promptly pay the twenty-four payments of $650.00 each hereinbefore set forth and shall promptly pay the fifty-nine rental payments of $1,000.00 each, stipulated in the lease to be paid, respectively, on the last day of May 1933, and on the last day of each month thereafter, the lessor will release the lessee from its obligation to the lessor to pay the twenty-four installments of $350.00 each, with interest, to be paid by the lessee on the last day of March 1938.”

On April 7, 1932, a further agreement was entered into between the lessor and the lessee by which the rent payable from April, 1932, to December, 1932, was reduced from $650 to $500 per annum. These two agreements had the effect of reducing the payments to be made by the tenant of the original lease to the amount named in the agreements for the specified periods just as though they had been so written in the original lease.

It appears that the tenant paid these installments of rent down to and including DeT cember, 1932, but failed to pay the rent for January, February, and March, 1933. The adjudication was made on March 31, 1933, the day on which the March installment fell due. The landlord filed her claim in the bankrupt court. In the claim the landlord sets up the various items of $350 and $500 which were not paid pursuant to the two amendments to the lease and which under these amendments were payable on the last day of March, 1938.

Objection is made to the claim by the trustee in bankruptcy under provisions of section 8814 of the Code of Alabama of 1923j which reads as follows:

“The landlord of any storehouse, dwelling house, or other building, shall have a lien on the goods, furniture and effects belonging to the tenant, and subtenant, for his rent, which shall be superior to all other liens, except those for taxes. In case the tenant or subtenant is adjudged a bankrupt, such lien on such goods, furniture and effects of the bankrupt, except for a dwelling house, used exclusively as a dwelling, shall, as against the trustee in bankruptcy, attach only for unpaid rent accrued and which shall accrue within six months from the date of adjudication computed pro-rata at the then current rate. The lien amount accrued and to accrue shall not be increased by reason of any default or breach of contract by tbe bankrupt. From the amount of such lien, so computed, tbe trustee in bankruptcy may deduct all payments and all demands wbicb could be legally set up against tbe landlord by way of recoupment, set-olf, or counterclaim. If tbe trustee in bankruptcy 'shall dispose of tbe lease as an asset of tbe bankrupt estate, then tbe landlord shall have a lien on tbe goods, furniture and effects of any person bolding under tbe trustee in bankruptcy.” (Italics mine.)

This -objection is based on these words found in this section, “Tbe lien amount accrued and to accrue shall not be increased by reason of any default or breach of contract by tbe bankrupt.”

Much of tbe argument is based on tbe meaning of tbe wording “accrued or accrue” as used in tbe statute. Tbe landlord contends that tbe meaning of these words is whether the rental payments bad been earned, while tbe trustee contends tbe meaning is that tbe payments become due and collectable. Many authorities have been cited on each of these contentions, so that it appears that tbe meaning of tbe word “aeerue” is dependent somewhat on the facts of each case and tbe objects to be accomplished either by tbe statute or contract in which tbe word is used.

In the first place, tbe statute gives to the landlord a lien on tbe goods, furniture, and effects belonging to tbe tenant wbicb receives tbe benefit of protection in the building. This building was occupied as a clothing store and tbe lease contemplated a mercantile establishment where goods are stored for sale. Manifestly, therefore, goods which might be in the store one day would not be there tbe following day, and in tbe course of a period of time, practically tbe whole stock of goods would change, so it appears to me that a claim which could not be in any event collected until 1938 would not be intended to give a lien on tbe goods wbicb were in tbe store in 1931, 1932, and 1933. So when tbe statute says that where tbe tenant is adjudged bankrupt tbe lien shall, as against tbe trustee, attach only for unpaid rent accrued and wbicb shall aeerue within six months from the day of adjudication, then tbe contemplation of tbe statute was that it was rent wbicb became due and payable within that time. Again it says “rent accrued,” that certainly means rent whieh is then payable and which can be collected within six ■ months.

Tbe intent as I gather it is to give a lien on tbe stock for tbe time tbe building is occupied by tbe bankrupt, and for six months thereafter, though not then occupied by tbe bankrupt, but required by tbe trustee to sell and dispose of tbe goods. So it seems to me from all tbe recitals of this particular act that tbe word “accrue” should be given tbe meaning of due and payable, and not that •of being earned.

Tbe next question for determination arises under these words of tbe statute: “Tbe lien amount accrued and to aeerue shall not be increased by reason of any default or breach of contract by tbe bankrupt.”

Applying this provision to tbe facts of this case, let us see bow it works' out. Tbe contract provides that a certain part, either $350 or $500 of tbe monthly rental shall not” be payable on tbe last day of certain months, but shall be payable with interest on tbe last day of tbe lease contract, namely tbe last day of March, 1938. Now suppose tbe tenant does pay tbe $650 or $500, as it may be, during the period contemplated by the amended contracts, and then shall continue to make the $1,000 payments called for by tbe contract to tbe end of tbe term. Certainly, under tbe provisions of tbe amended contract, these deferred payments cannot be collected under this contract. How, then, could any be collected? Only by a default or breach by tbe tenant.

In this aspect it may be observed that tbe construction of tbe word “accrue,” whether “earned” or “payable,” is immaterial, for •these installments can be enforced as a lien by tbe landlord or collected only by tbe default or breach by tbe tenant, and this is forbidden by tbe statute.

Tbe objection of tbe trustee to this part of tbe claim of tbe landlord will be, therefore, sustained.

Tbe next question arises on tbe proposition of tbe attorney’s fee. It is contended that the contract creates no lien for an attorney’s fee, but tbe contract does provide for an attorney’s fee to be paid by tbe tenant under certain contingencies, and I think tbe petitioner is entitled to a reasonable attorney’s fee, which I fix at $500.

So much of tbe claim as is for rent wbicb shall aeerue within six months from bankruptcy as fixed by tbe original and supplemental contracts is allowed. The referee will therefore be instructed to disallow so much of tbe claim as is for tbe amounts postponed by the supplemental contracts for payment in March, 1938, but allowing the claim for amounts fixed by the original and supple- - mental contracts for six months from the day of adjudication, and also allowing the ney’s fee of $500.