In re Bissinger Co. , 5 F.2d 106 ( 1925 )

JONES, District Judge.

The special master found that the Twenty-Pirst Street Realty Company was entitled to prove and have allowed its liquidated elaim for loss and damage arising out of the breach of the lease occasioned by this bankruptcy. The trustee objected to the allowance of the claim, and has excepted to the finding of the special master on the grounds: Pirst, that the special master should have held that the elaim was precluded by the terms of the lease; and, second, that the elaim is a contingent one and not provable in bankruptcy, and that the finding-of the special master allowing the elaim is contrary to law.

The Twenty-Pirst Street Realty Company entered into the lease with the bankrupt for a term of eight years beginning October 1, 1922, providing for a rental of $17,000 per year for the first three years, and a rental of $17,500 per year for the remaining five years. The lease was executed September 30, 1920. The lessee was adjudged bankrupt in 1922, and the premises in question were occupied by the trustee in bankruptcy, who elected not to assume the lease, but abandoned it as of no value to the estate. The lessor did nothing to forfeit the lease, under clause 5 of the lease providing therefor, and took no steps to re-enter or repossess the property. After the trustee had abandoned the property, the lessor filed its claim for damages because of the breach of lease oc-curing by reason of the bankruptcy.

It has been conceded by the trustee that the measure of damage to the lessor, if its claim is to he allowed, is the sum of $34,600, less $17,000 paid by the bankrupt as security for the performance of the lease.

The question, then, is whether the lessor has a provable claim against the bankrupt estate as for damages resulting from an anticipatory breach of an executory contract.

It has been well settled that bankruptcy proceedings amount to an anticipatory breach of an executory contract, and that unliquidated damages arising out of such breach may he liquidated by the court, and proved against the bankrupt estate. Central Trust Co. v. Chicago Auditorium, 240 U. S. 581, 592, 36 S. Ct. 412, 60 L. Ed. 811, L. R. A. 1917B, 580. It has been suggested that Mr. Justice Pitney in that case distinguished the eases arising between landlord and tenant and those affecting personalty. No reason for the difference is given, but reference is made to authority upon that question. I see no difference between the nature of the claim arising out of a breach of a lease and one arising out of the breach of contract for personalty. The bankrupt, by insolvency, has completely disabled himself fro.m perfqrmanee, and when the trustee in bankruptcy rejects or fails to assume the lease, the right of the lessor to liquidate his damages accrues, unless in some manner the lessor has precluded the making of such claim by forfeiture of repossession or reentry. It is not a claim for rent in futuro, but a claim of damage or loss for breach of contract.

The payment of the stipulated rental over the future period of the lease was not contingent upon bankrupt’s continued occupancy. He was hound to pay the rent for the balance of the term, whether he stayed in possession or not; it was a fixed liability. If the bankrupt had had an option to terminate the lease at some time, or under certain conditions, it might not be considered a fixed liability; but there was no way out for him hut to pay the rent. It was absolutely owing, although payable in future installments.

No later pronouncement upon this subject has been offered, and I am inclined to the opinion that the decision in Central Trust Co. v. Chicago Auditorium is applicable to the controversy here presented.

The report of the special master will therefore be approved and adopted, and the exceptions thereto overruled.