Ginsberg v. Lindel
| Decision Date | 28 November 1939 |
| Docket Number | No. 11542.,11542. |
| Citation | 107 F.2d 721 |
| Parties | GINSBERG et al. v. LINDEL. In re GLOBE DEPARTMENT STORE. |
| Court | U.S. Court of Appeals — Eighth Circuit |
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Joseph I. Brody, of Des Moines, Iowa (George E. Brammer, Clyde B. Charlton, Louis A. Parker, and Thomas B. Roberts, all of Des Moines, Iowa, on the brief), for appellants.
Haemer Wheatcraft, of Des Moines, Iowa (J. Rudolph Hansen, of Des Moines, Iowa, on the brief), for appellee.
Before SANBORN, THOMAS, and VAN VALKENBURGH, Circuit Judges.
On November 22, 1938, Globe Department Store, an Iowa corporation, filed its voluntary petition in bankruptcy and was adjudicated a bankrupt on the same day. Xen Q. Lindel, the appellee, was thereafter appointed trustee.
The bankrupt was engaged in owning and operating a department store in Des Moines, Iowa, in a building standing in part on land leased from the appellants' predecessor. The appellants as lessors filed their proof of debt in the bankruptcy proceedings alleging a statutory and a contractual lien for rent and praying that their claim be adjudged a prior and paramount lien on the property of the bankrupt. The trustee filed objections to the allowance of the claim.
The amount of the claim involved on this appeal, without interest, is the sum of $14,093.66, or, if a certain amendment to the lease governs, $8,043.66. These amounts consist of the following items:
1. Rent payable by the terms of
the lease for the period from
December 1, 1937, until October
31, 1938 ......................... $10,083.33
plus interest; or if the amendment
governs, $4,033.33
2. Taxes paid by the appellants 2,069.97
3. Payments by appellants on a
mortgage covering the premises .. 1,940.36
__________
$14,093.66
After a full hearing the referee entered an order allowing the claim in the amount of $8,422.21 of which amount $3,689.96 was allowed as a prior claim and $4,732.25 as a general claim. The appellants filed a petition to review the order of the referee; and the court entered an order allowing the claim for $8,043.66, but granted appellants priority for only $733.33 and allowed them a general claim for the remainder of $7,310.34. From this order of the court the lessors have appealed.
On this appeal the lessors take exception to two features of the court's order: First, to the allowance of the claim in the amount of $8,043.66 with interest instead of for $14,093.66 with interest; and, second, to the granting of priority for the sum of only $733.33 instead of for the entire claim whether it be fixed at $8,043.66 or at $14,093.66.
1. The amount of the claim. The difference in the amount claimed and the amount allowed by the court arises out of these circumstances. The original lease, made July 1, 1925, provided that the rent for the leased premises for the period under consideration should be $11,000 per annum payable in equal monthly installments in advance. On November 16, 1932, the lease was amended. The amendment reduced the monthly rentals to $366.66 on condition that the lessees should not default in any of their obligations under the lease. In case of any such default it was provided that "said reductions of rent herein granted shall be null and void ab initio." The lessees defaulted, and the lessors claim that for the condition broken they are entitled to the higher rentals. The court denied the claim on the grounds (1) that the conditional clause in the amendment to the lease is void as imposing a penalty, and (2) that the lessors had waived the breach of condition and were estopped to assert a right to the higher rentals under the original lease.
The court did not err in holding that the lessor had waived the breach of the condition in the amendment to the lease. Prior to the filing of the petition in bankruptcy on November 22, 1938, it was known to the lessors and to the creditors of the bankrupt that the bankrupt was in financial difficulties. The lessors were then negotiating with an "eastern concern with the view of leasing" the premises occupied by the bankrupt to it. Several of the creditors were about to commence suits against the bankrupt. The lessors feared that if proceedings were begun they would affect the negotiations for the new lease and "the deal might fall through and every body lose out." Under these circumstances about three weeks before the petition in bankruptcy was filed a representative of the lessors met the representatives of the threatening creditors and an agreement was reached by the terms of which the lessors promised that they would not make a claim for the higher rentals reserved in the original lease but only for the rentals provided for in the amendment in consideration for which the creditors agreed that they would not commence suits against the bankrupt while the negotiations were in progress. By this arrangement the creditors would benefit by the reduced claim of the lessors and the lessors would benefit by being able to carry on the negotiations for the new lease for their property without interference from the creditors. Each party promised to relinquish a known right in consideration of a like relinquishment by the other. The creditors performed their part of the agreement and the lessors are bound by their promise. In this court the lessors claim that it was not shown that their representative had authority to waive any of their rights. This claim was not made before the referee nor assigned as error here and it can not be raised here for the first time. Britton v. Western Iowa Co., 8 Cir., 9 F.2d 488, 491, 45 A.L.R. 711. The court did not err in establishing the claim in the amount of $8,043.66, instead of $14,093.66, and the order in that respect must stand.
2. Priority. Lessors' claim may be divided into two parts for the purpose of considering the right of priority: (1) $4,033.33 allowed by the court as rent and (2) $4,010.33 allowed for the payment by the lessors of taxes in the sum of $2,069.97 and delinquent payments on a mortgage in the sum of $1,940.36.
To secure the payment of the $4,033.33 the lessors claim the protection under the laws of Iowa of a statutory landlord's lien.
In the lease as amended the lessees covenanted and agreed to pay to the lessor as rent for said premises $4,400 per annum in equal monthly installments ($366.66) in advance. The unpaid rent for which the lien is in dispute is for the period from December 1, 1937, to October 31, 1938, all included within the year preceding the filing of the petition and the adjudication in bankruptcy. The Code of Iowa of 1935, sections 10261 and 10262, provides that "A landlord shall have a lien for his rent upon * * * personal property of the tenant which has been used or kept" on the leased premises; and that "Such lien shall continue for the period of one year after a year's rent, or the rent of a shorter period, falls due." The Supreme Court of Iowa has held, Richardson Brothers v. Peterson, 58 Iowa 724, 13 N.W. 63, 64, that Under the Bankruptcy Act of 1898, 11 U.S.C.A. § 1 et seq., such a lien is valid against a trustee in bankruptcy. Henderson v. Mayer, 225 U.S. 631, 32 S.Ct. 699, 56 L.Ed. 1233; Richmond v. Bird, 249 U. S. 174, 39 S.Ct. 186, 63 L.Ed. 543; Britton v. Western Iowa Company, 8 Cir., 9 F.2d 488, 45 A.L.R. 711. There can be no doubt that under the Iowa law and the Act of 1898 the $4,033.33 of rent accruing within the year preceding bankruptcy was secured by a valid statutory lien and was entitled to priority.
Section 64, sub. a of the Act of June 22, 1938, known as the Chandler Act, 52 Stat. c. 575, pp. 840, 874, 11 U.S.C.A. § 104, sub. a, amending the Act of 1898, provides that "priority for rent to a landlord shall be restricted to the rent which is legally due and owing for the actual use and occupancy of the premises affected, and which accrued within three months before the date of bankruptcy." Section 1, sub. (13) of the Act, 11 U.S.C.A. § 1, sub. (13), provides that "Date of bankruptcy" shall mean "the date when the petition was filed." By its terms this Act became effective September 22, 1938, just two months before the petition in this proceeding was filed.
The trial court held that the right of the lessors to priority for rent must be determined by application of the rule of the Chandler Act and not under the Act of 1898. Accordingly only that part of the rentals accruing within three months of the date of bankruptcy was allowed priority. This sum was determined to be $733.33. For the rentals accruing within twelve months, but prior to the three month period, the court held that the lessors were entitled only to a general claim in the amount of $3,300.
The appellants contend that the court erred in holding that their right to priority is governed by the Chandler Act and in refusing to grant priority to their entire claim for rent. The grounds of their contention are: (1) The Iowa landlord's lien for rent past due on September 22, 1938, the effective date of the Chandler Act, was a vested property right; (2) the Chandler Act, if construed to apply to such past due rent, destroys a vested property right and violates the Fifth Amendment to the Constitution, U.S.C.A.; and (3) the Chandler Act should not be construed to operate retrospectively, but only prospectively. The trustee contends that, (1) a statutory lien is not a property right, and (2) Congress may fix standards and establish limitations in bankruptcy affecting a creditor's remedy so long as the statutory provisions are fair, reasonable and equitable.
We are not called upon in this case to consider the constitutional...
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