107 F.2d 721 (8th Cir. 1939), 11542, Ginsberg v. Lindel

Docket Nº:11542.
Citation:107 F.2d 721
Case Date:November 28, 1939
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 721

107 F.2d 721 (8th Cir. 1939)





No. 11542.

United States Court of Appeals, Eighth Circuit.

November 28, 1939

Page 722

[Copyrighted Material Omitted]

Page 723

Joseph I. Brody, of DesMoines, Iowa (George E. Brammer, Clyde B. Charlton, Louis A. Parker, and Thomas B. Roberts, all of DesMoines, Iowa, on the brief), for appellants.

Haemer Wheatcraft, of DesMoines, Iowa (J. Rudolph Hansen, of DesMoines, Iowa, on the brief), for appellee.

Before SANBORN, THOMAS, and VAN VALKENBURGH, Circuit Judges.

THOMAS, Circuit Judge.

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 DesMoines, 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

Page 724 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 $7,732.25 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...

To continue reading