Central Trust Company of Illinois v. Chicago Auditorium Association No 162 Chicago Auditorium Association v. Central Trust Company of Illinois No 174

• Decision Date: 03 April 1916
• Docket Number: Nos. 162 and 174,s. 162 and 174
• Parties: CENTRAL TRUST COMPANY OF ILLINOIS, Trustee of the Estate of Frank E. Scott Transfer Company, Bankrupt, Appt., v. CHICAGO AUDITORIUM ASSOCIATION. NO 162. CHICAGO AUDITORIUM ASSOCIATION, Appt., and Petitioner, v. CENTRAL TRUST COMPANY OF ILLINOIS, Trustee of the Estate of Frank E. Scott Transfer Company, Bankrupt. NO 174
• Court: U.S. Supreme Court

240 U.S. 581

36 S.Ct. 412

60 L.Ed. 811

CENTRAL TRUST COMPANY OF ILLINOIS, Trustee of the Estate of Frank E. Scott Transfer Company, Bankrupt, Appt.,

v CHICAGO AUDITORIUM ASSOCIATION.

NO 162.

CHICAGO AUDITORIUM ASSOCIATION, Appt., and Petitioner,

v. CENTRAL TRUST COMPANY OF ILLINOIS, Trustee of the

Estate of Frank E. Scott Transfer Company, Bankrupt.

NO 174.

Nos. 162 and 174.

Argued January 12, 1916.

Decided April 3, 1916.

Messrs. Edwin C. Brandenburg, Frederick D. Silber, and Clarence J. Silber for the Central Trust Company of Illinois.

[Syllabus from pages 582-583 intentionally omitted] Messrs. William D. Bangs, Rudolph Matz, and John C. Mechem for the Chicago Auditorium Association.

Mr. Justice Pitney delivered the opinion of the court:

On July 22, 1911, a creditors' petition in bankruptcy was filed against the Frank E. Scott Transfer Company, an Illinois corporation, and it was adjudged a bankrupt on August 7. The act of bankruptcy charged and adjudicated does not appear. When the proceedings were commenced, the bankrupt held contract relations with the Chicago Auditorium Association under a written agreement made between them February 1, 1911, which had been partially performed. By its terms the Association granted to the Transfer Company, for a term of five years from the date of the contract, the baggage and livery privilege of the Auditorium Hotel, in the city of Chicago; that is to say, the sole and exclusive right, so far as it was within the legal capacity of the Association to grant the same, to transfer baggage and carry passengers to and from the hotel and to furnish livery to its guests and patrons. For the baggage privilege the Transfer Company agreed to pay to the Association the sum of $6,000, in monthly instalments of $100 each, and for the livery privilege the sum of $15,000, in monthly instalments of $250 each, and also agreed to furnish to the hotel and its guests and patrons prompt and efficient baggage and livery service at reasonable rates at all times during the continuance of the privileges. It was further agreed as follows:

'The party of the first part [Chicago Auditorium Association], however, reserves the right, which is an express condition of the foregoing grants, to cancel and revoke either or both of said privileges, by giving six months' notice in writing of its election so to do, whenever the service is not, in the opinion of the party of the first part, satisfactory, or in the event of any change in management of said hotel; and in case of the termination of either or both of said privileges by exercise of the right and option reserved by this paragraph, such privilege or privileges shall cease and determine at the expiration of the six months' notice aforesaid, and both parties hereto shall in that case be released from further liability respecting the concession so canceled and revoked.

'Said rights and concessions shall not be assignable without the express written consent of the party of the first part, nor shall the assignment of the same, with such written consent, relieve the party of the second part [Scott Transfer Company] from liability on the covenants and agreements of this instrument.'

The contract authorized the Association, in the event of default by the Transfer Company in the payment of any instalment of money due, or in the performance of any other covenant, if continued for thirty days, to terminate the privileges at its option, without releasing the Transfer Company from liability upon its covenants. Should either or both of the privileges be thus terminated before January 31, 1916, the Association was to be at liberty to sell the privileges, or make a new or different contract for the remainder of the term, but was not to be obliged to do this, and the Transfer Company, unless released in writing, was to remain liable for the entire amount agreed to be paid by it.

Up to the time of the bankruptcy this contract remained in force, and neither party had violated any of its covenants. The trustee in bankruptcy did not elect to assume its performance, and the Association entered into a contract with other parties for the performance of the baggage and livery service, and obtained therefrom the sum of $234.69 monthly as compensation for those privileges. On February 28, 1912, it exhibited its proof against the bankrupt estate, claiming an indebtedness of $6,537.94, of which $311.20 had accrued prior to the bankruptcy proceedings, and the remainder was claimed as unliquidated damages arising under the contract for alleged breach thereof on the part of the bankrupt through the bankruptcy proceedings. Of this amount $691.86 represented the loss incurred during the first six months of bankruptcy. Objections filed by the trustee were sustained by the referee, except as to that portion of the claim which had accrued prior to the bankruptcy proceedings. On review, the district court sustained this decision. On appeal to the circuit court of appeals, the order of the district court was reversed, and the cause remanded with direction to allow $691.86 upon the claim, and to disallow the remaining portion. 132 C. C. A. 452, 216 Fed. 308.

An appeal to this court by the trustee in bankruptcy was allowed, under § 25b-2 of the bankruptcy act (of July 1, 1898, chap. 541, 30 Stat. at L. 544, 553, Comp. Stat. 1913, §§ 9585, 9609), upon a certificate by a justice of this court that the determination of the questions involved was essential to a uniform construction of the act throughout the United States. This is No. 162. Thereafter a cross appeal by the Auditorium Association was allowed by one of the judges of the circuit court of appeals. This is No. 174.

A motion is made to dismiss the cross appeal, and this must be granted. In the absence of the certificate prescribed by § 25b-2, the sole authority for an appeal from a decision of the circuit court of appeals, allowing or rejecting a claim, is found in § 25b-1: 'Where the amount in controversy exceeds the sum of two thousand dollars, and the question involved is one which might have been taken on appeal or writ of error from the highest court of a state to the Supreme Court of the United States.' This limits such appeals to cases where Federal questions are involved, of the kind described in § 237, Judicial Code (36 Stat. at L. 1156, chap. 231, Comp. Stat. 1913, § 1214). The motion to dismiss is resisted upon the ground that the claim of the Association to damages beyond a period of six months was denied by the court of appeals as not constituting a provable debt in bankruptcy, and that a Federal question is thus necessarily presented, provability depending upon a construction of the bankruptcy act. An examination of the opinion of that court, however, shows that while it held that damages for anticipatory breach of the contract were provable, it held that the contract itself, because of the option reserved to the Auditorium Association to cancel it on six months' notice, was mutually obligatory for that term only, and hence no damages beyond that period were allowable. This involved no Federal question. Chapman v. Bowen, 207 U. S. 89, 92, 52 L. ed. 116, 117, 28 Sup. Ct. Rep. 32.

But, in view of the general importance of the question of the amount allowable in its relation to the questions involved in the trustee's appeal, we have concluded that a certiorari should be allowed in lieu of the cross appeal.

Coming to the merits: It is no longer open to question in this court that, as a rule, where a party bound by an executory contract repudiates his obligations or disables himself from performing them before the time for performance, the promisee has the option to treat the contract as ended, so far as further performance is concerned, and maintain an action at once for the damages occasioned by such anticipatory breach. The rule has its exceptions, but none that now concerns us. Roehm v. Horst, 178 U. S. 1, 18, 19, 44 L. ed. 953, 960, 961, 20 Sup. Ct. Rep. 780. And see O'Neill v. Supreme Council, A. L. H. 70 N. J. L. 410, 412, 57 Atl. 463, 1 Ann. Cas. 422. There is no doubt that the same rule must be applied where a similar repudiation or disablement occurs during performance. Whether the intervention of bankruptcy constitutes such a breach and gives rise to a claim provable in the bankruptcy proceedings is a question not covered by any previous decision of this court, and upon which the other Federal courts are in conflict. It was, however, held in Lovell v. St. Louis Mut. L. Ins. Co. 111 U. S. 264, 274, 28 L. ed. 423, 426, 4 Sup. Ct. Rep. 390, where a life insurance company became insolvent and transferred its assets to another company, that a policy holder was entitled to regard his contract as terminated and demand whatever damages he had sustained thereby. And see Carr v. Hamilton, 129 U. S. 252, 256, 32 L. ed. 669, 670, 9 Sup. Ct. Rep. 295. In support of the provability of the claim in controversy, Ex parte Pollard, 2 Low. Dec. 411, Fed. Cas. No. 11,252; Re Swift (C. C. A. 1st) 50 C. C. A. 264, 112 Fed. 315, 319, 321; Re Stern (C. C. A. 2d) 54 C. C. A. 60, 116 Fed. 604; Re Pettingill (D. C. Mass.) 137 Fed. 143, 146, 147; Re Neff (C. C. A. 6th) 28 L.R.A. (N.S.) 349, 84 C. C. A. 561, 157 Fed. 57, 61, are referred to; and see Pennsylvania Steel Co. v. New York City R. Co. (C. C. A. 2d) 117 C. C. A. 503, 198 Fed. 721, 736, 744. To the contrary, Re Imperial Brewing Co. (D. C. Mo.) 143 Fed. 579; Re Inman (D. C. Ga.) 171 Fed. 185 s. c. 175 Fed. 312; besides which a number of cases...