Colman Co. v. Withoft

• Decision Date: 01 April 1912
• Docket Number: 1,946.
• Citation: 195 F. 250
• Parties: COLMAN CO. v. WITHOFT. In re SWEENEY.
• Court: U.S. Court of Appeals — Ninth Circuit

195 F. 250

COLMAN CO. v. WITHOFT.

In re SWEENEY.

No. 1,946.

United States Court of Appeals, Ninth Circuit.

April 1, 1912

On March 31, 1909, Frank H. Sweeney filed his voluntary petition in bankruptcy, and on April 1, 1909, he was adjudged a bankrupt. He and the Colman Company, a corporation, were jointly liable on a lease of a building, and at the time of the adjudication in bankruptcy the lease had not expired. On February 18, 1908, the Colman Company and the bankrupt entered into an agreement whereby each assumed as between themselves a several liability for one-half of the rental reserved in the lease. Later, and before the petition in bankruptcy was filed, they entered into a second agreement in which it was provided that the Colman Company should procure, if possible, from the lessors, a rescission of the lease, and that to obtain such rescission the Colman Company might pay not to exceed $100 per month for each month of the unexpired term, and that the bankrupt would pay to Colman &amp Co. one-half the amount so paid by it, or agreed to be paid by it, as the consideration for such rescission. After the filing of the petition the Colman Company paid the rental which accrued for the month of April, 1909, in the sum of $350, and on April 27, 1909, it made an agreement with the lessors, whereby, in consideration of $2,400 paid by it, the lease was canceled. For one-half of these sums, to wit $1,375, the Colman Company filed its claim against the bankrupt's estate. The trustee rejected the claim, but the referee overruled the objection and allowed the claim. On the trustee's petition for a review, the referee's order was overruled by the District Court, and the claim was ordered disallowed. From that order the present appeal is taken.

Joseph C. Meyerstein, for appellant.

Joseph Kirk, J. M. Rothchild, H. L. Rothchild, I. M. Golden, and J A. Pritchard, for appellee.

Before GILBERT and MORROW, Circuit Judges, and HANFORD, District judge.

GILBERT Circuit Judge (after stating the facts as above).

The date of filing the petition in bankruptcy is intended to mark the line of separation between debts that are provable and those that are not provable against the bankrupt's estate. Those that are not provable remain subsisting obligations of the bankrupt, and he is not released therefrom by his discharge. The adjudication of bankruptcy does not dissolve contractual relations between the bankrupt and others. It takes from him his property and devotes it to the payment of debts which are provable under sections 63a and 63b of the bankruptcy act, but it does not absolve him from the obligations of contracts. Remington on Bankruptcy, Sec. 2729, and cases there cited.

While a contract to pay rent under a lease is not terminated by bankruptcy, the rent thereafter to accrue is not a provable debt against the estate. Watson v. Merrill, 136 F. 359, 69 C.C.A. 185, 69 L.R.A. 719; In re Roth & Appel, 181 F. 667, 104 C.C.A. 649, 31 L.R.A. (N.S.) 270; Atkins v. Wilcox, 105 F. 595, 44 C.C.A. 626, 53 L.R.A. 118; In re Rubel et al. (D.C.) 166 F. 131; Loveland on Bankruptcy (3d Ed.) 365. But the claim of appellant in this case, although it had its origin in the obligation of the bankrupt to pay rent which accrued after the filing of the petition, is not, as it is presented, a claim for rent; but it is one that arises out of the contract of two lessees, jointly liable for rent, whereby one thereof, the bankrupt, agreed to reimburse the other for all the payments which it might make in excess of one-half of the rental, and to pay it one-half of such sum as it might be required to pay in gross, not to exceed $100 per month for the unexpired term, to obtain a rescission of the lease.

It is held by the decided weight of authority that subdivisions 1 and 4 of section 63a of the Bankruptcy Act are in pari materia, and that the words 'absolutely owing at the time of the filing of the petition against him' are to be read into subdivision 4. In re Roth & Appel, 181 F. 667 104 C.C.A. 649, 31 L.R.A. (N.S.) 270; In re Swift, 112 F. 315, 50 C.C.A. 264; In re Adams (D.C.) 130 F. 381; In re Burka (D.C.) 104 F. 326. It is apparent that the appellant's claim was not a debt due and owing at the time when the petition was filed, but that it was contingent; that is to say, all the facts necessary to be...