Cotting v. Hooper, Lewis & Co., Inc.

• Decision Date: 03 March 1915
• Citation: 220 Mass. 273,107 N.E. 931
• Parties: COTTING et al. v. HOOPER, LEWIS & CO., Inc., et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

220 Mass. 273

107 N.E. 931

COTTING et al. v. HOOPER, LEWIS & CO., Inc., et al.

Supreme Judicial Court of Massachusetts, Suffolk.

March 3, 1915

COUNSEL

Tyler, Corneau &amp Eames and Archibald L. Jackson, all of Boston, for appellants.

Fred L Norton, of Boston, for appellees.

OPINION

BRALEY J.

By the assignment of the defendant corporation for the benefit of creditors the lessors had the right to enter upon the premises and terminate the lease. And under the lessee's covenants that, upon termination, the lessors for the remainder of the term should be entitled to indemnity against loss of rents and other payments, or at their election to demand the payment of damages in such sum as would measure the difference between the rental value of the premises and the rent reserved with other payments, they assented to the assignment as required by its terms ans asserted that as creditors they should be permitted to share in the distribution of the net assets. The defendant trustee having refused to recognize the claim, they ask by the bill as amended that the damages may be ascertained and allowed against the estate. If the assignment contained no provisions as to the nature and character of the liabilities of the assignor, upon which dividends were payable, the question whether the plaintiffs can participate would have to be determined as at common law. Andrews v. Tuttle-Smith Co., 191 Mass. 461, 78 N.E 99; Smith v. Goodman, 149 Ill. 75, 36 N.E. 621.

But as the instrument expressly provides that the net proceeds shall be distributed in substantial conformity with the 'bankruptcy acts of the United States' and the obligations and liabilities of the assignor are limited to such debts, obligations and liabilities as are provable 'against the estates of bankrupts under said bankruptcy acts, and are not entitled to priority under said acts,' section 63 of the U.S. St. of 1898, c. 541, is by reference incorporated and must be followed by the trustee. Lipsky v. Heller, 199 Mass. 310, 315, 85 N.E. 453; Andrews v. Tuttle-Smith Co., 191 Mass. 461, 78 N.E. 99.

The material portions are as follows:

'Debts of the bankrupt may be proved and allowed against his estate which are (1) a fixed liability; as evidenced by a judgment or an instrument in writing, absolutely owing at the time of the filing of the petition against him, whether then payable or not; * * * (4) founded upon an open account, or upon a contract express or implied. * * * b. Unliquidated claims against the bankrupt may, pursuant to application to the court, be liquidated in such manner as it shall direct, and may thereafter be proved and allowed against his estate.'

It was said in Dunbar v. Dunbar, 190 U.S. 340, 23 Sup. St Ct. 757, 47 L.Ed. 1084, that the purpose of section 63b was to permit an unliquidated claim coming within the terms of section 63a to be liquidated as the court might direct; and in Zavelo v. Reeves, 227 U.S. 625, 33 S.Ct. 365, 57 L.Ed. 676, Ann. Cas. 1014D, 664, that the debts or claims provable under the several classes of liabilities of section 63 are debts or claims which existed at and before the filing of the petition. It follows that omissions cannot be supplied by construction based on the U.S. St. of 1867, c. 176, § 19, providing for the proof of contingent liabilities, and the liability of the bankrupt is to be ascertained solely as of the date of filing the petition. If the existence of the debt or claim, whether liquidated or unliquidated, is then contingent, it is not provable. Morgan v. Wordell, 178 Mass. 350, 59 N.E. 1037, 55 L. R. A. 33; Goding v. Roscenthal, 180 Mass. 43, 61 N.E. 222; Dunbar v. Dunbar, 180 Mass. 170, 62 N.E. 248, 94 Am. St. Rep. 623; Harmon v. McDonald, 187 Mass. 578, 73 N.E. 883, 3 Ann. Cas. 64; Smith v. McQuillin, 193 Mass. 289, 79 N.E. 401; Wetmore v. Markoe, 196 U.S. 68, 25 S.Ct. 172, 49 L.Ed. 390, 2 Ann. Cas. 265. The distinction between demands, whose existence depends on a contingency, and existing demands, the cause of action upon which is dependent upon a contingency, is clearly pointed out in French v. Morse, 2 Gray, 111. The lease did not provide that upon making the assignment the leasehold should cease and determine and the lessee thereupon should become indebted for the rent payable for the unexpired term, or rent or damages to be ascertained, as the instrument provides, should at once accrue and be payable. If either of these provisions appeared the lessors might have contended that under section 63a, cls. 1 and 4, and liability would have been absolutely fixed concurrently with the date of the assignment, and a different question would be presented. In re Keith-Gara Co. (D. C.) 203 F. 585, 587; Ludlow v. Pugh, 213 F. 450, 130 C. C. A. 96. The right of termination under either covenant was optional with the lessors, 'who may immediately or at any time thereafter' enter upon and repossess the demised premises. The right might or might not be exercised. If not exercised the lessee remained bound by the covenant for rent. If exercised, then at their election upon repossession they could rely on either the covenant for indemnity or the covenant for damages, but the rent ceased. The period of decision could not begin until the assignment had become operative and there could be no termination until an actual entry. It is admitted that the plaintiffs promptly entered, yet the right to either indemnity or damages did not accrue until entry, when the leasehold estate was devested and terminated. Fifty Associates v. Howland, 11 Metc. 99, 102. The lessors could not have both indemnity and damages, and of course further affirmative action must be taken by making an election, which they did by bringing the present suit. It would seem to be manifest that at the date of the assignment the claim for damages was a contingent and not an existing demand, presently due, but not presently payable, even if resting upon a contract and capable of liquidation. Savory v. Stocking, 4 Cush. 607; Deane v. Caldwell, 127 Mass. 242; Bowditch v. Raymond, 146 Mass. 109, 114, 115, 15 N.E. 285; McDermott v. Hall, 177 Mass. 224, 225, 58 N.E. 695; McIntire v. Cottrell, 185 Mass. 178, 180, 69 N.E. 1091; Hall v. Middleby, 197 Mass. 485, 83 N.E. 1114; Atkins v. Wilcox, 105 F. 595, 44 C. C. A. 626, 53 L. R. A. 118; Weeks v. International Trust Co., 125 F. 370, 60 C. C. A. 236. And being a future demand, contingent upon uncertain events, it would not be provable. In re Ells (D. C.) 98 F. 967; Watson v. Merrill, 136 F. 359, 69 C. C. A. 185, 69 L. R. A. 719; In re Roth, 181 F. 667, 104 C. C. A. 649, 31 L. R. A. (N. S.) 270, note; Slocum v. Soliday, 183 F. 410, 106 C. C. A. 56; Colman...