Gulf Petroleum, SA v. Collazo, 6025.
| Decision Date | 22 April 1963 |
| Docket Number | No. 6025.,6025. |
| Citation | 316 F.2d 257 |
| Parties | GULF PETROLEUM, S.A., Appellant, v. Luis G. COLLAZO, Trustee in Bankruptcy, Appellee. |
| Court | U.S. Court of Appeals — First Circuit |
Victor House, San Juan, P. R., with whom Herbert S. McConnell, Wallace Gonzalez Oliver, Francis Gonzalez Oliver and McConnell, Valdes & Kelley, San Juan, P. R., were on brief, for appellant.
Luis E. Dubon, Jr., San Juan, P. R., for appellee.
Before WOODBURY, Chief Judge, and MARIS* and ALDRICH, Circuit Judges.
Gulf Petroleum, S.A., appeals from an order entered in the United States District Court for the District of Puerto Rico affirming the denial by the referee in bankruptcy of Gulf's motion seeking an order staying a sale of the assets of the bankrupt corporation, Puerto Rico Broilers, Inc., or in the alternative, excluding from the sale a portion of the bankrupt's land containing 3,000 square meters, and directing the trustee in bankruptcy to convey the 3,000 square meters of land to it upon payment of $10,000, the balance of the purchase price thereof. The following are the facts of the case appearing from the record:
Puerto Rico Broilers, Inc., was the owner of a farm consisting of 19.855 cuerdas in the Barrio of Mamey in the Municipality of Gurabo, Puerto Rico. On June 30, 1960, seven months before it was adjudged a bankrupt, Broilers entered into a contract with Gulf under which Broilers agreed to sell and Gulf agreed to purchase for $30,000 a parcel of land, to be segregated out of its farm, consisting of 3,000 square meters described in the contract, upon which Gulf desired to erect a gasoline service station. The contract provided for closing within 20 days after Gulf made demand to purchase which it agreed to do within 60 days. The obligation of Gulf to purchase was subject to the conditions, inter alia, that approval be obtained from the Planning Board of Puerto Rico of the segregation of the parcel of land being sold, of its rezoning from residential to commercial use, and of its use for a gasoline station. Upon the signing of the contract Gulf paid Broilers the sum of $10,000 which, the contract provided, "shall be credited to the purchase price which must be paid pursuant to paragraph 1, herein; Seller agrees to hold said amount in escrow until closing, and to return it to Purchaser in the event closing does not take place due to any reason other than by default of the Purchaser." On November 4, 1960, more than four months later, the parties executed another contract by which Broilers acknowledged receipt from Gulf of an additional sum of $10,000 to be credited to the purchase price and agreed "to hold the additional amount of Ten Thousand Dollars ($10,000.00) in escrow until closing, and to return it to Purchaser in the event closing does not take place due to any reason other than by default of the Purchaser." The parties also stipulated in this contract "that the Contract For Purchase and Sale executed by them on June 30, 1960, will remain in full force and effect until closing date."
On December 23, 1960, an involuntary petition in bankruptcy was filed against Broilers. At that time the contract between Broilers and Gulf had not been recorded in the Registry of Property, the approval by the Planning Board of the segregation and rezoning of the property had not been received, although applied for, and there had, therefore, been no closing under the contract or execution and recording of a deed. On January 17, 1961 Broilers was adjudicated a bankrupt and the proceedings were referred to the referee in bankruptcy. On February 13, 1961 Luis G. Collazo was appointed trustee. The contract of June 30, 1960 was not assumed by the trustee within the period of 60 days after January 17, 1961 or at any time after that period.
A public sale by the trustee of all the assets of the bankrupt's estate, including the Gurabo farm, was set for February 23, 1961. On that day Gulf filed with the referee a motion for an order directing that the sale be stayed, or in the alternative, that the trustee be directed to exclude the 3,000 square meters of land from any sale of the property and that the trustee be directed to sign a deed for the 3,000 square meters conveying title to Gulf and thereupon receive the amount of $10,000, the balance of the purchase price. The motion alleged that all of the conditions set forth in the contracts had been fully performed and that the only matter pending to conclude the sale was the execution of the deed and the delivery by Gulf of the $10,000 balance of the purchase price. The referee refused to stay the sale, but he did not confirm the sale of the Gurabo farm. In an order entered September 5, 1961, the referee held that the contract between the bankrupt and Gulf was an executory one, and that it had been rejected by the trustee since he did not assume it, which rejection gave rise to a right of action by Gulf against the bankrupt estate for damages which it was entitled to prove as an ordinary creditor. "But," said the referee, "it does not follow that Gulf is entitled to receive their $20,000 back in full from the trustee to the preference of all other creditors." The referee accordingly denied Gulf's petition. A petition for review of the referee's order was filed in the District Court by Gulf which also asked that the trustee be directed either to convey the property in question to Gulf upon payment of $10,000 or that the trustee be directed to make full restitution of the amount of $20,000 to Gulf in preference to the claims of other creditors. The District Court, upon review, affirmed the referee's order. This appeal followed.
On this appeal Gulf contends that the referee, and the District Court on review, erred in not directing the trustee to convey the 3,000 square meters of land in question to it, or, in the alternative, in not directing full restitution to it of the $20,000 paid by it in escrow under the contracts between the parties.
Gulf's contention that the trustee should have been directed by the referee to convey the land to it upon payment of the balance of $10,000 of the purchase price cannot be sustained. The contract of June 30, 1960 was a contract of purchase and sale1 which was still executory when bankruptcy intervened since the closing and execution of the deed had not yet taken place. Since the contract was executory the trustee had the right, in the exercise of his discretion, to reject it and under section 70, sub. b of the Bankruptcy Act could do so, as he did,2 by failing to assume it within 60 days after the adjudication of bankruptcy. Gulf argues that Broilers, and the trustee as its successor in title, held the land...
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