In re Keith-Gara Co.

• Decision Date: 13 March 1913
• Docket Number: 4,579.
• Citation: 203 F. 585
• Parties: In re KEITH-GARA CO.
• Court: U.S. District Court — Eastern District of Pennsylvania

203 F. 585

In re KEITH-GARA CO.

No. 4,579.

United States District Court, E.D. Pennsylvania.

March 13, 1913

For other definitions, see Words and Phrases, vol. 2, pp 1864-1886; vol. 8, p. 7268.) Henry T. Dechert, of Philadelphia, Pa., for claimant.

Benjamin H. Ludlow and Humbert B. Powell, both of Philadelphia, Pa for trustee.

J. B McPHERSON, Circuit Judge.

The order now under review allowed a landlord's claim for priority in the payment of rent. By agreement of counsel the amount claimed before the referee has since been reduced to $515.60; this being the sum that would have been due for the period from December 23, 1912, to March 31, 1913, if the bankrupt had continued to occupy the premises under the lease. The relevant facts are as follows: The adjudication was entered November 6, 1912, upon a voluntary petition. At that time the bankrupt was a tenant of the claimant under a year to year lease that would expire on March 31, 1913. The trustee continued the occupation and paid the rent for a few weeks, and on December 22d offered to surrender the premises, but the landlord refused the offer and has not yet (March 13, 1913) retaken possession. The bankrupt's goods on the premises--which, of course, were liable to distress-- were sold by the receiver (who afterwards became the trustee) and produced a larger fund than is needed to pay the landlord's claim in full. The rent was payable in advance on the 1st day of each month, and confessedly one month's rent at least was due when the adjudication was entered. But the trustee paid the actual arrears in full, and, as he has also paid all that became due for use and occupation up to December 22d, the only question for decision is whether priority should be allowed for the remainder of the unexpired term. The landlord asserts that by virtue of the following provision in the lease the rent, not only for one month, but also for the remainder of the term, had become due at the date of adjudication and (being for a shorter period than one year) was entitled to priority under the Pennsylvania law:

'If the lessee shall become embarrassed, make an assignment for the benefit of creditors, commit an act of bankruptcy, become bankrupt, or be sold out by sheriff's sale, or under any other compulsory procedure, or order of court, then the whole rent for any unexpired portion of the term of this lease, or any continuance thereof, shall at once become due and payable as if by the terms of this lease it were payable in advance, and shall be first paid out of the proceeds of any such assignment, sale or procedure, any law, usage, or custom to the contrary notwithstanding.' This contention is fully supported by the decisions of the Supreme Court of Pennsylvania. In Platt v. Johnson, 168 Pa. 47, 31 A. 935, 47 Am.St.Rep. 877 (a case that is recognized in Teufel v. Rowan, 179 Pa. 408, 36 A. 224), that court holds as follows:

'A stipulation in a lease for years that if the lessee shall become embarrassed, or make an assignment for the benefit of creditors, or be sold out by sheriff's sale, the whole rent for the balance of the term shall become due and payable in advance of other claims, is not against public policy, and will be sustained in favor of the landlord on a distribution of the proceeds of a sheriff's sale of the lessee's property, to the extent of giving the landlord priority for one year's rent.'

If therefore, the landlord's claim to priority depended solely upon the law of Pennsylvania, nothing more would be needed. But, of course, it remains to consider whether the Bankruptcy Act forbids the application of the Pennsylvania law; for the act is supreme in its own field, and where its provisions conflict with the laws of a state these laws must give way. In our opinion,...