In re National Credit Clothing Co.

• Decision Date: 04 October 1933
• Docket Number: No. 4880.,4880.
• Citation: 66 F.2d 371
• Parties: In re NATIONAL CREDIT CLOTHING CO. LLOYD INV. CO. v. SCHMIDT.
• Court: U.S. Court of Appeals — Seventh Circuit

66 F.2d 371 (1933)

In re NATIONAL CREDIT CLOTHING CO. LLOYD INV. CO. v. SCHMIDT.

No. 4880.

Circuit Court of Appeals, Seventh Circuit.

July 15, 1933.

Rehearing Denied October 4, 1933.

Bruno V. Bitker, Joseph E. Tierney, and Irving A. Puchner, all of Milwaukee, Wis. (Lloyd S. Jacobson, of Milwaukee, Wis., of counsel), for appellant.

Emil Hersh and Herbert Morse, both of Milwaukee, Wis., for appellee.

Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.

EVANS, Circuit Judge.

On September 30, 1929, bankrupt leased a building from appellant for a term of eighteen years at a rental of $15,500 per annum, in addition to which it agreed to pay the gas, electricity, heat bills, and taxes. Thereafter, bankrupt made a voluntary assignment to Oscar E. Schwemer of all of its assets, for the benefit of creditors, and said assignee, Schwemer, disaffirmed the lease. Shortly thereafter, in December, 1931, an involuntary petition in bankruptcy was filed, and an adjudication in bankruptcy followed on January 4, 1932. Appellant filed a claim for $230,958.63, which was disallowed by the referee whose action was affirmed by the District Judge. Its claim (excluding items not passed upon by referee or the District Court) was based upon a breach of the lease contract. On the hearing before the referee, the parties stipulated that the reasonable rental of the premises for the balance of the term was $5,604 a year, and the annual taxes, estimated coal and insurance bills, and janitor's services were $2,000 per year.

Computing the loss on the basis of these figures, the total of $230,958.63 was reached.

Whether appellant can distinguish its claim from those considered in the cases cited below,¹ which hold that in states where the common law prevails a claim for damages for anticipatory breach of a lease of real estate is not provable in bankruptcy, depends upon the effect of the action taken by the assignee, before bankruptcy proceedings were begun, in disaffirming the lease or upon its ability, because of the provisions of the lease, to bring its case within the holding of William Filene's Sons Co. v. Weed et al., 245 U. S. 597, 38 S. Ct. 211, 62 L. Ed. 497, and Gardiner, Trustee, etc. v. Butler & Co. et al., 245 U. S. 603, 38 S. Ct. 214, 62 L. Ed. 505.

In Central Trust Co. of Illinois v. Chicago Auditorium Ass'n, 240 U. S. 589, 36 S. Ct. 412, 414, 60 L. Ed. 811, L. R. A. 1917B, 580, the court held that:

"* * * 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."

As an exception to this rule, the court cites breaches of real estate leases by the tenant, saying:

"* * * Cases of the latter class are distinguishable, because of the `diversity betweene duties which touch the realty, and the meere personalty.' Co. Litt. 292, b, § 513."

In the present case the lease had been terminated by act of the lessee's representative prior to bankruptcy proceedings. Two provisions of the lease protected the landlord in case of a breach by lessee. They are:

"Nineteenth. It is covenanted and agreed that if said Tenant shall abandon said premises, Landlord is hereby authorized to go into possession of the same, advertise the same for rent and re-let the same in whole or in part for and on account of said Tenant, upon such terms as said Landlord may deem best, and to that end is hereby authorized, at its option and at the expense of Tenant, to clean, paper, repair, alter and subdivide the demised premises to suit tenants, and, after paying the reasonable expense of so doing and the expense of such reletting, apply the net proceeds thereof upon the rental and other charges herein reserved, the Tenant hereby agreeing to satisfy and pay any deficiency that may arise; or the Landlord may, at its option, at any time after the abandonment of said premises, and without prejudice to its rights to recover all rents then due or to become due, by a notice in writing terminate the within tenancy."

"Twenty-eighth. In the event Tenant shall be adjudicated bankrupt or insolvent according to law, or if any assignment shall be made for the benefit of creditors, Landlord may at Landlord's option terminate this lease and eject and remove from the premises the Tenant or any person or persons claiming under said Tenant or otherwise, and Tenant hereby agrees that in either of the events as herein set forth, all its right under said lease shall cease and terminate."

The only case...