YANKWICH, District Judge.
The Altill Company, a Washington corporation, presented, and the referee allowed, a total claim of $22,177, consisting of the following items:
1. Rent
October 1, 1932, to October 9, 1932
both inclusive at $2,000.00 per month
balance unpaid ........................... $ 580.65
2. Unpaid balance of consideration for
making lease ............................. 15,000.00
3. Taxes
Last one-half 1931 taxes due November
30, 1932 ................................. 5,437.57
4. Assessments ............................... $ 1,487.83
__________
$22,506.05
From this total, the claimant allowed a deduction of $320.04 as interest allowed on lease deposit of $20,000 from July 1, 1932, to October 9, 1932. The adjudication of bankruptcy was made on October 10, 1932. Over the objection of the trustee, the claim was allowed in the sum of $22,177.
The claim was based upon a lease entered into with the bankrupt as lessee and the claimant as lessor on March 14, 1929. It covered certain premises in Seattle, Wash., and the building thereon known as the Silverstone Building. By it, the claimant sublet to the bankrupt the property for 92 years and 11 months, the term beginning on January 1, 1929, and ending November 20, 2021. The claimant was a lessee under a principal lease made between it as lessee and the Boston Drug Company as lessor, the terms of which the bankrupt agreed to carry out, agreeing also to pay a stipulated monthly rental.
As the determination of the principal question involved in this review depends upon a proper interpretation of the terms of the principal lease, its principal paragraphs are here set forth either in full or in a summary which follows closely that made by counsel for claimant in the briefs filed upon this review. The pertinent paragraphs are:
"Fourth: This paragraph provides that, in addition to rentals, the lessee shall pay all taxes, assessments, and the like, which may be imposed upon the premises."
"Sixteenth: This provides in effect that the lessee may assign the lease, and if assigned after January 1st, 1933, the lessee having paid the lessor the $30,000 provided for in paragraph Eighteenth, the lessee shall be relieved from any liability for future rentals or other covenants of the lease.
"Seventeenth: `That any time after January 1st, 1933, the Lessee having paid to the Lessor the sum of Thirty Thousand ($30,000.00) Dollars as hereinafter agreed to be paid to the Lessor by the lessee, on January 1, 1933, the Lessee shall have the right upon sixty (60) days written notice to the Lessor, to surrender and terminate this lease and forfeit to the Lessor the full sum of Fifty Thousand ($50,000.00) Dollars, paid by the Lessee, as a consideration for the execution of this lease together with any interest accrued thereon, provided that if the sum of Twenty Thousand ($20,000) Dollars deposited with the Owner as a part of said sum of Fifty Thousand ($50,000.00) Dollars has been applied to the cost of a new building or returned to the Lessee on account of the erection of a new building, then the sum of Thirty Thousand ($30,000.00) Dollars paid to the Lessor together with any interest accrued thereon and the Lessee's interest in the new building shall be forfeited to the Lessor, and in the event of such a surrender and termination of this lease by the Lessee, the Lessee shall be under no further liability under any of the terms of this lease, or of the principal lease except the liability to pay any rent which has theretofore accrued and any and all other sums which have theretofore become due and payable by the Lessee, it being the intention that in such event the Lessee shall be liable for all taxes for the period up to the time of surrender and all installments of special assessments payable in the same calendar year in which surrender is made. In order to avail itself of the right to surrender this lease as herein provided, the Lessee must procure a written surrender of each and every sublease covering any part of the premises at the time of the surrender of this lease and deliver the same together with a written surrender of this lease by the Lessee to the Lessor.'
"Eighteenth: `That in consideration of the execution of this lease by the Lessor, the Lessee has paid to the Lessor the sum of Twenty Thousand ($20,000.00) Dollars, and the Lessee agrees that it will on January 1, 1933, pay to the Lessor the further sum of Thirty Thousand ($30,000.00) Dollars constituting a total payment of Fifty Thousand ($50,000.00) Dollars mentioned in Paragraph First hereof as a consideration for the execution of this lease, and the Lessor agrees that out of the payment of Twenty Thousand ($20,000.00) Dollars it will forthwith deposit the sum of Ten Thousand ($10,000.00) Dollars with the owner, and out of said payment it will then deposit an additional sum of Ten Thousand ($10,000.00) Dollars with the Owner, said Twenty Thousand ($20,000.00) Dollars to constitute the Twenty Thousand ($20,000.00) Dollars to be deposited with the Owner, as provided in Paragraph Thirteen of the principal lease and to be held by the Owner, and that said deposit of Fifty Thousand ($50,000.00) Dollars shall bear interest at the rate of six (6%) per cent. per annum payable semi-annually, the interest on the sum of Twenty Thousand ($20,000.00) Dollars to be paid by the Owner to the Lessee and the interest on the sum of Thirty Thousand ($30,000.00) Dollars to be paid by the Lessor to the Lessee, and providing there has been no breach by the Lessee of the covenants, terms or conditions of this lease remaining uncured, the principal of such deposits remaining in the hands of the Owner or the Lessor as the case may be shall be applied on the final rent falling due under the terms of this lease.
"`It is agreed, however, that in the event the Lessee shall replace the present building upon said premises with a new building, having both a cost and reasonable value of not less than the sum of One Hundred Thousand ($100,000.00) Dollars, such additional cost of said new building shall be deemed to replace the said Twenty Thousand ($20,000.00) Dollars deposited with the Owner, and said deposit shall, upon the completion of said new building, free from incumbrances created or suffered by the Lessee, be returned to or credited to the Lessee, or used in making final payments on the cost of such new building or improvements.'
"Nineteenth: `That if the Lessor shall forfeit this lease because of a breach of this lease by the Lessee, then the full sum of Fifty Thousand ($50,000.00) Dollars paid by the Lessee as a consideration for the execution of this lease, together with any interest accrued thereon shall be forfeited to the Lessor as liquidated damages, provided that if the sum of Twenty Thousand ($20,000.00) Dollars deposited with the Owner as a part thereof has been applied to the cost of a new building, then the sum of Thirty Thousand ($30,000.00) Dollars paid to the Lessor, together with any interest accrued thereon, together with the Lessee's interest in the new building, shall be forfeited to the Lessor as liquidated damages.'"
"Twenty-Seventh: `* * * and the Lessee covenants and agrees upon such forfeiture of this lease, or upon any termination of said demised term, to surrender and deliver up the said above described premises and property peaceably to said Lessor, or the agent or attorney of the Lessor, immediately upon the termination of said demised term and upon such forfeiture or termination said sum of Twenty Thousand ($20,000.00) Dollars deposited by the Lessee with the Lessor, and held by the Owner, together with any interest accrued thereon, shall be forfeited as liquidated damages to the Lessor, and the said sum of Thirty Thousand ($30,000.00) Dollars deposited with the Lessor by the Lessee together with any interest accrued thereon, shall be forfeited as liquidated damages to the Lessor, provided that if the said sum of Twenty Thousand ($20,000.00) Dollars held by the Owner has been returned to the Lessee or applied to the cost of a new building, then any and all interest of the Lessee in such new building and any and all improvements erected or installed by the Lessee shall be forfeited to the Lessor as liquidated damages in lieu of the said sum of Twenty Thousand ($20,000.00) Dollars.'"
"Forty-Third: `That it is further covenanted and agreed between the lessor and the Lessee herein that this lease shall not be assignable by operation of law, and in case of bankruptcy or insolvency of the Lessee, accompanied by the appointment of a receiver or trustee for the Lessee, this lease shall be void unless such receiver or trustee shall pay the rent and perform the Lessee's obligations of this lease so there shall be no default thereunder, otherwise the Lessor shall have, as well as all other remedies, the full remedy of forfeiture as herein provided for in case of default or breach of the lease.'"
On April 15, 1932, the bankrupt and the claimant entered into another agreement whereby the rent of the premises was reduced $1,000 a month for 35 months beginning April 1, 1932. By this modification and in consideration of the reduction of the rent, the lessee agreed to pay the sum of $30,000 payable on January 1, 1933, in monthly installments as follows: $2,500 on the execution of the agreement on April 15, 1932; $2,500 on the first of each month commencing May 1, 1932, and ending December 1, 1932; and the final sum of $7,500 on ...
