In re Public Ledger

• Decision Date: 25 April 1947
• Docket Number: No. 9096,9098.,9096
• Citation: 161 F.2d 762
• Parties: In re PUBLIC LEDGER, Inc.
• Court: U.S. Court of Appeals — Third Circuit

161 F.2d 762 (1947)

In re PUBLIC LEDGER, Inc.

Nos. 9096, 9098.

Circuit Court of Appeals, Third Circuit.

Argued October 14, 1946.

Decided April 25, 1947.

Rehearing Denied June 14, 1947.

COPYRIGHT MATERIAL OMITTED

M. H. Goldstein, of Philadelphia, Pa. (Albert B. Gerber and S. Harry Galfand, both of Philadelphia, Pa., on the brief), for Raymond A. Goldsmith.

Harry Reiss Axelroth, of Philadelphia, Pa. (Axelroth & Porteous and Daniel J. McCauley, Jr., all of Philadelphia, Pa., on the brief), for Daniel J. McCauley.

David Rosen, of Philadelphia, Pa. (Sidney Chait and Hirschwald, Goff & Rubin, all of Philadelphia, Pa., on the brief), for Warthman and others.

Before ALBERT LEE STEPHENS, GOODRICH and McLAUGHLIN, Circuit Judges.

ALBERT LEE STEPHENS, Circuit Judge.

This opinion treats of two appeals, both of which arise from claims of employees in the bankruptcy proceedings of the Public Ledger, Inc., a corporation, which for many years published a daily newspaper in Philadelphia, Pennsylvania.

Members of the Philadelphia Typographical Union No. 2, I. T. U., in the name of Daniel J. McCauley, presented claims in bankruptcy court, and members of the Newspaper Guild of Philadelphia and Camden, New Jersey, in the name of Raymond A. Goldsmith, likewise presented claims in bankruptcy court. All such claims were disallowed, and the District Judge affirmed. These appeals followed. Throughout this opinion we shall abbreviate "Public Ledger, Inc." to "Ledger"; "Philadelphia Typographical Union No. 2, I. T. U." to "Typographical Union"; and "The Newspaper Guild" to "Guild". We shall occasionally refer to Typographical Union and Guild as claimants.

For some time prior to the proceedings in bankruptcy court, the Typographical Union had been bargaining agents for a group of Ledger employees, and the Guild had been bargaining agent for another group of Ledger employees. Each agent had negotiated a contract with Ledger.

On November 7, 1941, Ledger filed its petition under Chapter X of the Chandler Act, 11 U.S.C.A. § 501 et seq., and the court made its order approving the petition, appointing trustees, and directing them in part as follows (successive orders extended the operation of the business thirty, five, twelve and seven days):

"Section 6: That the Trustees herein be, and are hereby authorized and directed, pending further order of this court, to manage, maintain and operate, and to keep in proper condition and repair, assets and property of the debtor, wherever situated; and to manage, operate and conduct the business of the debtor and to this end to exercise its authority and franchises and discharge all duties obligatory to it; and to employ and/or discharge, and fix the compensation of all employees; and to collect and receive the income, rents, revenues, royalties and profits of said assets, properties and business; to collect all outstanding accounts; to continue until further order of this court the business of the debtor for a period of six (6) days from the date of this appointment; to-wit, until the close of business on Thursday, November 13, 1941, making purchases of supplies and sales of products in the regular course of business; paying current wages, all according to law and subject to such supervision and control by this Court as the Court may exercise by further orders applied for herein."

Prior to the filing of the petition Ledger had been running a deficit, having lost half a million dollars during the last calendar year of the newspaper's publication, with the losses continuing up to the time the publication was suspended.

On January 5, 1942, the court ordered a discontinuance of the business, and the claimants' employment ceased.

On March 13, 1942, the court issued an order, adjudicating Ledger a bankrupt, continuing the trustees in office and referring the matter to a referee in bankruptcy. All current wages, the same as had been paid under the labor contracts, which had accrued from the time the trustees took office, November 7, 1941 — January 5, 1942, inclusive (not including vacation or severance claims), together with all unpaid current wages incurred by Ledger prior to its petition under the Chandler Act to November 7, 1941, had been paid. There is no accounting issue presented by either appeal.

The Typographical Union Members' Claims.

Provision in the Typographical Union-Ledger contract is made for vacation with pay, and the legal issue is related to the following excerpt from the contract:

"Beginning with the calendar year 1941, vacation with pay in advance shall be given on the following basis: (a) Employees who have held situations during the entire previous year shall be entitled to two weeks' vacation (ten days with pay) during the next calendar year. All other employees hired by the office shall be entitled to one day's vacation with pay for each twenty-six days worked in the preceding calendar year."

A number of Ledger employees had "held situations" throughout the calendar year of 1941, and some for lesser periods. The business was shut down on January 5, 1942, and all employment was discontinued before the employees had had the opportunity of taking their vacations. They filed claims for the vacation pay.

The denial of the claims was upon the ground that the contract providing for vacation with pay had never been assumed by the trustees, and upon the further ground that the contract could not be assumed legally without the court's specific authorization, which was never given.¹

The evidence is all one way, however, that no act of the trustees was inconsistent with the terms of the contract, and that every act of the trustees in relation to the employees was in complete accord with its terms. Mr. Robert Cresswell was the trustee in active charge of the business from the time the Chapter X petition had been filed and approved, and theretofore had been the Ledger's president, and as such he had signed the labor contract. Three letters from Mr. Cresswell, touching the subject, are in the margin.²

The evidence compels the conclusion that all persons concerned were exercised over the extreme delicacy of the situation, and that the court, the trustees, and the employees hoped that reorganization would be effected with little delay, that publication of the paper would continue, and that employment under the reorganized business would go on without interruption.

It was the trustees' responsibility to keep a labor crew at work and their responsibility to fix the terms of keeping the crew at work. They chose to keep the old crew upon the old terms. There is nothing in the evidence to indicate that the trustees sought to extend the contract beyond their own period of service, but the evidence is conclusive that they sought and obtained the services and proceeded throughout the period of their stewardship to benefit by them with the full knowledge that the services were being given under the terms of the contract. There was no break in the services under the contract; at least there was none before the court ordered the business shut down. No one acquainted with the circumstances can doubt that the trustees took the wisest course open to them in their endeavor to obey the court's order "to manage, operate and conduct the business * * * and to employ and/or discharge and fix the compensation of all employees."³

A point is made by appellee that the original authorization for continuing the business was but five days, and that the successive extensions were for short periods of time, and that, therefore, it is reasonable to infer that the court did not authorize or intend to authorize assumption of the contract. We think the inference unjustified. It is quite evident that the court expected that a workable plan for reorganization was possible of adoption within a short period of time, and, of course it knew that labor tranquility was necessary. The court knew, too, that good labor conditions under the contract constituted a valuable asset, and a necessary one to any possible reorganization or sale of the Ledger as a going concern. It is unreasonable to assume that the court contemplated anything but the continuance of the labor contract as the basis for the continued services of the employees.

In an article by Clark, Foley and Shaw, Adoption and Rejection of Contracts and Leases by Receivers (1933), 46 Har L.R. 1111, "adoption" is explained as follows: "The term adoption is usually applied * * * to a situation in which a receiver either (a) indicates an intention fully to perform the obligations of the insolvent, (b) indicates an intention to insist on full counterperformance, or (c) acts in such a way with reference to a contract * * * that fairness to the solvent party requires that the consequences of adoption be attributed to his action," and at page 1125, "* * * some action by receiver may be held to amount to adoption despite an intention to the contrary."

Appellees advance the argument that there is a privilege of "experimental assumption", that is, that the trustees "may ride along on a contract for a short time on an experimental basis." See Butterworth v. Degnon Contracting Co., 2 Cir., 214 F. 772, cited in the discussion of the subject by the court below. In our view it makes little difference as to the issues concerning these claims of employees whether the trustees expressly assumed the contract or merely knowingly conformed to its terms. The trustees could not seek and accept the benefits of the employment under the favorable terms of the contract without for the time of enjoying them, accepting and yielding to terms deemed burdensome. In the instance under discussion, the continuation of the employment under the terms of the contract after the trustees took charge was not solely upon the part of the trustees in merely riding along, that is, permitting the employees to continue their duties without mention of terms, for there was active cooperation in regard to the...