In re Stern

• Citation: 116 F. 604
• Decision Date: 03 June 1902
• Docket Number: 129
• Parties: In re STERN et al. Appeal of MANHATTAN ICE CO.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

116 F. 604

In re STERN et al. Appeal of MANHATTAN ICE CO.

No. 129

United States Court of Appeals, Second Circuit.

June 3, 1902

S. H Wandell, for appellant.

Moritz Frank, for appellees.

Before LACOMBE and TOWNSEND, Circuit Judges.

TOWNSEND Circuit Judge.

This cause comes here upon the appeal of the Manhattan Ice Company from an order of the district court for the Southern district of New York adjudicating it a bankrupt. The appellant was engaged in the ice business, and entered into contracts with sundry customers to supply them with ice at $2 per ton payable weekly, for terms extending during periods of from two to five years, the latest of said terms commencing on March 13, 1901. On or about April 11, 1901, said company permitted attachments to be put upon its property, receivers were appointed, and it utterly failed to fulfill said contracts. Certain of said customers on May 4th joined in filing a petition in involuntary bankruptcy against said company, and it was duly adjudicated a bankrupt.

The first error assigned is that the court erred in overruling a demurrer to the sufficiency of the petition on the ground that it did not specify in what business the corporation was engaged, and therefore failed to show that the court had jurisdiction. The petition alleged that the corporation had had its principal place of business within the Southern district of New York for the greater portion of six months next preceding the date of filing the petition, and had property within said district and owed debts to the amount of $1,000. These allegations seem to be sufficient, especially in view of the fact that the demurrer was filed as a part of the answer on which the parties went to final hearing. The proofs showed that the total amount of petitioners' actual loss from the failure to deliver ice up to the date of the petition was less than $500, but that they had been obliged to make new contracts for future delivery of ice at prices so much higher than $2 per ton that the direct loss in replacing said contracts would be greatly in excess of $500. The court below held that said claims were not unliquidated that the court below held that said claims were not unliquidated, that the whole damages for the terms covered by the old contracts were provable in bankruptcy, that the petitioners were entitled to recover said damages without waiting for the expiration of the terms of the old contracts, and were creditors for the requisite amount.

The question presented by the assignments of error is whether the court erred in holding that said petitioning creditors had provable claims to the amount of $500. Counsel for the corporation contends that these claims are for debts to fall due in the future; that no such claims are provable in bankruptcy; and that the petitioners must be limited in their proofs to the amount due for damages at the time of filing the petition. The pertinent provisions of the bankrupt act are as follows:

'Sec. 59. Who may File and Dismiss Petitions. * * * (b) Three or more creditors who have provable claims against any person which amount in the aggregate in excess of the value of securities held by them, if any, to five hundred dollars or over, * * * may fire a petition to have him adjudged a bankrupt.'

'Sec. 63. Debts Which may be Proved. (a) Debts of the bankrupt may be proved and allowed against his estate which are * * * (4) founded upon an open account, or upon a contract express or implied. (b) Unliquidated claims against the bankrupt may, pursuant to application to the court, be liquidated in such manner as it shall direct, and may hereafter be proved and allowed against his estate.'

The question as to what constitutes a provable claim in involuntary petitions in bankruptcy has been much discussed. It has been held that one having an unliquidated claim for damages for a tort was not such a creditor as to be entitled to institute involuntary proceedings. In re Brinckmann (D.C.) 103 F. 65. So it has been held that such claims and claims for rent to accrue under a lease or for breach of warranty are not provable as debts until they have been liquidated. In re Heinsfurter (D.C.) 97 F. 198; Beers v. Hanlin (D.C.) 99 F. 695; In re Mahler (D.C.) 105 F. 428. See, also, In re Morales, 5 Am.Bankr.R. 425, 105 F. 761.

But in the case at bar the question is not necessarily whether the claims are liquidated or unliquidated, but whether they are 'provable.' The statute provides that the petitioning creditors shall have 'provable claims.' Counsel for defendant corporation contends that damages to accrue in the future are not provable because they are uncertain in amount, and because not having yet accrued they are not yet in existence. But in actions for personal injuries, or for breaches of warranty in the sale of seeds, or for failure to deliver goods which have no recognized market value, the injured party is entitled to recover compensation for such elements of damage as are shown to be reasonably certain or probable, or such as naturally result in such cases and may be supposed likely to occur in the given case. 1 Suth. Dam.p. 251, Secs. 120, 121, and cases cited; Passinger v. Thorburn, 34 N.Y. 634, 90 Am.Dec. 753; White v. Miller, 71 N.Y. 118, 27 Am.Rep. 13; Strohm v. Railroad Co., 96 N.Y. 305; Railroad Co. v. Jones, 1 C.C.A. 282, 49 F. 343; Railroad Co. v. Harmon's Adm'r, 147 U.S. 571, 13 Sup.Ct. 557, 37 L.Ed. 284.

The authorities are conflicting as to whether an action will lie for damages for the breach of an executory contract before the stipulated time of such performance has arrived. The English cases and courts of many states, including New York, Illinois, Maryland, and Iowa, have held that a right of action accrues immediately. Benj. Sales (7th Ed.) p. 596; Frost v. Knight, L.R. 5 Exch. 322; L.R. 7 Exch. 111; Hochster v. De La Tour, 2 El.& Bl. 678; Burtis v. Thompson, 42 N.Y. 246, 1 Am.Rep. 516; Nichols v. Steel Co., 137 N.Y. 471, 33 N.E. 561; Fox v. Kitton, 19 Ill. 519; Dugan v. Anderson, 36 Md. 567-582, 11 Am.Rep. 509; McCormich v. Basal, 46 Iowa, 235.

Other states have held the contrary view. Thus, in Daniels v. Newton, 114 Mass. 530, 19 Am.Rep. 384, the whole subject was elaborately discussed, the leading English cases were not approved, and it was held that an absolute refusal of one party to an agreement 'ever to take' certain real estate which he had agreed to buy in the future would not justify an action by the vendor for damages for breach before the expiration of the agreed time. This court adopted the former view in Marks v. Van Eeghen, 30 C.C.A. 208, 85 F. 853, and it has generally prevailed in the lower federal courts. Grau v. McVicker, 10 Fed.Cas. 996 (No. 5,708); Roehm v. Horst, 33 C.C.A. 550, 91 F. 345.

In the supreme court of the United States it was decided in U.S v. Behan, 110 U.S. 338, 4 Sup.Ct. 81, 28 L.Ed. 168, and Lovell v. Insurance Co., 111 U.S. 264, 274, 4 Sup.Ct. 390, 28 L.Ed. 423, that where a party to an executory contract disables himself to perform the other party might regard it as terminated, and demand whatever damage he has sustained. And in Norrington v. Wright, 115 U.S. 188, 6 Sup.Ct. 12, 29 L.Ed. 366, it was held, after great deliberation, that a seller's breach in respect of part of the deliveries under a contract for successive deliveries justified the buyer in rescinding the whole contract. In Dingley v. Oler, 117 U.S. 490, 6 Sup.Ct. 850, 29 L.Ed. 984, one dealer in ice took a cargo from another dealer, agreeing to return the same amount the following season. Early in said following season the dealer who had received the ice declined...