In re United Button Co.

• Decision Date: 05 January 1906
• Docket Number: 103.
• Citation: 140 F. 495
• Parties: In re UNITED BUTTON CO.
• Court: U.S. District Court — District of Delaware

140 F. 495

In re UNITED BUTTON CO.

No. 103.

United States District Court, D. Delaware.

January 5, 1906

Syllabus by the Court.

A claim for unliquidated damages resulting from injury to the property of another, not reduced to judgment and unaccompanied and unconnected with any contractual or quasi contractual liability, is not susceptible of liquidation under section 63b of the bankruptcy act of 1898 (Act July 1 1898, c. 541, 30 Stat. 563 (U.S. Comp. St. 1901, p. 3447)).

Under the power conferred on the court by Act July 1, 1898, c. 541 Sec. 63b, 30 Stat. 563 (U.S. Comp. St. 1901, p. 3447), to direct the manner in which unliquidated claims against a bankrupt may be liquidated, ample authority exists to adopt any procedure appropriate to the particular case, whether it be submission to a jury on an issue framed, or production of evidence before the referee, or some other method.

William R. Sears and Robert Pennington, for bert Pennington, for petitioners.

Benjamin Nields, for trustee.

BRADFORD District Judge.

Jacob F. Brown, Samuel G. Adams and Edmund F. Leland, trading as Brown & Adams, have presented a petition for liquidation of an alleged claim against the United Button Company, a corporation of Delaware, bankrupt. The application is made on the following facts. A petition in involuntary bankruptcy against the United Button Company was filed August 4, 1904 and the corporation was adjudicated a bankrupt August 10 1904, and shortly thereafter the Security Trust and Safe Deposit Company, a corporation of Delaware, was appointed trustee. Brown & Adams filed a bill of complaint in the Superior Court of Massachusetts for Suffolk County, May 31, 1905, against the bankrupt and its trustee, in which it was alleged in substance, among other things, that the complainants were buyers and dealers in wool and had in or subsequent to 1902 acquired by lease for a term of fifteen years and were in possession of a large building in Boston specially adapted to the storage of merchandise; that the complainants occupied it for the storage of large quantities of wool; that the building was constructed 'in respect to thickness of walls matter of construction and in other particulars, with special reference to keeping of wool or other merchandise at a cool and even temperature'; that the United Button Company had for several years prior to the fall of 1904 occupied as its manufactory and distributing centre a building adjoining that occupied by the complainants, there being a party wall between the two; that the trustee in bankruptcy had since its appointment carried on the business of the bankrupt at the above mentioned manufactory; that an even and cool temperature is required for the proper keeping of wool, and if the latter is subjected to artificial heat it becomes 'unduly dried and loses in that way weight and natural moisture, and loses many of its other valuable qualities'; that in the conduct of its business the bankrupt and, later, the trustee, had generated and were then generating in the manufactory an 'immense amount of heat, which said defendants have cast and are now casting through the party wall into the warehouse' of the complainants and upon the merchandise stored therein; that by reason of the excessive heat passing from the manufactory into the warehouse the wool stored therein was damaged to the amount of $10,000 per annum at least; that the complainants had endeavored ineffectually to protect themselves against the heat by inclosing at their own expense a section of the party wall in hollow fire-proof brick; that the complainants from time to time had made complaint to the defendants, but without result, of the heat which escaped from the manufactory into the warehouse; that finally 'an arrangement was made with the defendant trust company' under which the complainants at their expense made certain changes and alterations in their warehouse for the purpose of stopping the further passage of heat, 'upon the agreement that if, upon proceedings taken by the plaintiffs against the defendant, it should ultimately be found by the court that the defendants were liable for such heat, then the expense thereof should be paid to the plaintiffs by the defendants'; that such changes and alterations made by the complainants had proved insufficient to prevent the passage of the heat, and that it continued to pass into the warehouse to almost the same extent as before; that the defendants had full knowledge of the character of the warehouse and of the fact that the wool stored there was liable to be damaged by heat passing through from the manufactory; and that the passage of the heat from the factory into the works 'causes a direct, sensible and visible injury to the property of the plaintiffs and to their rights therein, and that it constitutes a trespass thereon and a continuing nuisance upon the defendants' premises, causing great and irreparable damage to the plaintiffs' property and their rights therein.' The bill prayed for a temporary and permanent injunction; that an account might be taken of the damage sustained or suffered by the complainants, including the expense of the changes and alterations made by the complainants as above mentioned, and that the defendants might be decreed to pay to the complainants the amount found due. The bill nowhere alleges negligence against the defendants or either of them, but proceeds on the theory of the 'wrongful' and 'unlawful' conduct of business in the manufactory. The trustee in bankruptcy filed an answer July 17, 1905, to the above-mentioned bill. No decree has been made and the suit is still pending. Brown & Adams filed July 24, 1905, a proof of claim setting forth in substance that the United Button Company was indebted to them in the sum of $12,000 for injury caused to their wool by the wrongful acts and omissions of that company. The alleged claim not having been allowed, they filed August 8, 1905, the petition for liquidation now under consideration, in which it is averred in substance, among other things, that the United Button Company was at and before the filing of the petition in bankruptcy and still in indebted to Brown & Adams in the sum of $12,000 for 'wilful and malicious injury' to their wool caused by the wrongful acts and omissions of that company, as set out in an exhibit annexed to the petition. This exhibit contains a copy of the bill filed by Brown & Adams in the Massachusetts suit. The prayer of the petition is in substance that the alleged claim of the petitioners may be liquidated in the Massachusetts suit or in such other manner as to this court may seem meet and proper, and thereafter may be finally proved and allowed against the estate of the bankrupt. A hearing was had on the petition November 2, 1905, at which time the petitioners asked and obtained leave, on filing a proper affidavit, to amend their petition by striking out the words 'wilful and malicious' from the statement of the consideration of the alleged indebtedness. The requirement of an affidavit having been complied with, the proposed amendment was allowed. It is admitted that all of the property of the bankrupt in Massachusetts and elsewhere has been reduced to money by the trustee.

Section 63b of the bankruptcy act (Act July 1, 1898, c. 541, 30 Stat. 563 (U.S. Comp. St. 1901, p. 3447)) provides that 'unliquidated claims against the bankrupt may, pursuant to application to the court, be liquidated in such manner as it shall direct, and may thereafter be proved and allowed against his estate. ' If it be assumed that the petitioners have a claim provable and, after liquidation, allowable against the estate of the bankrupt, and that the lapse of time since the adjudication has not operated as a bar, it is at least doubtful whether such liquidation would be effected in Massachusetts suit. This court, of course, is without power to control or regulate the pleadings or practice to be observed, or the kind or measure of relief to be accorded, in that suit. The bill there seeks an account of all damages sustained by that suit. The bill there seeks an account of all damages sustained by the complainants through the alleged 'wrongful acts of the defendants' and a decree compelling the latter to pay to the former 'the amount so found due.' These acts, it is averred, were done by 'the defendant The United Button Company and, later, the defendant Trust Company as its trustee'; and it is to be inferred from the bill that the acts complained of resulted in damage both before and after the filing of the petition in bankruptcy. Apparently it is the purpose of the bill to secure a decree against both defendants for a lump sum of money representing the total amount of damage sustained by the complainants, without any apportionment of liability for that amount as between the bankrupt and the trustee. A demand for damages for a wrongful act done after the filing of the petition cannot in any aspect of the case constitute a provable debt or claim, and, if such demand be so united with one for damages accruing prior to such filing as to be indistinguishable from the latter, liquidation of claim as contemplated by the bankruptcy act is defeated. These considerations, apart from others which might be mentioned, sufficiently disclose the impropriety of any order by this court for liquidation of the alleged claim in suit pending in Massachusetts.

Under the power conferred on the court to direct the manner in which unliquidated claims against a bankrupt may be ascertained in amount, ample authority, I have no doubt exists to adopt any procedure appropriate to the particular case, whether it be submission to a jury on an issue framed, or production of evidence before the referee, or some other method. In section 58...