Isaac McLean Sons Co. v. William S. Butler & Co., Inc.

• Citation: 227 F. 325
• Parties: ISAAC McLEAN SONS CO. v. WILLIAM S. BUTLER & CO., Inc.
• Decision Date: 31 October 1914
• Court: U.S. District Court — District of Massachusetts

227 F. 325

ISAAC McLEAN SONS CO. v. WILLIAM S. BUTLER & CO., Inc.

United States District Court, D. Massachusetts.

October 31, 1914

Wm. F Wharton, of Boston, Mass., for plaintiff.

Frederick H. Nash, of Boston, Mass., for defendant.

Choate Hall & Stewart, of Boston, Mass., for receivers.

Malachi L. Jennings, of Boston, Mass., for claimant Sullivan.

Mrs Mary Mahan, of Boston, Mass., for claimant Murphy.

Carver Wardner, Cavanagh & Walker, of Boston, Mass., for claimant Jowett.

Lee M. Friedman, of Boston, Mass., for claimant Gagnon.

DODGE Circuit Judge.

The disputed claims above mentioned are among those referred to a special master, under the order of court entered December 15, 1913, relating to claims against the above-named company. Having heard the evidence relating to them, the master has reported as to each of the claims, allowing it in an amount stated in his report. The receivers object to each allowance thus reported, and contend that, upon the facts found, each claim should be disallowed.

The report was filed April 14, 1914, and no exceptions to it have been filed at any time, either by the receivers or any other party in interest. It therefore stands confirmed under rule 66 of the present equity rules (198 F. xxxvii, 115 C.C.A. xxxvii). But, notwithstanding this confirmation, no one denies that the court may decline to follow its result and disallow the claim, if satisfied that the decision of the master on the question of law upon which its allowance depends was wrong. The order of the court required the master only to 'hear the parties and their evidence and report thereon to the court. ' The questions of law arising were, as he states in his report, nevertheless argued before him by both parties and have been dealt with by him for that reason.

The facts found being thus undisputed, the question they raise is substantially the same in each case. Having stated his reasons for the result reached in regard to the claim of Elizabeth F. Sullivan, the master has referred for them to his report upon that claim in his report upon each of the other claims. I therefore consider that claim first.

1. Elizabeth F. Sullivan contracted in writing with the defendant William S. Butler & Co., Incorporated (hereinafter called the Butler Company), to take charge of one of its departments for one year from July 3, 1912, at a salary of $4,000 for the year. The receivers in this case having been appointed on November 7, 1912, she was dismissed by them on November 9, 1912. The sum allowed her by the master is what her agreed salary would have amounted to from the time of her dismissal to July 3, 1913, less what she earned under other employment after her dismissal and before the latter date. The receivers do not dispute the amount allowed ($1,548.04), if she is entitled to any amount.

Although the receivers might have adopted the contract, they were not bound to do so; their decision not to adopt was made without delay, and in the absence of adoption by them the receivership must be regarded as having prevented the company from performing it. In the case of an uncompleted contract of employment like this, a receivership of the employer's property and business has been regarded as preventing completion by operation of law, leaving neither party further bound by it, and leaving the employe no allowable claim for damages. People v. Globe, etc., Co., 91 N.Y. 174. This case has been followed in Malcomson v. Wappoo Mills (C.C.) 88 F. 680, where the unperformed contract was for the sale and delivery of goods; also in Re Inman, 175 F. 312, a bankruptcy case, where the effect of the seller's bankruptcy upon a like contract was in question.

But, in bankruptcy, the view taken in this circuit has been, in cases like the two last cited, that the purchaser's bankruptcy is the equivalent of disenablement and repudiation on his part, which the seller may treat as a breach and thereby acquire a provable claim for his damages. Re Swift, 112 F. 315, 50 C.C.A. 264; Re Pettingill, etc., Co., 137 F. 144; Pratt v. Auto, etc., Co., 196 F. 495, 116 C.C.A. 261. The same effect upon the contract is given, by a recent decision of the Court of Appeals for the Seventh Circuit, to the bankruptcy of a transfer company which was under contract with a hotel to furnish service for a term of years, unexpired at the bankruptcy, and to pay for the exclusive privilege of doing so. Re Frank E. Scott Transfer Co., 216 F. 308, 132 C.C.A. 452 (October 1, 1913).

A receivership resulting, as this is to result, in the distribution by the court of all the defendant's property, pro rata, among its creditors, is to be regarded as having the same effect as its bankruptcy would have had upon its unperformed contracts like the one here in question. See Penna., etc., Co. v. New York, etc., Co., 198 F. 721, 743, 117 C.C.A. 503; in the Court of Appeals for the Second Circuit. In this case, as in that, there was no appointment of a receiver over 'an objecting corporation'; but the defendant is to be regarded, for the purposes of the present question, as having participated in bringing on the appointment. Its answer admitted the allegations of the bill. Its consent is recited in the decree making the appointment. See Re Wm. S. Butler & Co., 207 F. 705, 708, 711, 125 C.C.A. 223.

In People v. Globe Ins. Co., to which reference has been made above, the receiver's appointment was in proceedings by the state to dissolve and wind up the defendant corporation, on whose part no participation appeared.

If the receivership, like bankruptcy, enables this employe to treat the contract as broken by the receivers' appointment and rely upon her right to damages sustained by the breach, as she does by her proof of claim, the only question is as to the provability of such a claim in proceedings like these.

Such a claim for damages may not be provable in bankruptcy, under the present act. Act July 1, 1898, c. 541, 30 Stat. 544. If not, the reason must be, not that it is unliquidated at the time of the bankruptcy, but that it is at that time contingent as to its existence or its amount. So far as it is unliquidated, it may be liquidated and proved in the proceedings, if the facts permit, as was done in Re Swift. But section 63 (Comp. St. 1913, Sec. 9647) requires a claim in order to be provable, to be...