Klein v. W. A. Gaybnesch Co.

• Decision Date: 12 November 1902
• Parties: KLEIN et al. v. W. A. GAYBNESCH CO.
• Court: New Jersey Court of Chancery

53 A. 196

64 N.J.E. 50

KLEIN et al.

v. W. A. GAYBNESCH CO.

Court of Chancery of New Jersey.

Nov. 12, 1902.

Proceedings for the allowance of the claim of Albert 1. Drayton against the W. A. Gavenesch Company, an insolvent corporation, for rent. From the refusal of the receiver to allow the claim, Albert I. Drayton appeals. Claim disallowed.

The rejected claim was for $2,535, for rent of the stores known as Nos. 548 and 550 Newark avenue, Jersey City, with frame stable in the rear, from February 1, 1902, to May 1, 1905, at $780 a year, according to the terms of a lease made between the parties on the 21st of April, 1900, and a supplement thereto. The lease in question lets the premises to the insolvent corporation for five years from the 1st day of May, 1900, at the yearly rental of $720, which by a supplement was increased to $780, with an express covenant on the part of the insolvent corporation to pay rent, and a clause giving the lessor the right of re-entry in ease of a failure to pay or to perform any of the covenants, with a covenant by lessor for quiet enjoyment; also that the lessee should occupy the stores for its business as wholesale grocer, and not otherwise; with a further clause preventing the sale of the business or the transferring of the lease without the consent of the lessor. The corporation went into the hands of a receiver on March 1, 1902, and the receiver took and held possession of the business and the leased premises until April 1, 1902, and paid the rent during that time as a part of the expense of settling the estate, and, on the day last named, sent the keys of the stores to the appellant So that the claim is reduced to the amount accruing and to accrue since April 1, 1902. The claim was presented on March 24, 1902, seven days before the receiver quit possession, and was acted on adversely by the receiver on October 15th. The written argument of the appellant states that from April 1st to the time of presenting the petition of appeal the premises have stood vacant because the appellant was unable to rent the same. It was agreed that whatever in the nature of possession the appellant took was not of such a character as to operate as a surrender of the premises, or a waiver of his right to demand payment of the rent reserved by the lease, and covenanted to be paid by the insolvent corporation.

Charles C. Black, for appellant.

R. S. Hudspeth, for receiver.

PITNEY, V. C. (after stating the facts). If I properly understand the report of the case of Stockton v. Bank, 32 N. J. Eq. 163, the question presented by this appeal is res judicata in this court That was a suit to wind up a savings bank, and the receiver asked the direction of the chancellor as to several matters which arose in the course of the administration of the estate; and the questions were argued before him by the receiver himself, and by counsel for the creditors of the estate. One of the matters submitted was this: Whether the rent on a lease of a store, etc., the term under which had not expired when the decree in insolvency was made, is payable after the time when the receiver delivered up the premises to the lessor. The report does not distinctly and expressly state that the insolvent corporation in that case was the lessee and covenantor to pay the rent but I think it fairly to be inferred that it was such lessee. The depositors in the insolvent corporation, which was a savings bank, were of the nature of stockholders, and stood on an equal footing, and were entitled to have divided among them what remained after the ordinary debts of the bank were paid; and the argument before the chancellor seems to have gone on the basis that there were sufficient assets to pay all the ordinary creditors in full, and leave something to be divided among the depositors. So that the question was not whether the lessor should receive a dividend on his claim for rent, but whether he should be paid anything; for, if he was paid anything, he would be paid in full. See Hannon v. Williams (in the court of errors and appeals) 34 N. J. Eq. 255, 260, 38 Am. Rep. 378, and Una v. Dodd (in this court) 39 N. J. Eq. 173, 182, 183. If I am right in my construction of the report, it would seem that the answer of the chancellor to the question so propounded must be decisive of the present case. That answer was as follows: "The object of the proceedings in insolvency, under the act, is to distribute the estate of a debtor corporation, no longer able to pay its debts in full, equitably among its existing creditors. The covenant to pay rent in the future is in fact valueless by reason of the insolvency, for the covenantor will have no property to answer its liability thereon. The bankrupt law of the United States provides for the proving of rent or other debts falling due at fixed and stated periods up to the time of the bankruptcy. But whether the covenant be valueless or not, the debt to be proved cannot include rent to become due. The claim, under the covenant in the lease, for rent accruing after the surrender of the premises to the lessor by the receiver, cannot be maintained." That seems to be the view taken of the decision by Vice Chancellor Reed in Bolles v. Chemical Co., 53 N. J. Eq. 614, 32 Atl. 1061. At page 618 et seq., 53 N. J. Eq., and page 1062 et seq., 32 Atl., the learned vice chancellor states clearly and accurately the present condition of the law on this subject But it does not appear that the claimant of the rent in Stockton v. Bank was represented by counsel before the chancellor; and the authority which he cites—Burrill, Assignm. § 374—does not sustain the rule laid down by him, in all its length. The learned author did not there have in view a claim made by a lessor upon a covenant made by the insolvent corporation to pay rent in futuro. On the contrary, it is plain that he did have in view something quite distinguishable, namely, a...