Knutson, In re
| Decision Date | 17 October 1977 |
| Docket Number | No. 77-1032,77-1032 |
| Citation | 563 F.2d 916 |
| Parties | In Re Terrence A. KNUTSON, Bankrupt. NORTHWEST AIRLINES, INC., Appellee, v. Edward F. KLINGER, Trustee in Bankruptcy and Terrence A. Knutson, Appellants. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Edward F. Klinger, Moorhead, Minn., for appellants.
Beryl J. Levine, Fargo, N.D., for appellee.
Before LAY, HEANEY and ROSS, Circuit Judges.
The trustee in bankruptcy appeals from the decision of the District Court that airline tickets purchased but not used by the bankrupt were executory contracts and, thus, must either be affirmed or renounced by the trustee. The District Court's decision reversed the decision of the bankruptcy court. We affirm the District Court.
The facts of the case are simple and were stipulated by the parties. Terrence Knutson filed a voluntary petition in bankruptcy on December 30, 1974. On December 16, 1974, immediately prior to filing the petition in bankruptcy, Knutson had charged two round trip tickets to Hawaii valued at $1,450.52. The tickets were for a trip to take place in January, 1975. The tickets were charged on a Northwest Top Flight credit card that Knutson had obtained from Northwest Airlines, Inc., in October, 1974. Knutson received the tickets but never used them. He was billed for the tickets on December 27, 1974, and had twenty-five days to pay for the tickets.
On January 29, 1975, Northwest filed an action in bankruptcy court against the trustee in bankruptcy. Northwest sought to have the court declare the tickets to be executory contracts and, as such, force the trustee to either affirm or renounce the contract under § 70(b) of the Bankruptcy Act. 11 U.S.C. § 110(b). The bankruptcy judge held that the tickets were property and, thus, an asset in bankruptcy rather than an executory contract. He ordered Northwest to pay the trustee the cash value for the tickets. Northwest would later be permitted to participate as an unsecured creditor in the distribution.
On appeal from the bankruptcy court, the District Court reversed. It held that the tickets were executory contracts which the trustee must either affirm or renounce. The District Court noted that "if the trustee is allowed the benefits of this contract and Northwest is forced to accept a dividend of the estate, the bankruptcy court, a court of equity, would, in effect, be participating in an apparently fraudulent scheme."
The sole issue raised on appeal is the legal issue of whether the tickets are executory contracts. 1 Professor Williston has commented that 1 Williston on Contracts § 14 (3d ed. 1957), quoted in 3A Collier on Bankruptcy P 63.33(2) at 1935 (14th ed. 1976). The following more limited definition of an executory contract has been established in the context of the Bankruptcy Act: "a contract under which the obligation of both the bankrupt and the other party to the contract are so far unperformed that the failure of either to complete performance would constitute a material breach excusing the performance of the other." V. Countryman, Executory Contracts in Bankruptcy: Part I, 57 Minn.L.Rev. 439, 460 (1973). See also V. Countryman, Executory Contracts in Bankruptcy: Part II, 58 Minn.L.Rev. 479 (1974).
In this case, by the terms of the ticket contract, Northwest was obliged to provide transportation for two from Bemidji, Minnesota, to Honolulu, Hawaii, at a future date and Knutson was obliged to pay Northwest for the tickets at a future time. At the time Knutson...
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Cochise College Park, Inc., In re
...is executory where licensor had continuing duty not to sell to others and licensee had duty to make annual payments); In re Knutson, 563 F.2d 916, 917 (8th Cir.1977) (agreement for provision of airline services is executory, where airline's provision of transportation services and bankrupt'......
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... ... & Admin.News 1978, pp. 5787, 5844, 6303. Accord, Jenson v. Continental Financial Corp., 591 F.2d 477, 481 (8th Cir. 1979) (a contract is executory where obligations of the debtor and the other contracting party remain partially and materially unperformed); In re Knutson, 563 F.2d 916, 917 (8th Cir. 1977) (a contract is executory where both sides have substantial obligations to perform); In re American Magnesium Co., 488 F.2d 147, 152 (5th Cir. 1974) (a contract is executory where both parties have ongoing commitments). See also In re Monsour Medical Center, ... ...
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... ... No. 989, 95th Cong., 2d Sess. 58, reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5844, 6303. See, In re O.P.M. Leasing Servs., Inc. ( "O.P.M. I" ), 23 B.R. 104, 117 (Bankr.S.D.N.Y.1982) (citing Jenson v. Continental Fin. Corp., 591 F.2d 477, 481 (8th Cir.1979); In re Knutson, 563 F.2d 916, 917 (8th Cir.1977); In re American Magnesium Co., 488 F.2d 147, 152 (5th Cir.1974), reh'g denied, 491 F.2d 1272 (5th Cir.1974)) ... In the absence of a precise statutory definition of an executory contract, courts have embraced Professor Countryman's 102 BR ... ...
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In re Sears
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§ 28.03 Leases and Contracts: The Effect of Bankruptcy
...439, 460 (1973); Countryman, "Executory Contracts In Bankruptcy: Part II," 58 Minn. L. Rev. 479 (1974). See also, e.g., In re Knutson, 563 F.2d 916 (8th Cir. 1977) (adopts Countryman definition).[17] Id.[18] See, e.g.: Second Circuit: In re Child World, Inc., 147 B.R. 847 (Bankr. S.D.N.Y. 1......
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...Chicago, Rock Island & Pac. R. Co., 604 F.2d 1002 (7th Cir. 1979); In Re Jackson Brewing Co., 567 F.2d 618 (5th Cir. 1978); In Re Knutson, 563 F.2d 916 (8th Cir. 1977). [8] In Re Harms, 10 B.R. 817 (Bankr. Colo. 1981), citing Workman v. Harrison, 282 F.2d 693, 699 (10th Cir. 1960). [9] 11 U......
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