McGraw v. Union Trust Co.

• Decision Date: 16 February 1904
• Court: Michigan Supreme Court
• Parties: McGRAW et al. v. UNION TRUST CO. (two cases).

98 N.W. 390

135 Mich. 609

McGRAW et al. v. UNION TRUST CO. (two cases).

Supreme Court of Michigan

February 16, 1904

Appeal from Circuit Court, Wayne County, in Chancery; Joseph W Donovan, Judge.

Petitions by Homer McGraw and another, as executors and trustees of the estate of Thomas McGraw, deceased, against the Union Trust Company, as receiver of the City Savings Bank of Detroit, for the allowance of certain claims against the insolvent's estate. From a judgment disallowing the claims, petitioners appeal. Reversed.

Wilkinson Post & Oxtoby, for appellants.

Bowen Douglas, Whiting & Murfin, for respondent.

MOORE J.

The petitioners have two claims against the respondent growing out of the same transaction, which may be considered together.

The following statement of facts is necessary to an understanding of the questions involved: The City Savings Bank failed on February 10, 1902. It occupied banking quarters in a building known as the 'McGraw Building.' Its lease provided for a term of five years from May 1, 1899, at a yearly rental of $3,000, payable in monthly installments of $250, due at the end of each month. The Union Trust Company, as its receiver, continued to occupy the banking office until March 31, 1902, up to which time the pro rata rent was paid. The keys, although tendered, were not delivered to the McGraw estate until an agreement was entered into July 8, 1902, by which it was provided that, without prejudice to the rights of either party, the receiver was to deliver up the keys, and the petitioners were to occupy the premises for the purpose of cleaning up and obtaining a tenant thereof, and re-renting the premises. No tenant was found until January 22, 1903, when the National Peat Fuel Company leased the premises on a weekly basis of $40 per week. This company occupied the premises for four weeks, paying in all $160 as rent. On February 11, 1903, the premises were rented to Alex Y. Malcomson for a coal office for a term of four years and two months from March 1, 1903, being the balance of the term of the City Savings Bank lease and an additional term of three years, he agreeing to pay for the balance of the City Savings Bank term at the rate of $2,000 per annum in monthly installments of $166.67. As the City Savings Bank would have paid for this 14 months at the rate of $250 per month, there would thus be a deficiency of $1,166.67 during the period of the Malcomson lease. The petitioners filed claims for the difference between what was to be paid by the bank and what in fact will be received. At the time of the failure of the bank it held a demand note of the petitioners, given on April 8, 1901, for $3,000, upon which interest had been paid to January 2, 1902. The petition asked to have the note and rent offset against each other. The petition also asked that the claim for rent be given priority, and, in case set-off was refused, that the rent be paid out of the assets of the savings and commercial departments in proportion to the amount of deposits in each of said departments when the bank failed. Objection was made to the petitioners' claims on the ground that their claim was contingent, and as such not provable against the assets of the bank in the hands of the receiver. The total claim of the McGraw estate included in the two petitions, and disallowed by the court, is the sum of $3,840.

The first question is, should the claim of petitioners be allowed? It is the claim of respondent that rent which became due after the appointment of the receiver does not constitute a claim within the meaning of the general banking act, citing cases. It contends that a rent service is not a debt, and a covenant to pay it is not a covenant to pay a debt, but is a security for the performance of a collateral act. It is the claim of relator, and we quote from brief of counsel 'The claim of the petitioners, as presented, shows an absolute and not a contingent liability, and constitutes a proper claim against the assets of the City Savings Bank in the hands of the receiver. Its claim is for damages sustained through the insolvency of the bank and for its breach of covenant, and not for rent to be paid by the receiver as administration expenses. * * * The rule appears to be that a receiver may elect whether he will take over and assume, or discard and disavow, outstanding leases of the insolvent party. The receiver will naturally take over leased premises which are profitable, and will also seek to surrender leases unprofitable to the tenant, but profitable to the landlord. For this reason the lessor is allowed to himself...