Shaw v. United Shoe MaChinery Co.

• Decision Date: 09 March 1915
• Parties: SHAW v. UNITED SHOE MACHINERY CO. et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

220 Mass. 486

108 N.E. 68

SHAW v. UNITED SHOE MACHINERY CO. et al.

Supreme Judicial Court of Massachusetts, Suffolk.

March 9, 1915

COUNSEL

A. G Wadleigh and F. E. Shaw, both of Lynn, for complainant.

W. B Farr and N. B. Todd, both of Boston, for respondents.

OPINION

CROSBY J.

This is a bill for instructions brought by the plaintiff as assignee for the benefit of the creditors of the Burnham Shoe Company. The question is whether certain claims presented by the defendants are legally provable against the estate.

No question has been raised as to the right of the plaintiff to maintain the bill, and that question is not considered or determined.

We now come to the real question at issue between the parties.

The report of the judge of the superior court shows that at the time the Burnham Shoe Company made the assignment to the plaintiff it was in possession of certain machinery used for the manufacture of shoes, and that such machinery was all owned by the defendant the United Shoe Machinery Company with the exception of one machine which was owned by the United Xpedite Finishing Company, defendant. This machinery was held and used under certain leases or license agreements entered into between the parties. These leases or agreements contain many provisions relating to the terms and conditions upon which the machinery is to be so held and used. It will not be necessary to consider all these provisions, but only certain clauses or articles which are substantially the same in all the leases.

The defendants, as unsecured creditors of the Burnham Shoe Company, having received notice of the assignment, duly assented to its terms, and presented to the assignee itemized statements of their accounts upon which they sought to recover dividends.

The items in dispute are certain 'return charges' on certain machines, charges for repairs, and freight and cartage charges on machines which were taken by the defendants after terminating the leases.

All of the leases and license agreements provide that:

'If the lessee becomes insolvent or bankrupt, or has a receiving order made against him, or makes or executes any bill of sale, deed of trust or assignment for the benefit of his creditors, * * * then and in each such case any or all leases of or licenses to use machinery then existing between the lessor and the lessee * * * shall at the option of the lessor cease and determine, and the possession * * * of all machinery the leases or licenses of which are so terminated, shall thereupon revest in the lessor free from all claims or demands whatsoever.'

Under and by virtue of the foregoing provisions in the leases, the lessors, soon after the notice of the assignment to the plaintiff, terminated the leases and licenses by giving proper notice thereof to the proper officers of the Burnham Shoe Company, and the plaintiff was notified of said termination, and allowed the lessors to take possession of the leased machines. The defendants entered and removed the leased property within one month from the date of the assignment.

The notices of termination contained a demand that the lessee forthwith deliver at the office of the lessors in Beverly, in this commonwealth, the machines designated in said leases and licenses, and any and all other machines belonging to the lessors which theretofore had been delivered into its possession, enumerating in detail the machines and stated:

'You are hereby notified that in the exercise of our rights in the premises, we have elected and hereby declare our option to terminate all leases and licenses which have heretofore been granted to you covering machines belonging to us, including herein the following leases and licenses, to wit.'

The deed of assignment was in the form of a common-law assignment. The third paragraph contained a provision to the effect that the debts provable by creditors of the shoe company were such debts as were provable against the estate of insolvent debtors under the laws of this commonwealth. The defendants who have assented to the assignment are bound by its terms.

Under our statute, the claims which are legally provable against the estate of an insolvent debtor are, so far as material to this case, defined as follows:

'Debts due and payable from the debtor at the time of the first publication of the notice of issuing the warrant may be proved and allowed against his estate at any meeting; and debts at that time absolutely due, although not payable, may be proved and allowed as if payable, with a discount or rebate of interest if no interest is payable by the contract. * * *' R. L. c. 163, § 31.

The question then is whether the disputed items in the respective accounts were provable at the time of the execution and delivery of the deed of assignment; in other words, were these items debts which were due and payable at that time, or were they debts 'at that time absolutely due,' although not payable?

We are of opinion that when the assignment was made these items were not debts due and payable, nor were they debts at that time absolutely due, although not payable, and that therefore such items were not provable against the assignee.

As we have seen, all the leases contain a provision that they may be terminated at the option of the lessor, if the lessee, inter alia, makes an assignment for the benefit of his creditors. It also appears that that option has been exercised by the lessors since the assignment was executed; but as the leases were in full force and effect at the time of the execution of the assignment nothing was then due on account of the items in question. The execution of the assignment did not terminate the leases, but authorized the lessors to end them at their option.

It is manifest that the disputed items were all contingent upon the termination of the leases, and so were in no sense absolutely due from the Burnham Shoe Company, and if the lessor had failed to exercise its option none of these items ever could become due or payable.

The return charges on the Goodyear machines are claimed under clause 10 in lease No. 7374, and clause 11 in leases No. 7374A and No. 7374B. Clause 10 provides that upon the termination of the lease or any extension thereof, the lessee shall pay to the lessor $150 on each of certain machines therein described. Clause 11 provides in part that upon the termination of the lease the lessee, in addition to all other payments to be made, shall pay the lessor a certain stipulated amount in respect to each leased machine----

'provided, however, that in case the lease and license hereby granted shall continue throughout the full term of seventeen years * * * and the lessee at the time of returning the leased machinery at the end of said full term, shall not be in default as to any of the payments under or other condition, stipulations or provisions of this or any other lease or licensed agreement between the lessor and the lessee, then the payment in this article hereof provided for shall not be required to be made.'

Under both of the above clauses the time is uncertain as to when the lease will terminate, if at all; and under clause 11 the payment therein referred to is also made contingent upon conditions which make it doubtful whether any sum ever will become due, even upon the expiration of the lease.

The claim for return charge on the eyeletting machines under lease No....