Opinion · Supreme Court of the United States
Irving Trust Co. v. A. W. Perry, Inc.
Irving Tr. Co. v. A. W. Perry, Inc., 55 S. Ct. 150 (1934)
- Type
- Opinion
- Court
- Supreme Court of the United States
- Jurisdiction
- Federal
- Date
- 1934-12-03
- Topic
- general
Mr. Justice Roberts delivered the opinion of the Court. The respondent was lessor in a lease having a number of years to run at the date of the tenant’s bankruptcy. The writing stipulated: “. . . for the more effectual securing to the Lessor of the rent and other payments herein provided, it is agreed *310 as a further condition of this lease that the filing of any petition in bankruptcy or insolvency by or against the Lessee shall be deemed to constitute a breach of this lease, and thereupon, ipso facto and without entry or other action by the Lessor, this lease shall become and be terminated; and, notwithstanding any other provisions of this lease, the Lessor shall forthwith upon such termination be entitled to recover damages for such breach in an amount equal to the amount of the rent reserved in this lease for the residue of the term hereof less the fair rental value of the premises for the residue of said term." Respondent filed a proof of claim, based upon this clause, which the referee expunged. The District Court affirmed the order.
Citator
- Cited by
- 26 opinions
IRVING TRUST CO.v. PERRY CO.,293 U.S. 307(1934)
55 S.Ct. 150
IRVING TRUST CO., TRUSTEE IN BANKRUPTCY,v. A.W. PERRY, INC.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT.
No. 22.
Argued November 5, 6, 1934.
Decided December 3, 1934.
CERTIORARI,292 U.S. 620, to review a judgment reversing a
judgment of the District Court which affirmed an order of the
Referee in Bankruptcy disallowing a claim based upon a covenant
in a lease.
The philosophy of theManhattan Propertiescase was that claims based upon rent stood apart as a matter of well-defined historical development, acquiesced in by Congress. The distinction being historical, reference to cases affecting personalty is futile. SeeGardinerv.Butler Co.,245 U.S. 603,605;Wm. Filene's Sons Co. v.Weed,245 U.S. 597;Maynardv.Elliott,283 U.S. 273;Central Trust Co. v.Chicago Auditorium Assn.,240 U.S. 581.
In bankruptcy the court is dealing with a statutory system, and can allow only such claims as the statute permits. The bankruptcy statute generally permits proofs of claim for anticipatory breaches of contracts, but as a matter of historical distinction sanctioned by longPage 309legislative history, claims for rent and claims for damages for breach of covenants to pay rent have not been provable.
In equity there may be a distinction between the making and the absence of a promise. In bankruptcy the distinction has to do with the subject matter.
The result below is contrary to the trend of the decisions of the lower federal courts.
Recent legislative history adds evidence that it was not the intention of Congress to have any exception to the general rule. Act of June 7, 1934; H.Rep. 194, 73d Cong., 1st Sess.; S. Rep. 482, 2d Sess.; H.Rep. 1773, 73d Cong., 2d Sess.; Act of June 18, 1934; S. Rep. 1404, 73d Cong., 2d Sess.
In construing an Act of Congress applicable to a controversy, resort may be had to amendments passed after the controversy arose.Copev.Cope,137 U.S. 682;Dunbarv.Dunbar,190 U.S. 340;Wetmorev.Markoe,196 U.S. 68.Mr. Thomas F. Dougherty, with whomMessrs. Albert StickneyandHersey Eggintonwere on the brief, for respondent.
By leave of Court, briefsamicorum curiaewere filed byMessrs. Walter E. HopeandH. Struve Henselon behalf of the Trustees in Bankruptcy of Louis K. Liggett Co., in support of petitioner; andMessrs. Thomas HuntandEarle W. Carron behalf of the Trustees of the A. Shuman Real Estate Trust, in support of respondent.
". . . for the more effectual securing to the Lessor of the rent and other payments herein provided, it is agreedPage 310as a further condition of this lease that the filing of any petition in bankruptcy or insolvency by or against the Lessee shall be deemed to constitute a breach of this lease, and thereupon, ipso facto and without entry or other action by the Lessor, this lease shall become and be terminated; and, notwithstanding any other provisions of this lease, the Lessor shall forthwith upon such termination be entitled to recover damages for such breach in an amount equal to the amount of the rent reserved in this lease for the residue of the term hereof less the fair rental value of the premises for the residue of said term."
Respondent filed a proof of claim, based upon this clause, which the referee expunged. The District Court affirmed the order. The Circuit Court of Appeals, reversing the decree of the District Court, directed that the claim should be allowed.1The case is here upon writ of certiorari.
Decision is to be made under §§ 1 (11) and 63(a) and (b) of the Act of July 1, 1898, as they stood prior to the filing of the petition on September 30, 1932, and the presentation of respondent's proof of claim on March 29, 1933.2The subsequent amendments of June 7 and 18, 1934,3are by their terms inapplicable.
InManhattan Properties, Inc. v.Irving Trust Co.,291 U.S. 320, we reserved the question of the provability of a claim for liquidated damages arising upon such a covenant. The petitioner's contention is that inasmuch as claims for future rent, or for damages for the breach of the covenant to pay rent, or claims upon contracts of indemnity conditioned upon reentry by the landlord subsequent to bankruptcy, were there held not provable, it logically follows that a claim for stipulated damages forPage 311breach of the lease may not be proved. We hold otherwise.
By the terms of the contract the filing of the petition in bankruptcy was, of itself, and irrespective of the election of lessor or lessee, a breach of the lease. The claim of the landlord, consequent upon the breach, arose and matured at the moment of the filing of the petition. The claim is not for rent reserved or upon the lease as such, but is founded upon an independent express contract, and hence within the very words of § 63(a) 4.
The Circuit Court construed the stipulation as an agreement on the part of the tenant to pay as liquidated damages, in the event of the specified breach, an amount equal to the difference between the present fair value of the remaining rent due under the lease and the present fair rental value of the premises for the balance of the term. The covenant is fairly susceptible of this construction. So read, the court held the clause provided a reasonable formula for ascertaining the damages of the landlord, did not smack of a penalty, and was therefore enforceable. SeeWm. Filene's Sons Co. v.Weed,245 U.S. 597. We concur in the view that the contract, as its terms were interpreted and applied, supports a provable claim for the stipulated damages.
The judgment of the Circuit Court of Appeals isAffirmed.
- Page 31069 F.2d 90. ↩
- Page 310 U.S.C. Tit. 11, §§ 1 and 103. ↩
- Page 310 Public No. 296 [c. 424,48 Stat. 911] and Public No. 387 [c. 580,48 Stat. 991], 73d Congress. ↩