Bowditch v. Raymond

15 N.E. 285, 146 Mass. 109, 1888 Mass. LEXIS 207

• Court: Massachusetts Supreme Judicial Court
• Decided: January 16, 1888
• Status: Published

Opinion

Morton, C. J.

Under our insolvent law, prior to the St. of 1879, c. 245, no debts, with certain exceptions not material to this case, were provable, unless they were debts “absolutely due ” at the time of the first publication of the notice of issuing the warrant. It has accordingly been repeatedly held that future rent, to accrue under a lease in which the insolvent debtor is lessee, cannot be proved. Savory v. Stocking, 4 Cush. 607. Treadwell v. Marden, 123 Mass. 390. Deane v. Caldwell, 127 Mass. 242. Ex parte Houghton, 1 Lowell, 554.

The principle of these cases is, that such rent is not a debt absolutely due at the time of the first publication. The lease may be terminated by the eviction of the lessee or otherwise, and no rent may ever accrue or become due. The lessor’s claim is a contingent one. It is not contingent merely as to amount, but the very existence of the claim depends upon a contingency. Boardman v. Osborn, 23 Pick. 295.

In the case before us the lease contains the provision that, if the lessees shall be declared bankrupt or insolvent, or shall make an assignment for the benefit of their creditors, the lessors may enter and expel the lessees, “ and thereupon the lessors may, afc their discretion, relet the premises at the risk of the lessees, who shall remain for the residue of said term responsible for the rent and taxes herein reserved, and shall be credited only with such amounts as shall be by the lessors actually realized.” The appellants contend that under this provision the liability of the lessees arises solely from their covenant, and that the amount to be paid by them is not technically rent, as the provision does not contemplate that they are to occupy the premises. But however this may be, the sums to be paid partake of the character of rent so largely that they come within the same principle. The covenant is to pay the rent reserved reduced by such sum as the lessors might receive from the new lessees if they should relet the premises.

At the first publication of notice there was a contingency, not merely as to the amount of liability, but as to whether it would ever attach or arise out of the covenant. The lessors in their discretion might not relet the premises, but resume possession of them. It may be that the lessees will be evicted by a paramount title, in which case it cannot be doubted that the liability of the original lessees would be terminated, or fail to attach. It may happen that the new lessees will pay as large a sum as the rent and taxes reserved in the lease, in which event no liability would arise under the covenant. Or the premises might be destroyed by fire, and thus the liability of the lessees be terminated. The existence of any debt in the future depends upon contingencies, and therefore the appellants’ claim cannot be proved under our insolvent law prior to the St. of 1879.

In the bankrupt court of this district it has been decided that a claim under a like clause in a lease could not be proved in bankruptcy. Ex parte Lake, 2 Lowell, 544.

The next question is, What is the effect of the St. of 1879, c. 245, § 1, re-enacted in the Pub. Sts. c. 157', § 26 ? The part of the statute which is of'importance in this ease is as follows: “ When any of the property of a debtor consists of a lease or agreement in writing, whereby he is liable for the rent therein reserved or for the use and occupation of premises as therein stipulated, the assignee at any time may, and at the request in writing of either the debtor, or of the lessor, or of those having his estate in the premises, shall, within twenty days after such request, by a written instrument filed with tbe records of the case, elect either to accept and hold under said lease or agreement in writing, or to disclaim the same; and if he elects to disclaim, such lease or agreement in writing shall thereupon be deemed to have been surrendered as of the day on which said disclaimer was so filed. And the debtor, provided he obtains his discharge in insolvency, shall be discharged from all liability under or by reason of said lease or agreement in writing, whether the assignee does or does not disclaim the same as aforesaid; and the lessor or those having his estate in- the premises may prove such damages, if any, as are caused by such surrender, as a debt against the estate of the debtor.”

The objects of the statute were to define the rights and duties of assignees when they found a part of the property of the debtor to consist of a lease or other instrument under which he was liable for rent or for use and occupation, and to give them the right to accept or disclaim such property, as the interests of the estate required; to enlarge the effect of the debtor’s discharge by making it a bar to his liability under such lease or agreement; and to give to the lessor thereunder the correlative right to prove his damages if it is disclaimed and surrendered.

All parts of the statute refer to the case where there is property of the debtor consisting of a lease or an agreement for use and occupation. In other words, the provisions as to the discharge of the debtor and the proof by the lessor apply only to the case where there is an existing lease or agreement which the assignee can accept or surrender. The lessors can prove only such damages as are caused “ by such surrender.”

In inquiring whether the statute applies to the case at bar, we are met with this difficulty. Before the first publication of notice, the lessors had entered upon the premises and expelled the lessees, and thus practically terminated the lease. The lessees had no longer any rights in the premises; they could not occupy them; they could not re-enter; the only interest they had in the matter was a bare liability under their covenant or agreement to indemnify the lessors for any deficiency in the amount they might realize from new tenants if they chose to let to such tenants. There was no property of the debtor which the assignee could accept; there was no right or interest in the debtor which the assignee, if he had undertaken to accept, could take or hold; and there was nothing for him to surrender.

Suppose this had been a case where the lessors had entered and expelled the insolvent two or three years before the insolvency. Could an assignee under the guise of accepting the lease • revive it, and subject the estate to the liability of indemnifying the lessors for any deficiency in the rent, and thus make them preferred creditors ? In such a case there is no election for the assignee to make; there is nothing to accept and nothing to surrender, and we are of opinion that it does not fall within the statute.

The Legislature had in mind the ordinary case of an existing lease or agreement; it did not contemplate a case like the one before us, and did not provide for it.

The appellants cite several English cases arising under the bankruptcy act of 1869, from which our statute of 1879 was taken with some modifications. 32 & 33 Viet. c. 71, § 23. Ex parte Dyke, 22 Ch. D. 410. Ex parte Patterson, 11 Ch. D. 908. In re Maughan, 14 Q. B. D. 956. Ex parte Corbett, 14 Ch. D. 122. In re Tickle, 3 Morrell, 126. Ex parte Walton, 17 Ch. D. 746.

The English bankruptcy statutes differ so much from our insolvent law that adjudications under the former are of very little aid to us in determining the construction of our statutes. But it will be found upon examination that the cases cited are not like the case at bar. In each of them there was an existing lease or term vested in the bankrupt at the institution of the bankruptcy proceedings, having more or less time to run.

We have considered the case in the light most favorable to the appellants, as if they had entered and expelled the lessees after the lease went into operation. We do not find it necessary to consider whether they in fact took possession before the' term commenced, nor, if they did so, what would be the effect upon the rights of the lessors and lessees. The facts, that the assignees disclaimed the lease in this case, and that the insolvent debtors entered the appellants’ claim upon the schedule of creditors, are unimportant. Neither could thus change the application of the statute, or affect the rights of the creditors.

Judgment for the appellees.