Court Opinion

ID: 8773012
Source: CourtListenerOpinion
Date Created: 2022-11-26 12:51:33.533952+00
Date Added: 2024-06-11T17:02:20.999712
License: Public Domain

HOUGH, District Judge.
The hopeless confusion produced by conflicting decisions on the subject under review requires an authoritative ruling, which this court cannot give. The matter should be promptly taken to the Circuit Court of Appeals, and settled, at least so far as this circuit is concerned. Therefore I shall do no more than briefly indicate what seems to me the reason of the matter, adding only that my view is supported especially by Watson v. Merrill, 14 Am. Bankr. Rep. 453, 136 Fed. 359, 69 C. C. A. 185, 69 L. R. A. 719.
It must be admitted (and is not denied by any party to this litigation) that the rent reserved in a lease is payable onfy at the dates prescribed *69in the lease, and until that date arrives, and payment is not made, the lessee is not liable for any installment, whether-sued on his rent contract or for damages measured by it. It appears to me plain that this situation, as between lessor and lessee, is not altered by any bankruptcy on the part of the lessee. Bankruptcy does not terminate the lease. 'Phis must be so from the very nature of bankruptcy, which does not destroy, but conserve, property, and the leasehold estate is property, which may (and frequently does) become the property of the trustee and inure to the benefit of creditors. It is impossible to conceive of a trustee in bankruptcy selling a lease, if bankruptcy destroy the same lease.
If the lease survives adjudication and is rejected by the trustee (i. e., not appropriated as belonging to the estate), it is necessarily an existing and continuing contract; and such contract requires parties thereto. Who are these parties ? The landlord is one. The trustee in bankruptcy, not having appropriated the lease, is not the other. Therefore that other must be the bankrupt lessee. Such being the case, does the bankrupt’s continuing liability on a lease, which has survived adjudication and been abandoned by the trustee, give rise to a provable debt ?
There are obvious reasons of expediency and equity why such" claims should not be provable. A landlord is a species (speaking very loosely) of preferred or secured creditor, in that his rent is presumed to be no more than a fair measure of the value of the use of his land, and that land he can always recover if his rent is not paid. If the trustee pays his rent (as rent), he has appropriated the lease. If no one pays that rent, the presumption of law is that the landlord, on getting back his land, can obtain from other tenants the value of its use. It is therefore inequitable to permit a landlord, not only to recover and relet the demised premises, but to share pari passu with other creditors not so favorably situated. In the second place, the admission of landlords’ claims arising and continuing to arise after adjudication, and 'after condition of the lease broken, tends to delay the settlement of estates, and should not be encouraged, unless the law absolutely requires it.
For these reasons [ prefer to concur in the reasoning and conclusion of Watson v. Merrill, supra, and that case, in my opinion, is not consistent with the doctrine that subdivision 1 of section 63a is modified or enlarged bjr subdivision 4 of the same section. Inasmuch as the lease survives adjudication, the only “fixed liability” thereunder is rent due at the time of filing- the petition. Nor can I think that section 57n affects the matter at all. That claims “shall not be proved” subsequent to a “year after the adjudication” is not an enlargement of the class of provable claims, but merely a restriction of the time wherein provable claims may be presented. In other words, section 57n merely limits the time within which such Claims as are described in section G3 may be proven.
It is directed that the claim presented be expunged.