Court Opinion

ID: 9615112
Source: CourtListenerOpinion
Date Created: 2023-08-22 04:31:22.865697+00
Date Added: 2024-06-11T13:21:27.746727
License: Public Domain

On Motion for Reargument.
This motion for reargument urges that my decision was erroneous in two respects:
First, in assuming that the debtor conceded the correctness of the special master’s conclusion that it has admitted “insolvency” within the law of New York; secondly, in disaffirming the master’s ruling that the lessor has waived its privilege of invoking the forfeiture clause.
The order of reference, dated June 17, 1936, provides in part as follows: “(4) The Special Master shall report upon all matters brought before him, and each report shall contain a form of order recommended by the Special Master to be made upon such report. When the report of the Special Master is upon a contested matter, the Special Master shall file the original of such report with the Clerk of this Court and shall give notice of such filing to each party who shall have appeared at the hearing before the Special Master on the matter to which the report relates, and, unless within such time as the Special Master may in his discretion fix, written objections to such report shall be filed with the Clerk, and copies of such objections shall be served upon all parties who shall have appeared at the hearing before the Special Master on the matter to which such report relates, the report shall stand confirmed, and any party may submit to the Judge acting in these proceedings the report of the Special Master and the order recommended by the Special Master to be made and entered on such report. If timely objections to such report shall be filed and served as above provided, such further proceedings shall be had on such report and objections as the Judge acting in these proceedings shall direct.”
In his report on the instant matter, the master made the following order: “I fix *616ten days from the date hereof as the time within which written objections to this Report may be filed with the Clerk and copies of such objections served as required by the Order of Reference. If no objections are filed within the time fixed, I recommend that the proposed Order submitted herewith be signed. If timely objections to this Report shall be filed and served as required by the Order of Reference, such further proceedings shall be had upon this Report, and such objections as the Judge acting in these proceedings shall direct.”
Despite these provisions, the debtor failed to except to that part of the master’s report which was unfavorable to it, and on the motion to confirm urged no objections to the master’s conclusion. In pursuance of Order 47 of General Orders in Bankruptcy, 11 U.S.C.A. following section 53, and of the order of reference of June 17, 1936, I accordingly accepted that portion of the report and reviewed only the rulings to which exceptions had been taken. The debtor not having obtained' the decision desired on the lessor’s exceptions, it now asks a review of the portion of the master’s report which was adverse to its contentions. No excuse is offered for the failure to raise the objections now urged against the master’s finding of insolvency on the part of the debtor and, in the ab-. sence of such excuse, it is doubtful if the objection should be regarded as having seasonably be.en made. However, the point is of importance to the debtor, and deserves disposition on grounds less technical. Hence, with an indulgence that may hot again be exercised, I will consider the objections as properly made.
The pertinent paragraph of the lease is quoted in my previous memorandum.
The question is whether the debtor, by conceding its inability to pay and discharge its obligations as they mature, has admitted itself to be “insolvent” within the meaning of that term as it was used in the lease. That, I think, it has done. The forfeiture clause was carefully drawn and undoubtedly was intended to be inclusive of the variants of financial integrity which might render the debtor unable to meet its debts upon their maturity. The clause contemplated a forfeiture if lessee should become insolvent, or if proceedings in bankruptcy should be instituted, either by or against it. Obviously, the "draughtsman of the lease did not intend that his alternatives should be construed as synonymous. If the phrase “proceedings in bankruptcy” be interpreted strictly and most fávorably to the debtor, we may assume that it pertained to the condition of liabilities exceeding assets. Hence, “insolvent” must be taken to apply to situations not precisely within the purview of a bankruptcy proceeding, as of the date of the lease, viz., 1920, and inability to meet obligations as they matured was just such a situation. Hence, I believe that the debtor has admitted insolvency within the forfeiture clause.
This conclusion is buttressed by the legal definitions of insolvency prevailing at the time the lease was drawn. The word has been most frequently interpreted in connection with section 15 of the Stock Corporation Law, Consol.Laws, c. 59. The term insolvency in that statute has always connoted inability to meet obligations as they mature. Brouwer v. Harbeck, 9 N.Y. 589; Abrams v. Manhattan Brewing Company, 142 App.Div. 392, 126 N.Y.S. 844; French v. Andrews, 81 Hun 272, 30 N.Y.S. 796, affirmed 145 N.Y. 441, 40 N.E. 214. General Corporation Law, Consol.Laws, c. 23, § 71, provides for dissolution, “where the corporation has remained insolvent for at least one year.” This section, upon the rare occasions when it has been invoked, contemplates a failure to pay debts as they mature. People v. Troy Chemical Co., 118 App.Div. 437, 104 N.Y.S. 22. See, also, Denike v. New York Lime & Cement Company, 80 N.Y. 599. Another definition of insolvency is to be found in Personal Property Law, Consol.Laws, c. 41, § 156, subd. 3. The foregoing statutes are obviously not controlling in the instant case, since they are used in connection with special situations, but they serve to demonstrate the interpretations and meaning of the term “insolvency” existing at the time the lease was drawn. Furthermore, in the absence of statute, the term' has come to m'ean inability to meet obligations as they mature. See Sterrett v. Third National Bank, 46 Hun 22, affirmed 122 N.Y. 659, 25 N.E. 913; Brown v. Montgomery, 20 N.Y. 287, 75 Am.Dec. 404. Debtor and Creditor Law, Consol.Laws, c. 12, § 271, upon which the debtor relies, was enacted in 1925, and has no bearing on the interpretation of a term in a lease made in 1920.
I conclude that the debtor has admitted it is “insolvent,” as that term was used in the lease and in the light of its meaning under the law of New York.- There is, therefore, no necessity for any further *617argument on this point. Nor will further argument be heard on the question of lessor’s waiver; that problem was considered in the original motion and nothing by way of addition to the previous argument has been proffered.
Motion, denied.