# Amicus Curiae Brief — Manhattan Properties, Inc. v. Irving Trust Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_0013%3A12 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 1934 - **Citation:** 291 U.S. 320 ## Text JAN 4 } FILE COPY CHARLES EL!3P E CL P Supreme Court a the United Res OCTOBER TERM, 1933. 5 MANHATTAN PROPERTIES, INC., Petitioners, against IRVING TRUST COMPANY, as Trus- tee in Bankruptcy of Oliver A. Olson ‘Co. Inc., Respondent. SAMUEL R. BROWN, ALMIRA B. MILLARD, ALFRED MILLARD and HUGH MILLARD, Petitioners, against - IRVING TRUST COMPANY, as ‘Trus- tee in Bankruptcy of United Cigar Stores _ Company of America,,a New Jersey Cor- ' poration, Respondent. No. 505. No. 506. BRIEF OF GODFREY GOLDMARK AS AMICUS CUR- IAE ON BEHALF OF TRUSTEE IN BANKRUPTCY OF McCRORY STORES CORPORATION. d SUBJECT INDEX. Landlords’ claims against McCrory Stores Corpora- tion $43,000,000 The reasons for filing Brief as Amicus Curiae...... (a) Reasons for bankruptcy of Chain Stores. . (b) Application of Northern Pacific Ry. v. Boyd eeeeeveeeoeeaeneeeeoeee see eeeeaee0e0e9 The Present Rule and its General Acceptance...... (a) Second Circuit (New York).............. (b) Fighth Circuit (Nebraska)............... (c) Leases here made with knowledge of this prevailing rule ....... icssecaseeesoedvee The Question of Relief if any is needed, + for (EE oGas Vieku Riae bc he aeeeeaniteabaes Perhaps question -is for. States through priority or lien statutes......... Seaneedpecucescue Perhaps situation is petite to nonprovable tort and compensation Se Rocckereuens al viedewndekee Tentative Draft of Legislation + apreaante- tive Committee set forth................... BRIEF OF ARGUMENT. too ee ee rn at the filing of the petition m bankruptcy........ . Claims must be justly owing—Sec. 57A of 1898 Act Reasons for the rule,—gach creditor gets a right in rem at the filing of the petition. . PAGE www wrnn wv 11 11 ii. POINT Il. The leases here involved contemplated the © possible bankruptcy of the Tenants and contain ex- ° press covenants fixing the Landlords’ rights and the Tenants’ obligations in such event. There is, there- fore, no basis for attempting to invoke the doctrine ‘ of anticipatory breach of contract on the theory of -an- implied covenant against going into bankruptcy. These express covenants measure the Landlords’ rights and do not create a provable claim.......... Bilateral Exeeutory Contracts contain im- plied ‘erm against disablement of per-.” formance by bankruptey—Chicago Audi- torium Case, 240 U.S: 581.....:........ The doctrine inapplicable here beeatise leases contain Express Covenants re- specting-bankruptey and the’ rights and obligations and method and time of en- - ° foreement of the latter. ‘There can be no rx implied covenant ....:...... ictie Picea - These provisions controlling........... ~ _ Me@ready v. Lindenborn................. ' Special Master’s. opinion in accord........ Judge.Mack’s opinion in accord........... Bankruptey of Tenant not an anticipatory breach of the covenants to pay damages upon bankruptey » of the Tenant as that cevenent only hecame effective because of the bankruptey .:........ eteeataweiees Parties havé agreed ‘that actuality of the future’and not present prophecy shall I 5 oko kcedn br anes ab oceans: Kothe Case distinguished............ Filene Case distinguished...... Nee ae Perhaps. covenant giving rise to provablé claim could be devised................. Validity of the Covenants here considered PAGE 13 13 23 oa bo to to bo ir) cp) bo bo aon iii a —_— Not contrary to public policy....----- If they are—a provable claim does not FOWL oo cc ccccrcrsecceveredcoseers Summary of Point II......-.---- a sunene * BOINT III. If the petitioners’ proof of their claims is not barred by the covenants of the leases, nevertheless, petitioners’ claims are so contingent in existence and amount that they are not provable ........-----: : The claim here is for damages not rent ....- If petitioners not contractually barred their claims are so contingent as to be not prov- ghee .ccccece. i. pec cieucwser oneness’ In re Merrill & Baker controlling .....- Congress did not intend. contingent claims to. be provable. Express provisions for the proof of contingent claims in the 1867 Act were omitted from the Act of 1898 and cannot be put back by construction .. . Question ‘‘lurked in the record’’ but not decided in Maynard v. Elliott ....---- a Arfalysis of the provisions of 1867 and 1898 hie cccudssventueesesntatesteseeses® Congress omitted from 1898 all provisions as to contingent claims but re-enacted in ~ substance the other provisions as to what claims were provable eeavees Soh kee a ae Provisions of 1867 Act cannot be put back by construction ...---+--++°: rer Peer r ‘ Pirie v. Chicago Title & Trust Co., 182 | - U. 8. 438 ....0eeeee SPT ree Ciaskes Davis v. Pringle, 268 U. S. 315~..----- The British Acts of 1869 and 1883 were not ' followed by Congress ..-----+--- eeeerrre Judge Lowell’s bill in 1882 contained spe- cific provisions as to leases; Congress knew of it in 1898 but. failed to incorpo- rate such provisions ....---++++s+5+00" 30 31 31 31 32 34-36 eel ly Sint GE EEE ° Shas ae See wc ot DA acon DN ke ang AMIE oe dab ies . POINT Vi. iv e Only question in what the Statuton provide The decisions ontabliah. Ghat elainie whieh will nod enforeenble only Wpon the oceurronee of a contingeney nol reasonably eortain to Heer Are Hol pray able ees Naty of ¢ ‘ont tnyeont ( ative ; | Maynard ee. lethiott ‘ Willian ie. lidelity & ho, Morrill e. Baker Rigwin e. Maarwire Dunbar oe. Dunbar Conelustons to Point 1 Toeverannnae hie POINT IV. The Petitioners’ Brief aska this Court to ig- nore history, precedent and Statuten Seeks general rule irrespoetive of Covennuts Iyneres fret of reentry by landlords and ofYeet thereof in absenee of the-covennuts If covenants ignored, damages do not sur Vive reentry SL a ie ee eee Doctrine of vable Anticipatory breach inappli Oe Cate 6 6-8 Oe 2 4 ee ee POINT V. Section 74 added ir in 1933 ions not make the claims provable . 4 Applies only to ans ecaiiitinas Nee Is. not retroactive and could not be made so Whole question for Congress if present stat- ‘ ute unjust... aa 7 VAciiC 41 ‘iS e oa A) of " e of AY AS | CITATIONS. Clarice: aE ' PAGK Honred of Coriminsionenn eo, Hurley, 169 Med. 920... 12, 92 ContralTrust Company o. Chiengo Auditorium As preety narertendbenne, AUN, CMD. cece eens . 43, 24, 29, 51 Chemical Bank oe Armatrong, 99 Bed 72000... 12, 52 1 qtark o Kirby, SOs N,V. SU ce eee - Davin oe. Pringle OK UL NSP a ued, oo, 41 ' Donbar ie. Dunbar, MOA BIOL. tence ey 4, Mh, 47 Averett oe. dudnon, 288 UN. is. er ae a 12 Mederal National Bank oe, Koepel, 255 Make. 17... 24 Hilene's Sonn Co. oe. Weed, 245 08. PPS ree 26, 27 Giarelinree 0. Uectler Cin, 24% UM, EE... eee: 4g Crymesn o. Sanders, et “ee 2 eS See kee fA) (Gidding, J. Mo. & Co. (Charles Tf. Mears, plaintiff, ugninal J. M. Chicding, & Co. Ine, defendant, eqquily ST VAD) 6... eee eee ees tivae cues 19, 23, 26, 52 (frommes vo. St. Paul Trust Co, 147 ML 684. 00.0066. + 5) Guarantee Tithe & Trust Co. ». Tithe Guaranty & Surety, 224 U.S. bod... eee ee See eee ce. oe Hall o. Gould Wa NLY. VST. ee eee y 49 Hermitage Co. vo. Levine, 248 N.Y. 335... .0..0005- 19,4 Houghton, ex parte, 1 Lowell 594. ...... 6.666006 3, 39 Joannes Brothers Co. ». Lamborn, et al., 297 N.Y. OT cdencesnns tacees S gate a susewaueess Rae Ay Kelly v, Security Mutual Life Ins.(Co., 196 N. Y. 16 A) ‘Kothe v. R. C. Taylor Trust, 280 U.S, 224......--. 26, 27 Kottler ». New York Bargain House, Inc., 242 N. Y. | io i webees eens ss ere ener ee ey 5) vi Cases: i , | | PAGE Lamson, ete. Co. v. Bowland, 114 Fed. GOP svc ccesvas 30 Lane v. Industrial Com’r of New Y ork, 54 Fed. (2d) Me cueanewseeannwnwarkdbssehcdtsstviav rTeTy 5 Martin >. Orgain, 174 Ped. 772... . cc cccccceccccece 4 Maynard v. Elliott, 2883 U.S. 273... 4,9, 11,31, 41, 42, 43, 44, 45 McCall v. Deuehler, 174 Fed. 133......0....0...0... 30 McCready rv. Lindenborn, 172 N. - See 14, 23, 49, 50 Mears v. Gidding. ........... 0.0.00. e0 cee ;. 19, 23, 26, Se Merrill & Baker, In re, 186 Fed. 312.............5 31, 44, 47 Michaels rv. Fishel, 169 N.Y. 381...... eiwavccarees 49 Miller_v. Schloss, 218 N. Y. 400.................... 14,.29 New Jersey v. Anderson, 203 U.S. 483..4......... ‘ 52 Nichols vr. Seranton Steel Co., 137 N. Y. 471......... 50 Northern Pacifie Ry. Co. v. Boyd, 228 U.S. 482..... Operators Oil Co. v. Barbol, 65 Fed. (2d) 857 eceee » ee Pettingill, In re, 187 Fed. 143..................... 51 Pirie v. Chicago Title & Trust Co., 182 U. S. 438.... 37,41 Price v. se 2 re Pree ene 41. Riggin v. Magwire,.15 Wall. 549..... ~iieeekeneeun 44, 47 Roehm vr. Horst, 178 U. S.1........ error Es TPeTr 50 Roth & Appél, In re, 181 Fed. 667.................. 3 Schall v. Camors, 251 U. S. 239............... _ .:, 9,39 Sexton v. Dreyfus, 219 U. S. 339........ SPEDE eee ‘12, 52 Sutton v. Goodman, 194 Mass.’ 389. . . ae eenginceesees 49 Thompson-Houston Electric Co. v. Durant Land Im- provement Co., 144 N. Y. 34............ rrr 49. Watson v. Merrill, 136 Fed. 359..:................ oe 3° Webster v. Fall, 266 U. S. 507.......,............- Si . Weitzen, In re, 3 Fed. Supp. 698 (S. D.N. Y. ee ee , 28. Cases : PAGE Western Electric Co. v. Powers Accounting Machine. Co., Equity 19-150............... ae eddy 27, 49, 53 Williams v. U.S. Fidelity & G. Co., 236 U. 8. 549 .. 10, 42 Wilson v. Penn. Trust Co., 114 Fed. 742 ........... 30 Wise Shoes, Ine., In re, 2 Fed. Supp. 521, aff’d with- ont opinion 64 Fed. (2d) 1023 ................ 19, 27 Zavelo v. Reeves, 227 U. 8. 625 ..............008 .. 10,29 StTaTUTES, ETC. : ~ Bankruptey Act of 1898 with Amendments: RUD ec cau deeds eacsedseretesae Pres) Be. TEE) ev ccvecsess senna eukesesewaee 36 See. — eres ee 42 Esch sy ckeuseaseeroenas Coors Fae caea en 51 General Order XXI Oe ccarncs tear deeecass 36 Bankruptey Act of 1867 (Rection 19) As Set Out in the Revised Statutes of 187’ | R. 8. See. SOG7T ........ ere rer fe SO , Eo. o.6 bose va dvestenaesisiiaweeeee EE ao vhe heen eus heck evedseareres 33, 36 * ee Sac deer edsdansiscaeanieeee 33, 36 eS PP errerr iy Tere creer rey Bankruptcy Act of 1841: ; Ti an snbakceveveedcexsnentesseeneen 38, 41 Legislation Proposed in Congress But Never En- acted: H. R. 5884, 73rd Congress, Ist Session ...... 6 S. 1382, 47th Congress, 2d Session “......... 39, 40 . Report No. 65, House of Representatives, 56th a: Congress, 2d NN ee TSN AEE 39° Third Tentative Draft of Amendments to the Bankruptcy Act by a Committee of the Fourth General Bankruptcy Conference under the Chairmanship of Paul H. King, Esq. ........ 6,7 - Vili PACK Mnglish Bankruptey Aet of T8833 (46 and 47 Viet, sh ree ne eaeaiv eck aes.s' 6 Mnglish Bankruptey Aet of T869 (82 and 38 Viet, ee De Uk eck eeadeee a6 Douglas and lMrank, ‘landlord Claims in Rear oganivation’’, 4h Vale 4. dhourginl 1008) (1983) < 2 Tiany on Landlord and Tonmat (L910), p. 16d A) T'THTany on Landlord and Tenant (L910), yp. UTA 49 2 Williston om Contracts (1920), S890 o.oo... 49 8 Williston on Contracts (1920), SIMD8 ooo e000... MW) 8 Williston on Contrnets (M20), SI4G6 00. hi) 1 Williston on Sales (1924), SOE eee, hi) Williston, Cases on Bankraptey (2nd id), note ep A GE ene bo pee a 86 Restatement of the Law of Contraets, S884 00.0... Mi) Restatement of the Law of Coutraets, S818 0000... HY | SUPREME, COURT OF THE UNITED STATES, OCTOBER TERM, 1933. , MaNnnatran Prorniertes, Ine., ‘ Pelitioners, aqainsl mn ‘ 7h . ; No, WW lnving Trower Comerany, os Trustee. in Bankrupley of Oliver A. Olson Co. Ine., . Respondent, Samuenn Re Brown, Aumina Bo. Mar nan, Anenens Mintaro and Peas { ar ~ Mitaatn, Pelitioners, against No. 506 leving Trosr Company, asx Trustee in Bankruptey of United Cigar Stores Company of America, a New Jersey Corporation, Respondent. a BRIEF OF GODFREY GOLDMARK AS AMICUS CURIAE ON BEHALF OF TRUSTEE IN BANKRUPTCY OF , -McCRORY STORES CORPORATION. , Pursuant to leave granted, this brief is filed on behalf of the Trustee in Bankruptcy of McCrory Stores Corpo- ration, bankrupt. McCrory Stores Corporation, which with its subsidi- aries operated 242 stores throughout the country, was ad- 9 Ne - judicated a bankrupt in New York on January 14, 13 upon its voluntary petition. The value of the assets of that estate is estimated at between $5,000,000 and $8,000,000 depending on the realizable value of equities in real estate, While merchandise creditors, debenture holders. and mis- cellaneous creditors have filed claims aggregating $9,000,- 000, landlords have filed claims aggregating f4. 3,000,000 for future rent and damages. It is evident, therefore; that the Trustee in Bankruptey of MeCrory Stores ( orporation representing the ereditors in that estate has a real interest in the outeome of. these CUSES, The Heasons for Filing Brief as Amicus Curiae. This brief ix filed becatse the underlying questions have recently become of paramount importance to property owners, general creditors, bankrupts, and consequently to the publie itself. During the past two years large corporations operating stores in numerous states throughout the country, and gen- eralivy known as ‘chain stores’? have as a result of. the ‘ depression found their volume of business and profits: con- stantly dwindling and have been unable to reduce their ex- penses proportionately, largely because of the existence of fixed obligations for high rentals on long term leases made during normal or exceedingly prosperous times. Gradually eash and quick assets have’ been consumed in paying such rents until ‘equitable insolvency ’’—the inability to meet obligations as they matured—has resulted, although in some cases not insolvency in the bankruptey sense. The - result has been that in fairness to merchandise ereditors, debentureholders and other creditors whose claims had ma- tured, these corporations were bound by voluntary petition to surrender their property to the bankruptey court for - administration. This procedure has in many quarters re- sulted in the ery that the purpose of the bankruptey pro- - ceeding was to avoid lease obligations, to defraud the * 3 landlords and to enable stockholders of these corporations ‘ to become revested with the property after the termination of the bankruptey proceeding. This contention, however, has overlooked the doctrine of the Boyd case (Northern Pacific Ry. Co. v. Boyd, 228 U.S, 482).° . The foregoing is the background which has caused these cases to excite a general interest. ae / The Present Rule and its General Acceptance. a .. For many years since the enactment of the Bankruptey Act of 1898, it has been the general view that under the. ordinary form of leases exacted by landlords, claims for future rent or wi damages for breach of lease obligations are neither provable nor dischargeable in bankruptcy. For ' the second circuit, the question was deemed decided in 1910 in In.re Roth & Apnel, 181 Fed. 667, which but followed a similar ruling under the Act of 1867 Ea parte Houghton, 1 Lowéll, 554. For the Kighth Circuit including Nebraska it was decided in Watson v. Merrill, 436 Fed. 359 in 1905. In a majority of the circuits the same rule ‘has obtained. Relying upon the doctrine of these cases, credit has been ‘extended for untold millions upon the confident assumption that if bankruptcy of the person obtaining credit ensued, the speculative. claims of landlords for future rent or damages growing out of long term leases would not share .with the ordinary unsecured general creditor in the dis- tribution. of the bankfupt’s assets. . During all the intervening years, landlords have evi- dently been content with this interpretation of the 1898 Act because no evidence is found of any effort either to bring the question to this court for determination or to amend the law until the recent agitation. The very leases here considered were made with knowledge of the existence of the acceptetl and prevailing rule of interpretation of the *For general discussion of the applicability of that case to the situation above described, see “Landlord Claims In Reorganization” by William O. Douglas and Jerome Frank, 42 Yale Law Journal, 1003, 1933. a 4 covenants here involved, The rule. has been considered a fixed rule of bankruptcy upon which all business trans- actions and the extension of credits have been predicated, ’ Under these circumstances, the injustice to the ordinary general creditor of now permitting claims of landlords of many millions of dollars to share pari passu in the dis. — tribution of the bankrupt’s assets, need Ri he enlarged upon. | | In Maynard vy. Elliott, 283 U.S. 273, 277, in discussing the question of the provability of claims against endorsers under certain circumstances and the effect of the estab- lishment of a rule contrary fo that deemed to be in foree, this Court said: , | “Only compelling language in .the statute itself would warrant the rejection of a construction so long and so generally accepted, especially where overturn- ing the established practice would have such far’ reaching consequences as.in the present-instance.”’ That principle of construction is peculiarly applicable here. ~The Question is for Congress. . Perhaps after a careful study of the whole subjeet Congress may for the future provide some fair measure of participation for landlords despite the termination of a lease by re-entry. (See for example suggestions of Com- mittee set forth in footnote on p, 7.) Perhaps.on the other hand Congress may deem thie questions a local one to be determined by each State and that the landlord’s right in bankruptcy should be limited to the Tight to a priority or a lien for rent for a given period, as.is now provided by the statutes of many States and protected by Sections 67 and 64 of the Bankruptcy Act.* Perhaps on the other hand, landlords should be in the same class as tort - niiailtiaiaiaiiie Sain * See for example Martin v. Orgain, 174 Fed. 772 (C. C. A. 5th) upholding a lien for rent accruing after bankruptcy under a Texas statute: 5 claimants or claimants under the Workmen’s Compensa- - tion Act whose claims are neither provable nor discharge- able in bankruptcy.. i Schall v. Camors, 251 U. 8. 239; Lane v. Industrial Com’r of New York, 54 Fed. (2d) 338. In Schall v. Camors, supra, as the briefs show, it was strenuously argued that tort claims should be provable in bankruptcy; that it was the underlying purpose of the ~ Bankruptey Act to permit all creditors to share in the bankrupt estate; that claims which are not provable are not discharged; and that it was contrary to one of the tinderlying purposes of the Bankruptey Act to deny the right to prove such claims because as a result the bank- rupt would not be discharged. | Despite all this argument, this court held that it was not the intention under the Act of 1898 to allow. ordinary tort claims based on nonfeasance or malfeasance without unjust enrichment to be proved and held if any remedy were needed, it was a question for Congress. Although fourteen years have elapsed since that decision, no amend- ment has been passed or agitated looking forthe allowange of tort claims in bankruptcy. Broadly speaking, it is as unjust to tort claimants to deprive them of their right to share in the assets of the corporate bankrupt as it is claimed to be unjust to a land- lord, and it is unjust to the individual bankrupt to keep ‘alive against him-claims in tort (not resulting in unjust enrichment) as it is to keep alive lease obligations. | Accordingly, whether and to what extent there _— be a change in this situation is obviously a legislative and not a judicial question. It is a question upon which differ- ent minds may differ radically. For example, the attempt to speculate-upon and presently determine future damages * growing out of the breach of long term leases, and the in- clusion of the amount of an expert’s guess of such dam- C. ee C . ages, as a provable claim to cut down the dividends of “ other creditors, may well result in the curtailing of credit in the future unless long term leases are abolished. Whether ~~ the landlords themselves would désire such a result may. well be doubted. ‘ Fixed legal rules; acquiesced in and relied upon in every day commercial transactions for a long-period of time may be changed by Congress i in the future after full consider- ation, but injustice and hardship must result if these rules are changed for the past by a reversal of the long acecepted rule unless required by ‘compelling language ip the stat- ute.’’ That there is none such but that on the comtrary Congress did not intend to include such claims as provable debts will be shown perearier. - Pending Legislation. | At the very last session of Congress, a bill'was intro- duced H.R. 5884 (73rd Congress, 1st Session), which in- cluded a provision for the amendment of Sectioy’63 of the Bankruptcy Act so as to provide for the inclusjon of prov- able debts of claims upon workmen’s compensation awards and claims for damages upon leases.’ The bill did not pass. At this very time there is also’ under consideration* the third tentative drfft of amendments to the Bankruptcy Act proposed by a representative committee under the lead of Paul H. King, Esq., Chairman of the Committee on Bank- ruptcy of the Michigan State Bar Association and Chair- man of the Comniittee on Uniformity | of Practige of the Na- tional Association-of Referees in Bankruptcy” That Coni- mittee’s recommendations with respect to the provability Sec. 4. (a) Section 63() of the Act of July 1, 1898, entitled ‘An ‘Act to establish a uniform system of bankruptcy throughout the United States’ ap - proved July 1, 1898, as amended, is amended to read as follows: * * (6) founded upon an award of an industrial “accident commission, or other Commission, body or officer, of any State or. Territory having power or jurisdiction to make awards as workmen’ $s compensation in case of injury or death for injury prior to adjudication; and (7) claims for damages réspect- ing executory contracts including future rent whether the bankrupt be an — individual or a-corporation, which came shall be liquidated under section 63(b) of this Act.” ; 7 of claims growing out of leases set forth below show that the competent draftsmen are aware of the possible injustice fo other creditors in permitting landlords to prove claims for future rent as suggested in’ H. R. 5884 (73rd Congress) quoted at page 6 supra, or for damages for breach of an entire lease.” ‘The whole subject should be left to Congress for further ‘consideration. > ean ?The Committee includes Mr. James A. McLaughlin of the Harvard Law School, Mr. Peter B. Olney, Jr., a New. York Referee, Mr. Harold Reming- ton; author of Remington on Bankruptcy, and Mr. Edwin S. S. Sunderland of the law firm of Davis, Polk, Wardwell, Gardiner & Reed. The third tentative draft of amendments. of that Committee contains the following addition to Section 70 of the Bankruptcy Act: - “bh The adjudication in bankruptcy shall constitute an anticipatory breach as of the date of the petition, without regard to the actionability of anticipatory breaches under state law, of any contract non-assignable on the part of the bankrupt or not adopted by a trustee within a reasonable time after his qualification and within four months after the adjudication whether a trustee has qualified or not. An unexpired lease of real or per- sonal property is an executory. contract within the meaning of this para- graph and ¢laims for loss of the unexpired portion thereof shall be provable if either party become bankrupt. A discharge shall relieve a bankrupt of all a leages or other executory contracts entered into before the petitiorNexcept as otherwise provided in Section 17. The . bankruptcy of a landlord, however, shall not work forfeiture of the tenant’s estate and shali give the landlord’s trustee in bankruptcy no elec- tion to terminate the estate. A general covenant’in a lease that it shall not be assigned shall nat be construed to prevent such lease passing to the trustee at his‘ election, but an express covenant that the bankruptcy of a specified party thereto or of either party shall terminate the lease at the election of the other party shall be valid.” It also proposed the following amendment to Section 63(4) of the Act: _“(4) founded@ upon an ‘open account, or upon a contract express or implied, including claims for anticipatory breach, as provided in section 70(b): Provided, however, that a claim of a landlord for anticipatory breach of an unexpired lease of real estate shall in no event be proved or allowed in an amount exceeding the rent reserved by the lease for the year next succeeding the bankruptcy ;” : ao And it proposed the following as Section 63(b) of the Act: ; “b Contingent claims and claims for anticipatory breach shall be barred b discharge, unless submitted under oath for allowance as provided in Sectton 57, and shall be deemed provable unless the court finds the con- tingencies incapable of being fairly estimated, in which event such claims shall not be deemed provable.” - , ; . : And the following as Section 63(c): : “c (b) Unliquidated contingent claims and claims for anticipatory breach of contract (claims against the bankrupt) may (, pursuant to ap- plication to the court,) be liquidated in such manner as (it) the court. shall direct. (, and may thereafter be proved and allowed against his es- tate.) The liquidation of a contingent claim, or a claim for anti¢ipato breach of contract, may be postponed until it appears whether or not ‘suc claim is to become capable of being fairly estimated without unduly de- laying the administration of the estate.” Words proposed to be deleted from the ‘present Act are enclosed in parenthesis. . é' WOT ARON GT om 5 we aa) Sal SOOT 7 ~ ; The Question Presented in these - | Two Cases. | -Because of the partulr. covenant tai ‘in the particular leases here involved, these two cases do not ‘ | * present the broad question whether claims for future rent are provable in bankruptcy.* They do not present the ques- | . tion whether under some form of covenant not contained in these cases provabl. claims for damages might be presented. Obviously these cases present the sole question whether the courts below erred in expunging the particular : claims predicated upon the particular covenants in the | leases between the claimants and the bankrupt which cove-- « nants expressly contemplated bankruptcy of the tenant and provided for the rights and obligations flowing therefrom. _ { BRIEF OF THE ARGUMENT. #8 > The provability of claims must be determined as of the ' date of the filing of the petition in bankruptcy. On that day each creditor with a provable claim gets an interest in rem in the assets of the bankrupt. -¢ ~~ HL. The leases here involved contemplated the possible bankruptcy of the tenants and contained express covenants - of indemnification against loss, fixing thé landlords’ rights ~ and the method and time of enforcement of the tenants’ obligations in such event. There is therefore no basis for attempting to invoke the doctrine of anticipatory breach of contract on the theory of implied cover.ants against go- ing into bankruptcy as was done in the Chicago Auditorium case, 240 U.S. 581.° These express covenants measure the '* See infra, page 30. ‘landlords’ rights and do not create a provable claim. The decisions of the New York Court of Appeals and two un- - reported and clearly reasoned decisions support’ these views. Nor can thera, be an anticipatory breach of these express covenants by bankruptcy because the cevenants only became effective upon the tenants’ bankruptcy and could not be breached by that very fact.¢ III. 4 - 6 Even if the foregoing contentions are not sustained then nevertheless the claims under the covenants are. 80 . contingent that they are not provaple. Congress by omit- ting the provisions for the proof of contingent claims con-: tained in the 1867 Act intended. that such claims should / not be provable and the omitted provisions cannot be put back by constriction. ‘The decided cases, too, show that such claims are contingent and not provable. Maynard v. Elliott, 283 U. S. 273, does not militate against but on: ane contrary ‘supports these views. e a o IV. ‘ The petitioners’ brief, asks this — to disregard ~ history, precedent and vale -of statutory construction and to make all claims for loss of future rent provable irrespec- _ tive of covenants and irrespective of their reentry upon the leased premises. Their argument leads to impossible re- - sults. Obviously the whole question is for Congress. — vz. € The amendments of 1933 do not make the claims prov- able. The provisidns are not retroactive and could not be made so. % fo -. POINT! - .,,.:* Provable debts include only those pre at the fling Of the petition in bankruptcy. . - d The foregoing rule is established by the ss. Say In Wdliams v. U.S. Fidelity & G. Co. , 236 U. S. 549, 556, , e this Court said: ‘ ‘Within the inteflament of the _ provable debts include all liabilities of the bankrupt founded on contract, express or implied, which at the time _. of the bankruptey were fixed in anfount or suscep- * ° tible ef liquidation. Dunbar v. Dunbar, 190 U. 8.™ _ 340, 350; Crawford v. Burke, 195 U. S. 176,. 187; Grant Shoe Co. Laird, 212 U.S. 445, 448; Zavelo v. Reeves, 227 U.S. -, 631.” In Zavelo v. Reeves, a U.. s. 625, the hidialials be- tween the filing of the petition arid his discharge agreed to pay one of his provable debts: “The question was whether the debt. was discharged. This court held that it was not, . and in the course of its opinion, said at page 631: «¢ , ‘‘But, reading the whole of Section 63, and con- _ . sidering it’ in connection with the spirit and purpose ‘of the act, we-deem it plain: that the debts founded ‘upon open account or upon contract, express or im- plied, that are provable under Section 63a 4 include only such_as-existed at the time of the filing* of the petition in bankruptcy. This court in effect adopted that construction when, in promulgating the General Qrders and Forms in Bankruptcy, 1898, under the authority conferred by Section 30, a form of dis- , charge was prescribed (Forms in Bankruptcy, No. — .. 59) by which it is ordered that the bankrupt ‘be, discharged from all debts andclaims which are made provable by said acts against his estate, and which. existed on the day of ____.— A.D. ‘on which day the petition for adjudication was filed | him; excepting such debts as are by law excepted | *Italics supplied throughout. 11 from. the operation of a discharge in bankruptcy’. . And the forms prescribed for proof of debts all de- clare that the indebtedness existed ‘at, and before the filing of the said petition’. Forms 81 to 36 inclusive: The General Orders and Forms,¢tc., are to be found. in 172 U. S. Appendix; 89 Fed. Rep., Preface; 32 C. C. A. Preface; 3-Foster’s Fed. Pract. (4th ed.) 9526, 2559;°2572.”" eo / And in Maynard v. Elliott, 283 U.S. 273, 275, this Court said: . ‘‘ Although the omission of any reference to con- tingent claims in Section 63 of the present Act has . -led to some confusion and uncertainty in. the de- cisions, it is now settled that claims founded upon contract, which at the time of the bankruptcy are fixed in amount or susceptible of liquidation, may be proved under subdivision (a) (4) of that section; _ althou&h not absolutely owing when the petition is filed.’’ : : . al —_— The statement in the-latter case that fhe claim ‘need not be ‘‘absolutely owing’, when the petition is filed per- haps overlooks the requirement of Section 57(a) of the Act, which provides as follows: ; v ‘‘Proof of claims shall consist-ef a statement under oath, in. writing, signed by a creditor setting forth. the claim, the consideration therefor, and whether any, and, if so what, securities are held therefor, and whether any, and, if so what, payments | have been made:thereon, and that the sum claimed is justly.ow1ne from the bankrupt to the creditor.’’ . One of the reasons for the rule that the date of the | filing of the petition is the date upon which provability of. claims must ‘be determined, is that upon the filing of the bankruptcy petition (followed of course by adjudica- tion) each creditor with a provable claim gets a right in rem in the assets of the bankrupt which is_in the nature of a lien upon such part of the property of the bankrupt~ - 12. ” —- - as the amount of the ovediter's s provable claim bears at— that time to the entire amount of the provable claims. This : is a vested right i in property. Board of Commissioners y..Hurley, 169 Fed. 92; » Chemical Bank v. Armstrong, 59 Fed. 372 2, 378; i, Sexton v. Dreyfus, 219 U.S. 339, 345. _ Again the whole scheme of the Bankruptey Act‘is that * the date of the filing of the petition is the date for deter- mining the substantive rights of the parties. -Thus where a bankrupt dies after the filing of a petition and even before adjudication, the Trustee gets only the surrender value of life insurance policies and the remainder of the proceeds of the policy goes to the beneficiary. Everett v. Judson, 298 U. S. 474. And where a creditor has a die against a principal and surety ang both are in bankruptey, the creditor’s rights against the two est tes are fixed as of the time of the filing | of the petition. - Board of Commissioners v. Hurley, Supra, ~ So,. too; as to the vesting of title in the’ Trustee under ~ Section 70 ‘of the Bankruptey Actas construed in 1 the Jue som case. _ + _In the light of this pane it wall be shown that at the time of the filing of the petition in bankruptcy neither claimant kere had:a provable eee in. bankruptcy. v POINT II.) | e ‘The leases here involved oitiesiateted the possible | bankruptcy of the tenants and contained express cove- ‘nants fixing the landlords’ rights and the tenant’s obli- gations in such event. There is, therefore, no basis for attempting to invoke the doctrine of anticipatory + breach of contract-on the theory of an implied cove- nant against going into bankryptcy.. These express. covenants measure the landlord’s rights and do not cre- ate a provable claim. 7 , ‘ In the leading case of Cenfral Trust ‘Co. v. Chicago Auditorium Association, 240 U. S. 581, this Court held that - . the bankruptcy of the transfer company constituted an anticipatory breach of its contract to furnish service to the Auditorium .flotel because the bankruptcy stripped the ‘transfer company of its assets which were needed in the performance of the contract and therefore disabled it from - performing its obligation. The very basis of the court’s ~ decision was found in the following sentence: ‘In short, it’must be deemed an. implied term of eyery contract that the promisor will’not permit him- self, through insolvency or acts of bankruptcy, to be disabled from making’ performance;. and, in this view, bankruptcy proceedings are but the natural - and legal consequence of something done or omitted” to be done by the bankrupt, in violation ‘of his engagement.’’ 240 U. S. at 591. In the present cases, the situation is wholly different.’ Unlike the Auditorium case the parties here did not im-. - pliedly undertake with respect to bankruptcy and leave it: to the law to determine their rights. On the contrary ee contemplated ‘the possibility of bankruptcy of the tenant and expressly provided the rights and obligations which should flow therefrom. The leases, presumably con- taining clauses exacted. by the landlords, provided that the - ‘ " - ‘ ~ P ° ” be a tyne eee / - - 7 ¢ , Be eg PP ELLE DIIGO LE MOS ies et : f “ ¥ : ' . [ADELE PRB * 14 bankruptcy a the tenant shofld be an act of default, and provaded that* thereupon the Jandlord’ at his option might . re-enter the premises ; and provided that in the event’ of | such re-entry in the one case (#595, Record, p. 12) ‘that . the tenant would pay at the end of each*month the differ- ence between the reserved rental and the avails of reletting, and in the other case (#506, Record, p. 28) that the tenant would ‘‘indemnify’’ the lesset against all loss of rent which * the landlord might incur by reason of the termination dur- ing the residue of the term. The parties having thus ex- ‘pressly’ provided for thé rights and .the remedies flowing rom the. tenant’s bankruptcy, there cannot be implied either in law or in fact any other remedy or any measure of damages "3 than that so’solemnly contracted for. In Miller ¥. Schloss, 218.N. Y. 400, the New York Court of Appeals said at page 406: ‘‘A contract cannot be implied in fact. where the - facts are inconsistent with its existence; or against ' the declaration of the party to be charged ; or where. there is an express contract covering the subject * matter involved; or against the intention or under- _ standing of the parties; or where an express.promise’ would be contrary to law.. The assent of the’person. to be charged is necessary and unless he has con- ducted himself in such manner that his assent may _fairly'be inferred he has not contracted (Morse v. Kenney, 87 Vt. 445; Mathie v. Hancock, 78 Vt. 414; Hertzog v. Hertzog, 29 Pa. St. 465; Earle v. Coburn, 130 Mass: 596; Central Bridge Corporation v. ae. oe batt, 4 Cush. 473): a This general wabesbibi has — been applied to the situation here presented by the New York Court of | Appeals in McCready v. Lindenborn, 172 N. Y. 400.» When read together the bill .of complaint ant the bill __of particulars as pointed out by the Court of Appeals, , set forth three causes of action—‘‘one for rent aecrued, a second for breach of covenant to pay the deficiency, and a third cause of action dha! a total breach of. the S aS : lease. ’” In that case, ‘as here, the’ lease provided that the pay rent “gone that if he did so the hould become | liable to pay him by way of dama; h@Aifference be- tween the amount of rent reservéd and amounts of rents which shall be: A receivefl or might with due diligence be epllected and received from said demised. premises during the-#esidue of said term remaining un- expired at or immediately before the time of such re-entry _*—in equal monthly payments as the amount of such differ- ence shall from time to time be ascertained’. And in that ° case, As here, the landlord instead of. telying- upon the ‘remedy given him by the lease tried to rely on a common law right to treat the lessee’s non-payment of rent and ‘repudiation of his rent covenant as a breach of the entire .’ ' lease so that he might retake possession .and sue at once for damages for breach of the entire lease. Theré, as here, the landlord preferred the common law, right, if there was one, of suing at ene time for-damagé@# for breach of the whole tease to the right given him by the lease which was to sue from month to month as and if there was a differ- ’ ence between the amount of rent reserved and the amounts collected from the premises on a re-letting. : The trial court, however, ruled that plaintiff, i in being: ing action for damages for breach of the entire lease was premature and refused to permit plaintiff to introduce evi- dence as to her damages. ~ Thereupon, plaintiff took excep-_ tions to the Appellate Division which reversed the tria court and held that the plaintiff at common law could treat the non-payment:of rent and the lessee’s repudiation as a breach of the entire lease and could: re-enter and sue for damages for such breach at once and that she did not have .. .-to rely on the remediés given her by the covenants of the _ lease. The Appellate Division said, 63 App. Div. 106, 111: ‘By the commencement of this action, however, the plaintiff. alleged a total breach of the le e by the defendant and sought to recover in this pare the damages sustained by reason of the breach. The : ae ree ec action was not brought to enforce the covenant to - pay rent. There can pe no doubt but that the plain- tiff would have had the right: under the covenants contained in-this lease to re-enter to lease the prop- erty and to recover under the lease the difference betaveen the rent reserved and the amount that she was’able to realize from the property? She did not . adoptthat course, but elected to treat the act of the defendant as a total breach of the lease and to re- - cover in one action the damages sustained by such breach, and the question is whether or not such an action can be maintained, The distinction between an a¢tion to recover money due under an agreement and an action to recover the damages sustained by a breath of the agreement, is well recognized. The legal effect of a breach of a contract of hiring for a definite period and the right of a party to it after such breach was exhaustively examined by the court in. Howard v, Daly (61 N. Y. 362). In that case, it was held that ‘A servant wrongfully discharged has but two reme ses growing out of the wrongful aet: (1) He may-treat the contract of hiring as continu- ing, though broken by. the master, and may recover damages for the breach. (2) He may rescind ‘the contract; in which-case he could sue on a quantum meruit, for services actually rendered. These reme- dies are independent of and additional to his right to sue for wages, for sums actually earned and due by the terms of the. contract.’ The learned judge also examined the rule to be applied in case of the de- fendant’s repudiation of the contract at the time of entering into the service, and he held, following the eases of Hochster v. De La Tour (2 El. & Bl. 678) and Frost v. Knight (L. R. (7 Exch.) 111 revg. S. C. L. R. (5 Exch.) 322), that the opposite party has an option either to treat the contract as subsisting, and when the day arrives for commencing to serve to offer to perform, or to regard it as immediately broken, and to sue before the day arrives. This dis- tinction between an action to recover damages for | the breach of a contract which is in its character © executory, containing mutual covenants by the con- tracting parties, and an action to enforce the cove- . nants and agreement of such a contract is recognized =~ in all the cages, and is based upon the right of a. - gs 4 . — . A Ww } ¢ , party to such«an agreement to elect whether he will _ consider the contract as broken and. destroyed, and = demand in oné action thé damages sustained, or, not- withstanding the refusal of one party to carry out: the contract, will bring an action to enforce its cove- nants. I can see no reason why this principle should not apply to a leasé as well as to any other contract - which is in its nature es utory, or which contains obligations to be performed in the future. Undoubt- edly in this case the plaintiff could under the.cove- nants in the lease have re-entered and recovered rom the defendant the difference between the rent — reserved and the amount realized from the property. “But upon what principle was the plaintiff confined to such a course? What wagthere to prevent her from ’ treating this refusal of the defendant to enter into possession of the premises and comply with the con- ditions of the lease as a total breach, and sue him for the damages thereby sustained?’’ _ From this ruling, the defendant appealed and the Court of Appeals rejected the entire argument of the Court bélow. _The Court of Appeals ruled that at common law the landlord could not treat non-payment of. rent and repudia- tion as a breach of the entire lease, and consequently that plaintiff could mot at once sue for damages for breach of remedy was that provided by the le a2 namely, to sue for ge the entire lease. The Court ruled ; at plaintiff’s only | month to month as.a deficiency between the agreed rental and the ammount collected from the premises appeared. The Court of Appeals at pages 408, 409, said: ‘We do not sustain the theory upon which the majority of the learned judges of the Appellate Di-: vision proceeded to judgment, ‘to wit, that an action will lie for the breach of the lease as an entirety and the recovery of all .the amazes in a single — brought before the exp! von of the term. the breach of an.agreement to pay money in installments ‘s not a breach of the entire contract and will not permit a rec-very of all the damages in advance -18 (Wharton & Co. v. Winch, 140 N. Y. 287; Moore v. Taylor, 42 Hun, 45.) So far as appears, the failire to pay the rent was the only breach af which the de- ¢ w fendantwas guilty, far he was under no legal obliga- tion to beeupy the demised premises, Kiven: if he refused to recognize the lease as in foree, because, as he claimed, the plaintiff failed to make the altera- _ tions provided for, this} was not a violation of any covenant that he had entered into. His breach con- _ sisted simply of a failure to pay money in monthly installments. In Wharton & Co... Winch (supra) - it was held that where a contract Ki or -railroad con- struction provides for payment in installments as the — work progresses, a- failure ‘to: pay an installment when ba is not such a breach of the entire contract as to authorize the contractor to refuse to proceed further and to recover the profits which he would have earned had the contract been fully. performed. So if a mortgagor refuses to pay the installments as they fall due upon a mortgage given by him, and even if he refuses to recognize the mortgage as in force for some reason, the mortgagee cannot, in the .ab- sence of a special provision. permitting it, call the whole mortgage due upon the ground of an entire breach. a ‘‘There scems to be a cistinction, whether well grounded in principle or not, between a contract for the payment of money in future installments and a contract for the delivery of goods in future install-— - ments (Nichols rv. Scranton Steel Company, 137 N. Y. 471), as well as a contract for future employment and service. (Howard vr. Daly, 61 N. Y. 362.) We think that the contract before us should be governed in this respect by the principle laid down in Wharton a - Co. v. Winch (supra). we _And then the Court added the following most significant statement: ‘* Aside from, this, however, when the parties by their contract provide for the consequences-0f a breach, lay down a rule to admeasure the damages and agree when they are to be paid, the remedy thus provided must be exclusively followed.’’ . =. seeeneeeiemmesmnaten Pas it: ahs J - 19 Thus with respect to the effect of the covenant to pay “damages at the end.of each month, the Court held that there could be.no recovery until the damages had actually ac- erued and then only, in the mode provided for in the cove- nant itself. This case has been cited with approval in later New York Cases. And the same principles have been held applicable in a case. where a covenant provided for ‘*in- demnity’’. rather than for the admeasurement of damages atthe end of cach month. | Hermitage Co. v. Levine, 248-N. Y. 333. In re Wise Shoes, Inc., 2 Fed. Supp. 521, affirmed without opinion 64 Fed. (2d) 1023. So also in the instant case the claims cannot be proved — and allowed because to do so would be contrary to the con-. tracts between the parties which expressly provided for - damages measured by the loss actually to be suffered in the future as determined by a reletting. Obviously before — any payment can be made to these claimants, their :con- tract requires that this loss must be ascertained. ‘Thus in at least two equity receiverships in the lower federal courts, claims similar to those of the creditors here, were held not provable on the ground just stated. In the Equity Receivership of J. M. Gidding & Co. the Southern District of New York (Charles H. Mears, plaintiff, against J. M. Gidding & Co. Ine. defendant, Equity 27-141), the landlord filed a claim upon a lease con- taining a covenant practically identical with that in No. 505. The claim of the landlerd and the Receiver’s objections | | thereto.were referred to the late Wallace Macfarlane of the New. York Bar as Special Master. His report disallowing the claim (to winch no exception was taken), although only the report of a Special Master, is quoted in part below because of his preeminence at the New York Bar and the » clarity and force of his reasoning. The opinion in its en- tirety is annexed hereto at page 58.. 7 i ate nace manana creas ieee: NT aL ee a 20 © In that case, a claim for $36,497. was filed for damages representing the loss for the unexpired term. The Master said: : 7 ~ “This item of $36,497. represents the excess of the total rent reserved for the unexpired term over the alleged estimated value thereof, which is stated . in the claim (Ex. 1, subd. 13) to be $13,000. per an- num. It is expressly claimed, however, as damages sustained by the lessor under the lessee’s covenant to continue to be liable after the termination of the lease for a sum equivalent to the amount of all the rent ‘reserved in the lease less the avails of reletting, such damages to be due and payable by the lessee on the several rent days specified in the lease (claim, ex. 1., subds. 11-13). | ‘“‘The receiver has objected to this item on ‘the ground that the lessee’s covenant for continuing lia-_ bility after reentry of the landlord provides specifi- cally not only that the measure of damages should be the equivalent of the difference between the rent reserved and the ayatls of reletting, but also that such damages, so measured, ‘should be due and pay- able by the lessee to the lessor'upon the several rent days hereinbefore specified’, that is to say, on the first days of June, September, December and March in each year; that this provision was exclusive of any other measure of damagés, and that the lessor was not entitled to claim a present lump sum equal to the excess of the total rent reserved for the unexpired term over the present value-of such a lease for the years it has stil to run determined by expert testi- ‘ fo. 7 > * ‘Tt seems to be apmitten in ‘the briefs filed with the master on behalf of the.claimant that if her right to damages must be determined by the language of the lessee’s covenant for continuing liability, the claim now made by her under that covenant will not \ be provable; byt it is argued that the receivership and the insolvency of the lessee constitute an antici- patory breach of this covenant, relieving’ the:lesgor | from its provisions in respect to payment of dam- . ages and entitling her to prove her whole damages as of the present time in a lump sum on the basis of " a comparison between the present value of. the unex- 21. y pired term and the rent reserved for the seventeen years that the lease has still torun. * * *° : “The lessee’s alleged ‘anftcipatory. breach’ of the covenants of the lease to pay rent and taxes and perform other obligations as tenani, was a conse- quence of its insolvency and the recei ership. The lessee thereby became unable, and the receiver re- fused, to perform any longer the covenants of the lease imposing obligations upon the lessee as ten- ant. This breach led to the termination of the lease _ and the annulment of the relation of landlord and tenant. The termination of the lease and the re- entry by thé landlord through summary proceed- ings brought into active operation the agreement continuing the personal liability of the lessee, which, though contained in Hie lease, was wholly uncon- — nected with the use of the land. This special agree- ment provides with completeness and precision just what the continuing liability of the former tenant for . damages should be, how the damages should be as- certained and even when they should become due and payable. Without this special agreement, the ten- ant, after the reentry of the landlord by summary proceedings would have been under no further lta- bility at all arising out of the lease proper. (C. P. A. 1434, Hall v. Gould, 13 N. Y. 127; Michaels v. Fishel, 169 N. Y. 381, 387; Gardiner v. Butler, 245-U. 8. 603. — “To say that the anticipatory breach arising from the receivership, as a consequence of which the. landlord reentered and annulled the lease, was also - a breach of the special agreement of the parties pro- viding what their respective rights and liabilities should be upon such a reentry for such a breach, is an untenable argument. The anticipatory breach in this case affected thé special agreement for continu- ing liability only by giving,it vitality and operative eo. ua ‘“‘4s already shown, the alleged anticipatory breach resulting from. the insolvency of Gidding & Co. and the appointment of a recewer, was not a breach of the covenant for continuing liability but operated, through the consequent annulment of the lease, to make that covenant effective. * * *— ‘‘Other authorities cited in the briefs, while de- * «> ciding questions analogous to that presented by this “ Ba Rene name ns — : ; : eR LEAL ALLO EAS ALLO OR BS Caras fe é ‘ “ “ wowy Sates! «5 i ’ ee “* ’ 22 claim, are clearly distinguishable. Those that in- volve the construction of a lessee’s covenants for continuing liability after reentry of the landlord and — . termination of the lease necessarily turn upon the form of the covenant, and it will be found that ap- ‘parent differences in the decisions are. satisfactorily explained arid reconciled by comparison of the cove- nants involved. In Filene’s Sons Co. v. Weed, 245 U. S. 598 and in the first claim allowed in Gardiner v. Butler € Co., 245 U. S. 603, the lessee agreed, in the event of reentity and the termination of the lease, to pay the difference between the rental value and the rent and other payments named in the lease for © the residue of the term. These covenants were, as the court held, agreements between the parties that: the evicted lessee should be liable for a present: pay- ment computed according to the familiar rule of datyages accruing to a lessor far loss of the profits of the unexpired term. In such eases,.the contract provides for a present claim determingd precisely in accordance with an agreed rule. On the other hand, where the case presents a covenant which provides that the tenant shall remain liable during the unéx- pired term for’ the amount, or the ‘equivalent’ of the amount, of all the rent reserved less the avails of reletting, without any provision for periodic set- tlements, the decisions hold with substantial uni- _formity, that the lessor has no right of action until the completion of the unexpired term, because until that time comes itis impossible to determine what the damages will be, or whether there will .be any damages at all’ ( Seidlitz v. Auerbach, 186 App... . Div. 7, 13 rev. 230 N. Y. 167; Matter of Hevenor, 144 N. Y: 271; Harding ‘v. Austin, 93 App. Div. ‘564 Substantially similar are the bankruptcy oo upon covenants which take the form of an agree- ment by the tenant to indemnify the lessor ‘during ' the residue of the term for loss of rent and other payments incurred by the termination of the lease. (In're Ells, 98 Fed. 967; In re Shaffer, 124 Fed. 111). ene “This item of damages, therefore, in the claim presented to the receiver should be disallowed, not because, it is contingent and uncertain, but because it-is contrary to the contract between the parties, s.. which expressly provides for damages nae by the difference between the rent reserved and the rent — actually recewed from time to time on reletting, to be ascertained and paid quarterly.. Obviously, be- fore it can be paid, it must be ascertained. Un- doubtedly, any claim in conformity with the contract covering any period except the quarter falling due March 1, 1924, would ‘have ‘eel ‘uncertain, dnd in- deed impossible of estimation, and therefore wholly contingent, because the rents that would be received in future period could not be known and the avails of reletting might in many quarters exceed the rent reserved. 7 — ae The:.same. conclusion was — a Circuit Judge Julian W. Mack, while sitting in the District Court in « New York, in an unreported opinion in Western Electric Co. v. Powers Accounting Machine Co. Equity 19-150 copy pf which opinion is annexed hereto at page 53. There Judge Mack in refusing to hold provable in equity a claim aumilar to that in No. 506, said: ‘*Nor can the Court adopt some other readily as- certainable measure of.damages such as the one that would have prevailed but for express specification of the method of determining the damages. The Court cannot alter the contractual provisions; the parties have not agreed that the lessee shall be liable for damages and then merely suggested a method of fixing them; they have provided that on such termi-. nation, when but for the provision no damages could be claimed, the lessee ‘shall be liable for any. loss or deficiency of rent which may be suffered.’ ‘«Not only is there therefore no basis for the claim as filed for the full reserved rent, but even if it were amended so as to charge an actual termination of the lease and in respect to damages therefor to assert, - contrary to the contractual provisions a right to the. 7 _ difference between the rents reserved and the actual rental value at the time of termination, it would have to be disallowed.’’ From the principle affirmed in the Gidding, Western Electric Co. and McCready cased it follows that the peti- tioners here had no presently due and enforceable claim a “ eo 4 which would have entitled them to bring an action in law or to prove in equity. Their claims were .likewise there- . fore not provable in bankruptcy because as stated by Judge Lowell in Jn Re Pettingill, 137 Fed. 143, 147, and quoted with approval by this Court in the Chicago Auditorium | case, supra, at page 992: | { «