Brief of Respondent in Opposition to Petition for Certiorari — Finn v. Meighan

ty Pocespivos FOR ‘Rezo TION UNDER Cuérren X ©

; ‘or THe Ban oy Acr. —

ON 0. 82,868.

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_ JOHN F. i: FINN, a8 Trustee. te Cnn

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: BERTON: ¢ -MEIGHAN, JR., ‘as Substituted Trastes

under the Last Will and Testament of © WILLIAM T.

woo, Deceased, \ or .

: BRIEF OF ‘RESPONDENT OPPOSING PETITION

birwcad bsanied ceed coeminaresmansn

.“ Burton C.- Merenan, JR., sf

Cquneet for Respondent.

Meionan & Necarsutmer, Esqs.,

Allechoys for ee

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l. Oennsie ihtow! cot ial SE READE IG Re OND Ee RSME AIOE

I]. ‘STATEMENT OF Case EATS BO hee PMO RIOD a 3

I. ARGUMENT RS OR LA Vee ORE eS eet 3-9

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(A) The ‘decision ot the Circuit. Court of*

Appeals for the -Sixth Circuit, r reported ' in,

110 Fed: (2nd) 850 is not in conflict with the

decision of the. Cireuit C ourt, ot Appeals

: for the Second Circuit -in | the | instant

matter (not as yet officially reported) ee

forth in, Record at pages 63 3, 6)... ec | ae

(B) The filing, and the approval by i District

Court, of the petitioit by Childs Company

for reorganfation under Chapter X of the

Bankruptey Act terminated’ the lease pur-

suant to and by virtue of the forfeiture .-

provisions contained i in said lease........... VOR “6

W. ‘Coscivsiox Bis as haaslal shi dilccethaddaceaesbae ss eleicieae eateeivesies 9

| Table of Cases Cited

. Denike ¢. tou York Lime and Cement Company, ()

X. Y. RI a oo RCE ANE eo OE MEETS ts a EE 6

French xv. Andrews, 81.Hun 272, aff’d 14) N.Y. 441: + 6

Hood v. Guaranty Trost: Co.,:270 N. Y. 17......... and. ae

: Simmons v. National Tool Co.- (C.C.A. 6}, 110 Fed.”

Be Ns aiaclapiecs pedis aehocihacaiietiehan djaoeadiceendcidotAésinlassnabiomncdhcess 3

base v. Third National Bank, 46 Hun 99, aff ‘d 122°

r,” F: GO ..,: , om laine agnosie ciananinnanistan ceca’ 6

ii

é kee ‘PAG

Thompson v. Consolidates (ias Co., 300 U. §. 8b. Liecueiaks oe s

. In re Walker (C.C.A. 2).98 Fed. (dig) 288.25, 6.7)

Wilcox r. Goess , 16 Fed. (Supp.) : SPEER NE SO De Aa 7

In re Wil-tow Cafeterias, 22 Fed."(Supp.) 617; rev'd’

on another. serge 95 Feds (2nd) 306 (C «. A. .2),

SS © BET nine neceeneyeenccnntnnncnnens jtonneeety Fy B |

Statutes Cited |

Section 530, Title 11, U.S.C.A.- SOc ne eal pear eaes a

Section 541, IRIS fA Ie: sinseinsntcntnerinmnnialinns ae -

‘Section 15, New ‘York Stock Corporation’ Law_.___..... 6

Section 71, New York-General Corporation Law... 4

Section 156, Subdivision 3 New: York Personal

en a ee a aA DI” EI DET CneI SCE Mrtoeen > —6

New York Debtor-C reditor Ra aceNe aoa ei als 7

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‘Supreme Court. of the Huited States

: Octoper TERM, 1944 , No. 953 :

7 : Pup \ - ~~ et . oF

In THe Matrer

ae

JN 2 2 GEIEDs COMPANY; | iret

Wil ec eat ak ee Ne |

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SS Prockenisas FOR "Heoscawmanion- UNDER -CHAPTER ee

-or THE Bankruptcy ACT. :

No. 82,868.

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JOHN F. x FINN, as s Trastée of Childs” phan.

. Petitioner,

tone ss wv. ; it

BURTON C. MEIGHAN, JR., as Substituted Trustee

* under the Last ‘Will and’ Testament - ‘of WILLIAM T.

WOOD, Deceased, se

Respondent

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BRIEF - OF RESPONDENT OPPOSING, ‘PETIT ION

FOR WRIT OF CERTIO

To 0 the Honorable the Chief Justice and Ussociate Jus.

Hoo of the Supreme it of the ened, States:

ee L. Opinions Below’

The opinion of the Circuit Court. of Appeals (per .

Swan, C.J.) appears in the Record at pages 63-65. and

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SATA RY SG RE 9 BOS LAE NT IORI IE EY OO

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has not as yet. been officially reported. The opinion of

the District. Court is found in the Record at pages 31-55

By ‘and has not as yet been’ — reported. '

Ak Statement of Cane:

- The respondent makes no objection* to “the statement

of the éase in the petition.

The sole issue before the Circuit Court of Appeals’

“for .the Second Cirenit concerned ‘the correctness of the —

District Court in construing the clause, ‘‘if the tenant

shall be adjudged bankrupt or insolvent hy any: court’

to-apply to the order of the bankruptcy. court approving

‘the petition. of Childs Company in reorganisation and

appointing a -trustee. .

This case does not present any question falling within

the category of those defined in. Rule 38 of this court as.

appropriate for certicrari. :

The conflict, alleged. by petitioner. t¢ exist betwee.

.. the Second Circuit. and the. Sixth Circuit. is ‘ilusory anc

nonexistent. ;

~ Bvervone_ of the spvsitistinns of error (Brief of

Petitioner, p. 6) states an erroneons a of th

lease relating te cancellation.

A decision .bv this court would: be of no ‘value as :

precedent except in cases involving leases’ with precise)

the same covenants and the same facts. _

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To supportwa_sreal or true éomplic ‘between. circuits =

there must exist comparability of issues. * That situation

does not exist here. |

The sole issue -of. law involved in this sinthar (for-

feiture of lease) is not the same as that which was be-

fore. the ‘Sixth Cireuit im the ‘Simmons wae. In that

‘éase the issue was the right to‘maintain an equity. Suit.

dor damages and profits by reason of an alleged patent

_infring cement. No forfeiture of a i lease or wiher Denier,

was invdlved.° , ,

The license’ agreement, after: pera Nationa! Tool

C ‘ompeiny’ to be the sole owner. of six grinding machines,

‘built. at its own “expense, with the: right to use anid

‘machines jn its factory at Cleveland, Ohio, states, “‘bu

the National Too] Company. shell not have. ‘the right to

sell or dispose of said machines directly gr Indirectly

to any. person ‘or -persons whatever, and in the event of

J Xe bankrupter, insolvency or dissolution of the Nationa!

“Tool C om~auy no title to said machines shall . be vested |

m any recewer or trustee for PUT PUSES of “SINE =

var ‘armdmg shaper cutters (talies supplied. ) ,

. There was nothing in the license. to. pre vent the

‘Natiotial Tool Company, the livensée, alae using the

machines ever while involved in bankrupte) . insulvency -

or dissolution proceedings, or after jts emergence from

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any nis proanbdings. The license ‘Agreement did ‘not

er peowide for forfeiture—it simply prohibited the sale of

the: machines to another or the passage oF title ies the

licensee to any trustee or récewer.

In the instant case the. court’ ideik bink Sndeek: it 2

long-term lease containing -a definite and. unequivocal for-..

~ feiture clause for’ the purpose of determining the scope

of the ‘said forfeitare clause. Rae ,

, The license agreement in, the Simmons case and the

-" forfeiture. clause in the itstant matter are fet at all

: cémparable, and ‘a decision involving the intent of the

parties in one is, of. ne caamaars At to the intent of ‘the’

. parties in the other. (eee iA .

' ‘Petitioner jis manifestly in error in attempting to

-. Support his contention of confict by inferring that th¢

Cirenit Court im the Simons case passed upon a for:

feiture issuer that the appeal from the District Court.

decision inv@ved that issue. @ounsel for Simmons. in

the course of argument before the District Court, stated:

2 “4tNowhere im the bill ‘of complaint was it allered that

“Be pid National Tool ‘Compaiy had forfeited ites geghis —

a > ~. Caiaior. thas bbe se agreement m- question.” ' (iteies- Bc oe

ee ) TE Pistrict Court (opinion not Bcially Zeperted i -

ae *“stafed : ‘No forfeiture is_praved: ae iP ah: |

| The record “in the Simmons. ‘ease Spther ices

- that Simmons and her e€ansel. dad: Het: petition thé, bank-

‘yupiey court, pending sreorganieticn “procopdings. to Ge"

clare a forfeiture of: the 1 ligénse herdement, nor did thes

"file any objections or take any exceptions | to the reotgani-

zation proveedings: It should -also be hoted that the

decree of confirmation provided, ‘‘that the-status of the .

executory contracts.of the debtor describgd in these pro-

ceedings and the rights, ‘privileges’ amd abilities of the

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Bice wore bet

parties hereia with. reppect thereto, as now existing, shall.

not be altered, impaired or afoul by ‘these proceed-

. igs”. (Italics supplied. a e.

~ The basis for the Sen decision was estoppel “As

. the District Court so aptl} put it:

“The question of the debtor's right to continue.

* - under the contract should have been fought out

‘before the master recommended, an@\ the bank- ~~

ruptcy judge approved and confirmed, the plan of _

reorganization which céntinued’ the contract in __

| __ —adorce_and unaffected by reorganization. * ° °

**Plaintiff took nc action whatever in the 77-B

proceedings of the debtor! and took no exceptions

. “and miade °no objections to the findings and report =

. .: . Of the Special- Master. or to. the entering. .of ee

decree of confirmation.””. t.

°

“An examination of the tiie rican’ indicates that er

| anv other decision. by. the District Court or by the Cirenit

Court of Appeals would hare: permitted Simmons to

| attack collaterally the concluded; bankruptcy proceadings.

. The Second Ciréait decisions’ (Jn re Walker, 92 Fed.

“(9nd) 2BSl> In re Willow Cafeterias, 22 Fed. (Supp. )

GI; rer *d op another ground 9 Fed. {2nd) 306, cert. den-

304 T: S: 567) referred to by Simmons im’ her eppea! brief’

were pot eonsid: Ted by the Sixth ( ireuit since they were.

_ DOT pertinent.to the issue in that case: The opinion af

the Sixth Circuit does: net dine bss os even meniicg Dew

_ CRSeS. aia

Petitioner hes assumed & eonfiet, ohed ini fact. none |

exists. bY fragmentary references to the Simmons brie.

and record. Fags gti 4 he tic &

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’ (B) The filing, aide approval by the District

Court, of the petition by Childs:Company for reorganiza-

tion under Chapter X of the Bankruptcy Act terminated ~~

pr why sto ag ayer eg nl lanes anaes aaiaaeed

visions contained in said lease.

‘The approval of the petition Me the debtor hy-the -

District Court below constituted an adjudication uf in-

solvency in that the said debtor-iwas unable to’ pay its

debts as they. matured. Jn re Walker, 93 Fed. (2nd) »

281, U.S.C.A. -§$§530, 541 (Title 11). .

It should be. noted that this lease is a . New York

contract made in 1922. New York definitions of insol-

vency prevailing in 1922 do serve to ‘demonstrate the

interpretations and: meanings of * word. insolvency

w

existing at the time the said le as drawn. For

_ example, the term insolvency used in the Stock Corpora-

‘tion Law (Section 15) has always vonnoted inability to .

meet -obligations as they mature (French v. Andrews, 81.

Hun 272, aff*d 145} =, Y.. 441): Again, the provision in *

' the Generai Corporation Law progiding for dissolution

where the corporation as remain insolvent for at least

ohe year (Section 71) cantemplate ‘failure to pay debts

as they mature (Denike v. New York Lime and. Cement '

Company, 80 N. Y. 399). A further example appears °

‘in the definition - of the word inSelvency in Section 156, -

Subdivision 3, of the Personal Prbperty Law. Further-

more, in the absence of statute, /the term has come to

‘mean inability tq meet obligations as they mature

(Sterrett.v. Third National ‘Bank, 46 Hun 22,” aff’d 122

N. Y. 659; Hood v. Guaranty Trust Co., 270 N.Y. 17; 24).

Petitioner argued below that the definition of insol/

_______veneyin—New York Debtor-Creditor Law, ‘enacted in

se

s insolvency (Wilcox

This court has said in Thompson v. Consolidated Gas 3

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1925, should be read into: the lease. This ‘coniajntion was _

rejected by the court below. The decision beldw is not

* contrary to. any New York decision. Kane -v. Larkin,

cited by petitioner, involved an attempt to set aside «a

preferehtial transfer and not the construction of a lease.

or othtr contract. The Debtor-Creditor Law is ‘limited

to. cases involving conveyances in fraud of creditors and

does not represent 9 general New: York definition - of

vi Goess, 16 Fed. (Supp.) 350).

€o,, 300 U. S. 55, 74, that:

**When not instructed by some decision of a

. state. court, we are disposed’ * * * «to accept

‘the construction given by the lewer federal court °

to a statute of the, State, “particularly when that

court -is composed: “ak: in; this instance, wholly of

citizens of the State, familiar With the history of

the statute, the local conditions to which it applies,

and -the character of the State's laws. ? 2

~ Reliance upon gr eoy? statutes is not necessary,

however, the court . ‘having expressed | itself on

similar lease clauses’ drawniabout the time of the instant.

- lease in holding the word “insolvency”? to mean an ‘in-

_ ability to meet obligations as they mature and not in- -

solvency in the bankruptey sense (In re Wil-low Cafe-—

terias, 95 Fed. (2nd) 306, cert. den. 304 U.S. 567: In re

Walker, 93 Fed. (2nd) 281): | fal Fam

' The contention of petitioner (Petitioner’s Brief, Ist

paragraph, p. 13) that ‘‘insolvext’* as used in the. for-

feiture clause of the lease refers to insolvency in the

bankruptey sense was rejected by the court below: As"

stated by Judge Swan @ Record, p. 65):

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_ Bat sinch a constrifetion would deprive the

words ‘or insolvent by any court’ of all ‘utility;

they, would add nothing to. the | prece eding words

‘adjudged. hankrupt’. *- *. * “Since, the tymeé-

honored meaning of insolvenyy, in the absence of

a-statute specifying another meaning, is inability >”

ature in ordinary,~

sly teasonable Y.

solvent’ in ‘that

Sense already cov-

to feet obligations as they m

course of business, it is egy

suppose ‘that the. parties user

sense rather than in the timate

ered by radjadged bankrupt’.’

: Bptitiones r argues under: Point IT (Brief. of Petitioner,

pp. %10) that the decisian. of the court below tends to—

defeat the very, purpose “of reorganization. proceedings,

and that the question is” novel.

This verve “argument was: made’ by équrisel tor the

debtor in, the Willow Cafeterias ease Lwhen | ‘petitioning

this court for a w rit ‘of certiorari. The petition in. that

vay was denied (/ re Ww d-low Cafe! terias: 304 be wi,

case £967,’ October term, 1937). i deartics eters

‘The qnestion. presented by petitioner is not. novel and

requires no decision ‘by. this: court. The question is not

what constitutes ” insols rency as that word is used in “the

Bankrupteys Act or ‘in state’ statutes but as to the. sense

in: which the word insolvent was used in this partié salar

‘contract. As stated tiy Judge Patterson in the Willow:

Cafeterias ease: ed

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4.

ltt is idle" to discuss the poliey behind’ thy

-. . €naetment of” Section 77-B, the question being not

“\. what the word ~ ‘insolvent’ meant. to “Congress 47),

oko popeing the ‘act but what it meant to the‘ lessor and

we? essee When they “wrote, it into these Aeases.’

Siach: question is not one. deserving the aftention of

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Bb . IV. Conclusion aoa at ey fie

' * Involving as it does cals the interpretation of a Iguse,

consideration of ‘state laws and thé special: facts | this

case, and without any substantial reason to beli e that

error has occurred -or that’ injustice has been done, the é |

petition for:a writ of certiorari should enied.

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“Respectfully submitted, ‘

Bu RTON C. Mr\cuan, Jr, ‘antes

- “Counsel for. Respondent. \

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