Kuehner v. Irving Trust Co.
299 U.S. 445 (1937)

Annotate this Case

U.S. Supreme Court

Kuehner v. Irving Trust Co., 299 U.S. 445 (1937)

Kuehner v. Irving Trust Co.

No. 354

Argued December 15, 1936

Decided January 4, 1937

299 U.S. 445

Syllabus

1. Section 77B of the Bankruptcy Act provides that, in proceedings to reorganize a bankrupt corporation, the claim of a landlord for indemnity under a covenant contained in a lease which has been rejected by the trustee in bankruptcy

"shall be treated as a claim ranking on a parity with debts which would be provable under § 63(a) of the Act, but shall be limited to an amount not to exceed the rent, without acceleration, reserved by said lease for the three years next succeeding . . . the date of reentry of the landlord."

Held:

(1) The language being clear, its meaning cannot be affected by resort to the legislative history. P. 299 U. S. 449.

(2) If, upon liquidation by deduction of present rental value from the present value of rent reserved, the difference exceeds the amount of the total rent for the three years succeeding the landlord's reentry, the claim may be allowed only for that amount; the surplus is not to have priority over the interests of stockholders or to be reserved as a liability of the reorganized corporation. P. 299 U. S. 450.

(3) Thus applied, the Act does not exceed the power to legislate upon the subject of bankruptcies, nor violate the due process clause of the Fifth Amendment. P. 299 U. S. 450.

2. Bankruptcy laws seek equitable distribution of the debtor's assets amongst his creditors, and Congress, in determining what such an equitable distribution demands, is free to establish standards of provability and measures of allowance, regardless of the claimant's ability to maintain an action in a court or the measure of his recovery in such an action if maintainable. P. 299 U. S. 450.

3. As respects the exertion of the bankruptcy power, there is a significant difference between a property interest and a contract, since the Constitution does not forbid impairment of the obligations of contracts under that power. P. 299 U. S. 451.

4. The Fifth Amendment does not prohibit bankruptcy legislation affecting the creditor's remedy for enforcement of a contract against the debtor's assets, or affecting the measure of the creditor's participation

Page 299 U. S. 446

therein, if the statutory provisions are consonant with a fair, reasonable, and equitable distribution of those assets. P. 299 U. S. 452.

5. The object of § 77B of the Bankruptcy Act is to extend the bankruptcy system to the reorganization of certain types of insolvent or embarrassed business corporations in the interests of the public, the creditors, and the shareholders; in discharging the claims of landlords, it admits them to participation with other creditors on a basis deemed by Congress to be equitable, giving them a new and more certain remedy for a limited amount, in lieu of an old remedy inefficient and uncertain in its result. This is not a taking of the landlord's property without due process of law. P. 299 U. S. 452.

6. The limit set upon landlords' claims cannot be regarded as an arbitrary discrimination between them and other creditors. P. 299 U. S. 453.

7. The limit fixed upon landlords' claims cannot be regarded as whimsical and arbitrary merely because, being general and uniform, it cannot have the same relation in all cases to the actual losses of different landlords. P. 299 U. S. 453.

85 F.2d 35 affirmed.

Certiorari to review the affirmance of an order of the District Court allowing the claim of a landlord, in reorganization proceedings under § 77B of the Bankruptcy Act, but limited to three years' rent from date of reentry.

Page 299 U. S. 447

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