Rent issues from the land, is not due until the rent day, and is
due in respect of the enjoyment of the premises let.
Where, however, a lessee corporation not only undertook to pay
as rental all sums payable by its lessor under overleases of the
same premises, but also, as the inducing consideration for the
lease, covenanted to pay at all events a certain amount per annum,
in monthly installments throughout the term, and, if the lease
should be terminated sooner, to pay a sum measured at the same rate
for the unexpired portion, less a discount,
held (1) that
the covenant created a present indebtedness, independent of rent,
for the whole amount so stipulated to be paid, and (2) that, upon
the appointment of receivers in a purely equitable proceeding to
carry on the lessee's business and pay its debts, and upon their
declining the lease, leaving rent in default, the lessor, by
reentry pursuant to the lease with the court's consent, might
perfect its claim to the amount payable under the covenant for the
unexpired term, and
Page 245 U. S. 598
that the claim thus perfected was provable within the time fixed
by the court for proof of claims against the receivers.
Held further, in such case, that the lessor might in
like manner perfect and prove its claim under the lessee's covenant
to pay as damages the difference between the rental value at the
date of entry and the rent reserved, for the residue of the term,
for such is not a covenant to pay or accelerate rent, but a
personal covenant liquidating damages upon a footing that is
familiar and fair.
When a court, without statute, takes possession of all the
assets of a corporation to satisfy its debts, the rights and
equities of the creditors are determined by their contracts with
the debtor. It is error to give to the filing of the bill the
effect of the filing of a petition in bankruptcy or to exclude a
lawful claim made within the time fixed for proving claims and
maturing within a reasonable time before distribution can be
made.
A covenant for the payment of so much per annum in monthly
payments throughout the term, and if the lease is terminated
sooner, for anticipating the payments for the unexpired portion
"less a discount at the rate of five percent per annum on payments
so anticipated,"
construed as intending a simple discount
on the payments as they would fall due --
i.e.,
monthly.
230 F. 31 reversed.
The case is stated in the opinion.
MR. JUSTICE HOLMES delivered the opinion of the court.
This case comes to this court by writ of certiorari upon a bill
for instructions filed by the receivers of William S. Butler and
Company, incorporated. The receivers were appointed upon the prayer
of a creditor, assented to by the corporation, in a bill brought
for continuing the business until the assets could be applied in
satisfaction of the company's
Page 245 U. S. 599
debts. Instructions are asked as to the amount to be paid to the
petitioner, Wm. Filene's Sons Company, under a lease of the
premises that William S. Butler & Co. occupied. The lease
covered five parcels of land held by the petitioner, also as
lessee, and ran for the terms, less one day, of the respective
original leases, which expired at different dates, from December
30, 1917, to February 28, 1921. It provided for a reentry in case
of a failure to perform any covenant, of bankruptcy, etc., or of a
receiver's being appointed and not discharged within ninety days.
These proceedings were begun on November 7, 1912. On December 5,
1912, the receiver elected not to assume the lease, and left the
rent due December 1 unpaid; on December 9, the petitioner reentered
in pursuance of leave granted by the court, and on December 17 made
demand upon the receiver for the sum that it alleges to be due. The
receiver filed this petition for instructions on April 7, 1913. On
September 30, 1913, the petitioner filed a formal claim, the time
for proving claims not yet having expired.
The lease is made in consideration of the lessee's covenant to
pay twenty thousand dollars a year until February 27, 1921 (the day
before the longest of the original leases expired), and of the
other covenants therein contained by the lessee to be performed.
The reddendum requires the payment as rental of all sums payable by
the lessor under the leases to it at the times specified in their
leases, "together with a further sum of twenty thousand dollars
yearly, payable in equal monthly installments until February 27,
1921." The lessor agrees, at the joint request of the lessee and
the overlessors in all the original leases in force at the time, to
cancel the overleases and abate the rent in respect of them upon
payment of a sum equal to $20,000 a year for the residue of the
term plus one day, "less a discount at the rate of five percent per
annum on payments so anticipated." There is a proviso
Page 245 U. S. 600
for an abatement of rent and other payments in case of fire, the
taking of part of the premises, etc., "except said payment of
twenty thousand dollars per year;" and there is a further
stipulation that, if the overlease of any part of the demised
premises is terminated, the payment of twenty thousand dollars per
year shall continue without any abatement. Finally, it is agreed
that, upon a termination of the lease as provided for, the lessee
will pay to the lessor, upon demand, a sum equal to twenty thousand
dollars per year, and at the same rate for a fractional part of a
year, for so much of the period up to February 27, 1921, as remains
unexpired, with one day added (less the five percent discount, as
aforesaid), and will further make one of three several payments at
the election of the lessor, of which it is only necessary to
mention the second. This was to pay to the lessor, as damages, the
difference between the rental value and the rent and other payments
named in the lease for the residue of the term, deducting, however,
such sum as has been paid for the same period under the clause
requiring the payment of twenty thousand dollars a year.
The substance of the petitioner's claim as argued before us is
for a sum equal to twenty thousand dollars a year in monthly
payments from December 9, 1912, to February 28, 1921, less a
discount at the rate of five percentum per annum on the payments
anticipated, and for whatever sum may represent its damages
estimated in the manner that we have just stated as stipulated in
the lease. The courts below were of opinion that the twenty
thousand dollars were simply an addition to the rent, that the
provisions for payment upon termination of the lease were an
attempt to secure a preference by accelerating the installments and
also were in the nature of a penalty, that the analogy of
bankruptcy applied, and that the claim for the above-mentioned
items could not be allowed. The circuit court of appeals seems to
have considered also
Page 245 U. S. 601
that the filing of the bill had the same effect as a petition in
bankruptcy in stopping claims that like this were not provable at
that date. 230 F. 31.
We are driven to different conclusions. In the first place,
whether a letter showing that the payment of $20,000 a year was a
substitute for a bonus of $340,000 was admissible or not,
United States v. Bethlehem Steel Co., 205 U.
S. 105,
205 U. S. 120,
we are of opinion that, on the face of the lease and the figures,
it was dealt with as a separate item and as the inducing
consideration for the sublease, the right to the whole of which was
earned when the sublease was made. The summary of the clauses
referring to it that we have given shows that the whole amount was
to be paid in any event, whether the overleases were cancelled, or
a part of the rent was abated, or the leases were terminated, as
well as if they ran their full course. It is true that, in the
reddendum, the words "as rental" might be construed to embrace the
later clause "together with a further sum of $20,000," but the
sentence does not compel that construction, and the dominant intent
and obvious fact seems to us to override any argument upon that
ground.
See Cox v. Harper, [1910] 1 Ch. 480. Rent issues
from the land, is not due until the rent day, and is due in respect
of the enjoyment of the premises let. The twenty thousand dollars a
year was to be paid whether the premises were enjoyed or not, upon
a personal covenant that created a present debt, with no
contingency except those possibly and lawfully accelerating the
time in which it was to be paid.
We perceive no ground that would justify the rejection of the
petitioner's proof for the whole sum subject to the discount
agreed. Certainly the fact that the termination of the lease
happened after the filing of the bill has no such effect, although
the sum was not presently payable until then. When a statutory
system is administered, the only
Page 245 U. S. 602
question for the courts is what the statutes prescribe. But when
the courts, without statute, take possession of all the assets of a
corporation under a bill like the present, and so make it
impossible to collect debts except from the court's hands, they
have no warrant for excluding creditors, or for introducing
supposed equities other than those determined by the contracts that
the debtor was content to make and the creditors to accept. In
order to make a distribution possible, they must, of necessity,
limit the time for the proof of claims. But they have no authority
to give to the filing of the bill the effect of the filing of a
petition in bankruptcy, so as to exclude any previously made and
lawful claim that matures within a reasonable time before
distribution can be made.
Pennsylvania Steel Co. v. New York
City Ry. Co., 198 F. 721, 740-741. Of course, it does not
matter that the claim was perfected by the petitioner's act, after
a default in the rent. The receivers would not, and Butler &
Company could not, pay it, so that all agree that the petitioner's
course was the prudent and only possible course to take, as it was
the course that was contemplated by the covenant in the lease.
Wilder v. McDonald, 63 Ohio St. 383, 397.
We agree with the petitioner that the discount on payments so
anticipated should be a simple discount on the payments as they
would fall due -- that is, monthly -- making the total according to
the Master's report, $137,348.88.
The rest of the claim is for damages ultra the twenty thousand
dollars a year -- the difference between the rental value at the
date of entry and the rent reserved, less the amount received under
the twenty thousand dollar clause. This also was contracted for,
and we see no reason why it should not be paid. The contract was
not that all the rent for the term should become presently due, it
was not for rent at all, but was a personal covenant that
liquidated the damages upon a footing that was familiar and fair.
Mass.Rev.Laws, c. 163, ยง 33;
Woodbury v. Sparrell
Page 245 U. S. 603
Print, 187 Mass. 426, 428;
International Trust Co.
v. Weeks, 203 U. S. 364;
People v. St. Nicholas Bank, 151 N.Y. 592;
Woodland v.
Wise, 112 Md. 35;
Reading Iron Works-Sweatman's
Appeal, 150 Pa. 369;
McGraw v. Union Trust Co., 135
Mich. 609;
Smith v. Goodman, 149 Ill. 75, 85-86;
Kalkhoff v. Nelson, 60 Minn. 284, 288;
Ex parte Llynvi
Coal & Iron Co. in Re Hide, L.R. 7 Ch. 28. The claim
divides itself into two items: one from January 1, 1913, until
April 1, 1913, when the whole premises were relet, put by the
master at $39,829.80; the other from April 1, 1913, to the end of
the term, put at $34,433.47. The other disputed item for expenses
of reletting is disallowed.
Decree reversed.
MR. JUSTICE BRANDEIS having been of counsel took no part in the
decision of this case.