Stanley Forman Reed

“ The District Court held that under Section 77 the lessor is a creditor for actual damages accruing from the rejection of the unexpired lease to the latest practicable date in the reorganization for presentation of lessors' claims. Damages were measured by the difference between the rent reserved in the lease and the net earnings of the property. The court allowed the amount proved up to June 20, 1937, with leave to the Connecticut Railway to apply for further hearings to liquidate damages suffered after that date. ”

“ It is well understood that such evidence must show damages to reasonable certainty. Mere 'plausible anticipation' does not merit consideration nor are flights into the realm of pure speculation entitled to be treated as evidence. [26] The determination of the amount to be allowed as the damage will be based on evidence which satisfies the mind.
Third. We comment briefly on two other points raised. The betterments and sinking funds having come into the possession of the lessors by the terms of the lease are not to be considered as offsets against the claim of the lessor. ”

“ It is first to be noted that the successive acts of the Congress, on extension of individual debts and corporate and railroad reorganization, are directed generally at the rehabilitation of debtors. [14] As one of the means used consistently to accomplish this, claims for future rent are made provable and dischargeable, so that the debtor would not be burdened with the rent obligation after discharge. ”

“ There is nothing to indicate that the Congress intended to have 'actual' interpreted as 'accrued.' The measure of damages applied by the courts for the breach of a lease, where damages are permitted, is uniform. ”

“ This condition made for inequality among both creditors and bankrupts, since recovery by claimants depended upon the artistry with which their leases were drafted and discharged bankrupts were often left with surviving claims for rent, unduly burdensome upon their efforts at self-rehabilitation. [5] Everyone interested in bankruptcy problems had long been familiar with the future rent situation and its ramifications into the fields of anticipatory breach of executory contracts and the provability of contingent claims. ”

“ New York City Railway Company, 2 Cir., 198 F. 721, expressed as follows, pages 741, 742: 'Claims which when presented within the time limited by the court for their presentation are certain or are capable of being made certain by recognized methods of computation, should be allowed. Claims which are not then certain should be disallowed because they afford no basis for making dividends.' The conclusion of the District Court, as affirmed by the Circuit Court of Appeals, is then offered as the correct rule in this case. ”

“ Reorganization of railroads * * * (b) * * * The term 'creditors' shall include * * * the holder of a claim under a contract executory in whole or in part including an unexpired lease.
'* * * In case an executory contract or unexpired lease of property shall be rejected * * * any person injured by such non-adoption or rejection shall for all purposes of this section be deemed to be a creditor of the debtor to the extent of the actual damage or injury determined in accordance with principles obtaining in equity proceedings. ”