a 1,000,000 gallon tank at a cost of $ 30,000 and a blending plant at a cost of $ 75,000, plus or minus 10%.
'3. By way of reimbursement, the bankrupt would be allowed a credit of $ 15,000 a year for five years, or a total of $ 75,000, against the thruput charges payable by the bankrupt under the 15 year thruput lease.'
It must be conceded that the bankrupt cannot, as matters now stand, recover the expense of the plant (item 2) by means of the credits over 5 years described in the 3rd clause. The fact remains that the claimant has the improvements, and the bankrupt has nothing but receipted bills (and, in part, unpaid bills) to the total of over $ 93,000.
In such a posture, there would appear to be a case for restitution; that is, the trustee would have a claim cognizable in equity despite (or perhaps by virtue of) its unenforceability at law. This is the claim which was denied by the referee. In part, the stated ground was the implausibility of the witnesses for ABC-Federal, and in part that the parties were in pari delicto.
It is the view of this court that the principle controlling here is that
'A person who has been unjustly enriched at the expense of another is required to make restitution to the other.' Restatement of Restitution, Sec. 1.
Here, claimant has received a substantial benefit by the construction of the blending plant on its property at the expense of the bankrupt. The trustee here seeks to recover the value of the benefit so conferred. The following provision of the Restatement of Restitution, Section 53, appears applicable.
'(1) A person who has rendered service to another or service which inures to the other's benefit or who has affixed chattels to the land or has improved the chattels of another, is entitled to restitution therefor if the services were rendered, or the chattels affixed, or the improvements made:
'(b) to obtain the performance of an agreement made with the other therefor, not operative as a contract, or voidable as a contract and avoided by the other party after the services were rendered, the transferor erroneously believing because of a mistake of law that the agreement bound the other * * *.'
The illustration given by the Restatement to the foregoing Subsection (1), Clause (b), is:
'3. A and B enter into an agreement by which B is to perform services for A in return for which A is to transfer to B '10 acres of land', no land being specified. B performs the services. Since the agreement is too indefinite to operate as a contract by A, B is entitled to restitution for the value of his services.'
In Walter v. Transue, 1901, 17 Pa.Super. 94, 99, the plaintiff was a tenant of real property under a five-year oral lease. After plaintiff had made improvements to the property, the defendant landlord evicted plaintiff because the lease was within the purview of the statute of frauds. The court stated that the plaintiff could recover the cost of his expenditures to improve the land.
Apart from exclusive concern with the equities of the trustee's position, it is well to look at the other side, and to consider whether the claimant is deserving of the Court's sympathy. The trustee insists that he is not, saying:
'* * * Jacobs never relied on the letter of March 19, 1956 as an arms' length honestly negotiated business transaction. He bought the terminal on the assumption that, through Callis, he could make a norisk investment which would pay fraudulent profits of prodigious proportions. Jacobs admitted that there was no price advantage to ABC-Federal in thruputting at Peltz St. (N.T. 236-237). The same service could have been obtained at any number of other terminals. Yet, the bankrupt was to donate a $ 30,000 tank to claimant and build a $ 75,000 plus blending plant at claimant's terminal, (Claimant was to repay the cost by thruput credits over a five-year period); the bankrupt was to have no written security interest in the blending equipment that it was to provide; it was to receive no interest or other yield on its advance of $ 75,000 plus for the blender, claimant was to receive an excellent return from the bankrupt as rent on the storage building to be erected by claimant, and Jacobs personally was to receive 2/3 of 1 cents for himself on each barrel of fuel oil thruput at the terminal by the bankrupt.
'Patently this transaction provided for the bankrupt no fair inducement to deal. It was nothing more than a devious scheme conceived by Jacobs and Callis to raid the treasury of the bankrupt for their mutual enrichment. Callis' share of the booty was $ 625 permonth, plus his expenses from claimant, 1/3 of 1 cents per barrel for each barrel of fuel oil thruput by the bankrupt, an option to purchase Jacobs' interest in claimant, and the CFM wholesale oil business. Jacobs' share was the benefits to the terminal to be conferred by the bankrupt as outlined in the letter of March 19, 1956.'
With this we agree.
It follows from the foregoing discussion that the Referee's position that there was no contract will be affirmed. This Court, however, cannot agree with the Referee's denial of the counterclaim. It seems that to do so would be to confer an unjust enrichment upon the claimant at the expense of the bankrupt's creditors. In the view of this Court, accordingly, the trustee is entitled to the property transferred or the value thereof.
There are implications that some of the dealings made before bankruptcy by the ABC-Federal were not above reproach. It does not follow, however, that the trustee does not have clean hands and is, therefore, not entitled to equity.
The trustee is the guardian of the bankrupt estate. He represents the innocent creditors whose money and property were appropriated to the advantage of the claimant. Neither wrong doing on the part of the management of ABC-Federal, nor overreaching on the part of the claimant, is to be allowed to defeat the rights of the creditors or -- on the other hand -- to permit the claimant to be unjustly enriched.
For the foregoing reasons, it is hereby ordered that the exceptions of claimant Peltz Street Terminals, Inc., to the Referee's disallowance of its Claim are denied.
It is further ordered that the exceptions of the trustee to the Referee's disallowance of the counterclaim of the trustee are sustained. It is therefore the ruling of this Court that the trustee shall recover from the claimant the sum of $ 93,429.86 and it is so ordered.