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In re Arbycraft Co.

March 27, 1961

IN THE MATTER OF THE ARBYCRAFT CO., DEBTOR. APPEAL OF BORNOT DEHON, CREDITOR.


Author: Kalodner

Before KALODNER, STALEY and HASTIE, Circuit Judges.

KALODNER, Circuit Judge.

This is an appeal from the reversal by the District Court of the Order of the Referee in Bankruptcy allowing as an administration expense of the Receivers a bill for repairs to a boiler on the premises leased to the debtor, and occupied by it at the time during the pendency of a Chapter XI, 11 U.S.C.A. ยง 701 et seq., proceeding.

The Referee, in his Opinion, based his disposition on his conclusion of law that the tenant was liable for the repairs under the terms of the lease and his finding that the "tenant" in his capacity as agent for the Receivers in the conduct of the business, had acquiesced in the making of the repairs.

The District Court reversed the Referee's Order and disallowed the landlord's claim. It premised its action on its view that the Referee had erred in concluding "as a matter of law that the tenant [debtor] was liable under the terms of the lease for the cost of the repairs", and its further determination that the Referee had erred in his finding as to acquiescence.*fn1

The critical facts may be summarized as follows:

In November, 1959, the Arbycraft Co. ("debtor") filed a petition for arrangement under Chapter XI of the Bankruptcy Act. Receivers were appointed and authorization granted to them to operate debtor's business*fn2 and to employ any of its personnel in the course of such operation. Pursuant to the authorization stated the Receivers employed debtor's executive vice-president, Girard Esayian, to operate the business.

Debtor's business was conducted in a building which it had leased in March, 1956. The lease*fn3 in effect at the time the events pertinent here transpired, contained the following clauses:

"8(b) Lessee covenants * * * that he will * * * repair all damage to plumbing and to the premises in general; keep the same in good order and repair as they are now, reasonable wear and tear * * * excepted."

"13(e) In the event of the failure of Lessee promptly to perform the covenants of Section 8(b) hereof, Lessor may go upon the demised premises and perform such covenants, the cost thereof * * * to be charged to the Lessee. * * *"

On January 19, 1960, the boiler in use on the leased premises failed to function and Esayian telephoned one Harry M. Rommedl, who was the real estate agent of the landlord, Bornot Ehon, to acquaint him with the situation but Rommel was out of his office. Subsequently (the record does not disclose the date) Rommel returned Esayian's call.

Thereafter, Esayian engaged the Triple A Welding Service to perform such work as might be necessary to get the boiler back in operation. While the Triple A men were at work employees of C.Rodney Morris and Son, Inc., appeared and advised Esayian they had been instructed by Rommel to work on the boiler.

With reference to the foregoing incident, Esayian testified as follows: (Hearing before the Referee, February 25, 1960). N.T.p.17

"Q. While these men from Triple A were working, did another company come in and tell them to go away; dismissed them because the owner of the building had instructed them ...


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