owed to the defendant by the bankrupt under the contract marked D-3. This writing was forwarded to the defendant with a letter of October 8, 1957, from the attorney for the Archdiocese, which letter contained this language (P-5):
'The work which you have not yet completed makes it impossible for the Archdiocese to use the heating system in parts of Msgr. Bonner High School and, for that reason, it becomes necessary for the Archdiocese of Philadelphia to guarantee payment of your balance (?) of $ 5,292.00 composed as above, in order to protect the health and safety of the students at Msgr. Bonner High School. I am authorized to state that payment of the amount of $ 4,362.00 will be made to you upon completion of the work which you agreed to do for Penn Plumbing & Heating Co. at Msgr. Bonner High School and upon the issuance of an architect's certificate authorizing payment. It will be appreciated if you will sign the enclosed statement to the Archdiocese of Philadelphia so that the nature of this undertaking may be reduced to writing.'
The writing or statement enclosed with the letter of October 8 was signed by the authorized representatives of defendant on October 10, 1957, and contained this language (P-7):
'The undersigned, at that time and prior to that time, refused, and still refuses to complete said work in the amount of Seven Hundred Eight Dollars ($ 708.00) unless it is paid not only for the work to be completed, but also for the completed work for which payment had not been received.
'In order to obtain completion of said work on its building, the Owner, Archdiocese of Philadelphia, has agreed to pay the undersigned Three Thousand Six Hundred Fifty-four Dollars ($ 3,654.00) for work previously completed and for which PENN did not pay the undersigned and Seven Hundred Eight Dollars ($ 708.00) to complete work not, as of October 1, 1957, completed. In consideration of such payment by the Archdiocese of Philadelphia the undersigned agrees to:
'1. Execute any writings which may be required of undersigned by Archdiocese to assist it in prosecuting any claim which it may have against any other party or parties for total or partial reimbursement of any monies paid by the Archdiocese of Philadelphia hereunder to undersigned.
'2. Pay over to the Archdiocese of Philadelphia any monies which it may receive from any other source on account of the work for which the Archdiocese of Philadelphia is making payment hereunder.'
The above-mentioned writing executed on October 10 was returned to the attorney for the Archdiocese with defendant's letter of October 10, 1957 (P-6), stating that defendant was 'completing the necessary work at the high school' since they accepted the guarantee of payment by the Archdiocese. No survey was ever undertaken by defendant to determine the value of the work still to be done under the subcontract (D-3) on August 9, 1957, and the estimated bills sent out by the defendant prior to that month were not indicative of the value of the uncompleted work and materials.
The work was completed by the defendant and, in January 1958 the Archdiocese paid the defendant in accordance with its guarantee (P-7 and P-8), both the $ 3654. billed and unpaid in August 1957 and the $ 708. which admittedly did not become due to defendant until the work was completed during the month following October 8, 1957. In November 1957, these amounts were paid to defendant out of a segregated account, where the Archdiocese kept funds allocated for payment of school construction and renovation costs, including the amount allocated for the payment of the unpaid amount specified in its contract with the bankrupt (P-8).
By ruling of September 19, 1958 (P-9), the above two amounts were allowed by the Referee in Bankruptcy as a set-off against the amount owed to the bankrupt by the Archdiocese under the contract of December 5, 1955 (P-8),
even though the Trustee in Bankruptcy objected to the allowance of the set-off of $ 3654., as opposed to the set-off of $ 708. The Trustee then instituted this suit to recover the $ 3654., less the pro rata distribution which is payable by the bankrupt on defendant's claim in this amount.
Assuming that defendant had the right to terminate its obligations under the contract (D-3) with the bankrupt in August 1957, in spite of its acquiescence in the bankrupt's consistent disregard of the 30-day payment requirement after submission of bills
and the lack of any evidence that defendant had even requested payment of amounts due under the contract until the bankrupt stopped work on August 9, 1957, the record makes clear that defendant never elected to terminate its obligations under the contract other than its obligation to make performance within a reasonable time. Its representatives wished to continue with the contract, but to have the Archdiocese guarantee payments due, and to become due, under its terms. Defendant never had a survey made of the value of the work to be performed and requested formation of a new contract providing for payment of such amount. The letter of October 8 states that payment of the exact amount due under the contract with the bankrupt (D-3) would be made.
Having made no election to terminate its obligations, defendant was still bound on its contract. Specialties Development Corp. v. C-O-Two Fire Equip. Co., 207 F.2d 753 (3rd Cir. 1953), cert. den. 347 U.S. 919, 74 S. Ct. 519, 98 L. Ed. 1074 (1954); Gray v. Maryland Credit Finance Corporation, 148 Pa. Super. 71, 25 A.2d 104 (1942); In re Moore's Estate, 191 Pa. 600, 43 A. 474 (1899); Restatement, Contracts, § 309; Williston, Contracts, § 688. This being so, its refusal to perform unless the Archdiocese paid the bankrupt's debt was wrongful and constituted duress. Ordinarily, a threat to repudiate a contract, without more, is not duress. Vines v. General Outdoor Advertising Co., 171 F.2d 487, 490 (2nd Cir.1948), and cases cited therein. But, as here, the likelihood of irreparable injury and absence of adequate legal remedy, in that defendant's performance was needed to open the school on time, indicate that duress was present. Restatement, Contracts, § 493; Williston, Contracts, § 1620; see Vines v. General Outdoor Advertising Co., supra.
Under such circumstances, the defendant, in securing such full payment of a debt existing prior to bankruptcy from a fund allocated to payment of a debt due the bankrupt by the Archdiocese, when other creditors will only receive a pro rata distribution, received a void transfer prohibited by the terms of the bankruptcy laws and the cases interpreting these bankruptcy laws. See § 70, sub. e of Bankruptcy Act, 11 U.S.C.A. § 110, sub. e; 4 Collier on Bankruptcy, 14th Ed., §§ 70.71, 70.78; Eisenrod v. Utley, 211 F.2d 678, 680-681 (9th Cir. 1954); Warner v. Dworsky, 91 F.Supp. 884, 886 (D.Minn.1950), reversed 98 F.Supp. 466 (D.Minn.1951), reversed 194 F.2d 277, 280-281 (8th Cir. 1952); cf. In re ABC-Federal Oil & Burner Co., 182 F.Supp. 928, 936-937 (E.D.Pa.1960), aff'd. 290 F.2d 886 (3rd Cir.1961); First Bank of Marianna, Fla. v. Pinckney, 139 F.2d 575 (5th Cir.1944); In re Times Square Auto Supply Co., Inc., 47 F.2d 210, 212-213 (2nd Cir.1931).
As indicated by Judge Lord in the ABC-Federal case, supra, the plaintiff-trustee has a right of recovery in a case such as this under the principles of the Restatement of Restitution. Also, it is noted that there is diversity of citizenship between the parties in this case.
The following Requested Findings of Fact and Conclusions of Law are affirmed insofar as they are not inconsistent with the foregoing:
Plaintiff's Requests for Findings (Document No. 23) Nos. 1-11, 13-16, 17 modified to eliminate all words after the semi-colon, 18-22, 24 modified by deleting the word 'several,' 26, 27 modified by deleting 'every' and adding an 's' to the word 'method,' and 28-36.
Plaintiff's Requests for Conclusions (Document No. 23) Nos. 1, 3, 4 and 5, as stated in letter of March 9, 1963, attached to plaintiff's Requests (Document No. 23).
Defendant's Requests for Findings (Document No. 22) Nos. 1-6, 7 modified to delete all words after the word 'and' as well as that word, 8-11, 13 modified to substitute for 'in due course' the words 'on that date,' 14-17, 18 deleting the second sentence, and 19-26.
Plaintiff shall submit an appropriate form of order, serving a copy on defendant, within a week and defendant shall have a week after such service to submit its comments on such proposed order.