Provability of Claims for Future Rent for Damages Against a Trustee in Bankruptcy or a Receiver of an Insolvent Tenant upon Abandonment of the Leased Premises, Measure of Damages in Federal Court Receiverships
The large number of insolvency proceedings during the present economic period throws into relief two legal problems of vital importance to the landlord and the general creditors of the tenant. May the landlord prove a claim against the insolvent tenant's estate for the loss of future rent, or for damages due to the abandonment of the lease upon the insolvency of the tenant, and if such a claim is provable, what is the measure of damages? These problems are acute because of the present extreme deflation in rental values where the involvent's lease has an unexpired term of many years at fixed rentals which in amount may be double the present rental value of the same premises for the balance of the term. A considerable number of chain stores and other enterprises operating in many states have resorted to receiverships, partially at least to mitigate the high rent factor in their fixed operating cost through the disaffirmance of leases by the receiver. In the end the business is often returned to the same hands from which the receiver took it. Receivership frequently serves as a method of reorganization. The courts have thus, in many instances, served as a clearing house of the depression, where old liabilities and fixed charges are liquidated and deflated in an orderly way under the sanction of the law, by a pro rata distribution of assets (i. e., the present deflated market value of the assets) to creditors of the estate in the receiver's hands. How does the landlord fare in these proceedings?
Norman M. Littell,
Provability of Claims for Future Rent for Damages Against a Trustee in Bankruptcy or a Receiver of an Insolvent Tenant upon Abandonment of the Leased Premises, Measure of Damages in Federal Court Receiverships,
7 Wash. L. Rev.
Available at: https://digitalcommons.law.uw.edu/wlr/vol7/iss3/1