reasons, such as a palpable mistake or misconception of the decided weight of the evidence. Furrer v. Ferris, 145 U. S. 132, 12 Sup. Ct. 821, 36 L. Ed. 649; Tilghman v. Proctor, 125 U. S. 136, 8 Sup. Ct. 894, 31 L. Ed. 664; Lansing et al. v. Stanisics et al., 94 Fed. 380, 36 C. C. A. 306; Snider et al. v. Dobson et al., 74 Fed. 757, 21 C. C. A. 76; Warren v. Burt et al., 58 Fed. 101-106, 7 C. C. A. 105; Latta et al. v. Granger, 68 Fed. 69, 15 C. C. A. 228; Paxson et al. v. Brown et al., 61 Fed. 874, 10 C. C. A. 135; Stuart v. Hayden et al., 72 Fed. 402, 18 C. C. A. 618. The learned judge who heard this case patiently for two days, with opportunity to observe the witnesses, their conduct on the stand, with probable personal knowledge of what manner of men they were, was in better position to form a correct estimate of the probative force to be attached to their testimony than this court can form from the more or less imperfect expression of the testimony in type.

A careful reading of the record has failed to persuade us that injustice has been done appellants by denying their petition for a final discharge from their debts. The spirit of the bankrupt act is commendable. Its purpose is to release the honest debtor from the burden of debts which he is unable to longer carry; to give freer play to his energies and enterprises, that he may thereafter be better able to support himself and those dependent upon his earnings, and thereby be in position to render a better service to the state and to society. This beneficent policy is conditioned always upon the bankrupt's full and complete surrender of all his unexempt property for the benefit of his creditors. He must be honest in this respect. He must neither conceal nor withhold knowingly anything from his creditors which they are entitled, under the law, to know or receive. Whenever the court is impressed with the belief, after due inquiry and examination, that in the main the bankrupt has intended and tried to comply with the law, he should be dealt with liberally on his petition for manumission from his debts. On the other hand, in order to obstruct gross abuses of the spirit of the bankrupt act, that it may not aid the dishonest debtor in being acquitted of his honest debts, while withholding aught that he should surrender for the benefit of his creditors, it is the duty of the court to look into the heart of his transactions.

When the partners received between seven and eight thousand dollars for said cotton, their assets reduced to cash were inadequate to meet their liabilities. They had past-due obligations to creditors. This large amount of cash, without notice of its possession to their creditors, was placed in an insecure wooden desk in a public store, and left unguarded for two whole nights. This money was not entered by the bookkeeper on the cashbook of the company. It was not even counted by said bookkeeper, for the flimsy reason, assigned by him, that he was busy, and for the lack of opportunity to make the count without exposing the money to the public, although two nights had intervened, when they would have had the privacy of their own counting room for such purpose. The three partners knew of the deposit of this money in said desk. There was a large safe in the storeroom, which, while it may not

But

have been burglar proof, was a much safer place for money against an accident of fire. William P. Barton, Jr., claims to have left the store the evening before the alleged burglary, and gone to his home, where he remained all night. The other two brothers were in the store after he left, and were in there when the principal clerk left. All the doors to the storeroom were securely fastened from the inside, except the front door, which was locked from the outside. On the following Sunday morning the loss of this money was proclaimed by William P. and Ross Barton, and when third parties reached the store the back door was open, and a window in the rear of the building was shown to be raised, and there was a goods box on the outside, below this window, to indicate that the entrance to the building might have been effected through said window. the presence of a layer of dust on the sill of the window, and cobwebs on the inside thereof, undisturbed, disproved the entry of any person through the window. The physical condition of the desk just after the loss of the money was proclaimed well warranted the conclusion that the person or persons who abstracted the money accomplished their work by having keys to the front door of the storehouse and to the desk. There was no indication of any breaking of the outside roller to the desk, nor any evidence of a violent entry into the drawer or the door inside of the desk. It is true that the door was found open and wrenched from the hinges, but as these hinges were inside of the door, and the lock of the door was unbroken, this wrenching of the door from its hinges could only have been done after the door itself was opened with a key. All of which indicated that the job was done by a bungler, who sought inconsiderately to leave evidence of a violent entry, which was transparently foolish.

Without going into further details, the only plausible suggestion against the complicity of the surviving brothers in the appropriation of this money is the opportunity Clib Barton had to take it, as he had the means of access to it. This suspicion is largely predicated of the assumption that he was seen at a late hour the night of the alleged burglary about the balcony of the storehouse. This assertion rests upon the merest hearsay testimony. No witness testified to having so seen him, but a witness was permitted, without objection, to say he was told that Clib Barton was wandering about drunk that night, and was seen about the place at a late hour. It is apparent why this incompetent statement was admitted unchallenged. The objecting creditors deemed it a circumstance bearing on the existence of a probable conspiracy between the brothers to surreptitiously extract and hide the money, while the surviving brothers were willing enough to save themselves by the imputation thus cast upon their dead brother, so long as the ignominy of it did not proceed from their own mouths. In a contention between living brothers and the dead one, the presumption would rather favor the innocence of the latter. Maudlin drunk as he was when he returned with the money, he turned the package over to William P. Barton, Jr., the bookkeeper, who thus became its custodian; and it is doubtful if Clib Barton, who continued in an intoxicated con

dition from the time he returned home until the time of the alleged burglary, even knew where the money was placed by William P. Barton, Jr. The other brother did know that the money was placed in said desk. It is true that there was evidence tending to show that Clib Barton, after he returned from Little Rock, passed a $50 bill at a saloon; and, while it would not be a strained inference that this bill was a part of the money received for the cotton, there is no more reason for assuming that he extracted it after than before the delivery of the package to his brother.

There were other instances and circumstances in evidence of an inculpatory character against the conduct of the petitioners in connection with this money, which are not of sufficient importance to affect the conclusion reached by the District Judge. Giving to his conclusion that deference to which it is entitled, his action in denying the petitioners for discharge must be affirmed. It is accordingly so ordered.

WATSON V. MERRILL.

(Circuit Court of Appeals, Eighth Circuit. March 18, 1905.)

No. 2,087.

1. BANKRUPTCY-RENTS ACCRUING AFTER PETITION-PROVABLE CLAIM. Rents which the bankrupt had agreed to pay at times subsequent to the filing of the petition in bankruptcy do not constitute a provable claim under the bankruptcy law of 1898, because they are not a "fixed liability * * absolutely owing at the time of the filing of the petition against him," and because they do not constitute an existing demand, but both the existence and the amount of the possible future demand are contingent upon future events, such as default of lessee, re-entry of lessor, and assumption by trustee, so that they neither form the basis of an unliquidated nor of a liquidated provable claim. Act July 1, 1898, c. 541, § 63, cls. "a," "b," 30 Stat. 562, 563, 3 U. S. Comp. St. 1901, p. 3447.

2. SAME-DAMAGES FOR BREACH OF CONTRACT TO PAY RENTS NOT PROVABLE CLAIM.

Damages for the breach of a contract of the bankrupt to pay rents at times subsequent to the filing of the petition in bankruptcy do not constitute a provable claim, for the same reason that the claim for the rents is not provable.

3. LEASE-REPOSSESSION BY LESSOR RELEASES LESSEE.

The retaking of the premises by the lessor releases the lessee from payment of all subsequently accruing rents unless the contract expressly provides otherwise.

4. BANKRUPTCY-TRUSTEE-OPTION TO ASSUME EXECUTORY CONTRACTS. The trustee in bankruptcy has the option to assume or renounce the leases and other executory contracts of the bankrupt, as he may deem for the best interest of the estate.

5. SAME-ADJUDICATION DISSOLVES NO CONTRACTS.

An adjudication of bankruptcy absolves the bankrupt from no agreement, terminates no contract, and discharges no liability.

6. SAME-ADJUDICATION NO BREACH OF BANKRUPT'S LEASE.

An adjudication of bankruptcy in a case in which there was no rent due at the time of the filing of the petition in bankruptcy does not constitute a breach at that time of the covenants of the bankrupt in his lease to pay rents accruing thereafter.

(Syllabus by the Court.)

Appeal from the District Court of the United States for the District of Kansas.

This is an appeal from a decree of the District Court, sitting in bankruptcy, which reversed an order of the referee that the appellant, Watson, should be allowed a claim of $1,437.50 for damages for the breach by P. A. Brown, by means of his adjudication as a bankrupt, of a lease which he had taken from the appellant. On May 1, 1902, Brown leased of Watson a storeroom in a building about to be erected for a term of 10 years from October 1, 1902, and agreed to pay a monthly rental of $60 in advance during the term. He paid this rent to March 1, 1903. On February 6, 1903, a petition in bankruptcy was filed against him, and receivers were appointed, who took possession of his personal property in the rented premises. On April 2, 1903, he was adjudged a bankrupt, and a trustee was appointed. On March 2, 1903, Watson and Brown made a written contract which recited that it had become impossible for Brown to comply with the terms of his lease, and that he was obligated to his lessor thereby in the sum of $6,900, and in which he acknowledged himself to be indebted to Watson in the sum of $2,300, and surrendered to him all his rights and privileges under the lease, while Watson by the same contract released Brown from any further obligation to pay rent for the leased premises. Afterwards Watson filed his proof of claim for $2,300 against the estate of Brown, which was founded on the lease and on the contract of March 2, 1903. He also filed a petition for the liquidation of this claim, in which he alleged that he had incurred extraordinary expense in the construction of the building in expectation of the rental, that the rental value of the premises was only $40 per month, and that he had sustained damages to the amount of $20 per month from March 1, 1902, until the end of the term of the lease, which amounted in the aggregate to $2,300. The referee found the rental value of the premises to be $47.50 per month, and allowed the claim of Watson for $1,437.50 for damages for a breach of the lease. Upon a petition for review, the District Court reversed this decision, and directed the referee to disallow the claim.

David Ritchie, for appellant.

H. C. Tobey, W. S. McClintock, I. J. Ringolsky, and Thomas L. Bond, for appellee.

Before SANBORN and VAN DEVANTER, Circuit Judges, and PHILIPS, District Judge.

SANBORN, Circuit Judge, after stating the case as above, delivered the opinion of the court.

The contention of counsel for the appellant is that the claim of the lessor is not for rents which were payable after the petition for adjudication in bankruptcy was filed, but for damages for a breach of the contract in the lease to pay these rents; that the adjudication in bankruptcy dissolves all contractual relations of the bankrupt at the date of the filing of the petition in bankruptcy (In re Jefferson [D. C.] 93 Fed. 948; Bray v. Cobb [D. C.] 100 Fed. 270; In re Hays, Foster & Ward Co. [D. C.] 117 Fed. 879); that the dissolution of a contractual relation is a breach of the contract; and that for the breach of the contract to pay the rents accruing subsequent to the filing of the petition a claim for damages may be allowed in bankruptcy (In re Swift, 112 Fed. 315, 50 C. Č. A. 264; In re Stern, 116 Fed. 604, 54 C. C. A. 60; In re Frederick L. Grant Shoe Co. [C. C. A.] 130 Fed. 881).

It is, however, the nature of the claim, and not the name which is applied to it, that conditions its provability in bankruptcy. Wat

son's claim was for $20 of the $60 per month which the lessee had agreed to pay him for rent of the leased premises for 115 months after the petition in bankruptcy was filed. In reality, his claim was for the entire $60 per month, but he had received by the surrender to him of the premises by Brown under their contract of March 2, 1903, and had credited to him, the rental value of the premises, $40 per month, so that the rent which he claimed remained unpaid was but $20 for each month.

At the close of the hearing the referee found that the rental value of the premises was $47.50 per month, and that the only rent remaining unpaid was $12.50 per month for the 115 months subsequent to February, 1903, and this amounted to $1,437.50, which he allowed to the appellant under the name of damages for the breach of the contract in the lease.

These facts demonstrate the proposition that, while counsel and the referee call this allowance damages for a breach of the lease, it is in fact nothing but that part of the monthly rent which was to accrue after the petition was filed, which the referee found that the lessee had not paid by his surrender of the leased premises to the lessor in March, 1903. But rent which the bankrupt has agreed to pay, and which is to accrue subsequent to the filing of the petition in bankruptcy, does not constitute a provable claim under the bankruptcy law of 1898 (Act July 1, 1898, c. 541, 30 Stat. 562, 563, 3 U. S. Comp. St. 1901, p. 3447), because it is not "a fixed liability * * * absolutely owing at the time of the filing of the petition against him" (section 63a), and because it is not an existing demand, but both the existence and the amount of the possible future de mand are contingent upon unforeseen events, such as default of the lessee, re-entry by the lessor, and assumption by the trustee, so that it is neither an unliquidated nor a liquidated provable claim (section 63b). City of Walla Walla v. Walla Walla Water Co., 172 U. S. 1, 19, 19 Sup. Ct. 77, 43 L. Ed. 341; In re Ells (D. C.) 98 Fed. 967, 969, 970; In re Mahler (D. C.) 105 Fed. 428, 430; Fidelity Safe Deposit & Trust Co. v. Armstrong (C. C.) 35 Fed. 567, 569; Matter of Hevenor, 144 N. Y. 271, 274, 39 N. E. 393; In re Commercial Bulletin Co., Fed. Cas. No. 3,060; In re Collignon, 4 Am. Bankr. Rep. 250; Atkins v. Wilcox, 105 Fed. 595, 44 C. C. A. 626, 53 L. R. A. 118; In re Curtis (La.) 9 Am. Bankr. Rep. 286, 292, 295, 33 South. 125; In re Heinsfurter (D. C.) 97 Fed. 198; Beers v. Hanlin (D. C.) 99 Fed. 695; Lamson Consol. Store Service Co. v. Bowland, 114 Fed. 639, 642, 52 C. C. A. 335, 338; Wilson v. Pennsylvania Trust Co., 114 Fed. 742, 52 C. C. A. 374. In Deane v. Caldwell, 127 Mass. 242, 244, Chief Justice Gray (subsequently Mr. Justice Gray of the Supreme Court) announced the true rule upon this subject in these words:

"Before the day at which rent is covenanted to be paid, it is in no sense a debt-it is neither debitum nor solvendum-for, if the lessee is evicted before that day, it never becomes payable. Bordman v. Osborn, 23 Pick. 295. It is not within the provision of a bankrupt act allowing 'uncertain or contingent demands' to be proved against the estate of a bankrupt, because it is not an existing demand, the cause of action on which depends upon a contingency, but the very existence of the demand depends upon a contingency."