IN RE GAS CO. OF MIAMI BEACH, INC.
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A gas company's customer deposits held under service contracts are contingent liabilities, not provable claims in bankruptcy, because the company's obligation to return them arises only upon cessation of service, which has not occurred.
Customer deposits made under gas service contracts are contingent liabilities that do not constitute provable claims in bankruptcy when service has not ceased and the trustee continues performing the service contracts.
[1] A contingent liability arising from a service contract—where the obligation to return a deposit depends on future cessation of service—is not a provable claim in bankrupt…
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Join FLexlaw to unlock all legal intelligence“It was a contingent liability. It was not a liability existing at the time the company was adjudged bankrupt, and was not a provable claim.”
Court explaining why customer deposits do not constitute provable claims in bankruptcy
Gas company customers made deposits with the company as security for monthly gas service accounts. Upon the company's bankruptcy, the trustee assumed …
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The contract made with consumers for meter service, whereby the consumer made a deposit thereunder with the gas company, was for the protection of the gas company on its monthly accounts, and the deposit was to be returned to the Customer when service ceased. At no time has service ceased. Upon, the company’s being adjudged a bankrupt, the trustee assumed the'service contracts, and has continued uninterruptedly serving gas to the consumers. The purchaser at foreclosure sale has by agreement recognized the validity and existence of the service contracts. The terms under which the customer’s deposits were made have not been violated by the gas company, and there has at no time existed a right to the return of the money to the customer. The liability of the gas company attached whenever the contract was breached by failure to deliver gas, or whenever the customer decided to cease using gas. It was a contingent liability. It was not a *664liability existing at the time the company was adjudged bankrupt, and was not a provable claim. First Natl. Bank v. Elliott (C. C. A.) 19 F.(2d) 426, 430; Crawford v. Burke, 195 U. S. 176, 25 S. Ct. 9, 49 L. Ed. 147; Colman Co. v. Withoft (C. C. A.) 195 F. 250; Burns Mtg. Co. v. Bond Realty Corp. (C. C. A.) 47 F.(2d) 985.
The contract depositors seek to be declared unsecured creditors in order that they may vote, at creditors’ meetings upon the question of general distribution of the assets to creditors. They are not entitled to any distribution. They have no interest in the fund of the gas company in the bands of the trustee. Each of said service customers can obtain their money back whenever they cease using gas.
I think the referee was wrong in bis ruling that they were unsecured creditors. He is reversed in that ruling at this time, as this seems the best way to dispose of what is in fact, under existing circumstances, a moot question.
Cases With Similar Vibessemantic neighbors from the corpus
Citator
Authorities Cited
- Crawford v. Burke, 195 U.S. 176 (U.S. 1904)
- First Nat. Bank of Pikeville v. Elliott, 19 F.2d 426 (6th Cir. 1927)
- Burns Mortg. Co., Inc. v. Bond Realty Corp., 47 F.2d 985 (5th Cir. 1931)