Opinion
No. 76 B 1483
May 14, 1979
Chapter XI Arrangements — Rejection of Executory Contract — Payment of Money
A contract could not be rejected as executory where the only unperformed obligation was to make monetary payments in accordance with its provisions. Moreover, the debtor's unperformed obligations were in the nature of contingent installment payments which should be treated as "unsecured debts" for bankruptcy purposes.
The debtor was involved in corporate reorganization under Chapter XI of the Bankruptcy Act. The controversy pertained to the rights and obligations of the respective parties under an agreement and a modification of the agreement. The creditor was a sales engineer. The gist of the debtor's commitment was to compensate the creditor for introducing it to the compactor business. The amount of compensation was to depend on the level or profitability of the business activity generated. In the instant action, the creditor sought to have the court direct the debtor to continue to make payments under the modification agreement during the course of the Chapter XI proceeding, while the debtor sought to reject the agreement as a burdensome executory contract.
The existence of some unperformed obligation does not automatically render a contract subject to rejection under Section 313(1) of the Bankruptcy Act. This is particularly true, noted the court, where the open obligation only involves the payment of money.
Here, noted the court, the debtor's only unperformed obligation to the creditor under the modification agreement was to make payments in accordance with its provisions. The creditor's performance was substantially complete when the modification agreement was signed. Since for practical purposes there never was any real performance to be rendered by the creditor under the modification agreement, and the debtor's only real obligation was to remit payments from time to time, the court concluded that the debtor could not reject the agreement. The court also concluded that the debtor's unperformed obligations to the creditor were in the nature of contingent installment payments which must be treated as "unsecured debts" for bankruptcy purposes. See Secs. 313(1) [§ 365] at ¶ 8629 and 353 [§ 365] at ¶ 8629.