The opinion of the court was delivered by: BRIEANT
Lester M. Ritter, formerly the chief executive officer of Lyntex Corporation, makes four claims for additional compensation, seeking payment for: (1) two weeks of further vacation pay; (2) six weeks of severance pay; (3) approximately seven months of sick pay; and (4) an increase in his rate of compensation from $45,000.00 per year to $50,000.00 per year. The Court conducted an evidentiary hearing on June 6 and 9, 1975.
Ritter was employed by Franken Trimming Co., Inc., a subsidiary of Lyntex, pursuant to an Employment Agreement dated March 31, 1971 ("Employment Agreement" or "Agreement"). That Agreement provided that it would be in effect from no later than September 1, 1971 until September 1, 1974. Ritter was to be paid a salary of not less than $50,000.00 annually. The Agreement further provided that if he were unable to perform his services for a period of six consecutive months, Franken Trimming could terminate this contract on not less than thirty days notice after the six month period. The Agreement makes no mention of vacation or severance pay.
Although the Agreement provided that it may not be changed orally, on May 12, 1972, Ritter agreed orally with the Chairman of the Board of Lyntex to accept a salary of $45,000.00 per year, or $865.00 per week. This reduction in salary was an act of good faith made necessary by the financial ailments of the Lyntex companies. It was agreed that if business improved, Ritter would be paid the difference in salary.
On April 15, 1974, pursuant to an order of this Court, proceedings under Chapter X of the Bankruptcy Act were commenced for the reorganization of Lyntex and two of its subsidiaries. The order authorized the Trustee to employ Lawrence S. Wasserman as President of Lyntex, and Richard B. Stoll and Lester M. Ritter as Vice Presidents of Lyntex at salaries of $760.00 per week. Almost immediately thereafter, Wasserman and Stoll resigned and left the business.
Ritter informed the Trustee that he would not continue to work at this salary. On May 1, 1974, pursuant to an order commencing Chapter X proceedings as to six other Lyntex subsidiaries, the Trustee was authorized to employ Ritter as an officer of the debtor corporations at a salary of $865.00 per week, the same salary that he had agreed to accept in 1972. At that time, Wasserman and Stoll had left. Ritter continued to perform his duties under the direction of the Trustee until July 29, 1974. In the early morning of July 30, 1974, Ritter suffered a heart attack and did not return to work at the debtor corporations.
The Trustee and the Securities and Exchange Commission contend that the claims here asserted are governed by the prior orders of this Court pursuant to § 191 of the Bankruptcy Act, 11 U.S.C. § 591, which reads in part: "A trustee or debtor in possession may employ officers of the debtor at rates of compensation to be approved by the court." The Trustee contends that, if extraordinary fringe benefits were to be included in the compensation of officers, prior approval by the Court would be required.
The applicant advances several theories. First, he asserts that rights and benefits granted to him under his Employment Agreement, or pre-bankruptcy practices of the debtor corporations, are preserved, except to the extent they are expressly modified by the Court's order. Ritter contends that his Employment Agreement, as orally modified, together with custom and practice at the Lyntex corporations, was an executory contract which the Trustee elected not to reject. Ritter also asserts that certain benefits were the subject of oral agreement with the Trustee. Applicant contends that he is entitled to severance pay under an estoppel theory predicated upon his justifiable reliance upon the Trustee's practice regarding other employees. Finally, Ritter asserts that he is entitled to a higher rate of compensation because of the benefit that he conferred upon the bankruptcy estate through his services.
The Court rejects applicant's argument that the terms of his employment continued as before, as a portion of an executory contract not rejected by the Trustee, under the powers conferred by § 116(1) of the Bankruptcy Act, 11 U.S.C. § 516(1). Assuming momentarily that his prior employment arrangements constituted an executory contract, applicant's argument fails because it is axiomatic that an executory contract "cannot be rejected piece-meal; it must be rejected in its entirety or not at all." 6 Collier on Bankruptcy para. 3.24, at 592.
Moreover, the Trustee's employment of an officer of the Chapter X debtor has been subjected to special treatment and greater Court scrutiny "to safeguard the administration of the debtor's property in custody of the court." In re J. P. Linahan, Inc., 111 F.2d 590, 592 (2d Cir. 1940). The additional responsibilities imposed on the Court by the Bankruptcy Act distinguish the Trustee's employment of an officer from other employment contracts and other executory contracts. Cf. Shopmen's Local Union No. 455, Int'l Ass'n. of Bridge, Structural and Ornamental Iron Workers v. Kevin Steel Products, Inc., 519 F.2d 698 (2d Cir. 1975); In re Public Ledger, 161 F.2d 762 (3d Cir. 1947).
We now turn to Ritter's individual claims for compensation:
Ritter asserts that it had been the policy of Franken Trimming to give its officers six weeks paid vacation each year. The Trustee testified that his agreement with Ritter was for four weeks vacation. The Trustee has paid Ritter for four weeks vacation and ...