- Case Type:
- Case Status:
- No. 17-1019 (7th Circuit, Jan 11,2018) Published
- In an opinion decided by quorum due to Judge Posner's retirement, the Court found that the plain language of the subject lease permitted the City to retain structures and improvements on City property without cost and provided that the debtor had no post-termination rights in or to those items, regardless of how the lease terminated. The lease's limitation of the debtor's post-termination rights prevented its post-petition lender's lien from priming the City's rights under the lease because the lender could not have more rights under the lease or in those assets than the debtor had.
- Procedural context:
- Appeal from decision of the District Court for the Central District of Illinois on cross-motions for summary judgment; District Court's ruling on motion for summary judgment reviewed de novo.
- The City of Peoria leased a gas conversion system from the debtor. The lease gave the City the absolute right to retain structures and improvements installed at the City's landfill as part of the lease on its termination. When the debtor subsequently converted an involuntary petition against it to a voluntary case, it obtained post-petition financing from a lender that took blanket liens in the debtor's assets as collateral for that financing. The debtor defaulted on the post-petition loan and the lender exercised its remedies. During that process, the debtor's bankruptcy trustee unsuccessfully sought to assume and assign the lease. The City notified the debtor of its intent to terminate the lease and to retain the structures and improvements under the lease's negotiated terms. The lender sued the City on grounds that its superpriority lien gave it superior rights to the assets in question and that the City's retention of that property resulted in unjust enrichment. On cross-motions for summary judgment, the District Court ruled in favor of the City on grounds that the pre-petition lease provisions controlled the priorities of the parties' rights with regard to the structures and improvements on termination.
- Hamilton, Bauer, Posner
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